Talphera Inc (TLPH) 2014 Q1 法說會逐字稿

Good afternoon and welcome to the AcelRx Q1 2014 Financial Results Conference Call. (OPERATOR INSTRUCTIONS.)

Please note, this event is being recorded.

I would now like to turn the conference over to Tim Morris. Please go ahead, sir.

Thank you, Chad, and good afternoon. Welcome to today's call. I'm Tim Morris, Chief Financial Officer for AcelRx.

During the call today, we will make forward-looking statements, including, but not limited to, statements relating to future financial results, including 2014 financial guidance and cash forecasts, potential milestone and royalty payments under the Grunenthal agreement, the process and timing of anticipated future development of AcelRx's product candidates, including the timing of potential approval for ZALVISO, therapeutic and commercial potential of ZALVISO, and the anticipated timing of therapeutic and commercial potential of AcelRx's product candidates, including the timing of the Phase III trial for ARX-04. These forward-looking statements are based on AcelRx's current expectations and inherently involve significant risks and uncertainties. AcelRx's actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. We encourage all investors to review the various risks detailed in the Risk Factors and elsewhere in AcelRx's US Securities and Exchange Commission filings and reports. AcelRx undertakes no duty or obligation to update any forward-looking statements contained in this release and as a result of the new information, future events or changes in its expectations.

I will now turn the call over to Richard King, our President and CEO.

Thanks, Tim.

I'm joined on the call today by Tim, obviously, but also by Pam Palmer, Founder and Chief Medical Officer for AcelRx.

On today's call, I will give you an update on our activities and progress so far this year, including the NDA efforts for ZALVISO, pre-commercial activities and infrastructure of preparedness ahead of a potential approval, and the Grunenthal collaboration. Pam, in turn, will give you an update on the medical education and publication efforts for ZALVISO and also our ARX-04 program. Finally, then Tim will provide a brief review of the financial results for the quarter and future investor relation activities. And then lastly, we'll take your questions.

As you're aware, we submitted the NDA for ZALVISO, our sublingual sufentanil tablet system, for the treatment of moderate to severe acute pain in the hospital setting, last year. The NDA was accepted for filing in December and has a PDUFA date of July 27, 2014.

Since that time, we have been in active dialogue with the agency. It appears the FDA is fully-engaged in the review process, and their questions have been in line with our expectations. We continue to anticipate a decision in regards to approvability of the NDA by the PDUFA date.

Now as the ZALVISO PDUFA date falls on a Sunday, the decision may come on Friday, July 25, 2014. However, there can be no assurance that we will receive a response ahead of the PDUFA date.

Now while there are no guarantees, of course, we are planning for a successful outcome of the ZALVISO NDA review and have begun numerous pre-commercial activities to ensure preparation for approval and launch. Our principal pre-commercial activities year to date consist of completion of sales force sizing. Our efforts have confirmed our preliminary thoughts that the initial sales force will include 65 sales representatives. We've also completed territory definition. And now I understand the 65 sales representatives will be based in 7 geographic regions in the United States. We have elected to go with a sparse alignment, meaning that we will cover the major metropolitan areas extensively with no coverage in more remote areas. These territories are designed to target a total of 1,400 hospitals initially, which our research indicates manage 80% of the procedures in which ZALVISO could be used, but we envisage ultimately being able to reach around 2,000 hospitals in total through the sales team.

We've also completed segmentation market research, completing extensive primary qualitative and quantitative market research with pharmacy and therapeutics committees, nurses, surgeons, anesthesiologists and hospitalists. This has enabled us to confirm the interest level in ZALVISO, driven largely by the clinical profile derived from the placebo-controlled studies in our Phase III, and reflecting the sufentanil-based pre-program non-invasive delivery of pain management for patients in the post-operative setting. Snapshots of some of this market research are included now in our corporate presentations.

We're also embarked on primary and secondary research to determine the appropriate list price of the ZALVISO 40-cap cartridge; the controller kit which comprises the controller, the tether and the holster; and the disposables pack, which includes the dispenser and the thumb tag. Our goal in this research is to identify the price-demand curve such that we can [optimally] price ZALVISO and its components.

We've also been adding personnel with commercial experience. So far this year, in line with our plan, we have added 12 new hires, most of whom have considerable commercial experience. We have 15 open positions for which we have over 500 applicants and are actively recruiting for key commercial hires, including the 7 regional business managers and the MSL team. Our goal is to have all of the regional managers and MSLs in place prior to the ZALVISO PDUFA date.

I'm pleased with the progress to date on the commercial front and anticipate these activities will increase in the next several months.

