Vaxart Inc (VXRT) 2015 Q1 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the Biota Pharmaceuticals first-quarter FY15 earnings conference call.

(Operator Instructions)

I would now like to turn the call of Sarah McCabe of Stern Investor Relations. Please proceed.

Thank you, operator.

My name is Sarah McCabe of Stern Investor Relations. I would like to welcome you to the Biota conference call and webcast to review the Company's first-quarter FY15 financial results, and to provide an update on a number of recent corporate developments. This morning we issued a press release which outlines the topics that we plan to discuss today. The release is available at www.Biotapharm.com. With me today from Biota are President and CEO, Dr. Joseph Patti, and Executive Chairman, Russ Plumb.

Before we begin the call, I would like to remind you that today's discussion will contain forward-looking statements that involve risks and uncertainties. These risks and uncertainties are outlined in today's press release and in the Company's recent filings with the Securities and Exchange Commission, which we urge you to read. Our actual results may differ material from what is discussed on today's call.

With that, I will now turn the call over to Biota's CEO, Dr. Joseph Patti.

Thanks Sarah, and thank you for joining us this morning.

Today on our call I'll begin with a brief overview of the corporate changes we recently announced at Biota. Then I will provide an update on the latest activities related to the planned initiation of a Phase 2b trial with vapendavir in patients with moderate to severe asthma, and provide a status update on the data analysis from the LANI Phase 2 IGLOO trial. Russ will then review the financials from the quarter and give us an update on our negotiations with BARDA, which we are pleased to announce today that we've been able to resolve a critical item and reach a settlement related to the cost to complete the Phase 2 IGLOO trial subsequent to the termination of our contract.

Let me start with the recent management changes. On September 26 we announced that I would become President and CEO of the Company and that Russ Plumb would be appointed Executive Chairman of the Board. These changes became effective October 1. In addition to the executive operating changes, Dr. Jim Fox transitioned from Chairman to Lead Director at Biota.

I believe 2015 is going to be a very exciting year for Biota as we advance vapendavir into Phase 2b trial next quarter, progress our RSV F protein inhibitor into the clinic, and continue our efforts to broaden our antiviral pipeline. Today we have a strong balance sheet with two royalty-generating products, a team that is clinically focused and data-driven, which I believe can deliver multiple opportunities to create shareholder value over the next several quarters.

Now let's turn our attention to our first clinical candidate, vapendavir, a potent broad-spectrum capsid inhibitor of enteroviruses in development for the treatment of human rhinovirus-infected patients with underlying respiratory illnesses. In the seven major markets, which consist of Japan, EU and the US, there are an estimated 64 million individuals of all ages that have asthma. Further, approximately 24 million of these individuals can be classified as having moderate to severe asthma.

There is growing evidence that suggests upper respiratory infections are a significant risk factor associated with asthma exacerbations. In most cases, human rhinovirus, or HRV, is the dominant viral pathogen detected in both children and adult asthmatics experiencing an exasperation. Additionally, asthma patients are more likely to have an HRV lower respiratory infection, with symptoms being more severe and lasting longer.

It is against this backdrop of significant lung disease and unmet clinical need that we're excited about the potential of vapendavir. Activities required for the planned initiations of Phase 2b trial next quarter are well underway. Drug substance manufacturing is complete, over 60 clinical sites have been selected in the US and Europe, and the formal approval of regulatory submissions is tracking well.

The Phase 2b trial is expected to enroll approximately 375 patients. The primary endpoint for this trial will be the least square mean change from baseline to study day 14 in the ACQ6 total score. The ACQ6, or asthma control questionnaire, is a validated tool designed to assess asthma control and utilizes both patient-recorded outcomes and forced expiratory volume in one second.

Planned secondary endpoints included the measurement of asthma exacerbations, changes in lung function, virology outcomes, as well as affects on symptoms of HRV infection. The primary efficacy analysis population will be the ITTI-infected population defined as all subjects with confirmed HRV infection who receive study treatment. In addition to this trial on asthmatics, we are also considering a Phase 2a HRV challenge study in patients with Chronic Obstructive Pulmonary disease, or COPD.

Now let me turn to our second clinical candidate, laninamivir, or lani, which is being developed as a one-time treatment for influenza A and B infections. As I commented during our last earnings call, we believe that the totality of data analyzed to date suggests that a single dose of lani demonstrated robust antiviral activity, and that in our opinion lani exhibited activity similar to that observed in other clinical trials for other neuraminidase inhibitors.

We are making progress towards completing the clinical study reports to the lani Phase 1 asthma study, the TQT study, the Phase 1/2 pediatric study, and the Phase 2 IGLOO study. We are currently -- we currently estimate that these reports should be complete next quarter, at which time we will request a meeting with the FDA. The goal of the FDA meeting would be to obtain clarity on the appropriate path to approval, including defining the primary endpoint for future registration trials. We believe that the feedback from the Agency will be critical as we engage potential partners interested in the Phase 3 development and commercialization of lani outside of Japan.

