Talphera Inc (TLPH) 2012 Q2 法說會逐字稿

Good day and welcome to the AcelRx Pharmaceuticals second-quarter 2012 financial results conference call. At this time all participants are in a listen-only mode. Following management's prepared remarks, we will hold a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded today, August 9, 2012.

I would now like to turn the call over to Jim Welch, Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you, Mike. Good afternoon and welcome to today's call. This is Jim Welch, and joining me today is Richard King, AcelRx's President and CEO.

Earlier today, AcelRx issued its second-quarter 2012 financial results, which we will discuss in more detail on this call. In addition, we would like to provide you with an update on our progress with the Phase 3 clinical trials for ARX-01, our Sufentanil NanoTab patient-controlled analgesia system that is being evaluated for the treatment of postoperative pain.

A financial results press release has been posted on our website at www.AcelRx.com. Also, a replay of this conference call will be available later today on the Investor Relations section of our website.

Please keep in mind that the risks and uncertainties involved in the Company's business may affect the matters referred to in forward-looking statements made by management during today's call. As a result, the Company's performance may differ from these expressed in or indicated by such forward-looking statements, which are qualified in their entirety by the cautionary statements contained in the press releases and the Company's Securities and Exchange Commission filings.

I will now turn the call over to Richard for a Company overview.

Thanks, Jim, and welcome, everyone, to this afternoon's call. AcelRx continues to make strong progress across multiple areas of our business.

We currently have two Phase 3 studies up and running, and we expect our third and final Phase 3 study for ARX-01 to be initiating enrollment and dosing of the first patient later this quarter. With the upcoming initiation of the final Phase 3 study, AcelRx will have all three planned Phase 3 studies for ARX-01 ongoing. The Phase 3 trials are being conducted at roughly 65 US centers and will enroll approximately 950 patients in total, with about 600 patients receiving our Sufentanil NanoTab therapy.

For those of you who were new to our story, our lead product, ARX-01, is designed to provide patients the ability to control their own pain while they are in the hospital recovering from major surgery. Patient-controlled pain has historically been demonstrated to provide better satisfaction for patients. As many of you are aware, patient satisfaction with pain control is now a major measure of hospital performance in HCAHPS, a tool which is used to measure patient perspectives on hospital care, and which is used by patients and payers alike in the selection of hospitals for procedures and for reimbursement purposes.

ARX-01 uses the novel opioid sufentanil, delivered through a noninvasive preprogram delivery device to manage postoperative pain. We chose sufentanil because we believe and published clinical studies indicate it can be an attractive to opioid for pain treatment due to its high therapeutic index, potency that is 5 to 10 times greater than fentanyl, and the fact that it has no active metabolites. Our Phase 3 trial should provide additional information on these attributes, and we are looking forward to the unveiling of the ARX-01 Phase 3 studies over the next few quarters.

The ARX-01 system is designed to avoid the challenges associated with intravenous delivery of low therapeutic index opioids via programmable infusion pumps. These older infusion pump technologies opened the door for misprogramming and possible harm to patients from drugs such as morphine and hydromorphone.

Our ARX-01 Sufentanil NanoTab system consists of the drug sufentanil, with a 300-fold higher therapeutic index than morphine, formulated in tiny NanoTabs which are delivered under the tongue through a dedicated, handheld, noninvasive device that is preprogrammed to dispense and control the number and frequency of sufentanil doses a patient can receive to treat postoperative pain. Because patients are not connected to an infusion pump via an intravenous line, they're able to get up and move about freely without having to take the pump with them, as is current practice.

Now recall that our first Phase 3 trial with ARX-01 began earlier this year in late March. This randomized, double-blind, placebo-controlled, pivotal study in patients after major abdominal surgery will compare 100 patients treated with the ARX-01 system, delivering Sufentanil NanoTabs, to 50 patients treated with the ARX-01 system delivering placebo NanoTabs. The primary endpoint of this study is a measurement of pain called the summed pain intensity difference to baseline, or SPID, which is the FDA standard for acute pain studies.

