Theriva Biologics Inc (TOVX) 2011 Q3 法說會逐字稿

Good afternoon, and welcome to Adeona's third quarter, 2011 investor conference call. All participants will be in listen-only mode.

(Operator Instructions)

At this time, I would like to turn the call over to Kris Maly, Vice President of Corporate Communications at Adeona. Chris

Thank you, Denise, and good afternoon to all of our listeners. Welcome to Adeona's investor conference call for the quarter ended September 30, 2011. Before we begin, I will read the company's Safe Harbor statement. This conference call will include forward-looking statements on Adeona's current expectations and projections about future events. Generally, the forward-looking statements can be identified by terminology such as may, should, expects, anticipates, intends, plans, believes, estimates, and similar expression. These statements are based upon current beliefs, expectations, and assumptions, and are subject to a number of risks and uncertainties, including the risks and uncertainties set forward in Adeona's filings with the SEC, many of which are difficult to predict. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. The information included in this conference call is provided only as of the date of this conference call, and Adeona undertakes no obligation to update any of the forward-looking statements stated on this conference call on account of new information, future events, or otherwise, except as required by law. I would now like to introduce Adeona's CEO, Jim Kuo. Jim?

Thank you, Kris. Good afternoon, everyone, and thank you for joining our third quarter call. In addition to Kris Maly, I'm pleased to be joined today by Dr. George Brewer, our Senior Vice President of Research and Development; and Julie Caudill, our Vice President of Finance. We also wish to welcome our special guest, Dr. Rhonda Voskuhl, Director of the UCLA multiple sclerosis program.

Today, Julie Caudill will begin first, by taking you through our third quarter 2011 financial results. Second, Dr. Voskuhl will provide an overview of our newest trial that was just announced last Friday, the Phase II clinical trial evaluating our drug candidate Trimesta for cognitive dysfunction in multiple sclerosis. Third, I will present the depth of Adeona's pipeline, with a review of our multiple sclerosis program, the Meda deal on fibromyalgia, and our ALS clinical program. In addition, I'll provide an update on our product development program for wellZin. We'll end our call with a question and answer session, during which time registered callers on the toll-free phone line may queue to ask questions. Now, let me turn the call over to Julie Caudill, our Vice President of Finance and Corporate Controller. Julie?

Thank you, Jim, and good afternoon, everyone. Total net revenues for the three and nine months ended September 30, 2011 were $293,000 and $972,000, respectively. The three month revenues were nearly unchanged from the previous year. The nine month revenues were significantly less than the $2.5 million for the same period in 2010, due to $2.1 million from the flupirtine sublicense fee with Meda AB. Laboratory revenues from our wholly owned subsidiary, Adeona Clinical Labs, increased to $293,000, and $972,000 for the three and nine months ended September 30, 2011, respectively. The three month revenues were nearly unchanged from the previous year, but for the nine months, there was an increase of $552,000 for the same period in 2010. These changes resulted from an increase in the client base, and the expansion of in-house diagnostic testing services to include a full array of microbiology testing. Total cost and expenses for the three and nine months ended September 30, 2011 were $1.2 million and $4.3 million, respectively, compared to $1 million and $3.4 million for the same periods in 2010.

General Administrative Expenses for the three and nine months ended September 30, 2011 were $682,000 and $2.6 million, respectively, compared to $602,000 and $2 million for the same periods in 2010. These increases were primarily the result of increased salary expense and consultant fees. For the three and nine months ended September 30, 2011, General Administrative Expenses include a non-cash charge relating to stock-based compensation expense of $51,000 and $861,000, respectively, compared to $68,000 and $252,000 for the same periods in 2010. The stock-based compensation expense for the nine months ended September 30, 2011 includes a one-time charge of $398,000 relating to the modification of certain stock options prior to expiration held by a member of the Board of Directors. Research and Development expenses for the three and nine months ended September 30, 2011 were $289,000 and $801,000, respectively, compared to $229,000 and $963,000 for the same periods in 2010. The increase for the three months ended September 30, 2011 was primarily the result of increased costs associated with our new clinical programs, and the development costs associated with the commercialization of wellZin.

