Talphera Inc (TLPH) 2018 Q2 法說會逐字稿

Welcome to the AcelRx Second Quarter 2018 Conference Call. This call is being webcast live on the Events page of the Investors section of AcelRx's website at acelrx.com. (Operator Instructions) This call is the property of AcelRx, and any recording, reproduction or transmission of this call without the express written consent of AcelRx is strictly prohibited.

As a reminder, today's call is being recorded. You may listen to a webcast replay of this call by going to the Investors section of AcelRx's website.

I would now like to turn the call over to John Saia, AcelRx's General Counsel.

Wonderful. Thank you for joining us this afternoon. Earlier today, we reported our second quarter 2018 financial results in a press release. This press release and the slide presentation accompanying this call are available in the Investors section of our website.

With me today are Vince Angotti, our Chief Exec Officer; Dr. Pam Palmer, our Chief Medical Officer; and Raffi Asadorian, our Chief Financial Officer.

Before we begin, I'll remind listeners that during this call, we will make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of AcelRx.

In addition to the company's periodic, current and annual reports filed with the Securities and Exchange Commission, please refer to the text of our press release for a discussion of the risks associated with such forward-looking statements.

I'll now turn the call over to Vince Angotti. Vince?

Thank you, John, and good afternoon, everyone. Thank you for joining us today.

In the first half of 2018, we've not only achieved several milestones, but also successfully executed on value-driving objectives. We expect the second half of the year to continue along a similar path as we anticipate completing each of the goals we set out on our year-end 2017 conference call.

I'm very pleased with the progress we've made to date on the regulatory front, on our prudent cash management, on the strengthening of our financial position and institutional shareholder base and our continued evaluation of potential commercial partners for DZUVEO in Europe.

Clearly, our most anticipated milestone in the second half of the year is the potential approval of DSUVIA in the U.S. in November. And on the call today, I'll, one, highlight our successful achievement of milestones during the second quarter; two, provide an overview of the key activities that we expect will lead to a successful second half of the year; and three, give some insight on how we're planning the successful launch of DSUVIA in the U.S. once approved. Raffi will then provide an overview of our financial results and position and some near-term financial guidance.

I'll first start with our achievements during the second quarter of this year. On our fourth quarter 2017 conference call, we set forth a number of objectives and milestones that we intended to execute on during the year. We did this to provide transparency to our shareholders and make it clear where our priorities and activities were focused.

Each month, we continue to demonstrate progress with these objectives. I believe that our second quarter has been one of the most successful in the company's history. Achievements this quarter included the completion of the HF study for DSUVIA, the resubmission of the DSUVIA NDA and ultimate acceptance of that NDA, which occurred within 2 weeks of the resubmission date. At the time of acceptance of the DSUVIA NDA, the FDA provided us with a PDUFA date of November 3, 2018. And in subsequent discussions with the FDA, they provided us with a tentative date for an advisory committee meeting. Once the final advisory committee meeting date is publicly confirmed, we'll provide more information.

In parallel to the U.S. regulatory process, we received a CHMP positive opinion, and ultimately, the European Commission approval for DZUVEO, as DSUVIA is known in Europe, during the second quarter. The European approval represents the second AcelRx developed drug to receive European approval. We believe the market opportunity for DZUVEO is significant as the 5 largest European countries for adult patients in moderate to severe acute pain in medically monitored settings represents approximately 51 million patient visits in emergency departments and 16 million outpatient surgeries annually.

As we have previously stated, we do not intend to commercialize DZUVEO in Europe on our own and expect that this will be done with a partner. Our timing of concluding any deal with a partner will be after we've received U.S. approval for DSUVIA as we believe more value is created for DZUVEO upon U.S. approval. Not only does the U.S. approval provide more credibility in Europe, but our U.S. volumes will bring down unit cost for DZUVEO, which is important in the lower-priced European environment.

While our second quarter was successful, we still have some significant objectives to achieve in 2018. In the second half of this year, we're focusing on a potential regulatory approval of DSUVIA in the U.S., and we continue to prepare for our FDA advisory committee meeting. Our team is eager to provide the broader public audience with evidence of how DSUVIA may be able to satisfy an unmet need for a noninvasive acute pain treatment in today's health care systems as well as support these same health care systems in solving some of the current drug shortages that a majority, if not all, are experiencing with IV opioids.

