Zevra Therapeutics Inc (ZVRA) 2015 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the KemPharm fourth-quarter 2015 corporate update call.

(Operator Instructions) I would now like to introduce your host for today's conference, Mr. Jason Rando.

Sir, you may begin.

Thank you.

Good afternoon, everyone, and thank you for joining our call today.

At this time, I would like to remind our listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time including, but not limited to, statements about KemPharm's expectations regarding future operating results.

Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws.

Information contained in the forward-looking statements is management's beliefs based on current expectations and is subject to change.

Actual results may differ materially from forward-looking statements.

KemPharm disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments, except as required by law.

There is more complete information regarding forward-looking statements, risks, and uncertainties in the reports KemPharm files with the SEC.

These documents are available on KemPharm's website at www.KemPharm.com, under the investor relations section, and we encourage you to review these documents carefully.

Speaking on today's call will be Travis Mickle, President and CEO, who will provide an update on KemPharm's corporate and clinical development achievements as well as the recent regulatory announcements involving KP201/APAP.

LaDuane Clifton, CFO, will review KemPharm's fourth-quarter and year-end 2015 financial results; and Tracy Woody, Chief Commercial Officer, will provide an overview of KemPharm's commercialization strategy for KP201/APAP.

At the conclusion of the remarks, we will then proceed to a question-and-answer session.

I now turn the call over to Travis.

Thank you, Jason, and thanks, everyone, for joining the call this afternoon.

2015 was truly a transformative year for KemPharm, starting with our successful IPO last April and ending the year with the filing of our NDA for KP201 with acetaminophen.

We continue to build the business operationally, now as a public company, as a research and development organization with our additional products and technology that we introduced in 2015 and the early part of 2016, as well as commercially with the advancement now of KP201 with acetaminophen towards the potential approval in June.

Even with all the success that we had in 2015, we are even more excited about what lies ahead for us in 2016.

I would like to highlight just some of the recent events that have occurred so far as we really get excited about what's upcoming for this year.

Number one, we would like to point to the recent close of our successful financing during a very turbulent time for both the healthcare industry and the market, as well as our notification of acceptance for review of our NDA for KP201/APAP.

With that notification, we received a priority review of six months' review time and the PDUFA date set for June 9, based not on the acceptance date, which would have been expected from the FDA guidance in prior practice, but based on the filing date.

Additionally, we also filed out IND for KP511, recently highlighted in our continued success in advancing our technology through important milestones.

To that, we remain focused on advancing at least one new discovery candidate into the pipeline every year, as we did last year with the advancement of KP746, our ER prodrug of oxymorphone.

At the same time, we want to file at least one new NDA each year to expand our available products, which we feel are truly differentiated in the marketplace with long composition of matter based patterns.

Looking forward into 2016, certainly the PDUFA of KP201 with acetaminophen is a very important milestone for the organization as well as KemPharm's transition from a development company to a commercial entity.

We are also looking forward to the data from our proof-of-concept studies we have planned for both KP511 and KP415 in this year.

We expect to see KP511 have proof-of-concept data in the second quarter of this year, as well as proof-of-concept data for KP415 in the second half of this year.

Additionally, based on results of our studies with KP201, we found that at high oral doses KP201 releases statistically lower amounts of hydrocodone when compared to other hydrocodone combination products.

We have provided this information to the FDA and are working to start two additional studies to investigate the possibility that KP201 could reduce respiratory depression, which may help reduce the risk of overdose.

Both these studies are planned to start this year, with future guidance as to their completion.

It should be noted that no other opioid or formulation of an opioid has demonstrated the ability to self-limit exposure to the opioid at high doses and this data would be a critical part of getting this affect into our label for KP201.

With that background and forward-looking approach to KemPharm in 2016, I would like to now turn it over to LaDuane, who will discuss our financial results.

Thank you very much, Travis.

Our quarterly results for Q4 2015: we had a loss of $9.2 million, or $0.64 per share, and that is compared to a Q4 2014 loss of $11.8 million, or $4.97 per share.

The main -- the improvement in net loss quarter over quarter was primarily driven by a lower change in the fair value of our warrant liability in comparing the two quarters.

Use of cash during Q4 of 2015 was $7.7 million, which included the payment of the $2.4 million PDUFA fee we submitted with the KP201/APAP NDA.

We expect that amount to be refunded in Q1 since this was our first NDA filed with the FDA.

Our burn rate has remained in the range throughout 2015 in between $5 million to $7 million per quarter.

Looking to the 12-month results, net loss for the full year 2015 was $54.7 million, or $7.42 per share, compared to 2014 of $24.5 million and $10.27 per share.