We will measure SPID over the first 48 hours immediately after the patient has had surgery, which is typically the time period during which they might be in hospital after their procedure. We will also collect a host of other pain data, as well as safety and tolerability data during this study. Currently we expect this study to provide top-line data in the fourth quarter of 2012.

The second Phase 3 trial began in April and is a direct comparison of our Sufentanil NanoTab ARX-01 system to the current standard of care for postoperative pain management in the hospital, which is IV PCA with morphine. This study is being conducted in patients after either major abdominal or major orthopedic surgeries.

It will compare the two treatments on a variety of efficacy and tolerability endpoints, including patient assessment of global satisfaction with their method of pain release; pain control; rate of dropout due to inadequate analgesia; ease of setup and operation by the nurse and patient, respectively; and degree of sedation experienced by the patients in the two treatment arms. We anticipate approximately 400 patients will be randomized to receive either ARX-01 or IV PCA with morphine; and we expect top-line results from this study to be announced, again, in the fourth quarter 2012.

In preparation for initiation of our third and last Phase 3 study, we have incorporated early feedback from the first two Phase 3 studies to make a few minor design changes to the ARX-01 system, such as lowering the brightness of the indicator lights on the patient's side of the unit and extending the life of the system out to 72 hours without requiring recharging. We have confirmed usefulness of these features through software validation and verification, and have completed final and summative human factors testing of the system.

We have also tested and validated the system's instructions for use with nurses and patients alike. And we now believe we have the final version of the device, a sublingual sufentanil delivery system that could be commercialized in the US and in multiple markets throughout the world.

The third planned Phase 3 trial will be a randomized, double-blind, placebo-controlled study to be conducted at approximately 45 clinical centers in the US that will randomize three patients for active treatment with ARX-01 for every one patient that will receive placebo.

We plan to enroll a total of approximately 400 patients who have just undergone major orthopedic surgery, such as complete knee or hip replacement. Patients will be randomized for Sufentanil NanoTab 15 micrograms or placebo NanoTabs, with both treatments being delivered via the ARX-01 systemic at a maximum dosing rate of 1 NanoTab every 20 minutes.

This trial is designed to be a sister study to our first Phase 3 evaluation of ARX-01 after abdominal surgery. And when presented together, we believe these two studies will form the basis for approval of a label that allows ARX-01 to broadly treat postoperative pain in the hospital.

The primary endpoint is the same as the earlier study, the sum of the pain intensity difference to baseline over the 48-hour study period, or SPID-48. Secondary endpoints we are measuring include pain relief scores, patient global satisfaction ratings, and use of rescue medication.

Through questionnaires we will also be measuring the ease of setup and operation of the ARX-01 system for nursing staff and patients, respectively. The study will begin later this quarter, and we expect to complete the trial and announce top-line results in the first quarter of 2013.

The growing postoperative pain market exceeds $5 billion a year in annual sales, based on estimates for the US, Japan, and the five largest European countries combined. In the US, we believe there are over 9 million surgeries a year where moderate to severe postoperative pain could potentially be treated with ARX-01.

Let me shift briefly now to some other activities and accomplishments that I would like to tell you about. AcelRx received its first US patent during the second quarter that covers small-volume oral transmucosal dosage forms. The patent describes a method of treating pain by administering a small-volume solid tablet containing sufentanil by adhering to the oral mucosa. It covers our proprietary NanoTab technology to late 2030 and provides domestic protection for each of AcelRx's four Sefentanil NanoTab development programs.

We have recently announced that we had been awarded two additional patents associated with our novel Sufentanil NanoTabs, both describing the composition of our NanoTab and broadening the base of our NanoTab intellectual property protection out, again, through 2030. We continue to work with both the US and European patent offices on our other filed intellectual property relevant to our proprietary technology, including the NanoTab and also our delivery devices. AcelRx has more than 70 pending patent applications worldwide and continues to file new patent applications to further strengthen its market exclusivity.

In early June, we successfully completed a $10 million pipe financing. The additional cash should enable AcelRx to complete its Phase 3 clinical trials and to commence preparation of the NDA for ARX-01. We are planning for an NDA submission to the FDA in Q3 of 2013.

With that overview, let me turn the call over to Jim who will review our financial results for the second quarter.

