Talphera Inc (TLPH) 2015 Q2 法說會逐字稿

Good afternoon and welcome to the AcelRx second quarter 2015 financial results conference call.

(Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Timothy Morris, Chief Financial Officer. Please go ahead.

Thank you, Denise. Good afternoon everyone and welcome to today's call. Today, I'm joined by Howie Rosen, our interim Chief Executive Officer and Pam Palmer, our Founder and Chief Medical Officer. During the call today, we will make forward-looking statements including but not limited to statements related to future financial results including AcelRx plan to seek a pathway forward towards gaining approval of Zalviso in the US, essential next steps by AcelRx related to the FDA and Zalviso, anticipated resubmission of the Zalviso NDA to the FDA including the scope of the resubmission and the timing of the resubmission and the FDA review time, financial guidance and cash forecast, potential milestones and royalty payments under the Grunenthal agreement the process and timing of submissions on the Zalviso MAA including timing for potential approval to MAA by the EMA, the status of the collaboration agreement with Grunenthal or any other future potential collaborations, the process and timing of anticipated future development of AcelRx product candidates including Zalviso and ARX-04 including the timing and quality of data for ARX-04, and the therapeutic and commercial potential of AcelRx pharmaceutical product candidates including Zalviso and ARX-04.

These forward-looking statements are based on AcelRx Pharmaceuticals' current expectations and inherently involve significant risk and uncertainties. AcelRx Pharmaceuticals' actual results and timing of events could differ materially from those anticipated in such a forward-looking statements and as a result of these risks and uncertainties, which include without limitations, risk related to AcelRx Pharmaceuticals' ability to finalize the pathway towards the resubmission of the Zalviso NDA to the FDA, potential additional clinical studies, human factor studies, and/or additional data analysis necessary in order to resubmit the Zalviso NDA, AcelRx's ability to receive regulatory approval for Zalviso, any delays or inability to obtain and maintain regulatory approval of its product candidates including Zalviso in the United States and Europe, its abilities to receive any milestones or royalty payments under the Grunenthal agreement and the timing related thereto, the ability to obtain sufficient financing, the success, cost and timing of all development activities and clinical trials including the phase 3 ARX-04 trial and the related data, the market potential for its product candidates, the accuracy of AcelRx's estimates regarding expenses, capital requirements and the need for financing and other risks detailed in the risk factors and elsewhere in AcelRx Pharmaceuticals' US Securities and Exchange Commission's filings and reports including its quarterly report on form 10-Q filed with the SEC on May 5, 2015.

AcelRx Pharmaceuticals undertakes no duty or obligation to update any forward-looking statement contained in this release as a result of new information, future events or changes in its expectations. I will now turn the call over to Howie, interim Chief Executive Officer.

Thank you, very much Tim, and I'd like to thank everyone for joining us this afternoon for our second quarter call. During today's call we'll provide the following: an update on our progress towards Zalviso approval in Europe with our partner Grunenthal, a brief regulatory update on Zalviso in the US, an update on ARX-04, and a brief review of the second quarter financial results including cash guidance for the remainder of the year.

Let me start with the Zalviso regulatory update in Europe. As reported recently, the Committee for Medicinal Products for Human Use, or CHMP, of the European Medicines Agency, or EMA, has adopted a positive opinion for Zalviso sufentanil sublingual tablets. The opinion, while not binding, recommends a marketing authorization for Zalviso for the management of acute moderate to severe postoperative pain in adults, patients and hospitals. Our partner, the Grunenthal Group, submitted the marketing authorization application or MAA under the centralized procedure in July 2014.

The positive opinion by the CHMP will next be reviewed by the European Commission or EC for central marketing authorization in the European Union, or EU, which has the authority to approve medicines for the 28 member countries of the EU and in addition, Norway, Iceland and Lichtenstein. We're anticipating a decision by the EC in late September or early October. If approved, AcelRx would be eligible to receive a $15 million milestone payment from Grunenthal who we would expect to begin launching Zalviso in the first half of 2016.

AcelRx had previously received CE market approval for the Zalviso device and iso-certification of its quality management system issued by the British Standards Institution or BSI, a notified body. Under the terms of our collaboration, Grunenthal is responsible for all commercial activities for Zalviso including obtaining and maintaining pharmaceutical products regulatory approval in the Grunenthal territory. AcelRx will be responsible for maintaining device regulatory approval in the Grunenthal territory and the manufacturing and supply of Zalviso to Grunenthal for commercial sales and clinical trials.

