Vaxart Inc (VXRT) 2016 Q4 法說會逐字稿

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Aviragen Therapeutics fourth-quarter and fiscal year-end financial results conference call.

(Operator Instructions)

It is now my pleasure to hand the conference 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 fourth-quarter and fiscal year-end 2016 earnings results, and to provide an update on recent pipeline and corporate developments.

Earlier today 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. Throughout the fourth quarter we have made significant progress in all areas of the organization, critical to building a dynamic value-creating anti-infective company. We have advanced our clinical pipeline of three direct acting antivirals, we've strengthened our management team with the addition of Jonas Niaura as Vice President Corporate Development and Strategy, and we bolstered our balance sheet with the addition of $20 million of non-dilutive funding.

Additionally, in July we executed an exclusive worldwide license and sponsored research agreement with the Georgia State University Research Foundation to jointly develop and commercialize RSV replication inhibitors discovered by Professor Richard Plemper and his team in the Institute for Biomedical Sciences at Georgia State University. This collaboration marks another important milestone as Aviragen as we continue to broaden our portfolio of novel antivirals focused on respiratory infections with significant unmet clinical need.

Now turning to our antiviral clinical development programs, let's begin with a brief overview of our vapendavir program, a direct-acting antiviral to treat upper respiratory infections caused by human rhinovirus in at-risk populations such as asthmatics and COPD patients. We are currently evaluating the safety and efficacy of vapendavir in the Phase 2b SPIRITUS trial, which is a multicenter, randomized, double-blind, placebo-controlled, dose-ranging study in moderate to severe asthmatics. These patients are experiencing symptomatic HIV infections and have a history of their asthma worsening with an upper respiratory infection.

The primary endpoint of the study is the change from baseline to study day 14 in asthma control as measured by the Asthma Control Questionnaire 6, or ACQ-6. The ACQ-6 is a validated tool that includes both an objective measure of lung function and patient reported data reflecting asthma symptoms.

Key secondary endpoints in this study include lung function assessments, such as FEV1, the incidence of moderate and severe exacerbations, and the use of beta 2 agonists. We are 90% enrolled in the study. We anticipate completing enrollment in the near term, and releasing top-line data from the trial around the end of the year.

Now let's turn to BTA585, our oral fusion inhibitor in development for the treatment and prevention of respiratory syncytial virus, or RSV, infections. We are pleased to report that, following a temporary delay and approval from the UK regulatory authority, MHRA, enrollment has resumed in our Phase 2a RSV challenge study. The study, which was initiated in April, is a double-blind, placebo-controlled trial designed to evaluate the safety, pharmacokinetics and antiviral activity of BTA585 in healthy volunteers challenged intra-nasally with RSV.

Following a positive test for RSV, or five days after challenge, two cohorts of 30 healthy adults will be randomized to receive either 585 or placebo, dosed twice daily for seven days and monitored for 28 days. The primary endpoint of the study is area under the curve for the viral load in nasal wash among subjects who test positive for RSV prior to dosing.

The first cohort of 30 subjects dosed at 400 BID has been enrolled. Following a safety review committee in early October, a decision to proceed to enroll the final cohort for 600 mgs BID will be determined. As a point of reference, both 400 milligrams and 600 milligrams BID have previously been evaluated in our Phase 1b seven-day multiple ascending dose study.

Data from the MAD study shows that BTA585 was generally well tolerated at all dose levels, and overall there are low incidents of adverse events. Additionally, there were no serious adverse events, no drug-related clinically significant changes in ECGs or laboratory values. So, given the current timeline, we expect, anticipate top-line antiviral data from the Phase 2 trial will be available around the end of the year.

Finally, let's turn to our third Phase 2 clinical candidate, BTA074, a first-in-class direct-acting antiviral in the development for genital warts, or condyloma. Condyloma are caused by human papilloma virus 6 and 11, the most common manifestation of HP infection and the most commonly sexually transmitted viral disease worldwide.

In February we initiated a 210-patient randomized placebo-controlled Phase 2. As we previously reported, due to a delay in availability of drug product required to resupply the initial clinical sites, we have extended the project timing for top-line data results. We are now producing enough drug to complete the entire trial and will be delivering that drug product to clinical sites in late Q4 calendar 2016.

We also will be expanding the number of sites in order to expedite enrollment in this trial. As we see enrollment trends from all participating clinical sites, we should have better clarity on when enrollment will be complete and when top-line data would be available. As of today we anticipate top-line data in the second half of 2017.