Once DSUVIA is approved, our intention is to execute on the final 2018 objective: the resubmission of our already-prepared NDA for ZALVISO, inclusive of the positive Phase III IAP312 study results.

Again, while we were prepared to submit or resubmit the NDA at the end of last year, we strategically decided to wait to resubmit ZALVISO into the second half of 2018. The decision to lead with our main product opportunity, DSUVIA, was based on multiple factors, including our belief that launching DSUVIA first will provide us a better platform on which ZALVISO can more easily follow after health care professionals are educated on and experienced with the benefits of sufentanil sublingual tablets and the management of moderate to severe acute pain.

The last topic I'd like to discuss today before handing the call over to Raffi is our planned commercialization efforts for DSUVIA in the U.S. We believe the market opportunity in the U.S. for DSUVIA is very large. There are nearly 92 million patient visits annually associated with moderate to severe acute pain in the health care systems. The vast majority of those visits, over 51 million, present in emergency departments, with 33 million of those emergency department visits resulting in administration of an opioid to help relieve the pain.

Importantly, according to our research, roughly 18 million of those patient visits result in an IV only for pain medication delivery, not for hydration nor anti-infectives, just for pain relief. Given the noninvasive nature of sublingual sufentanil, we believe this creates a significant opportunity for DSUVIA to potentially displace the IV for those 18 million emergency department visits that are receiving the IV simply just for pain.

As I stated before, our goal is not to grow the opioid market. But if the health care provider has decided to use a drug like IV morphine to treat the patients with moderate to severe acute pain, we believe DSUVIA is a compelling alternative.

In the past 4 months, we've conducted 4 different advisory boards for 45 different health care professionals from diverse geographies and disciplines, including ER physicians, anesthesiologists, general surgeons, orthopedic surgeons, clinical pharmacists and directors of nursing, have provided their feedback on the pain treatment landscape and DSUVIA's clinical profile.

Their message to us was that opioids remain a necessity for the treatment of moderate to severe acute pain in these medically supervised settings. And in addition, they communicated both the clinical profile and efficient, noninvasive administration of DSUVIA provide differentiating features versus the current opioid standards of care. And finally, they provided us advice on how to advance and potentially accelerate the formulary process within their health care systems. Clearly, the IV opioid shortage has challenged nearly all U.S. hospitals, and many health care providers are eager to have an alternative in DSUVIA.

Assuming DSUVIA approval on November 3, we're planning our U.S. commercial launch in 1Q 2019. And after rigorous analysis, our universe of hospitals has been identified with the alignment of corresponding sales territories. We expect to start with a focused sales team of approximately 10 to 15 hospital account managers for the first 6 months of our launch to gain and consolidate learnings. We plan to gradually expand the number of sales reps to approximately 60 over the course of the next 6 quarters as we expand the coverage to our key target hospitals.

Our initial plan was to bring on the first phase of sales representatives upon DSUVIA approval. But as the IV opioid shortage has continued and an increasing number of potential customers have expressed interest in DSUVIA, we've decided to hire a portion of the first wave of sales representatives prior to approval to be in a better position when we launch DSUVIA.

With that, let me now turn to Raffi to provide an update on our financial results and outlook for 2018.

Think you, Vince, and good afternoon, everyone.

The second quarter, much like last quarter, was managed conservatively from a financial perspective. We continue to manage our cash prudently, with the goal of ensuring we have adequate financial resources as we move down the path of obtaining approval for our product candidates.

We ended the first quarter with $50.1 million in cash and investments, which was a decline of $1.1 million from the end of the first quarter. Our cash use was driven mainly by our cash operating expenses incurred of $6.2 million plus $2.3 million of debt service in the quarter, offset by $7.4 million of net cash raised using our ATM facility during the quarter.

Our second quarter revenues of $0.8 million decreased from the second quarter last year due to the lower ZALVISO shipments to Grunenthal as they continue to work down the inventories purchased for the initial launch and through early 2017. As indicated in prior quarters, we expect these reduced revenue levels throughout the year despite continued growth in Grunenthal's ZALVISO sales. As a reminder, these collaboration revenues do not have a significant impact on our cash flows in the near term since a significant portion of European ZALVISO royalties and milestones were already monetized with PDL in 2015.

