Akari Therapeutics, Plc (AKTX) Q4 2017 Earnings Report, Transcript and Summary

Good morning ladies and gentlemen and welcome to Akari Therapeutics Fourth Quarter and Full Year 2017 Financial and Operational Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Mr. Peter Vozzo of West Wicke Partners, Investor Relations for Akari Therapeutics. You may begin.

Thank you, Daniel. Good morning everyone. For anyone who has not had a chance to review our results we issued a press release earlier today which is available in the investor relation section of our website at www.akaritx.com under the events tab. Please note we are using a slide presentation that can also be found in the events tab of the company's website. On the call with me today are Akari Therapeutics Chief Executive Officer, David Solomon and Chief Financial Officer, Dov Elefant. As provided on slide 2, please be advised that today's discussion includes forward-looking statements including predictions, expectations, estimates and other information that might be considered forward-looking. Throughout today's discussion we will present some important factors relating to our business that could affect those forward looking statements. The forward looking statements are also subject to risks and uncertainties that make actual results to differ materially from statements we made today as a result we caution you against placing undue reliance on these forward-looking statements and would also encourage you to review our filings with the SEC for discussions of the factors and other risk that may affect our future results on the market price of our stock. Finally we're not obligating ourselves to revise our results or publically release any updates to those forward-looking statements in light of new information on future events. Now turning to slide 3, it's my pleasure to turn the call over to David Solomon.

