Vaxart Inc (VXRT) 2016 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen. Welcome to the Aviragen Therapeutics third-quarter 2016 earnings conference call. (Operator Instructions.)

I would now like to turn the call over to Will O'Connor of Stern Investor Relations. Please proceed.

Thank you, operator. My name is Will O'Connor of Stern Investor Relations. I would like to welcome you to the Aviragen Therapeutics conference call and webcast to review the Company's third-quarter 2016 earnings results and to provide an update on recent pipeline and corporate developments.

This afternoon, we issued a press release which outlines the topics that we plan to discuss today. The release is available at aviragentherapeutics.com. With me today from Aviragen Therapeutics are President and CEO, Dr. Joseph Patti; EVP and CFO, Mark Colonnese; and Vice President of Clinical Development, Anna Novotney-Barry.

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 materially from what is discussed on today's call.

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

Thanks, Will, and good afternoon, everyone. During this quarter, we had a significant number of events that I believe have enhanced the Company's position, both strategically and financially, and I'll begin today by sharing with you the significance of each event.

First, let's start with the change of our name from Biota Pharmaceuticals to Aviragen Therapeutics. It's changed dramatically over the last 24 months, and this change was the last step in our transformation from what was largely a drug discovery and early-stage licensing organization to one focused on the clinical development of our portfolio of infectious disease product candidates that address important viral diseases into late-stage clinical trials. The new name reflects our strategic focus on developing the next generation of direct-acting antivirals with the associated potential for significant shareholder value creation.

Dovetailing well with our corporate strategy was the recent transaction in which we received a gross payment of $20 million from Healthcare Royalty Partners for a portion of the Company's royalty rights related to Inavir, the number-one selling influenza treatment in Japan. These non-dilutive proceeds provide the Company financial flexibility as we prepare for top-line data from the Phase 2b Vapendavir SPIRITUS trial, as well as the Phase 2a BTA585 RSV challenge study later this year.

On a strategic note, in March we announced the sale to Spero Therapeutics our intellectual property portfolio focused on gram-negative and gram-positive antibiotics. This technology wasn't a particularly good fit with our focus on antivirals, so rather than shelve a potentially valuable asset, we put it into the hands of a company that's totally focused on antibiotic drug development. While the specific financial details have not been disclosed, we did realize a small immediate financial benefit. But more importantly, we're positioned ourselves to receive significant financial upside should Spero develop compounds that become clinical candidates or commercial products. We think this transaction reflects solid management of our available assets.

Now turning to one of our clinical assets, BTA585, a fusion inhibitor that has been progressing well through the initial human clinical trials. After reporting positive results in December from our Phase 1 single ascending dose study, in February we reported top-line results from the Phase 1 multiple ascending dose study, in which we indicated that BTA585, dosed twice daily at 100, 400, or 600 milligrams, was observed to be generally well tolerated at all dose levels with no serious adverse events. Additionally, there were no drug-related clinically significant adverse events in ECGs or clinical laboratory values observed. Further, antiviral levels of BTA585 were rapidly achieved and maintained in the plasma and nasal wash fluid, which we believe is relevant for the ongoing Phase 2a RSV challenge study.

The RSV Phase 2 challenge study, which was initiated last month, is a double-blind, placebo-controlled trial designed to evaluate the safety, pharmacokinetics, and antiviral efficacy of our orally dosed BTA585 in healthy volunteers challenged intra-nasally with RSV. Following a positive test for RSV or five days after challenge, approximately 60 healthy adults will be randomized to receive either BTA585 or placebo, dosed twice daily for seven days and then monitored for 28 days. The primary endpoint of the study is area under the curve for viral load in nasal wash among subjects who test positive for RSV prior to dosing. We anticipate top-line efficacy and safety data to be available in the second half of this year.

By the age of one year, 60% to 70% of children will become infected with RSV, in which approximately 2% to 3% require hospitalization. By two years of age, almost all children have been infected by RSV. Global estimates of the annual RSV disease burden in children under five years old are approximately 30 million lower respiratory tract infections, 3 million related hospitalizations, and up to 200,000 associated deaths. So there is a clear and obvious clinical unmet need for antivirals to address this important infection. The FDA recognizes this unmet clinical need, and in February granted BTA585 fast-track designation.