As you know, we entered into a commercial collaboration with Grunenthal for the EU and Australian rights to ZALVISO. Since the execution of the agreement, we have been working extensively with our colleagues at Grunenthal on the preparation of the filing of the MAA. We have held joint meetings in Europe with our rapporteur and co-rapporteur ahead of the filing, and I'm happy to report that the process is on time and we anticipate filing the MAA under the central procedure around the middle of this year.

I'd now like to turn the call over to Pam Palmer, Founder and Chief Medical Officer, for an update on medical affairs and ARX-04.

Thank you, Richard.

Our medical affairs team led by myself and recent new hires, Dr. Brenda Lemus, who heads up our MSL group, and Karen DiDonato, who runs our internal medical affairs and pharmacovigilance functions, have been extremely active. We have had a major presence, including sponsoring symposia, posters and booths at the following important medical meetings since the beginning of the year -- American Academy of Pain Medicine, American Academy of Orthopedic Surgeons, American Society of Peri-Operative RNs, American Society of Regional Anesthesia, American Academy of Anesthesiologist Assistants, American Society of Perianesthesia Nurses, and the American Pain Society. These meetings target the three main decision-makers for ZALVISO in the hospital setting -- namely anesthesiologists, surgeons and nurses focused on treating pain in the hospital.

Feedback from these meetings is that there's a high level of enthusiasm from ZALVISO from all engaged audiences. Of particular interest was the overwhelming response from perianesthesia nurses at the most recent ASPAN meeting in Las Vegas. These nurses are responsible for transition of the patient from the operating room to the floor. They're key individuals in the implementation of floor-based analgesia for patients and represent a key target audience for AcelRx. Their excitement at the possibility to use ZALVISO pending approval was very apparent.

On the publication side, four ZALVISO manuscripts have been submitted and two of these have been accepted for publication this quarter. The main focus is obviously the Phase III clinical data for ZALVISO. We have also submitted and had accepted for publication a pharmacoeconomic study of the cost of the current IV patient-controlled analgesia standard of care to lay the groundwork for the potential cost reduction provided by ZALVISO.

In addition, the initial results of this study will be presented in June at the International Society for Pharmacoeconomics in Outcomes Research, otherwise known as ISPOR, at their annual meeting in Montreal. ISPOR annual meeting represents one of the largest international forums for presentation of pharmacoeconomic research.

On the infrastructure side, we have selected our vendor for medical information requests, pharmacovigilance, product complaints and other elements required as part of our (inaudible). We've begun preparation of the Academy of Managed Care Pharmacy, or AMCP, dossier. The AMCP dossier is a single-source document which communicates a clinical, safety, economic and quality-of-life value proposition of medical products to payers and providers. The AMCP dossier will be the basis of our discussion with the pharmacy and therapeutics, of P&T, committees as we seek formulary approval.

In addition to the pivotal Phase III study, the ZALVISO AMCP dossier will contain the head-to-head study and the results of the pharmacoeconomic study on IV PCA and ZALVISO.

In conjunction with our efforts to understand the needs of the customer more acutely, and in an effort to ensure we present the ZALVISO material appropriately and in the manner that key customers can understand, we've recently held a number of advisory boards with pharmacists, surgeons and nurses in major metropolitan areas. Several more advisory boards are planned throughout the country in the upcoming months.

On the clinical front, we continue our efforts to move ARX-04 into Phase III. We've initiated the definitive single and multiple-dose TK study for ARX-04 this week. We have selected the CRO to run the Phase III study with the goal of enrolling the first patient in the fourth quarter of 2014. Overall, we believe the Phase III program for ARX-04 will be efficient and will allow us to leverage the substantial data gathered on sublingual sufentanil during the ZALVISO development program.

I will now turn the call over to Tim to review the financials and provide an overview of the upcoming investor relations events.

Thank you, Pam.

Net loss for the first quarter of 2014 was $9.6 million, or $0.22 per share. This compared to a net loss of $12.8 million, or $0.34 per share, for the first quarter of last year. The decrease in net loss and net loss per share is due to lower R&D expenses in Q1 2014 as compared to the same period last year. As the bulk of the clinical work for ZALVISO was completed last year, R&D expenses are lower in 2014.

During the first quarter of 2014, AcelRx recognized $95,000 of deferred revenue under the commercial agreement with Grunenthal. As the agreement was signed late last year, there were no corresponding revenues in 2013. In the first quarter of last year, we recognized $940,000 in revenue under the US Army grant for reimbursement of development expenses for ARX-04. All work related to this grant was completed last year, and accordingly, no revenues were recognized in 2014. Operating expenses for the quarter were lower, mainly due to the decrease in R&D expense mentioned above, partially offset by higher G&A expenses from the pre-commercialization activities in the first quarter of 2014.