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

Thanks, Joe, and good afternoon, everyone. Today I'll be reviewing the financial results for the fourth quarter and fiscal year ended June 30, 2016, as well as providing an update of our cash position.

Let's start out with the bottom line. Our net loss for the three-month period ended June 30, 2016 was $7 million, as compared to a net loss of $19.9 million in the same period of 2015. Basic and diluted net loss per share was $0.18 for the three-month period ended June 30, 2016, as compared to $0.55 in the same period of 2015.

The income statement components of our loss are as follows. Revenue decreased to $0.6 million for the three-month period ended June 30, 2016, from $4.1 million in the same period of 2015, due to a $3.5 million reduction in royalty revenues. We actually had some modest government stockpiling sales of the flu product Relenza in 2015, while there was no stockpiling in 2016.

Just as background here, almost all of our royalties from regular end-market flu sales come in the late fall and winter months and is typically reported in our December and March quarters. If we have any meaningful royalties in the June and September quarters, it likely comes from government stockpiling orders.

Turning now to research and development expense, we increased our investment to $6 million for the three-month period ended June 30, 2016 from $5.2 million in the same period in 2015. The increase reflected higher clinical costs related to the initiation of our Phase 2a challenge trial investigating the use of BTA585 as a treatment for RSV, and higher expenses for producing clinical supplies of BTA074 for its Phase 2 clinical trial for the treatment of condyloma. This trend of modestly higher R&D costs should continue at least for the period that we have three concurrent Phase 2 clinical trials ongoing.

As you reviewed our income statement, you certainly noticed the large expense last year totaling $17.6 million, related to in-process R&D expense. This was purchased R&D from our Anaconda Pharma acquisition in 2015, and was a one-time expense. There was no in-process R&D expense this year.

Looking at general and administrative costs, we continue to keep a lid on our G&A spending, and there was no increase in spending in 2016 over 2015 levels.

As you look closer to our financial statements you'll note some unusual accounting related to our sale of a portion of our Inavir royalties for gross proceeds of $20 million to Healthcare Royalty Partners, or HCRP, which we announced in April 2016. So, I'll just take a minute to give you the main impact on our financial statements.

As a result of a limit on the amount of royalties that HCRP can earn under the arrangement, US accounting rules require Aviragen to account for this transaction under what is known as the debt accounting method. So, there is no gain on our income statement. And we recorded an $18 million liability related to this transaction, part of which is in current liabilities, and the majority of it is in long-term liabilities on our balance sheet.

Now here's the important thing to know. Aviragen has no obligation to pay any amount to HCRP other than to pass through to HCRP its share of royalties as they are received from Daiichi Sankyo who markets Inavir. So, although we have a large liability on our books, we have no obligation to pay it.

In addition, although the royalty payments were sold to HCRP, the debt accounting rules require the Company to continue to recognize as revenue HCRP's share of the royalties. So, to help clarify this for you, we've added a new line on our income statement for HCRP's royalties called non-cash revenue. As this share of the royalties are passed through Aviragen to HCRP under the arrangement, the $18 million liability is reduced by a like amount.

Finally, we are required to record non-cash implied interest expense on the liability each quarter. So we've added a new line for non-cash interest expense on our statement of operations to help identify these amounts for you. This is interest expense that we will not be paying from Aviragen's cash either. So, I hope the new line items that we've added to our income statement will help all of you better track the results of our operations.

The good news of all this is that the Company held $69 million in cash and short-term investments as of June 30, 2016. This was buttressed last quarter by real cash from the aforementioned royalty sale, and, based on our current operating plan, which includes our three ongoing Phase 2 development programs, should last roughly into early 2018.

To quickly summarize the financial results for the full fiscal year ended June 30, 2016, we reported a net loss of $25.4 million as compared to a net loss of $19.1 million in the prior year. The $6.3 million increase in net loss from prior year was primarily due to a $15.3 million decrease in revenues, reflecting a $6.8 million reduction in royalty revenue, principally related to Relenza, and $8.5 million in lower service revenue due to the cancellation of the BARDA contract in 2014.

Also contributing to the higher full-year loss was $6.5 million increase in research and development expenses, largely related to higher costs for their Company's vapendavir and BTA585 clinical development programs. These items were partially offset by the impact of the non-recurring $17.6 million in-process R&D expense recorded in 2015 related to the acquisition of Anaconda Pharma.

That wraps up my comments. And as a reminder, the fourth-quarter and fiscal year-end 2016 financial results, as well as this afternoon's announcement, are available on the investors section of our website. So at this point let's open up the call for questions. Operator?