In the US, we have been granted a general advice meeting with the FDA in early September. The purpose of the meeting is to discuss the timeline and activities necessary to resubmit the Zalviso NDA. Pending the outcome of the meeting, we may have additional clarity on what we will need to do to gain approval of Zalviso. Now, I'd like to turn the call over to Pam who will provide you with an update on ARX-04.

Thank you, Howie. As you know, we initiated a pivotal phase 3 trial for ARX-04 in March of 2015. I'm happy to report the study's fully enrolled. In total, [153] subjects were randomized into this study. The clinical sites are now in the process of completing the task necessary for database logs. Assuming all goes as planned, we anticipate top line results in early Q4 2015. As a reminder, ARX-04 is a single use 30 microgram sufentanil sublingual tablet in a disposable prefilled single-dose applicator administered to the patient by a healthcare professional. The proposed indication for this product, is a treatment of marked severe acute pain in a medically supervised setting. This phase 3 study, SAP 301, is a multi-center double-blind placebo controlled trial that evaluate the efficacy and safety of ARX-04 versus placebo for the treatment of marked severe acute pain following outpatient abdominal surgery. The primary endpoint of this study is to demonstrate a statistically significant difference in the time waited summed pain intensity difference to baseline, or SPID, of ARX-04 compared to placebo over a 12 hour dosing period, also known as SPID 12. As you will recall, this phase 3 study is the second of two pivotal clinical studies required for the ARX-04 NDA filing.

We are also working with the Department of Defense, or DOD, under contract to partially support our development of ARX-04. This quarter, we plan to initiate the final clinical trial of ARX-04, an open-labeled safety study in the emergency room. This study will add to the safety database for ARX-04 and will help us understand how the application of ARX-04 treats trauma related marked severe acute pain in the emergency room, one of the large target markets to this product. This study is an open-label safety study in patients who present to the emergency room with moderate to severe acute pain due to trauma or injury.

AcelRx will continue to present the results from its clinical trial in the next several months. Planned presentations by our Medical Affairs team include an integrated safety and efficacy analysis of sublingual sufentanil at the Ninth Congress of the European Pain Federation, or EFIC, meeting in Vienna, Austria, September 4, 2015. The results from the pivotal ARX-04 bunionectomy study will be presented at the 2015 European Congress on Emergency Medicine, or ECEM, in Torino, Italy, on October 12 to 13, 2015. The results from the pivotal abdominal surgery study, SAP 301, will be presented at the American Society of Anesthesiologists' 2015 annual meeting in San Diego, October 24 through the 28. I will now turn the call back to Tim to discuss the financial results.

Thank you, Pam. Earlier today, we reported financial results for the second quarter and first six months ending June 30, 2015. I refer you to that press release for specific details on the actual results. The net loss for the second quarter of 2015 was $8.9 million or $0.20 basic and diluted net loss per share. This compares to a net loss of $10.6 million or $0.24 basic net loss per share and $0.30 diluted net loss per share for the second quarter of 2014. The decrease in the net loss and the net loss per share was primarily due to revenue generated under our contract with the DOD for ARX-04 development and increased G&A expenses as a result of the cost reduction plans implemented at the end of March 2015, partially offset by having no other income in the second quarter of 2015 as compared to $2.2 million of other income recognized in the second quarter of 2014.

For the first six months ended June 30, 2015 AcelRx reported net loss of $18.9 million or $0.43 basic net loss per share and $0.47 diluted net loss per share. This compares to $20.2 million or $0.47 basic net loss per share and $0.50 diluted net loss per share for the same period in 2014. We recognized $1.4 million in revenue related to the DOD contract in the six months ending June 30, 2015. In addition, in the six months ended June 30, 2015, we recognized $667,000 of previously deferred revenue under the collaboration agreement with Grunenthal as compared to $166,000 in the first six months of last year.

At the end of June, we had cash, cash equivalents and investments of $51.2 million. This compares to $75.4 million at the end of December, 2014. The net change in cash, cash equivalents and investments was $24.2 million for the six months ended June 30, 2015, $13.3 million for the second quarter and $10.9 million for the first quarter of 2015.

The decrease in cash for the second quarter of 2015 was higher than the first quarter of 2015 mainly due to the initiation of principle payments under line of credit with Hercules. These payments totaled $2.2 million for the second quarter of 2015. Assuming a receipt of the $15 million milestone payment from Grunenthal for the approval of Zalviso in the EU, and revenues earned under the DOD contract for ARX-04, we anticipate our cash balance at the end of the year in 2015 to be approximately $45 million.