Our combined G&A and R&D expenses, net of stock-based compensation expense, were $6.2 million in the second quarter 2018, which was in line with the $6.5 million in the first quarter of 2018 and a reduction from the $8.1 million incurred in the second quarter of 2017.

The decline from Q2 2017 was mainly attributed to lower ZALVISO-related development costs that were incurred in 2017. Operating expenses were the main driver of our cash flows and will continue to be in the near term.

Finally, as already reported, in July, we closed a public offering of common stock, raising $20 million before underrating -- underwriting and related fees. The purpose of this financing was mainly to reestablish our institutional shareholder base. We successfully achieved this objective, bringing in some solid long-term shareholders that we expect will support AcelRx in the coming years as we commercialize DZUVEO.

Nearly 80% of the offered shares were purchased by 5 quality institutional shareholders, which we believe has strengthened our entire shareholder base.

We've continued to remain within our cash flow guidance for the year. Looking forward, we continue to expect our quarterly pre-commercialization net cash burn to remain in the $10 million to $11 million range prior to prelaunch preparation costs, which we expect will ramp in the fourth quarter of 2018 if DSUVIA is approved by our anticipated PDUFA date. This includes approximately $2 million to $2.5 million per quarter of debt service.

With that, let me turn the call back over to Vince.

Thanks, Raffi.

We're optimistic about the remaining upcoming milestones with an expected DSUVIA approval by the FDA in the near term. We remain focused on the path forward with the AdCom being the key next step, and we intend to keep the positive momentum and look forward to updating you throughout 2018. We'd like to thank our existing and our new shareholders alike for your continued support of AcelRx.

I'd now like to open the line for any questions you may have. Operator?

(Operator Instructions) Our first question is from Brandon Folkes at Cantor Fitzgerald.

Firstly, given there's obviously limitations on comparing this, but the other opioid AdComs we've seen this year and the briefing documents for tomorrow's [range] discussion, are there any takeaways from that, that you've seen that have potentially changed your sort of approach to the AdCom or you think maybe any read-throughs to the FDA's willingness to approve an opioid in the current climate?

And then secondly, given the current IV opioid shortage, I mean, what are the limiting steps to you launching post-approval? Can we assume an early 1Q '19 launch if approved?

And then lastly, what are your thoughts on DSUVIA being complementary to a larger IV opioid player's offerings?

Let's take it step by step. I think I've got 3 questions, Brandon, and thank you for them. The first was looking at the history of the AdComs this year, and does it change potentially our approach as we are coming close to our AdCom here in short order.

I'll ask Pam to comment on that, and we've clearly been watching those AdComs this year and do have opinions on that.

Sure. I, Brandon, feel very confident actually having watched very closely the various AdComs that have recently occurred. The committee is really focused on efficacy and safety. And to be honest with you, they have turned down an IV NSAID in Meloxicam. They've turned down a Schedule III opioid, buprenorphine. And so they're not particularly bashing on opioids and then welcoming nonopioid adjuvants.

What they're looking at is the solid efficacy and solid safety data. And when they don't see it -- that's what they're looking for. When they don't see it, they, in fact, vote negatively. And then you can see that the FDA -- and in the case of IV Meloxicam, there was no advisory committee. The FDA themselves gave them a CRL on that. But I feel very heartened by the fact that they're focusing on the data, the efficacy and safety data. And we are very confident in that part of our NDA package, and in fact, our entire NDA package. So I feel terrific about that.

And as far as the IV shortage, I'll let Vince discuss that.

Yes. As you can imagine, Brandon, since we've been out in the field, although limited in scope based off of the number of employees we have in the company, we've gotten a broader feedback based off of the advisory boards I mentioned to you. We are hearing it from all sides of the country with asked follow-up to us regarding DSUVIA in light of this IV opioid shortage and their concern for having an alternative moving forward.

Our launch is currently planned for the first quarter of 2019. We'd like the launch as early as possible in that quarter. It'll be dependent partly upon the FDA's feedback, assuming we're approved on the label and how that will affect our packaging moving forward because we'll need time to get that in order before we can actually ship to the 3PL and the wholesalers moving forward. So while our goal is to have shipments ready as early as we can in that quarter -- in the first half of the quarter, it will be dependent on the FDA's feedback regarding that label and packaging.