Moving on to our most advanced program, Vapendavir, a direct-acting antiviral to treat human rhinovirus and upper respiratory infections and to reduce the frequency of exacerbations in at-risk populations, including asthmatics, we are currently studying Vapendavir in the Phase 2b SPIRITUS trial, which is a multi-center, randomized, double-blind, placebo-controlled, dose-ranging study in moderate to severe asthmatics. These patients are experiencing symptomatic HRV infection and have a history of their asthma worsening with a cold or upper respiratory infection.

The ability to help manage the patient's asthma control, improve lung function, and reduce the incidence of exacerbations would provide significant clinical benefit to these asthmatic patients who, when they develop an upper respiratory infection, typically need to increase the frequency of a short-acting beta-2 agonist, or more severe cases need to take oral systemic corticosteroids to prevent an exacerbation or, even worse, hospitalization. I'm pleased to report that we're nearing the completion of enrollment in the trial and continue to expect to report top-line data in the second half of this year.

Turning to our third clinical program, in February we commenced dosing patients in our Phase 2 study of BTA074, a first-in-class direct antiviral in development for the treatment of genital warts, or condyloma. Condyloma are caused by human papilloma virus types 6 and 11, the most common manifestation of HP infection and also the most common sexually transmitted viral disease worldwide.

In February when we began enrollment in the 210-patient randomized, placebo-controlled Phase 2 trial based on the duration of dosing and the number of subjects that needed to be randomized, we estimated that top-line data would be available in the first half of 2017. However, due to a delay in the availability of clinical trial material required to supply the initial clinical sites, we now anticipate top-line data to be available in the second half of 2017. In order to minimize the delay as much as possible, we are planning to approximately double the number of clinical sites that could participate in the trial.

All in all, we believe the overall progress that we achieved in the third quarter prepares us well for an exciting second half of 2016.

With that, I'll turn the call over to Mark to review the financials.

Thanks, Joe, and good afternoon, everyone. Today I'll be reviewing the financial results of the third quarter of our 2016 fiscal year, as well as providing an update on our cash position. So let's start with a review of our revenue and expenses.

Revenue decreased to $5.3 million for the three-month period March 31, 2016, from $5.9 million in the same period of 2015. The decline was mostly due to a $1.3 million decline in Relenza royalties, reflecting lower government stockpiling, largely offset by a $1.1 million increase in Inavir royalties.

Inavir has been steadily growing its market-leading share of the flu medication market in Japan, which as an aside, led us to the final structure of the sale of a portion of our Inavir royalties for $20 million, as Joe highlighted earlier. Based on the product's historical success, we believe there's considerable upside to Inavir's commercial prospects in Japan, so we were keen to retain all of the rights to the royalty upsides from future sales growth. We also believe that our royalty streams are an overlooked asset by investors based on the Company's current market cap, since royalty streams from Relenza and Inavir should extend to 2019 and 2029, respectively.

Turning back to our review of the results of operation, looking at research and development expense, we increased our investment to $8.5 million for the three-month period ended March 31, 2016, from $4.8 million in the same period in 2015. This increase was the result of higher clinical costs related to the ongoing Phase2b SPIRITUS trial for Vapendavir, the introduction of BTA585 into clinical trials this year, including a Phase 1 SAD/MAD trial, and startup costs for a Phase 2a challenge trial, and expenses for the initiation of a Phase 2 trial for BTA074. Remember that this next quarter coming up will be the first time that we have had three Phase 2 trials running concurrently, so we should continue to see R&D spending at higher levels than last year while we have all of these Phase 2 clinical trials ongoing.

General and administrative expense decreased to $2.3 million for the three months ended March 31, 2016, from $3.2 million for the same period in 2015. The reduction was due to lower staff-related expenses and the absence this year of legal and other professional fees that we incurred last year during our acquisition of our BTA074 asset.

Turning to our balance sheet, the Company held $50 million in cash and investments as of March 31, 2016. And combined with the $20 million in gross proceeds from the partial sale of our Inavir royalty in April, that increases the Company's available cash balance to approximately $70 million.

As a reminder, the third-quarter 2016 financial results, as well as this afternoon's announcement, are available on the Investors section of our website. At this point, let's open up the call for questions. Operator?

(Operator Instructions.) Christopher James, FBR and Company.

This is Justin Kim on for Chris. So we just had a couple of questions. Can you discuss a little bit more on the unmet need in HRV, and then what patient population groups we might expect to see meaningful impact and opportunity to treat or change the treatment paradigm?