On the investor relations and business development front, planned presentations and participation in upcoming conferences include: Rodman and Renshaw seventeenth Annual Global Investment Conference sponsored by HC Wainwright September 9 in New York, the FBR second Annual Healthcare Conference September 9 in Boston, the NewsMaker Biotech Industry Conference sponsored by BioCentury September 10 in New York, the BioPharm America Conference September 14 and 17 in Boston, and the fifteenth Annual Biotech in Europe Forum for Global Partnering and Investment September 29 and 30 in Basel, Switzerland. I will now turn the call back to Howie for some closing comments.

We're pleased with the recent positive CHMP opinion regarding Zalviso in the EU and may have more clarity with regards to the FDA and Zalviso over the next quarter. Our pipeline continues to advance as we expect top line pivotal phase 3 results from ARX-04 early in the fourth quarter and as we initiate an additional phase 3 open-label safety study with ARX-04 in the emergency room.

Finally, I would like to announce that AcelRx will be hosting an analyst and investor day on October 2 in New York City. We look forward to providing more detail on ARX-04 at that time including any new data available as well as more background on the commercial opportunities. Following our upcoming FDA meeting, we also may have more clarity on Zalviso and our planned pathway forward. Thank you for being on the call today. We will now open the call up to questions.

(Operator Instructions)

Randall Stanicky, RBC Capital Markets.

Thanks, guys. I have several. The first one and this question may be premature but I want to ask it anyway. What are your initial expectations for the upcoming General Advice Meeting and could we get in your view, immediate feedback on how you should proceed?

Sure. Randall, this is Tim. Our expectations are is that obviously, we will sit with the agency and work with them in terms of two things. One, to try to determine the nature of the request for additional clinical studies. And then two, we want to talk to them about the timeline and the plans to move forward. I think that's been the goal all along from that. I guess in terms of the second part of your question, do you think we'll get immediate feedback? Is that -- what was the second part, Randall?

Yes. Should we expect, when you sit down with them, should we expect a fairly quick decision and update to us in terms of how you're expected to proceed?

That's difficult to say. I think if it's obvious one way or another then potentially the timeline could be relatively quick. We're hoping that the meeting does provide some clarity there. We would plan to get feedback to the extent that we have something to say about a definitive timeline and definitive set of actions. It is difficult right now to promise that. We understand the importance. Howie, what do you think?

I agree. Depending on what is actually discussed, we, as in the past, may need some time to digest it and get advice from some of our outside advisors as well. Our goal would be to update people once we have the clarity.

Got it. And let me ask one more. Rest of world, is this something that could be an opportunity between now and an update on the US path? Is there an opportunity to do additional deals such as you did with Grunenthal in other regions such as Latin America and some other places?

For Zalviso?

Correct.

We've always felt that having an approval in one of the major territories, US or Europe, would be a big leap forward in terms of trying to put together a rest of the world partnership. I think the positive CHMP opinion is clearly a step in the right direction there. A lot of these countries will look to an EU approval or approval of the MAA to move forward. So we would hope that, assuming we'd get an approval in Europe, in again, late September early October, I think that will be a catalyst. I don't think we'll have anything between now and the meeting in September with the agency. We think that having the European approval in place will help on our BD efforts outside of the US.

Got it. And one final one. This may be for Pam, but just on ARX-04, assuming we get favorable data, when should we expect you to file? And then the followup to that would be, how are you thinking about the commercial build out in the absence of a Zalviso sales infrastructure? Thanks.

I'll ask Pam to comment on the timing and then I'll come back on the commercial question.

Sure. We've certainly shown efficient NDA filing capabilities, at least with Zalviso. Certainly in 2016, we would be filing an NDA with positive data from the SAP 301. The current plan for the open-label safety ER study is a small study. That shouldn't take much time to finish.

I will say a couple of things that we have to do, Randall, before we have a definitive timeline on the filing. We will to meet with the NDA, kind of a pre-NDA filing there. As soon as we have something a little bit more definitive on the timeline, we'll get back to you. I think as you saw at the end of the prepared remarks how we talked about an analyst day on October 2, so we will look to fill in a little bit more details around timelines for ARX-04, obviously closer to that date.