The decrease for the nine months ended September 30, 2011 was primarily the result of decreased costs associated with the discontinuation of some of our clinical programs in prior periods. For the three and nine months ended September 30, 2011, research and development expenses included a non-cash charge relating to stock-based compensation expense of $5,700 and $20,000, respectively, compared to $20,000 and $73,000 for the same periods in 2010. Costs of laboratory services for the three and nine months ended September 30, 2011 were $261,000 and $806,000, respectively, compared to $192,00 and $430,000 for the same periods in 2010. These increases were primarily the result of increased costs associated with the increased client base and expansion of in-house diagnostic testing services to include a full array of microbiology testing, including salary and supply costs. Total net other expenses for the three and nine months ended September 30, 2011 were $160,000 and $1.7 million, respectively, compared to $290 and $7,600 of total net other income for the same periods of 2010.

For the three and nine months ended September 30, 2011, total net other expense included $165,000 and $1.7 million, respectively, relating to the estimated fair value of the warrants associated with the January 2011 and April 2011 financings, adjusted for the change in their fair value at September 30, 2011. Total net other income for the three months ended September 30, 2011 included $6,900 of interest income from our short-term investments. Other income for the nine months ended September 30, 2011 included $63,000 relating to the settlement of accounts payable previously accrued in prior periods, and $6,900 of interest income from our short-term investments. The net loss for the three months ended September 30, 2011, was $1.1 million, or $0.04, per share compared to $733,000, or $0.03 per share for the same period in 2010. The net loss for the nine months ended September 30, 2011, was $5 million, or $0.18 per share, compared to $841,000, or $0.04 per share for the same period in 2010.

As of September 30, 2011, our cash increased significantly to $7.5 million in cash, cash equivalents, and short-term investments, compared to approximately $2.6 million in cash and cash equivalents on December 31, 2010. As of October 31, 2011, we had approximately $7.2 million in cash, cash equivalents, and investment in debt securities. Our cash position should allow us to meet our currently planned operating needs for at least the next 12 months. While we are in a strong financial position, we continued to preserve our cash by maintaining minimal infrastructure and full-time personnel comparable to our industry peers. For the quarter ended September 30, 2011, our cash burn was approximately $1 million. Jim, I'll turn the call back to you.

Thank you, Julie. Now, it's my great pleasure to introduce our special guest, Dr. Rhonda Voskuhl, Director of the UCLA multiple sclerosis program. Dr. Voskuhl is a principal investigator of the recently announced clinical trial to evaluate our drug candidate, Trimesta, for cognitive dysfunction in female MS patients. She is also the lead principal investigator of the ongoing 150 patient, multi-center clinical trial evaluating Trimesta for relapsing, remitting MS in women. I will now turn the call over to Dr. Voskuhl, who will review what cognitive dysfunction means in the MS patient population, the scientific basis for this trial, the outcomes she is expecting from this trial, and how she believes Trimesta may be able to address the compelling unmet needs for these patients. Dr. Voskuhl?

Thank you. In multiple sclerosis, all of the trials that have been conducted in the past have focused principally on the reduction in relapse rates. However, there is an unmet need, specifically with respect to cognition. So, in the area of cognition, the MS patients, approximately 50% to 65%, so the majority, will at some point experience cognitive difficulties. These are very unique and distinct from those in Alzheimer's disease, for example, something that many of us are familiar with, due to its incidence. In contrast to Alzheimer's disease, where there is a clear memory problem, recent memory problem, the people with multiple sclerosis experience mostly a processing speed problem, so it will not be entirely evident to observers or outsiders that the MS patients are having cognitive difficulties, but to the patients, they are very much aware of it. It is indeed the reason that most of them have to quit work, or feel like they should work in a less stressful environment.