Peter, thank you very much and thank you for all of you to join our call this morning. I appreciate your attention. We're going to use the slide presentation as Peter mentioned to guide my discussions. The page number will be announced and for all of you the page number is at the bottom right of the slide. Again I am David Horn Solomon the Chief Executive Officer of Akari Therapeutics and we'll start on slide 4. I'm very pleased today to tell you about our 2017 year-end result and recent achievement since the end of the reporting period. In summary I can tell you that we're progressing Coversin through clinical development and good progress has been made. Recently we received regulatory clearance to open our first clinical site in Europe for our Phase 3 PNH trial called CAPSTONE. We also recently completed Phase 2 of a trial of Coversin for paroxysmal nocturnal hemoglobinuria or PNH trial called COBALT and I can gladly report you that we have met our primary end point. We used at the end of the trial 45 milligrams per day dosing regimen and that is the dosing regimen that we expect to use in our future clinical trials in PNH and other indications as well. For Coversin in PNH we have fast tracked designation and we had in September an end of Phase 2 meeting that was completed including agreed upon Phase 3 trial design for CAPSTONE with the U.S. food and drug administration with the FDA. We also have opened and initiated a clinical trial in Phase 2 of Coversin in aHUS, Atypical Hemolytic Uremic Syndrome and that was initiated at the end of 2017 and then finally I can report to you in terms of progress that we have strengthened our leadership team and expanded our Board in particular with the addition of Mike Grissinger until recently the global head of licensing M&A and business development at Johnson & Johnson. So we're very pleased to have Mike and also another Board member, Peter Feldschreiber joining our Board. Now we turn to our pipeline on Page number 5 and our pipeline essentially is divided into two modes if you will. Our pipeline is divided into Coversin and it's variance that involves the complement system specifically C5 of validated target and divided dual acting indications where Coversin is known not only inhibit C5 but also inhibit LTB4 part of leukotriene pathway another key part of the immune system. At the very top of our pipeline you can see Coversin and PNH with our planned Phase 3 starting end of this quarter Q1 2018. Coversin as I just mentioned is also has initiated it's study in Phase 2 in aHUS and we look forward to also advancing Coversin LA or long acting which is a once weekly formulation that would address patient convenience and patient need going forward. In terms of our dual programs I'm pleased to tell you that we will be initiating Phase 2 studies of Coversin in both AKC and Bullous Pemphigoid within H1 2018 with results occurring within calendar year 2018 as well and here Coversin takes advantage to the dual activity of both C5 and LTB4. Now we turn to slide 6 which is really to summarize the similarities and differences between Coversin as a complement inhibitor and Soliris from Alexion Pharmaceuticals and how Coversin is differentiated from the marketed Soliris from Alexion. In terms of chemistry Coversin is a small protein $15,000 as opposed to Soliris which is human engineered monoclonal antibody. The mechanism of action for Soliris is that it block C5 binding at a specific binding site and Coversin also binds and inhibits C5 at [indiscernible] but also binds and inhibits LTB4. The administration of Coversin is subcutaneous and we will be introducing later on a specific pen device auto injector pen, 31 gauge needle for both patient convenience that I think will be useful way of introducing Coversin as a marketed product. Additionally Soliris on the other hand is an infusion IV infusion that is given currently twice weekly to patients. The advantages of Coversin of course is obvious self-administration that patients control which is a benefit to both patients and their care givers, Soliris a marketed product has proven efficacy and as I mentioned is by IV infusion. Now I would like to turn to our Phase 2 clinical trial in PNH, the COBALT study on page 7 of the presentation. This was a study where eight patients entered the trial, seven patients completed the study and entered our long term conserve safety registry, one patient however withdrew at day 43 who met the primary endpoint but withdrew owing a suspected co-morbidity that was unrelated and adjudicated as unrelated to Coversin therapy. The primary efficacy endpoint was met which is an LDH endpoint and I will come to that in a matter of minutes, all patients through the study were self-injecting, five patients injected once daily, two patients twice daily all patients had good compliance and Coversin was well tolerated with a good safety profile with no drug related adverse events reported during the COBALT study. Now I'd like to turn to the results graphically on page 8 and what you can see on this graph is on the Y axis going is LDH as reported times the upper limit of normal as many of you know who look at PNH data this is an enzyme that is elaborated from homological red blood cells so it tells sort of where you're at in terms of your PNH condition, your therapy but by itself it's not a clinically meaningful endpoint and on the Y Axis it's time through 90 days and you can see that at all the patients had a declamation in our study of LDH and by day 28 the reporting today and end of day had an LDH of 1.8 times the upper limit of normal or below and therefore met the primary endpoint in our study and you can see how the LDH levels track through 90 days of the clinical trial. If we turn now to page 9 we've actually done a subset analysis and the reason for this is that the last three patients dosed in the study were dosed not at 30 milligrams a day as seen in blue but the last three patients were dosed at 45 milligrams per day which is now the dose that we intend to use in our ongoing clinical studies. You can see in this graph again mapping LDH times the upper limit of normal on the Y axis against time that in red the 45 milligrams per day patients they were dosed had a more rapid declination of LDH and remained durable at or below 1.5 times the upper limit of normal all the way through 90 days of reporting. On the other hand the original dosing regimen of 30 milligrams a day also had a declination of LDH but resolved ultimately to at or under 1.8 times the upper limit of normal. So it is this higher dose 45 milligrams a day that we intend to use in our ongoing Phase 3 studies. Now we turn to slide 10 which is essentially a summary of all the patients that have been dosed with Coversin in our Phase 2 study in PNH and also in one study one patient who was in a special program consent which is the resistant patients and you can see that we have a history of many months of therapy of these patients over time and the drug essentially was well tolerated by the patients and as I earlier mentioned no serious adverse events to report. Again the patient who withdrew at day 43 is reported at the very bottom. All the patients who completed on page 11 now, all the patients who completed PNH studies who opted to continue Coversin therapy for the treatment of a PNH were entered into the long term safety registry called Conserve and I won't go through all the details here but there are currently seven patients in Conserve all between 5 to 14 months duration injecting either once daily or twice daily, most of them on 45 milligrams to-date now one patient on 35 milligrams a day. Three long term patients have seen relatively stable LDH levels and one long term patient has had an intermittent rise in LDH over time, a second patient experienced a rise in LDH associated with a [indiscernible] illness and the LDH for these patients in the safety registry ranged between 1.8 to 3.1 times the upper limit of normal. The last two patients that entered Conserve had LDH levels of 1.5 and 1.2 times the upper limit of normal, again this is not a clinical trial b utilization rather a safety registry that we continue to monitor safety data. Now we turn to page 12 because as I mentioned we had an end of Phase 2 meeting with FDA and we discussed our Phase 3 plans and I want to share with you those plans going forward on page 12. We have received regulatory clearance importantly in Europe to open our first clinical site CAPSTONE and CAPSTONE being the Phase 3 program of Coversin and PNH in naïve patients and so we're looking forward to beginning that trial end of this quarter Q1 2018. The study CAPSTONE is in naïve patients who will be randomized to Coversin plus the standard of care versus the standard of care in other words patients with transfusion support of randomized to Coversin and I think that is an important study in terms of naïve patients. We also intend at a later time to begin a study called ASSET which is a switch trial these are Soliris, [indiscernible] treated patients, they will be randomized to [indiscernible] Soliris or be switched to Coversin. The FDA has indicated the safety and efficacy data for the proposed number of unique PNH patients on Coversin that we proposed seems reasonable subject to review of the actual data upon submission and of course we're in ongoing discussions owing our fast track status with regulators and will follow all their guidance as we carry out these Phase 3 programs. Now I want to switch gears and turn to slide 13 to tell you very briefly about our other program in aHUS where Coversin is now began a Phase 2 study. As you know this is a chronic and life-threatening genetic disorder characterized by microangiopathic hemolytic anemia, thrombocytopenia and kidney injury and obviously the efficacy C5 inhibition has been well established owning the approval of Eculizumab or Soliris for this indication as well. There is a lot of support in the clinical community for one's daily Coversin in terms of a therapeutic flexibility owning the subcu administration for episodic patients and for patient convenience and our plans in Phase 2 where we have already opened a study at a site is to enrol upto 10 naïve patients at seven sites across Europe again initiated in 2017. Now I want to switch gears a little bit again on page 14 and talk about our dual acting programs and this is seen on our so called ice-berg slide, the difference between our company and some others is that owning the fact that Coversin binds and inhibits not only C5 and the complement system but also C5 and LTB4 in [indiscernible] system it affords us a range of different indications that we can target and of course I've mentioned our PNH programs and plans to begin our Phase 3 program shortly and our aHUS program but below the waterline of course there is a range of other indications including most notably AKC on the right and [indiscernible] where we think that Coversin is a suitable medicine to address a lot of unmet need in those spaces and in fact as I mentioned we're going to begin an AKC on slide 15 in terms of or anticipate near term milestones at Phase 2 study in AKC anticipated H1 2018 and also a Phase 2 study in both [indiscernible] anticipated H1 2018. Again to reiterate in terms of PNH we will open our first clinical site for our Phase 3 naïve study called CAPSTONE anticipated at the end of March in 2018 and we look forward to updating all of you on our progress in PNH of course. We also hope to continue and advance Coversin long acting our once weekly program towards Phase 1 at a later date. So with all that said thank you again for your attention and now I'm going to welcome our CFO, Dov Elefant who is going to give you a Q4 and full year 2017 financial summary. So thank you and welcome Dov.