You asked a question on the commercialization and you're right, the original plan was to potentially piggyback off the Zalviso commercial efforts. I think we're doing a couple of things from a commercial prep standpoint for ARX-04. One, we're trying to actually understand the size of the market and I think our initial work is showing that the marked potential is bigger than either we originally thought and others had originally thought. So we're trying to figure out the best way to approach this. We are still of the belief that having some commercial capability ourselves is the best way to retain value for the Company and for the shareholders.

We are trying to make sure that we can identify the exact markets to go after and to look at all of the potential options the we would go to commercialize it under a couple of different scenarios; that would be with Zalviso, without Zalviso, with a partner. We don't have anything definitive yet but we are beginning to think about the commercial potential for ARX-04. And again, we would look to probably share some of our findings with you and maybe explore some of the potential paths to commercialize the product roundabout the time when the Phase 2 results are unveiled and in a little bit more detail around the analyst day at the beginning of October.

Great. Thanks guys.

Thank you.

David Amsellem, Piper Jaffray.

Thanks. Just a followup on this general advice meeting. Maybe give us a little bit of color on what happens to get to the point where you would decide to go through a formal dispute resolution process and is that something that's still on the table?

I think David, we would always kind of reserve that right. I think to date, we've been comfortable, at least with the interactions with the agency. We clearly want to have the meeting. I think if we don't come to some resolution or if we don't come to a path forward that appears to be reasonable to us or our external advisors or something that makes sense, we may potentially pursue a more formal dispute resolution at that time.

Again, it's a little bit too early to tell. We always have that. For example, if their request were just really too outrageous and didn't make sense to us and continue down a pathway that, for us, were just not attainable and were unrealistic, then we would potentially look to pursue a little bit different formal dispute resolution versus just kind of rolling over and continuing to study the drug. That might be one scenario.

Secondly, and I may have missed this, I apologize in advance. But just on the CEO search, could you give us a little bit of color on how you're thinking about what kind of candidate would be ideal and how far along you are, if you can talk about that? And then lastly, in terms of that, are there any other major hires within the organization that you feel you need to make beyond just the Chief Executive position? Thanks.

I'll let Howie comment as well. I think a lot of that, David, has to do with the outcome of the meeting, the timeline and the path forward in terms of what's required for Zalviso and I think that's why to date -- it depends on how long that takes of then what type of person we're looking for. Howie, do you want to comment on David's question?

Yes, David, and thanks for the question. Tim's right. It partially depends on where we end up in the US but also in terms of getting the quality of candidate that we want. Having some of that uncertainty taken care of is important and I'm committed to stay on as long as necessary. So there's no clock ticking in terms of finding someone.

Can I followup? Is the implication here that you're having trouble attracting a candidate with the path forward being up in the air? In other words, Tim, and if I'm interpreting your comment correctly, does it mean that you have to have clarity on the path forward in order to be able to make a hire?

It's really more, it comes to the second part of your original question which was whether there are any other key hires that we would need. And so, as you know from a cost reduction point of view, we reduced essentially all of our or most of our commercial infrastructure. And so, the timeline to when we would get to commercializing things ourselves is one of the key things. Do you want someone with a background that has a strong commercial background or more of a general management background or something different?

Thank you.

I think David, it's also safe to say that the search has actually been put on hold so they haven't been actively looking for folks. So until we have this clarity, the Company has made the decision to not aggressively look for new candidates.

Boris Peaker, Cowen.

Thanks for taking my question. I guess maybe just first on the General Advice Meeting with the FDA. I'm just curious, what happened to get that meeting? Previously, you were denied a meeting and now they allowed it. Is there any kind of discussion or exchange of information that enabled it?

Howie, do you want to take that?

I can take that. We continue to have a dialogue with the FDA and we provided them with some additional information and that led to them agreeing to grant us a meeting. So, we are pleased to have that progress.

Got you. Was that clinical information? I just want a clarification.

It was really just pretty much across the board. Just leveraging the information that we had and perhaps providing it in a more comprehensive way.

Got you. Also, in terms of the European opportunity, I'm just curious, how are the market dynamics for Zalviso different in Europe? And in the context of what can we learn from Grunenthal's initial launch in Europe regarding the US commercial potential of this drug?

I think a couple of things. Obviously, PCA is a standard of care for postoperative pain for moderate to severe pain in a hospital setting. To some extent, the standard of care will be different. The pricing will be different. Their pricing won't be as good as we get in the US.

I think it'll be nice to see what happens in clinical practice. It'll be nice to see if they are gaining favor with a certain type of procedure or having particular success with, say, orthopedics or general surgeons. It'll be interesting to see if they are having success on a regional basis and whether that is due to some of the work that they've done from a pre-marketing standpoint.