As of March 31, 2014, we had cash, cash equivalents and investments of $92.9 million as compared to $103.7 million at the end of 2013, a decrease of $10.8 million.

AcelRx reiterates its financial guidance for 2014 with total operating expenses anticipated to be in the range of $48 million to $52 million.

I would refer you to our press release for more details on the first-quarter financial results.

As we enter the second quarter, we will increase our investor relation activities and presence. We have a number of conference presentations and a variety of non-deal road shows planned in the next two months. These will include participation and presentation at the following health care conferences -- the UBS Global Health Care Conference May 20 in New York City; the Jefferies 2014 Global Health Care Conference June 30, again in New York City; Roth Capital 101 Conference June 24 in London; and the JMP Securities Health Care Conference June 25 in New York City. Our non-deal road show activities will take us to meet with investors in San Francisco, San Diego, Boston, the Mid-Atlantic, Denver, the Midwest and Florida.

One housekeeping item is I would like to remind investors and analysts that we will enter a quiet period ahead of the ZALVISO PDUFA. The quiet period is scheduled to begin on July 1, 2014.

I will now turn the call back to Richard for a quick summary.

Thanks, Tim.

And before we answer your questions, I'd like to briefly summarize our major goals and potential milestones looking out over the coming months.

ZALVISO is under review at the FDA for the management of moderate to severe acute pain in adult patients in the hospital setting with a PDUFA date of July 27, 2014. Dialogue with the agency is active and it is ongoing.

An MAA filing via the centralized procedure in the EU for ZALVISO is being prepared by AcelRx and Grunenthal, and we expect to make our submission in mid-2014.

We are engaged with a notified body, VSI, to pursue ISO 13485 certification for AcelRx and (inaudible) for the ZALVISO device in Europe. We anticipate realization of both of these key milestones in the second half of 2014.

The buildout of our commercial capabilities is ongoing with sales leadership to be added in the second quarter of 2014 ahead of the ZALVISO PDUFA, and we continue with the hopes that pre-commercial activities [at risk] ahead of the approval itself.

With that, I'd like to open the call for questions. Operator, if I can turn it back to you so you can coordinate, I'd appreciate it.

Certainly. We will now begin the question-and-answer session. (OPERATOR INSTRUCTIONS.) Our first question comes today from Louise Chen of Guggenheim Securities. Please go ahead.

Hi. This is (inaudible) for Louise. I have a couple quick questions. First question that I have is do you expect an AdCom for ZALVISO? Also, you've said that you feel that you have enough cash to fund operations through 2015 excluding Grunenthal. Do you know how much cash -- how far the cash would go if you did include the Grunenthal milestones? And lastly, what type of label do you expect to get for ZALVISO? Thank you.

Okay. (Inaudible), good to hear from you. So on the AdCom front, no, I think that we've always communicated that we don't anticipate an AdCom for (inaudible) in the hospital setting, and there's no indication that the FDA is going to request one at this late stage. On the cash from a Grunenthal standpoint, Tim, did you want to comment on that?

Sure. We clearly have enough cash to get through '15, and there are a fair amount of milestones from the Grunenthal transaction. But I think cash and cash needs beyond '15 will be dependent on revenues and expenses. Obviously, if we had some of the milestones from Grunenthal, we could get well into '16. We haven't commented much beyond that, though, so it's really hard to say at this point.

And then your last question -- related to --

What kind of label do we expect?

What kind of label can you be --

Yes, any specific on the labels that you expect that you think that would be more -- incrementally more competitive for your product (inaudible)?

Oh, so -- yes. The -- from a label standpoint, we have obviously got an indication in the first instance, which is a broad indication, that we're trying to pursue with the agency. That's a point of differentiation to some competitors. And the indication itself is for basically the creation of pain relief. Some of our competitors maybe have an indication for the maintenance of pain relief. We hope to be able to see some commentary in the label about the device and the nature of features of the device that support effective set-up and patient use of the device. So that's still, obviously, to come as a discussion. Labeling discussions typically happen late in the game, and at this stage, we won't comment in terms of where those label discussions will take us to in the course of the next 2, 3 months as we finalize that discussion with the agency. But in broad terms, those are the areas that we've looked at as we've provided the label to the agency for that discussion to begin.

Thank you.

Our next question comes from David Amsellem with Piper Jaffray.

Hi, guys. This is Traver Davis on for David. Thanks for taking the questions. So just a couple. So it's looking a little more like the potential entry of The Medicines Company's product in Ionsys won't happen until, I guess, early 2015 at the earliest, given the timing of their filing. And I guess this could be several months after your launch. So with the persistent delays on their filing, are you thinking about potential introduction of your product any differently from a commercial perspective? And then I have a follow-up.