Again, one of the key drivers was this non-cash adjustment to fair market value of the warrant liability on the balance sheet.

Our cash position at 12/31 2015 was $51.3 million.

That's cash, cash equivalents, and marketable securities.

And as Travis alluded to, on February 9 we announced the closing of the offering of $86.25 million of 5.5% senior convertible notes which will come due in 2021.

Net proceeds from that offering were $82.8 million, of which $18.6 million were used to repay our term notes.

On a pro forma basis, combining those proceeds with our 12/31 cash balance, we would have a balance of $115.5 million.

We believe this positions us well to continue advancing our product pipeline as well as begin the launch of KP201 in APAP.

So with that I will turn it back over to you, Travis.

Thanks, LaDuane.

As I mentioned previously, KemPharm is preparing extensively for KP201 with acetaminophen's upcoming PDUFA date of June 9. At the time of approval, KemPharm will be informed of the schedule that the FDA recommends for KP201 with acetaminophen.

As you may recall, based on the compelling data, we requested a Schedule III from the FDA while all the other opioids in this class are the more restrictive Schedule II.

Once approval occurs, that scheduling recommendation is provided to the DEA in order to ultimately write that recommendation into law.

In the past this process has been quite variable, but with the recent passage of a new law, this process is now shrunk down to approximately three months.

That three-month timeline typically goes off the post recommendation from the FDA.

With that in mind, KemPharm has adopted a dual path approach to the commercialization with a focus on preparing internally to launch the product, while at the same time discussing the possibility of a partnership.

To clarify, we are not choosing a path in which will follow.

We have chosen to take both paths.

And should the appropriate offer that would come with the right commercial partner present itself, at that point there would be -- we would be faced with a choice.

The choice, as it exists today, is to commercialize the product fully as exists here with KemPharm.

Until then it is business as usual as Tracy and her growing team will be focused on KP201/APAP followed with KP201/IR, KP511, KP415, and so on.

With that in mind I would like to turn it over to Tracy Woody, our Chief Commercial Officer, to provide you with an update on our commercial plan.

Thank you, Travis, and good afternoon, everyone.

As Travis mentioned, with the positive news on the priority review and the PDUFA date set for June 9, we have accelerated our timeline quite a bit in several areas, including some key additions to the KemPharm management team.

Our first hire was Nick Holsman, who is Senior Director of Commercial Strategy and Market Access.

Nick brings over 15 years of successful industry experience to KemPharm.

His unique combination of start-up biopharmaceutical, managed markets, and service provider experience combined with his broad therapeutic background is a great fit for KemPharm at this stage of the Company's lifecycle.

On the marketing side, Mike Wasyluk joined KemPharm as the Director of Product Marketing.

Prior to joining KemPharm, he successfully commercialized and managed multiple GI products at Salix Pharmaceuticals.

Of particular value to KemPharm is Mike's experience as product manager at Victory Pharma, where he marketed a portfolio of opioid and non-opioid pain therapies.

Finally, Matt Casbon joined KemPharm in February of 2016 as the Vice President of Marketing.

Matt brings more than 20 years of marketing and sales experience to KemPharm.

Matt most recently served as the Executive Director of Marketing for Chimerix, a start up biopharmaceutical company.

Prior to joining KemPharm, Matt led the brand marketing team as Senior Executive Director of Marketing at Salix Pharmaceuticals, a specialty pharmaceutical company.

During his time at Salix, Matt was responsible for a portfolio of 15 promoted brands that included several successful product launches and key acquisitions leading to the sale of the company in April of 2015.

These new commercial hires and the addition of several agency partners in advertising, medical communications, and publication planning, trade, and distribution and market access have helped us accelerate our planning.

We have initiated several projects related to product positioning and messaging, as well as pricing and payor contract strategies.

Over the prior 12 months, we have conducted quantitative and qualitative market research with prescribing physicians and completed two rounds of payor research.

Since last spring we have specifically engaged with payors from commercial Medicaid and Medicare plans to determine potential formulary tier status and control under a number of pricing scenarios.

Understanding how to position and price KP201 to APAPs in the crucial managed markets environment will build a foundation for successful launch and we have ongoing analysis to improve our probability of success.

These insights will guide our commercial buildout plan as we prepare for a potential launch in the first quarter of 2017.

This, of course, will all depend on the positive outcome regarding FDA approval and timely scheduling by the DEA so we can proceed to final steps of manufacturing, including product packaging and distribution.

Given the growing public health problem of abuse and misuse of prescription opioid products, we believe the priority review granted by the FDA for KP201 to APAP is very well-timed.