Thank you, Richard. AcelRx reported a net loss in the second quarter of 2012 of $7.2 million or $0.35 per share, compared to a net loss of $4.8 million or $0.25 per share for the second quarter of 2011. Common shares used in calculating basic and diluted earnings per share were 20.6 million in the second quarter of 2012 compared to 19.4 million in the period a year ago. At the end of June, AcelRx had 22.6 million shares outstanding, which includes the shares from the pipe financing completed in the second quarter.

During the second quarter of 2012, AcelRx recognized revenue of $224,000, which resulted from reimbursement for work completed under a research grant from the U.S. Army Medical Research and Material Command, or USAMRMC, for the development of our ARX-04 product candidate, a Sufentanil NanoTab for the treatment of moderate to severe acute pain. Research and development expenses in the second quarter totaled $5.4 million compared to $3.0 million in the second quarter of 2011.

The increase was primarily due to the Phase 3 clinical trial expenses for ARX-01. We would anticipate R&D expenses will continue to rise on a quarterly basis as we move through the second half of 2012, due to the ongoing Phase 3 clinical trial activity for ARX-01.

General and administrative expenses were $1.8 million for the quarter ended June 30, 2012, compared to $1.6 million for the second quarter of 2011. The increase resulted primarily from expenses associated with stock-based compensation and patent controlled legal costs.

As of June 30, 2012, AcelRx had cash, cash equivalents, and investments of $31.9 million, compared to $35.8 million at December 31, 2011, and compared to $27.7 million at the end of the first quarter of 2012. Our net cash burn for the first six months of the year was $3.9 million, including the proceeds from the $10 million pipe completed in June. Net proceeds from this pipe were $9.1 million.

Now I'll turn the call back over to Richard.

Thank you, Jim. Before we answer your questions, I would like to briefly summarize our major goals and potential milestones, looking out over the coming months. We expect to deliver top-line results from two of the Phase 3 ARX-01 trials -- the placebo-controlled abdominal surgery study and the active comparator study against IV PCA -- during the fourth quarter of this year. We will now announce top-line results of these studies as soon as they are available, but we are also in the process of evaluating opportunities to present the data from these two studies, to ensure timely awareness of the capability and application of the ARX-01 Sufentanil NanoTab PCA System in the postoperative hospital setting.

We anticipate that results from the soon to be initiated placebo-controlled orthopedic surgery study will be available in the first quarter of 2013, with an NDA filing for ARX-01 anticipated within six months of that last data set, most likely during the third quarter of 2013. Once we have Phase 3 data in hand, we plan to engage in discussions with potential partners regarding ex-US commercial rights to ARX-01. As all of you know, the timing of a licensing agreement is absolutely impossible to predict, but obviously is an important business objective for AcelRx to achieve.

We anticipate additional patents could issue from both the US and European patent offices covering the NanoTab and the device technology associated with our Sufentanil NanoTab products.

Our Phase 2 study for ARX-04, our single-dose Sufentanil NanoTab product candidate for the management of acute pain, will be underway as soon as we receive sign-off for the study protocol. Our study, as you will recall, is funded by a grant from the USAMRMC.

And finally, we selectively plan to strengthen our management team through the addition of several very specific key hires in the medical affairs and commercial arenas as we continue to prepare for commercialization in the US. As you can tell, the coming months will be busy ones at AcelRx, with a number of key events expected to occur.

With that, I would like to open the call for questions. Back to you, Mike.

(Operator Instructions) Charles Duncan, JMP Securities.

Hi, guys. Thanks for taking my question and congratulations on the nice progress in the quarter.

Thank you, Charles.

So my first question is on ARX-01. I am wondering if you can characterize in any way the types of abdominal surgery patients you are getting in. Are these kind of garden variety, or is there any risk that less severe patients may be enrolled in this trial?

Actually, it's a good question, Charles. What we are -- if I take you back to the Phase 2 studies for a moment, the dominant part of the enrollment into Phase 2 was actually hysterectomy patients, with a smaller group of colectomy patients. Actually, turns out that in the intervening two years, a lot of hysterectomies have become scope-only procedures, and we have elected to not put scope-only surgeries into our studies, simply because we want to ensure that we get an adequate level of pain that we can assess.