I think there probably is a fair amount to learn from their experience in Europe that we could hopefully parlay into the US. I don't know, Pam, you've spent some time with them. Do you have any comments and what that market looks like and how we could use it here in the US?

Sure. I think whatever happens there is certainly a conservative indicator of what would happen here. We do know that they're more price sensitive. We think we've priced our products accordingly to take advantage of their price sensitivity. But also, you might see disparities between Northern Europe and Southern Europe, for example, that you're not necessarily going to see in the US where adoption tends to be more uniform. But I think whatever they do, it certainly we would expect it to be more robust in the US.

And my last question, have you commented what the overall commercial potential that you see in Europe?

Yes. I think we have independently taken a look at that market and I think we put the opportunity conservatively at again, at lower pricing at a peak sales of about $150 million.

Great. Thank you very much for taking my questions.

Michael Higgins, ROTH Capital Partners.

Thank you, Operator. Hello, guys. A lot of questions have been asked on the upcoming September meeting. Hopefully you can help us with what you believe the FDA has learned since March around the NDA and as well as what you've learned from the FDA position since that March letter?

Michael, this is Tim. It's going to be difficult to interpret what the FDA has learned and what we've learned from them. I think as Howie mentioned earlier, maybe some continual dialogue with the agency, providing additional information to them from some of the data that we have generated since the CRO and that has been specifically from the bench test data and the human factor work.

It's hard to say if that has had an impression on them or what exactly they think of it until we've had the meeting. So it's probably too much to speculate as to the change in their thinking. I really haven't any opportunity to sit in front of them. We are encouraged by the fact that they granted a meeting. We think it is a positive step forward and we'll just take it for what it's worth.

Is this a reasonable [for me] to expect -- say there's a 75% chance that there's some sort of outcome from the meeting that we'll hear something within the week or will we wait until October 2, and have more dialogue with you then?

Again, that will depend on the nature of the meeting. But keep in mind that the October 2 date wasn't set around anything specific to the FDA. We just looked at that as an appropriate time for an update.

In terms of letting the market know the results of the meeting with the agency, I think as Howie mentioned before, we will take what we learned from the meeting. We will confer with a lot of our experts here. And then, once we're all in agreement on the path forward and the results of the meeting, we're happy to explain that to the market. We do know that it's important to us and to everyone and to our investors. And so, we will try to get something out as quickly as possible.

Okay. And then one last followup. It sounds like you have a confirmed date for a meeting -- I could be wrong on that. If you can help us, is the meeting with the reviewers? Does it extend beyond that to their supervisors as well?

The meeting is with the division and the other folks in the agency have been invited to participate. We won't know who actually participates until the meeting has taken place.

Thanks, guys.

Sure.

Hugo Ong, Jefferies.

Hello guys, this is Hugo speaking in for Biren Amin. Just a question on ARX-04's trial in abdominal surgery. Can you talk about why you're stratifying based on gender and whether or not this was done similarly in the Zalviso program?

Sure, Pamela has that one for you, Hugo.

Well, we have a situation in these studies where we have procedures that are gender specific. For example, one of the procedures is abdominoplasty that we're doing SAP 301 and those are mostly going to be in women. So we're just making sure -- and we've got obviously, a herniorraphies as well that will mostly be in men. We're just making sure that we have got an even balance of males versus females in general for that study.

But the main thing was to make sure that -- and there's three different types of surgeries that we did; inguinal herniorrhaphy, abdominoplasty, and then any laparoscopic surgery. We just wanted to keep a close eye on the male/female. There tends to be more females than males in all of our studies and that was something that we also saw for SAP-301.

Okay, great. And just a followup, is there any reason why -- the inclusion criteria, is there a reason why you're requiring the female patients of childbearing potential to have effective method of birth control when they're going through their abdominal surgery?

It is just standard. Is just standard whenever you're at [the study drug]. There is nothing specific about sufentanil and opioids are used in pregnant women all the time, but it's just standard for an investigational study drug to make sure that the patients are not pregnant.

Got it. Great. Thanks for taking my questions.

This will conclude our question and answer session. I would like to hand the conference back over to Howie Rosen for his closing remarks.

I'd just like to thank everyone again for taking the time today to call in to our second quarter call. And as we mentioned, we'll be participating in several investment conferences next month so we look forward to keeping you updated. Thanks again.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.