It's a good question. So yes, that ability to push forward on gaining formularies early and ahead of a time point when Ionsys might be into the marketplace is one that's not lost on us. So that's certainly a topic of conversation and thought. At the moment, our plans remain the same as we've communicated previously, which is assuming an approval of July 27, we would add about a third of the sales force in the Q3 timeframe basically to push forward on P&T work and approval, and the remainder of the sales force in Q1 of '15. Those are obviously movable numbers, but at this stage, that remains our focus and our plan. But certainly, that delayed timing is something that's not lost on us.

Gotcha. Thanks. And then just as a follow-up on the timeline you said about hiring a sales force or ramping up the sales force. So how should we think about the ramp in operating expenses once ZALVISO is approved, again bearing in mind that -- you had just mentioned that you guys would be hiring about a third of the sales force in 3Q and filling out the rest over the -- I guess the subsequent months. So -- yes, just any idea of how should we think about operating expenses, say, from 3Q on could be helpful. Thanks.

Tim, do you want to take that one?

Sure. Yes. Now I think as Richard mentioned, we would expect to bring on a third of those folks in -- to be available really starting most likely in the fourth quarter. So I don't think you're going to see a whole lot of change between the second and third quarter. You will see a little bit of increase in G&A. I think starting in the fourth quarter, you will see the impact of those reps, and I think the guidance we've given previously is that each of those reps is about a $250,000-per-year fully-burdened expense. And so you would expect to see the impact of those guys in for the fourth quarter.

Great. That's helpful. Thank you.

Our next question is from Ed Arse with Roth Capital partners.

Hi. Good afternoon.

Good afternoon, Ed.

Hi, Ed.

Hello. So just a few questions on your -- maybe your prepared remarks. Now I find it interesting that things continue to go well in terms of your pre-launch activities, and I think that bodes well for -- obviously for the launch. I was interested in how you are continuing to tighten up your own internal estimates of the price-demand curve and the pharmacoeconomic work which -- some of which will be published soon. I don't want to steal some of the thunder from ISPOR, but I was just wondering if you could give us sort of your general thinking around how that work impacts your thoughts of the flexibility of your ultimate pricing.

So -- and I'll -- I'm not going to kind of steal that thunder ahead of time either, but I'll take you back for now to what we've talked about previously, which is (inaudible) in the $100-$200 per two days worth of therapy. P&T committees support -- about 2, 3 years ago now -- against that with $150-$300 for that -- basically the cartridge and the dispensing tip. The disposable is part of the ZALVISO product. Getting us good margins on that part of the business. Continue to think that that $150-$300 is the relevant range, broadly speaking, but hoping to pin down where in that range is going to be the optimization price point for the product. So that's the goal of the research. It's currently being filled and obviously it plays against the pharmacoeconomic part of what we see now as IV PCA cost in 2013 as opposed to back in 2010, 2011.

Okay. The only other question I had was just -- really just to further understand the -- some of the activity around the infrastructure, in particular with the AMCT dossier. If you could just -- I don't know if that was covered in detail. I joined late. But if you could just review some of the things that you're working on there.

Sure. Pam, do you want to take that AMCT dossier question?

Sure. So I'm working with Dr. Brenda Lemus, who we've hired on recently, to get the dossier in good shape for the P&T committees. (Inaudible) that is a combination of the placebo-controlled studies, but obviously, hospitals are interested in seeing all of the data which is very separate from when someone is just trying to discuss on-label studies only. The hospitals want to see all the data. So they will be seeing that -- the comparator study, our [IEP-309] study, as well as the pharmacoeconomic story that we've laid out with the research that we've done. We've done original research using a premier database, as well as cold data from the literature on the incidence of programming errors, issues with infection with needle sticks, etc. So all of that will be pulled together in the dossier to make a very compelling argument to P&T committees for the adoption of ZALVISO.

Okay. Great. Thank you.

Thanks, Ed.

Our next question comes from Greg Suvannavejh with MLV & Co.

Great. Thank you. Good afternoon. Can you hear me fine?

We can. Thanks, Greg.

Okay. Thanks. Apologize if there's background noise. But I've got a couple of questions. One, just since your last quarterly call, has there been anything substantial or maybe not substantial that has you thinking any differently around big-picture things like pricing, market opportunities, positioning, how doctors might be thinking about the product. I know you spent some time on the call saying that you've kind of done additional market research, but are things basically the same as they were three months ago in terms of how you're thinking about the product opportunities?