So we are seeing a dramatically lower level of hysterectomy. We are seeing quite a lot of colectomy patients, which the pain is significant; nephrectomy patients, which again pain is significant; prostatectomies. So a number of procedures where the surgeries are all open, they qualify under the terms of our studies, and we are quite comfortable with the sort of procedures we are seeing enter into our abdominal surgery study.

That's helpful. Regarding also the IV PCA head-to-head study, which is a pretty cool one in my mind, what are you seeing in terms of dropout rates on a blinded fashion? Are you seeing what you would like to see?

We have not made any commentary. We are not seeing anything untoward in terms of dropouts in that study.

So nothing that we weren't expecting. But no particular signal from dropouts that we would point out or speak to at this stage.

Okay. Then can you offer any color on the design of the orthopedic study that you intend to start (multiple speakers) ?

Yes, it's very -- in fact, it's pretty much identical to the abdominal surgery study. We are looking, again, for procedures which have significant pain associated with them. Knees we know are extremely painful; hip as well.

We don't allow people to have femoral nerve blocks or adjuvant therapies, as that could reduce the pain associated with these procedures. Again, we want to demonstrate that sufentanil as an entity in its own right is able to very effectively control pain in those procedures.

We do allow the use of rescue, 2 milligrams of morphine an hour, maximum, as a way of keeping patients in the placebo arm in the study for longer. So there is a comparator group against which we can assess the actively treated patients. But nothing really unusual in comparison to what we did in the abdominal surgery study, placebo-controlled study.

Then last question regarding partnering for -02 and -03. Clearly you can guys have been very busy and probably focused on -01, but wondering if there is any update on your partnering activities, and whether or not you think there could be any read-through with -01 results, if that may enhance, change, or reduce activity in terms of partnering -02 and -03.

It's a good question. We continue to see interest in -02 and -03, Charles. I do think that data from the ARX-01 studies is a milestone for not only ARX-01 but also for ARX-02, ARX-03, and ARX-04 partnering. So I think that there is implication in that data across the portfolio of products from a partnering perspective.

Thanks for the added color.

A pleasure. Good to talk to you.

David Amsellem, Piper Jaffray.

Thanks, just a couple. So, first on -01, can you go through any potential gating factors to an NDA filing, beyond just the obvious clinical trial? Anything related to the device, safety, toxicology work, or other clinical work that you anticipate you may need to do or already have to do to get to your NDA.

On the device front, we are pretty much there. Virtually everything is completed that is required to both filing of the device alongside of the Sufentanil NanoTabs.

On the -- from a clinical standpoint, we have commitment to do an irritation study in the hamster cheek pouch model. And we also have definitive PK work to do that we are planning to do toward the end of this year.

Nothing that is unusual or -- it is planned into our sequence, ready to enable filing of the NDA in the third quarter of '13. So that work will remain to do after we issue this last study.

Okay. That's helpful. Then secondly, regarding safety, what is your level of confidence that the FDA will be comfortable with the safety profile of sufentanil in the context of potentially much broader way in which the drug will be used compared to what we have seen historically? Do you feel that in terms of exposures, in terms of safety data, that what you have will be sufficient for the FDA?

Certainly that is the indication that we have from the Agency at this stage, David. There is nothing that they have -- the FDA has asked for beyond scope of the clinical work that we are completing for ARX-01.

Remember, there is an extensive database of information on sufentanil using very, very large doses in patients as an agent. So that's quite an exhaustive data base and provides for much greater levels of singular exposure (technical difficulty) we would anticipate (technical difficulty) progressive ARX-01 (technical difficulty) pain (technical difficulty) close offsetting. So (technical difficulty) signal (technical difficulty) anything beyond what we are doing.

Okay, then last question, on a competitive question or marketplace dynamics question. A lot of noise about opioid-reducing modalities or opioid-sparing modalities. We are now seeing the launch or rollout of a long-acting bupivacaine product.

So I knows that the goal near-term is to get through the trials and get through the FDA. But thinking about this competitively, how do you think about positioning versus these non-opioid modalities in these invasive surgeries?