While there are a number of abuse-deterrent extended-release products, there are no FDA-approved immediate-release hydrocodone APAP products available.

As IR hydrocodone APAP products are far and away the most prescribed opioids with over 90 million prescriptions written in 2015, there is a real unmet need for an abuse deterrent alternative in this product category.

According to our market research, physicians and payors are extremely interested in the prodrug or the ligand-activated therapy technology in KP201/APAP and believe this new molecular entity could potentially fill an important void in the current market.

Physicians and payors are both very interested in the potential of what the prodrug KP201 offers, specifically that it's designed to release the hydrocodone component after it is metabolized in the GI tract following oral administration.

Given that oral ingestion of prodrug is required to release the active ingredient, there's potential for resistance to alternate non-oral routes of abuse like smoking, IV, and intranasal.

They believe the prodrug approach may offer a meaningful difference from the formulation-based abuse-deterrent technologies employed in the extended-release opioids on the market today.

Payors have highlighted some important differences between the extended-release opioids for chronic pain and the immediate-release products for acute short-term pain.

In our research they have suggested that they were less willing to manage a short-term 14-day prescription of 4 to 6 tablets a day where we see price ranges from approximately $1.65 a tablet to $2.33 a tablet for some of the branded IR products like Vicodin.

A newer-branded IR product they recently launched appears to have a price of about $4.25 to $6.38, compared with the extended-release opioids range from approximately $2.70 to $34 a tablet, depending on the dosage strength.

One other thing to note is that this is a new molecular entity and there is the potential that there will be no A/B-rated generic equivalents available for substitution.

Based on these market dynamics and our research, we feel confident our developing pricing strategy will align favorably among stakeholders.

Recent data, survey data also suggests that hydrocodone IR products may be a gateway product leading to the non-medical use of other prescription opioids and illicit drugs.

The potential for KP201/APAP to be the first and the only IR hydrocodone APAP to assist in deterring abuse, misuse, and diversion, once physicians make the choice to prescribe, is very attractive for physicians and payors alike.

We are currently segmenting prescribers of IR opioids and evaluating the potential sizing of our core sales -- field sales and managed care teams.

Generally speaking, just over 12,000 physicians, all specialty deciles 8 through 10 prescribe about 30% of the total hydrocodone APAP prescriptions.

This work is to be completed by the end of first quarter of this year.

We are engaging with key opinion leaders and patient advocacy groups in the pain management space and plan on interacting with key target audiences at some of the upcoming meetings, including the American Pain Society meeting in May and the international conference on opioids in June, which will be on the eve of our PDUFA of June 9.

In summary, we are pleased with our potential target audiences' reactions to KP201/APAP product profile and acknowledgement through the priority review designation that there is a critical need in the hydrocodone IR combo prescription market for a product with potential abuse-deterrent properties.

We are very pleased with our recent progress in assembling a core commercial team and look forward to building out our commercial capabilities over the next few months.

These efforts should put us in an excellent position as we prepare for potential launch in the first quarter of 2017.

Now I would like to turn the call back to Travis.

Thanks, Tracy.

Again as I reiterated in the beginning of the call, we accomplished some great things in 2015 and we're extremely excited about the opportunities that lie ahead for us in 2016 and 2017 and beyond.

Certainly now would be a great time that we could actually turn it over to the Q&A session for this call.

(Operator Instructions) Tyler Van Buren, Cowen and Company.

Thanks, that was great detail on the commercialization strategy, but wanted to get a little more information on the potential proof-of-concept data that we would be getting later this year on KP511 and KP415.

Just wanted to know what we might see when they both report out.

Thanks so much.

Sure.

I will start with KP511, since this is the first molecule that we will actually have proof-of-concept on in the second quarter of this year.

For that one, we're looking at the prodrug to effectively release the hydromorphone as well as the properties of the prodrug, i.e., how much gets in systemically, what other metabolites may form.

From that date we will be able to determine about roughly 90% of the development path remaining for that particular compound.

In this particular case, we are going into that study with an IR product so we will eventually have to convert that using formulation approach to an ER product.

For KP415 it's a little different, the prodrug itself is already -- inherently has an extended-release profile, so we're looking at head-to-head comparisons of our product and the release of methylphenidate from that now compared to, say, Concerta, Ritalin, or some other long-acting methylphenidate-based product, as well as comparisons to the IR methylphenidate.

Again, we are using this as a reference, as we did during our development time on Vyvanse, in order to really tease out what benefits there may be with this extended-release opioid.

In this case, methylphenidate.

On top of that we also will be looking at the predictability or the variability of the pharmacokinetic profiles from subject to subject.