Finally, while we continue to pursue various strategies to broaden our antiviral pipeline, we are advancing BTA-C585, our RSV fusion inhibitor through IND-enabling studies, and anticipate the initiation of Phase 1 clinical trials in mid-2015. This follows our presentation of promising preclinical data ICAAC in September.

The data presented at ICAAC included results from a number of in vivo studies designed to assess the antiviral activity of 585 prior to and during experimental RSV infection in a cotton wrapped model, which demonstrated a dose-dependent decrease in virus titers in lung tissue. Similarly, a highly significant dose-dependent decrease in RSV mRNA in lung tissue was also observed in this model. Further, preliminary nonclinical oral single- and multiple-dose data from several animal toxicology studies indicated that 585 was highly bioavailable and well-tolerated.

I will now turn the call over to Russ for a review of this quarter's financials.

Thanks, Joe.

Before we review our financial results for the quarter, let me first say that we are pleased to announce this point that we've reached a partial settlement agreement with BARDA on their reimbursement of all post-termination date costs associated with completing the Phase 2 IGLOO trial. I will go into the details of this settlement and anticipating impact on our financial results next quarter, as well the status of ongoing discussions with BARDA in a few minutes.

I wanted to point out that this settlement agreement did not impact our accounting our financial results for the three months ended September 30, 2014. We anticipate the financial accounting impact of this agreement will be reflected in the quarter ended December 31, 2014. I also want to reiterate that it will be a little difficult to compare the financial results for this and next quarter with the similar quarters last year due to the nature of how we are accounting for contract revenue under our contract with BARDA that was terminated in May of 2014.

As we highlighted in our press release this morning, during the quarter ending September 30, 2014 we did not recognize or record another $1.3 million in contract revenue for activities and costs that we believe we're entitled to be reimbursed for under our contract with BARDA and pursuant to applicable governmental regulations, but for which we believe we potentially may not be fully reimbursed for as of September 30, 2014. This brought the cumulative amount of such revenue that we had not recognized from the termination date of the contract through September 30, 2014 to $4.9 million. We have, however, recorded all the costs related to the activities associated with this unrecognized revenue as of September 30.

I wanted to bring this to your attention. As you look at financial results for the quarter, please note that if we had recognized such revenue under more normative conditions, our revenue from services would have been $1.3 million higher during the quarter ended September 30, 2014.

That being said, today we reported a net loss of $6.9 million for the three-month period ended September 30, 2014 as compared to a net loss of $3.9 million in the same period last year. The $3 million increase in net loss as compared to the same quarter last year was primarily the result of a $2.5 million reduction in the net earnings we recognized on the BARDA contract, which in our statement of operations is easily calculated as revenue from services less cost of revenue, as well as a $1.9 million increase in research development expense, offset in part by $1.6 million change, or swing, from a foreign exchange loss last year to a gain this year.

The $2.5 million swing from a profit of $1.5 million on our BARDA contract activities last year to a loss of $1 million in 2014 is largely the result of significantly less activities being conducted under the contracted due to its cancellation in May of this year, and us not recognizing the $1.3 million in revenue I just alluded to.

The only other item I'd like to highlight in our statement of operations today for our first fiscal quarter was that our research and development expense increased to $4.9 million from $3 million the same period last year. The $1.9 million increase was a result of a $2.9 million increase in direct preclinical/clinical manufacturing costs associated with our vapendavir and RSV programs and a $100,000 increase in salaries, benefits and share-based compensation related to lower allocation of internal labor costs to the BARDA contract. These increases were offset in part by a $1.1 million decrease in research, preclinical costs and other expenses related other various preclinical programs that have been discontinued over the past year.

As of September 30 we held $77.6 million in cash, cash equivalents, short-term investments, and long-term investments, which is about $14.1 million less than we held at June 30, 2014. This decrease was largely the result of our loss from operations in the quarter of about $7 million, coupled with a $6 million increase in net working capital balances, which was largely related to the timing differences in payments of costs incurred and receipts of reimbursements under the BARDA contract. As I mentioned on our last earnings call, we have separated out the accounts receivable and accounts payable balances associated with the BARDA contract on our balance sheet so it is easier for you to assess the potential impact that the close-out of the BARDA contract may have on our future financial condition.

As reflected on our balance sheet, as of September 30, 2014 we recorded an accounts receivable balance of $16.3 million due from BARDA, and we owed $13.3 million in payables and accrued expenses associated with related activities. Again, this accounts receivable balances does not include the $4.9 million of cumulative revenue that we have not recognized as of September 30, 2014 under the BARDA contract.