Great question. First thing I would say is at the broad level multimodal analgesia has become established over the last 10, 15 years, as a method of pain treatment. Dealing with multiple pathways is an effective at way to control pain in the postoperative setting. So I think that is here to stay.

And I think that we will be playing alongside of the likes of long-acting bupivacaine as opposed to necessarily competing head-to-head with (technical difficulty) bupivacaine. There is room for both of us in that regard.

Where I do think there is an opportunity is -- I am not sure physicians necessarily have been targeting opioid-sparing treatments as much as they have been targeting morphine-sparing treatments. I think morphine is just a particularly bad player in this arena.

And I would argue that we are 100% morphine sparing. You don't need it at all. So that would make sense that we would fit in there.

I would also argue that there is -- regardless of adjuvants and so on -- the need it for the use of an opioid to control moderate to severe postoperative pain is going to be here for a long, long time. So there will be a continued need for an opioid, and we would like to be that number-one choice in that selection of an opioid for postoperative pain patients.

Okay, thanks, Richard.

Pleasure, David.

Ritu Baral, Canaccord.

Hi, guys. Thanks for taking the question. How should we be looking at the data that is going to come out from the IV PCA trial?

What sort of primary endpoint -- I'm sorry, what sort of secondary endpoints and safety metrics do you think are the most important? And what secondary metrics are most important for pharmacoeconomic arguments that you may make?

That's a great question. There is a host of data that is going to come, associated with this head-to-head study. Clearly the primary endpoint, which is noninferiority to the current standard of care, IV PCA with morphine, is a critical one. We heard that loud and clear from P&T committees.

They get that we are noninvasive. They get that we are nonprogrammable, which is clearly an advantage against the invasive and potentially un -- mistakenly programmable infusion pumps. The requirement was to basically show that we are not in any way inferior from providing control of that postoperative pain.

So primary will be critical in that regard, and demonstration of noninferiority.

For the secondary endpoints, there is a host of them that we are interested in. Obviously we are interested in however long it takes to actually get to control pain for these patients.

We are interested in the nature of patient and nurse reaction to both the setup and then use of the device itself, in terms of just absolute rates of satisfaction. As I mentioned earlier, global patient satisfaction with their method of pain control is a formal measure now being used to assess hospitals one against the other. And we think we fit perfectly into that arena.

We will look at, obviously, the full safety and tolerability experience with IV PCA morphine compared to Sufentanil NanoTabs. In particular, we are going to very closely measure the effects on sedation since sedation, as we know, is the start of the bad cascade that leads to oxygen desaturation and can expose the patient to the risk of respiratory depression. And that is the very harmful pathway that can be destructive to patients post-surgery.

(technical difficulty) Are we going to measure system-related events? That is the amount of time the nurse has to spend interacting with our two respective systems here. And remember, our Sufentanil NanoTab system is set up so that the nurse, once the device is set up, is able to leave that device with the patient for a period of two days, typically, before they have to access a new drug cartridge.

Whereas with IV PCA with morphine -- forget the blocking of the catheter and so on for the patient. But just in terms of changing morphine syringes, there are 4 or 5 of those in that same 2-day period. So a lot of nurse interaction, a lot of time required to maintain patency of that IV PCA system.

So a host of different endpoints that we are capturing that, one, will provide insight to the clinical experience with our system; but two, as you rightly pointed out, will also be a start point for the pharmacoeconomic experience with our system as well.

Great, and a quick follow-up. Do you need to meet with the FDA again, or will you be meeting with the FDA again on the final device now that you've made the last set of changes?

No. We submit to them -- we have submitted to them what is called a CMC amendment, which describes those changes. We anticipate that the next time we formally meet will be at our pre-NDA briefing meeting with them. So that will be when the majority of the data is in hand.

Great. Thanks for taking the questions.

Thanks, Ritu. Okay, I think at this stage it sounds like we have exhausted our questions. I would like to thank you for your interest in AcelRx Pharmaceuticals and for joining us on today's call.

If you have any further questions, please feel free to contact us directly. And in the meantime, I wish you all a great rest of the day. Thank you.

We thank you, sir, and you also have a great day. The conference call is now concluded. At this time, you may disconnect your lines. Thank you, again.