Basically, when they are confronted with multiple cognitive tasks, they become overwhelmed, and can't answer the questions. A great example of this would be if a MS patient were teaching a class, and at the end of the class, students came down and several of them asked questions. In the past the MS patient might have been able to say, oh yes, it will be this, that, and the other, and send the students along their way. However, with MS, as it affects most MS patients, the patient, or the teacher in this case, will find themselves somewhat overwhelmed by all of the questions at once, and they feel like they need time to come up with the answers to these questions, if just given more time. So it's, really, principally a processing speed problem. And it's so important, actually, and so widely recognized, that a test called the PASAT, it's the paced serial addition test, it has become part of the standard MS functional composite, which is a composite that assesses MS disability, and in includes -- the MS composite includes cognitive function and walking speed. Everybody knows that walking speed is important, but recognizing the importance of this cognitive difficulty, it is now one of the parameters within the standard MS profile.

So given that widespread recognition of cognitive difficulties, the specific processing speed problem, and given the fact that there are no treatments targeting this particular disability in MS-- and again, as I said, that it causes most patients, that is the reason they quit working, it's also the reason they can have difficulty with social situations, of course, that involve multitasking cognitively. The patients are very aware of it, it makes them very uncomfortable. I think we could all imagine if we were in the same position. There really is a very intense unmet need to take care of this problem for the patient, so MS is more than walking, is the bottom line. Now, none of the drugs that are available so far have been targeted toward this cognitive difficulty, and they have had very minimal affects on the cognitive problem. We have become very interested in whether Trimesta, since it is principally an estrogen, on whether it could help with this cognitive problem, because there's a lot of basic science suggesting that estrogens can be neuroprotective, and not just anti-inflammatory, so not just suppressing immune system, not just suppressing relapses, but also, principally affecting the brain and the ability to function confidently. Some of this has been shown in as simple systems as rats and mice, who had ovarectomies and then had estrogen giving back, in normals, it's been shown in animal models, and we have just shown in our animal model, the MS, that indeed giving estriol, basically the main component of Trimesta, that it does indeed improve cognitive function.

So, that together, we've got a new trial that has started, and it's very exciting, because the primary outcome for this trial will be cognitive testing. And it will be formal cognitive testing that is very designed for the MS patient. It's brief, and it's designed to target them specifically. Then, the secondary outcomes will be brain MRI and a cognitive evoked potential, so it's a biomarker of the cognitive problem, and then of course the standard things that everybody looks at in MS, which are the relapse rates and the walking speed, the EDSS. So, I guess that's it in a nutshell. The new trial will enroll about 50 to 60 patients, and they'll be equally split between getting Trimesta or placebo. The beauty of it is, it should be easier to enroll, because all of the patients can be on their standard immunomodulatory therapy, whether that be an Interferon or Copaxone. They continue taking them, because we know they don't do much to cognition, and then we add on estriol or a placebo pill to their standard therapy. We are going to treat them for one year, and we're actually not so much looking for a slowing of the decline. We're actually looking for an improvement in the cognitive testing, because estrogens have been shown to improve the branching out of these nerve cells, or neurons, to make new synapses, and the synapses are the connections. So making new out-branches and new connections of these nerve cells to cause actually an improvement, not just a slowing of decline of cognition. And I think that's the overview. It probably would be good to move on with that overview.

Great, thank you, Dr. Voskuhl. That was wonderful. And for those interested in asking questions related to the cognitive dysfunction MS clinical program, Dr. Voskuhl will be available during the Q&A session at the end of our call.

Now, I would like to turn to our discussion of our other clinical development programs. I'll begin first with relapsing remitting multiple sclerosis While there are currently eight FDA approved therapies for multiple sclerosis, they, by and large, are strong anti-inflammatory drugs, and only provide a modest and temporary benefit for patients with relapsing remitting multiple sclerosis. The majority of these approved drugs require frequent, painful injections or infusions that have been associated with unpleasant side effects, high rates of noncompliance among users, and eventual loss of efficacy, due to the appearance of resistance to approximately 37% of patients. This dissatisfaction with current treatment is why we and many others are so excited about the revolutionary potential of our Trimesta drug candidate.