So I think that we've now completed some fairly extensive research, both qualitative and quantitative, at the hospital level, as well as at the surgeon level and the specialty level. I think we have really confirmed the scope and scale of the opportunity, the differentiation in ZALVISO derived from the clinical data set that was generated in Phase III, and how physicians respond and react to that very positively to allocate under brand share or preference share -- substantial share of their patient population under management in the range of 30% to 50%, depending on specialty. We see prioritization of hospitals for those that will likely provide P&T support earlier. We see also prioritization amongst the physician population in terms of the historical behaviors that makes us think we can figure out who's going to be an early adopter of ZALVISO versus a later adopter. And then ultimately because of their specialty, what sort of scale of opportunity might exist there. So I think there's a much tighter definition of it. I don't think it's that different to where we anticipated 6 months ago or a year ago, to be honest with you, but it's nice on the scale of research that we've completed to get feedback on your data that's going to be supporting your marketing efforts, that indeed the opportunity is there. And I think that's probably the best description. Tim, (inaudible)?

Pam, do you want to comment on your recent experience from talking with the nurses at the medical (inaudible)?

Yes. It's funny. I think PCA, or IV PCA, I should say, is sort of a theoretical concept for physicians such as myself. We order it. We sort of look at it in the patient's bedroom, but we don't actually set it up and we don't really actually live, eat and breathe the issues with it the way the nurses do in the PACU, which is another acronym for the recovery room. This ASPAN meeting was around really [PACU] -- 2,000 nurses from around the country and they specialize in treating patients in the recovery room and getting them set up with the PCA -- IV PCA so they can go to the floor. So these folks have to deal with it every single day. And I just was overwhelmed by the response. We had people 5 and 6 deep at our booth. I think in the first 15 minutes, I was telling these guys we ran out of every card and study that we brought there. They're dying for something new. They're absolutely sick of the 40 years of IV PCA and they really, really want to see something really transformational occur in this space, and I think we're poised to do that.

Okay. Great. Thank you very much for that. Just another question. Just in light of some recent news for some other companies today which have had products pending FDA approval, can you give us a sense as of today -- maybe characterize your recent communications with the FDA? Are you at a point where they no longer have been requesting any information from you? Or if they have, what's the nature of the information that you're providing for them?

What I'll say, Greg -- we have a very -- it's a dynamic discussion. It's not quite daily, but certainly it's a weekly interaction that has been there since really the receipt of our Day 74 letter. It's active. It's focused on understanding the data set, more looking at it in different ways, looking at it both from a drug as well as from a device standpoint. We're seeing kind of equal focus on each of those two areas. So I'm not seeing one group lag behind the other group in terms of that interface and interaction. And it continues to be dynamic. I think that's -- for me and for me VP of (inaudible) -- very encouraging and -- sign of that continued work at the FDA to move towards to the PDUFA date.

And maybe I'll ask this one last question. This one's for Tim. Tim, you've been at the company for about -- I don't know -- a month and a half or so now, and I realize that you're still, relatively speaking, early days. But is there anything specific that you've been able to kind of bring to AcelRx or are there initiatives that you have in place or are actually undertaking now in terms of you coming from other organizations and now being at AcelRx.

Yes. There's probably two areas, Greg, that I've been focused on here for the last 6 weeks. One is really commercial preparedness as we look ahead and anticipate a successful outcome of the PDUFA date coming up on T minus 90 days, just to make sure that we are ready to go for anything from kind of the day-one website, to make sure that all of our -- both financial systems are in place, the quality systems are in place. We have to get our agreements in place with all the distributors and the like, so I want to make sure that we're ready to go on that front. And so hopefully, we've made some very good progress on that side. Also, as we get into the hiring phase, we need some internal systems and processes in place which I think we made good progress in the last month and a half. And I think the second area that we want to focus on is to really get out there and tell the story. I think we've got good support from the analysts that we have. I think we have a good base of shareholders. But I think the story needs to be more broadly distributed, and we'd love to have some more shareholders out there. And so that's why we're going to put a concerted effort here in the next 60 months or -- 60 months -- 60 days to get out and to get in front of the right people, to tell them about the company, the events that are happening and the catalyst and make sure people are paying attention. So that's really been the focus for the last 6 weeks and will continue to be the focus in the near term.

Okay. Great. Well, thank you for taking my questions and good luck with everything.

Thank you very much.

Thanks, Greg.

This concludes our question-and-answer session. I would like to turn the conference back over to Richard King for any closing remarks.

Yes. So thanks, everybody, for dialing today. Thanks for your questions and we'll look forward to catching up with you again soon. Thanks very much.

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