So how do we anticipate the partial settlement agreement we just read with BARDA will impact our near-term financial results and position? As we indicated in our press release today, BARDA has agreed to reimburse us $4.7 million to cover all the costs associated with the completion of the Phase 2 IGLOO clinical trial of lani that occurred after the May 7, 2014 termination date of our contract. We anticipate that we will recognize the vast majority, if not all, of the revenue from this partial settlement agreement in the quarter ended December 31, 2014.

Further, of this $4.7 million settlement amount, approximately $3.4 million is included in the $4.9 million of revenue accounts receivable we have not recognized as of September 30, 2014. In other words, based on this agreement with BARDA, $3.4 million of the $4.9 million in revenue accounts receivable that was not recognized as of September 30 will be recognized under GAAP during the quarter ending December 31, 2014.

So if we were to pro forma our September 30 balance sheet to reflect the potential impact of this agreement, our contract accounts receivable balance from BARDA would be $3.4 million higher, or a total of $19.7 million, while our accounts payable would remain as is. I realize the accounting for this is a bit confusing. We want to try to be as transparent as possible, as the likely impact of this agreement on our future financial results and position without of getting too mired in the accounting details.

Finally, I want to emphasize that this partial settlement agreement with BARDA relates only to the post-termination Phase 2 IGLOO trial costs and does not include any agreement or settlement regarding other ongoing discussions and negotiations we are having with BARDA with respect to finalizing other invoicing costs for activities undertaken taken prior to the termination date, as well as those activities that occurred after the termination date, other than in association with the Phase 2 IGLOO trial. It also does not include any settlement regarding determining the nature and extent of any other equitable adjustments or final termination settlement.

While making good progress in getting these other items resolved, we cannot yet determined if, when, and to what extent we will finalize these discussions and reach a final settlement agreement or other partial settlement agreements with BARDA. I'd be happy to answer to questions you have regarding our financial results or the status of our discussion with BARDA during the Q&A session.

That concludes our prepared remarks this morning. We now open up the call for any questions. Operator?

(Operator Instructions)

Bret Holley, Guggenheim Securities.

Thanks for taking my questions. You guys, I'm just wondering, on the planned phase II trial for vapendavir, what is the historical kind of, I guess, outcome with a ACQ6 in regards to placebo effect? How do you control for that in the planned trial?

The goal, what's clinically relevant for these types of studies, is a change of 0.5 in the score of ACQ6. I'm not quite sure how you -- can you give me a little bit more specifics on what you mean about how you control for the placebo effect?

Well, I'm just wondering what kind of placebo effect is seen on the endpoint? I guess, kind of a corollary question is, how you going to manage getting confirmed rhinovirus infections in the trial?

Okay. I got you. So everybody -- so we will be doing multiple sampling techniques on the patients. So the patients will have to, one, be categorized as moderate to severe based on the level of inhaled corticosteroids they're taking.

Then they will have (technical difficulties) signs and symptoms of a rhinovirus infection. We will then take -- we take samples from them, which we will do PCR, as well as other respiratory viral panels. And so while they'll be enrolled in the study if they meet the inclusion criteria, the efficacy analysis will only be on those individuals that come back basically positive for rhinovirus.

Okay. And then, I guess, based on the experience with laninamivir, how do -- I guess, how do you model how many confirmed infections you're going to get? What is the risk that this is going to drag out the timeline of the trial?

Right. The timeline and the 375 patients is taking into account somewhat, I'd say, moderately conservative approach of 40% of the randomized patients will actually have confirmed HRV infection.

Okay. And then what's -- I'm sorry.

The actual number obviously is a lot less that we need for the powering of the study. But we are allowing, or we're assuming a 40% -- we hope that we can do better than that. Some previous HRV studies, large phase IIIs, were able to get close to 60%. But again, to be conservative we're modeling 40%.

Okay. And then that puts you on the timeline. With all of those assumptions, that puts you what kind of timeline for data?

Right. So we are allowing approximately 12 month to enroll, which then would give us data midyear in 2016.

Okay, great. Thank you very much.

(Operator Instructions)

At this time, I'm not showing any further questions. I would now like to turn the call back over to Dr. Patti for any closing remarks.

Thank you. T o summarize the key elements of today's call. First, planning activities related to the initiation of vapendavir phase IIb trial are well underway. We believe we are on schedule to begin the trial next quarter.

Two, we anticipate submitting the final lani critical study reports to the FDA next quarter. Finally, we are pleased with the recent partial settlement agreement with BARDA, and we continue to discuss with BARDA the timing, nature and extent of the reimbursement for our other invoices and elements key to the termination settlement.

Thank you for joining us this morning. We look forward to updating you on future calls.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day.