Randall Stanicky, RBC Capital Markets.

It's Ashley Ryu on for Randall.

Thanks for taking my question.

I was just wondering how are you thinking that the opportunity for KP201/APAP depending on the scheduling?

So how should we think that the different opportunities if it were a Schedule III versus Schedule II?

Can you provide any updated thoughts around the label?

Thanks.

Sure.

I will start and I will actually turn it over to Tracy to discuss in more detail.

I think there's a lot of evidence here that the difference between a Schedule II and a Schedule III, as far as the convenience to prescribe, the ability to call in scripts, the ability to re-prescribe, is pretty great.

Again, patient access being a key advantage of being a Schedule III.

For the most part, all of our planning and manufacturing plans, commercial plans have been focused as if this would be a Schedule II, which I think is the conservative thing to do here because the opportunity only grows if it's a Schedule III.

Tracy, do you have anything else to add to that?

No, I think that covers it all, thanks.

I'm sorry; what was the second part of your question?

Yes, I just wanted to know if you had any updated thoughts around the label, but --.

Sure.

Our thoughts on the labels have not changed.

Again, we feel very confident about the Category I and II language that we've received about the abuse-deterrent properties preventing extraction and tampering, as well as the pharmacokinetic parameters that we have seen with the molecule.

As far as Category III, I think there's great evidence to show that the pharmacokinetics have mirrored the pharmacodynamics here and that there's meaningful information that needs to be informed on the label.

Just given that we didn't meet the primary endpoints of Emax in the Liking scores, which I think in this particular case, because they are occurring at drastically different times, is not meaningful.

But just because that's different than the current guidance, we are less confident in our ability to receive that language.

Got it, thank you.

John Newman, Canaccord.

(Operator Instructions) Rohit Vanjani, Oppenheimer.

Thanks for taking the question.

So just remind me again can you -- if the FDA comes back and recommends Schedule II, can you launch with that Schedule II midyear and then still negotiate with the DEA in the background?

Or does that process have to happen with the DEA before you can launch?

The FDA actually -- because this is a new chemical entity or new molecular entity, the FDA actually determines that the schedule will be.

It's called a recommendation, but that recommendation has never been changed or overturned by the DEA.

They don't have a review division to do so.

So once that goes into place there was new legislation approved back in November that mandates that initial market approval with that new schedule has to be made within three months of approval of the product.

Now, eventually that may take longer to get the final approval, but at that point we can start to ship the product, work on our final label, get everything prepared.

From there, we will still have some lead time in order to get things through the distribution chain as well as train the sales staff, get the MSOs up to speed, meet with payors because until then you don't have your final label.

So essentially at the point of the final DEA schedule is when we would have our label to work from.

And so once the FDA deems it's Schedule II or a Schedule III, that is final?

There's kind of no negotiation with the DEA to change it?

There is not.

We can go back with more data to request a different schedule at some point, but that request would go through the DEA.

But we will know on the PDUFA date where you are going to probably settle out?

That's right.

Sometimes the recommendation comes in after PDUFA, but in most cases I've seen it comes at the time of approval.

Then has there been any back and forth with the FDA thus far on labeling or is it still too early?

Labeling discussions typically do not proceed until very late in the cycle.

Right, okay.

And then any word on the competitive IR front, IR hydrocodone APAP products?

I think you've mentioned Teva, a Teva product, I can't remember, on the last call or something like that.

Is there any word on that program or any others?

There's no further update that we can provide.

We haven't seen any additional information about that product.

And then did you begin the APAP free formulation for KP201 yet?

Yes, and that product is still right on track for an NDA filing for next year.

And that's a six-month study?

We are still in negotiation with the Agency on what studies they would like to see for that, but every study we can do actually takes less time than placing the product on stability for one year, which is required for the NDA to file.

Okay.

And then the last one for me is current cash I think you said it was $115.5 million.

How long is that good for?

Yes, that's a pro forma number off the 12/31.

We expect that will take us into at least Q3 of 2017.

And until Q3 2017 you anticipate a burn of $5 million to $7 million per quarter or there will be a ramp that starts in the second half of the year or something?

Yes, that was the burn rate that prevailed in 2015.

As we go towards our commercialization, towards the second half of 2016, you're going to see the burn rate increase.

Great, thanks for taking the questions.

Thank you, I am showing no further questions at this time.

I would like to turn the call back to Dr. Mickle for closing remarks.

I greatly appreciate everybody joining us for the call today.

I have nothing additional to add, so again thank you for your time and look forward to continuing to update you on our progress, both in the clinic and commercially, in the future.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program and you may all disconnect.

Everyone, have a wonderful day.