Sure, thanks for the question. This is a perfect opportunity for Anna Barry to discuss that, having just come back from an important meeting that the FDA held on RSV.

I think he asked about the unmet need in HRV?

Oh, I'm sorry. I thought you said RSV. I'm sorry. Yes, my bad. I thought you said RSV -- sorry. But we can touch on that anyway.

HRV, clearly, obviously, we're developing this for a patient population that we believe, the moderate to severe asthmatics, that as I mentioned in the prepared remarks, when they develop an upper respiratory infection, their asthma control, it becomes challenging for them to manage their asthma control. We understand from the patient population and baseline information in our trial that they are borderline control, their lung function is depressed, and that from the literature, there's a significant number of exacerbations that can occur in this patient population. We clearly think there's a definite unmet need there.

Similarly, COPD patients exhibit, or have the same sort of issue when they develop HRV upper respiratory infections. So ideally, with positive data coming out of SPIRITUS, we would be very interested in exploring the opportunity in COPD. And finally, related to the asthmatics -- obviously, pediatric asthmatics; there's a significant opportunity there -- actually, a growing opportunity for the number of children that are presenting to their pediatrician with asthma and asthma-like symptoms.

I would just add, Joe, that there's numerous studies that establish -- and certainly our own study will establish that as well -- that the most common upper respiratory infection agent that's viral is HRV. And so there's quite a few of the patients. They get colds and upper respiratory infections throughout the year that the responsible agent is human rhinovirus. And so similar to the situation when you have flu that is circulating, you can rest assured that many of the colds and infections that are seen in the community will be due to the agent we're studying.

Great. That's very helpful. And I guess, segueing into RSV, then?

Oh, now we get RSV correct. Go ahead, Anna.

So as far as the unmet need, although any child, particularly those from age two to two years of age and the elderly can get an RSV infection, it's particularly full of morbidity for those who have underlying disease or who are immunosuppressed, or in the case of infants who are premature. And although there are a plethora of vaccines and prophylactic agents in development, there will always be a need to intervene with a therapeutic agent for RSV, even when you have prophylactics or vaccines, because not everybody will get a vaccine, and people will still get sick. And this was certainly established recently at a meeting last week, where FDA, academia and investigators and industry attended to discuss the development of clinical trials and endpoints in clinical trials in order to develop these drugs.

So I think it's been well established that there's an unmet need for interventional agents, and these agents have the challenge to be developed for use, both in young children and also in the elderly and in immuno-compromised hosts.

Great. And I guess my last question would be on the data events for the upcoming year, or for the end of the year, second half of the year. Are there specific conferences that we can expect a full breakout of the data?

It would be unlikely for us to have the data as well as get it prepared for the infectious disease cycle. Those, unfortunately, aren't coinciding with when we believe top-line data could be available. We will have, or we do anticipate, though, presenting a poster on the Phase 1 SAD/MAD 585 data in September at the -- October, I'm sorry -- at the ISDA meeting.

Great, thanks.

(Operator Instructions.) Anita Dushyanth, Zacks Investment Research.

I just had a couple of things on the RSV trial. How many patients do you think you -- the enrollment rate is per month? And as far as the readout goes, when you say that you're looking into the second half of 2016, will that be more towards the last quarter of this year, or will it be in the later half of the third quarter of this year?

Yes, Anita, so to the second question, the best guidance we have right now is the second half. We can't get much more precise than that because it's not a monthly or weekly, biweekly enrollment. It's a, call it quarantine group by quarantine group. So the way the trial is run is that there's a number of rooms that can hold the healthy volunteers that would subsequently be challenged. And so that is an iterative process, and so we have blocks of individuals scheduled throughout the summer and into the early fall that will come in, be quarantined, challenged, and then released. So it's a little different than your typical trial, where you have multiple sites all enrolling at one time. This is a single-site study.

Right. Okay, thank you.

This concludes today's Q&A session. I would now like to turn the call back over to Dr. Patti for closing remarks.

Thank you. In closing, we have a solid balance sheet that allows us to execute our strategic plan as we look forward to top-line data from the Phase 2b SPRITUS trial and the Phase 2a RSV challenge study later this year. We believe that successful outcomes from these important studies should unlock considerable shareholder value. I look forward to updating everyone on future calls. Thank you for joining us today, and have a pleasant evening.

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