If one were to go to the chalkboard and design their ideal MS drug candidate, it would likely have the following features; number one, safe. Two, oral, once daily. Three, well-tolerated. Four, anti-inflammatory as well as immunomodulating properties, and five, existing evidence of efficacy. In our opinion, Trimesta meets all of these criteria. So first, safety. Estriol has been approved for therapy in Europe and Asia for the treatment of post-menopausal symptoms, and thus, in our opinion, has a wealth of safety data in healthy women associated with it. Two, oral, once daily. Well, Trimesta is an oral, once daily pill. Three, well-tolerated. In women who take estriol for postmenopausal symptoms, they tolerate it extremely well and are highly satisfied with it. Four, anti-inflammatory, as well as immunomodulating properties. For reasons that Dr. Voskuhl touched upon, estriol's mechanism of action is what one would desire in such a therapy. Five, existing evidence of efficacy. We know that pregnancy causes remittance in MS, and estriol is thought to be responsible for it. Also, improvements in MS brain lesions were observed with patients treated with estriol.

In addition to meeting all these criteria, Trimesta has received over $8 million of non-dilutive grant money, so others obviously agree with the potential therapeutic advantages of estriol over existing therapies. This past Friday, we were excited to announce that we have partnered with the Skirball foundation and several other financial supporters to equally fund the Trimesta cognition trial. We believe that such an arrangement both validates the therapeutic value of Trimesta to treat cognition dysfunction in MS patients, as well as provides non-dilutive capital for our drug development programs. Our collaboration with the Skirball foundation represents a new paradigm for nonprofit organizations and biotech companies to bring new products to the market. I expect in our industry we will see more of these types of collaborations. We're expected to be a trailblazer here.

Moving on to flupirtine for fibromyalgia, I'd like to remind everyone of our $17.5 million corporate partnership with Meda that we announced in May, 2010. Meda assumes all future development costs, and it estimates that the US market for fibromyalgia is near a $1 billion at the time of potential launch. If certain milestones and results are achieved, we are eligible to receive up to $15 million of additional milestone payments, and royalties on net sales. Flupirtine is a potentially revolutionary product for fibromyalgia. The 30 current products are either antidepressants or seizure drugs. A poor fit, in our opinion, for a disease characterized by pain. Flupirtine has already been approved in Europe for pain, and represents the unique mechanism of action for treating fibromyalgia. Already, clinical data was generative harbor, indicating its potential efficacy in fibromyalgia patients that failed all other treatments.

Now, I would like to discuss ALS, or Lou Gehrig's disease. In June 2011 we're pleased to announce plans to sponsor clinical trials for patients suffering from ALS. This trial is based on the hypothesis of the neurological team at the PNA center for neurological research that giving high doses of zinc to ALS patients may decrease the amount of toxicity from unfound glutamate and prevent neurotoxicity. Importantly, this clinical trial is intended to evaluate the safety and efficacy of our proprietary drug candidate, AEN 100, a gastroretentive sustained release zinc-based tablet in ALS patients. The preparation of the clinical protocol is currently ongoing, and it is intended that an amendment will be filed to the current investigator IND application.

Efforts are also underway for the manufacturing of clinical trial medications and protocol review by the institutional review board. Currently, the clinical investigators at PNA are conducting a Phase I-II open label study of ALS patients to determine the safety of zinc in conjunction with low doses of copper. To date, no safety issues related to zinc therapy have been observed in the ALS patients. As the findings from this open label study are the basis for our planned clinical trial, we look forward to PNA presenting the final results at the twenty-second international symposium on ALS, motor neuron diseases in Sydney, Australia from November 30 to December 2, 2011. We intend to disclose the results concurrent with PNA's presentation at this international symposium.

Now, I will move on to our wellZin commercialization program. We announced last week that we have executed an agreement with F&F Foods of Chicago, Illinois to provide commercial scale manufacturing of wellZin, and we are working in the distribution and marketing aspects of our wellZin products in addition. We look forward to making wellZin available for this year's cold season.