(Operator Instructions)

Ed Arce, HC Wainwright & Co.

Hi. Good afternoon, guys. Just a couple questions here. If you could tell us a little bit more about these new formulations that you mentioned in your release, and how you see integrating that into the overall program going forward.

Sure, absolutely. This is Joe. We recently completed a bioavailability study in healthy volunteers in which we dosed each subject with three different versions of vapendavir: the phosphate capsule, which is the current form of vapendavir in the SPIRITUS trial; a new tablet; as well as a new oral suspension.

And the reason we felt this important was twofold. One, from a Phase 3 and commercialization perspective, we felt tablet would be the preferred form of vapendavir. In addition, it adds the opportunity for increased intellectual property protection.

And, secondly, because asthma is an important problem in pediatrics we felt that an oral suspension would be best amenable for that patient population. So, the good news is all three of those in the healthy volunteer study looked comparable.

Good. Okay. When would you be prepared to switch to the tablet, I guess for the next trial?

Right. For the next trial that we conduct would be utilizing the tablet.

Okay. You went over the accounting for the recent financing so I don't really feel like I have any other questions there. I'll stop there and get back in the queue.

Anita Dushyanth, Zacks Investment.

Hi. Good afternoon. Thank you for taking my questions. The first one would be, about 20 patients are yet to be enrolled in the vapendavir study, if I'm right. Is that primarily -- are we awaiting from just one center in North America and Europe, or would that be only North America or Europe? Like, where are we waiting for this last --?

Sure, Anita. We have approximately 68 centers that are participating in the SPIRITUS trial, both in the United States as well as central Europe. So, we are able to enroll across the whole spectrum.

So, where will they show up? The period until we can enroll them depends on when they've been screened. But now we're waiting for them to develop an upper respiratory infection so they can be randomized.

Okay. And that is not like necessarily in a single center. It is distributed across the centers?

From a perspective, we have approximately 60% in the States and 40% outside.

Okay. And, also, I know you're waiting to release the [top line] at the end of this year. Could you detail some plans, like what you are planning to do after that as far as RSV and (inaudible)?

Let's talk specifically about vapendavir and SPIRITUS trial. With favorable data we'll be preparing our end of Phase 2 packet for the FDA. That's important as we contemplate a Phase 3 program. So, that would be the next immediate step for that program following the data.

For BTA585 we are looking to complete the challenge study and get top-line antiviral data, again, around year end. For that program we're also working on responding to the FDA's clinical hold, which would include the clinical data from the ongoing study once it's complete, as well as additional non-clinical studies that we are in the process of completing. So, that would be the next iteration for that program.

And then obviously we still would be enrolling in BTA074 in the first quarter of next year. So, that would still be an ongoing enrolling program.

And you are still planning to respond to the FDA by the beginning of 2017, right?

We anticipate responding to the FDA in Q1 of 2017.

Okay. All right. Thank you.

(Operator Instructions)

Ed Arce, HC Wainwright.

Hey, Joe, just one other question. As you look forward to the readout of SPIRITUS at the end of the year and looking forward to discussing all that data with the FDA and moving forward broadly, I know you're in the process of beginning negotiations with potential partners, both in Europe and potentially in Japan or greater Asia. Could you perhaps give us a little bit more details around where that stands now and how you see that going forward into next year?

Sure. We don't really like to comment specifically on those discussions. But what I can tell you is that we are reaching out, as you indicated, to both potential global partners and regional partners, organizations that currently have respiratory sales franchises where we believe vapendavir would fit well. So, that's the process of getting the program on the radar screen, having the initial dialogue, which then will facilitate the more in-depth discussions once the data are available.

Okay, great. Thanks, guys.

There are no further questions in queue. I'd like to hand the conference back to Dr. Patti for closing comments and remarks.

Thank you. The last 12 months have been a transformative period for Aviragen. We've rebranded the company as Aviragen Therapeutics to reflect our transition from a drug discovery and early-stage licensing organization to one focused on clinical development of antiviral therapies.

We out-licensed our antibiotic program to Spero Therapeutics. We advanced the clinical development of our three antiviral programs, both clinically as well as on the CMC front. We strengthened our Executive Management Team with the addition of business development skills. And, finally, we bolstered our balance sheet with $20 million of non-diluted cash.

We enter our FY17 year with excitement regarding our clinical programs and look forward to the data readouts from our Phase 2b SPIRITUS trial and Phase 2a RSV challenge studies around the year end. Thank you for joining us this afternoon and have a great day.

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