Beyond that, I think your third question was DSUVIA. And I'm not sure, I'm going to ask you to clarify, complementary to a larger opioid offering, can you maybe give us a little more clarity on that?

Yes. I mean, given the IV opioid shortages that sort of some of the larger players have experienced, I mean, would DSUVIA be an attractive product for them to have in their bag as well as the IV opioids that they currently own?

Yes. So I can't comment on their perspective on that. What I can comment on, again, is the feedback we're getting from potential customers moving forward, we mentioned it in the script, on the clear differentiation they're seeing based off of the ease of administration and the clinical profile versus what they have as standards of care today. And based on that, of course, we're bullish on our product. But we feel it's going to have significant commercial opportunity moving forward. In the event that those other companies see the same thing, that could be a possibility.

The next question is from Roger Song at Jefferies.

So just a quick question from me. Vince, have you submitted the REMS to be part of your NDA resubmission? If so, how do you think it will be incorporated to the AdCom discussion?

Yes. So the answer to that have we submitted it as part of the package? The answer is yes. We've had discussions with the FDA since the resubmission. There has been interest and follow-up regarding the REMS.

Pam, I'll let you comment concerning the AdCom, but we certainly feel like that would be a part of that discussion.

Yes, absolutely. The REMS will be a part of the discussion at our advisory committee. And we previously had presented a REMS for the ZALVISO program. And in fact, that was pre-cleared prior to us receiving that CRL. So we feel very confident in our REMS program and think that we'll be able to easily work with the FDA to make sure that it's a very solid REMS program while not hampering commercial sales.

The next question is from Ed Arce at H.C. Wainwright.

This is [Matt] on for Ed. I guess, we were mostly wondering if there were any particularly surprising insights that you gained from the advisory boards you met with, perhaps in terms of either the AdCom or your approach to commercialization.

Yes, good question. So you're asking whether insights regarding AdCom or commercialization. Not regarding the AdCom, we've been preparing fairly well for that. And the best education I think you can get is by closely watching the historical AdComs that have occurred, even more recently, in the opioid class of medications.

But with the commercialization, I have to tell you, we were a little bit surprised at how widespread the IV opioid shortage was. And while you've read about it and heard about it, when you actually speak to the customers experiencing it and they proactively bring it up to you, it's not something we try to probe in these ad boards. It's unavoidable in their communications to us. And again, it's from all areas of the country. It's not geographic dependent or hospital size dependent. They all seem to be experiencing it.

And what that's resulted in for us, we believe, is while it might not create a commercial improvement as far as peak sales, et cetera, are concerned. What it is actually creating is we feel like accelerated potential reviews by P&T committees, where these processes can potentially take more time, months. What we're feeling is that the agendas will incorporate a DSUVIA review earlier than we likely anticipated going into this launch, if that helps.

That was very helpful. And just part of that accelerated review process, would you say that's more of a community hospital focus or also part of the urban hospitals?

Well, for us, it's going to depend on the targeting and who we approach first. And we've done a rigorous amount of targeting in order to get our territorial alignment, so that we are very careful on our human resource deployment moving forward. It's a mix of community as well as larger institutions. So what I can provide you to date is that through that analysis, which includes patient visits through emergency departments, patient visits for same-day surgery within these particular hospitals, what we feel are ratings on access for sales teams and MSLs as well as those we might consider early adopters versus late adopters. We've created a universe that we feel captures our market of about 3,000 hospitals nationally.

However, of those 3,000 hospitals, 1,200 of them account for about 70% of the business in our area of focus. So that's why we believe these 1,200 hospitals are the first we're going to obviously try to penetrate. We believe the 60 sales representatives over the course of 1.5 years can handle that workload. It comes up to obviously about 20 hospitals per sales representative. And that includes institutions that might be teaching versus community as long as they meet the criteria as set forth in that analysis. Hope that helps, [Matt].

At this time, we show no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Vince Angotti for any closing remarks.

Thank you, operator, and thank you for joining us today and for your continued support of AcelRx. We look forward to updating you on our continued progress with the upcoming milestones. Have a great week and weekend. Thank you.

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