Let me conclude by saying, at Adeona, we are dedicated to developing new medicines for serious central nervous diseases in illnesses that currently have limited treatments. We are today clinically testing with our collaborators new treatment options for lapses in multiple sclerosis and cognitive dysfunction in multiple sclerosis. We are planning to soon initiate a clinical trial under an IND to evaluate our zinc-based product, AEN100, in the treatment of ALS. We continue to advance our product candidate wellZin toward commercialization. At Adeona, we are motivated each day to do the best work we can possibly do for the people suffering from serious CNS diseases. From time to time, we share directly from them or their families. We aspire to give them a reason for hope in a better tomorrow.

Now, let me open up the floor to any questions. Will the call moderator please describe the procedure to ask questions from our listeners?

Thank you. We will now begin the question and answer session. (Operator Instructions) At this time, we will pause momentarily to assemble our roster. Mr. Keay Nakae of Chardan.

Thank you. Couple questions for Dr. Voskuhl. First of all with respect to the clinical trial design of the cognition study, can you tell us how much interaction have you had with the FDA in designing the study?

I haven't based the study design on the FDA's recommendation. I've based it on what we know about MS and what we know about estriol treatment.

Okay. In choosing the sample size, what is your hypothesized treatment benefit that you're hoping to see in terms of improvement in the PASAT score?

It is, of course, a significant improvement between the groups. Basically, you compare baseline to month 12 within the individual. Actually, we are doing it at zero, six, and 12 months. We do it for each individual, then we compare the two groups of individuals. We have powered it to where we will see a significant difference between those groups. With respect to the percent change, we expect to see about a 10% to 15% improvement, actually, and this is an important point. So, some drugs may hope to merely slow the decline. We didn't design it that way, because we think the decline in MS will be too slow to have a trial this short, which is only one year duration. So, rather than do that -- and also based on the basic science, as I said, about probably being able to improve the connections being made. We think we can cause an improvement in -- it's not just stabilizing the disease but improving it by about 10% to 15% on the testing. The most classic testing.

Okay. Given that it's basically an all commerce trial, is there any types of medication -- I know you've talked about their inability to improve cognition, but is there any of the current treatment regimens that might favor your drug or work against your drug as you enroll all-comers?

Well, I will qualify a little bit the all-comers notion. We are not going to have people enrolled that have taken Tysabri or some of the more toxic medications, because we don't want a late sequela of those more toxic medications to come through. Now, when we get the people in our trial --so to be specific, we've got people on Rebif, Betaseron, and Avanex, and they are in one group. We've got people also on Copaxone. Now, what I mean by the group is it's going to be stratified according to that treatment. So, that when people get randomized you will have an equal amount of people that are on the interferons that are on the estriol and placebo, and it will equal the number of people that are on Copaxone, that are on the estriol and placebo. Again, the reason we chose those was because it is quite widely known that there is minimal effect of those drugs on cognition.

Okay, but none of them might have an advantage or disadvantage for your drug that you're aware of?

The advantage is that we know that they are relatively safe, these injections that cost $35,000 to $40,000 a year. The ones that we've chosen are extremely safe. We've excluded the ones that are not safe, and we've also chosen them because they do not have an effect on the primary outcome measure.

Okay, very good. One question for Jim. With the ALS stated that is going to be presented at the end of this month, what specifically will they report on? Will it just be a subset of the stuff? How full or detailed will be analysis be?

Yes. Thanks, Keay, for asking that question about what will be presented at the international symposium. It is our understanding that PNA will present the data from all 10 patients for the open label trial that they are currently conducting. So, that would be all the patients that they had planned to study in this Phase I/II clinical trial.

Okay, very good. We look forward to that. Thanks.

Yes, we do, as well, look forward to it.

(Operator Instructions) I am showing no further questions in the queue. This will conclude our question and answer session. I would now like to turn the conference back over to Dr. Jim Kuo for any closing remarks.

I'd like to thank everyone once again for joining our call. It's wet here where we are, and we hope it's drier where you are. So, thanks again.

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