Thank you, David. I will now briefly summarize the key financial results for fourth quarter and year-end 2017 and direct you to the fourth quarter to full year results press release issued earlier today. Turning to slide 17, research and development expenses for the three months ended December 31, 2017 were 7.1 million compared to 6.6 million for the same period in 2016. Research and development expenses for full year 2017 were 23.3 million compared to 17.3 million for full year 2016. These increases were due primarily to expenses associated with the anticipated initiation of the Phase 3 trial of Coversin in patients with PNH, the Phase 2 trial of Coversin in patients with PNH that started the Phase 2 trial of Coversin in patients with aHUS, hiring, consulting and personnel expenses and an increase in share based compensation expense Moving on general and administrative expenses for the three months ended December 31, 2017 were 3.7 million compared to 3.3 million for the same period in 2016. G&A expenses for full year 2017 were 11.7 million compared to 9.9 million for the full year 2016. These increases were due primarily to higher legal accounting and professional service fees and increased personnel and recruiting expenses offset by lower share based compensation expense. Net loss for the three months ended December 31, 2017 was 9.3 million as compared to 8.3 million for the same period in 2016. Basic and diluted net loss per share was $0.01 in both the fourth quarter of 2017 and 2016. Net loss for the 12 months ended December 31, 2017 was 32.6 million as compared to 18.1 million for the full year of 2016. Basic and diluted loss per share for 2017 was $0.03 compared to $0.02 for 2016. These year-over-year increases in net loss and loss per diluted share were due primarily to higher R&D and G&A expenses in 2017. During 2017 we utilize 31.6 million of cash in operations compared to 24.6 million during 2016. As of December 31, 2017 we had 28.1 million in cash and cash equivalents compared to cash, cash equivalents and short term investments of 44.1 million as of December 31, 2016. During the fourth quarter of 2017 the company sold 3.48 million American Depository shares or ABS through an underwritten offering resulting in net proceeds the company of approximately 15.7 million. Each ADS represents 100 ordinary shares. As of March 20, 2018 the company had 1,525,693,393 ordinary shares outstanding. Based on our current cash position in operating plan we expect that our current cash balance is sufficient to fund operations into the second quarter of 2019. I will now turn the call back to the operator for questions.

[Operator Instructions]. Our first question comes from [indiscernible] with Canaccord Genuity. Your line is now open.

2018 is shaping up to be very active on the clinical front and I just got a quick question regarding cash, is the 28 million on hand enough to get Phase 3 CAPSTONE in PNH naïve patients over the finish line? Thanks?

So we have certainly have enough cash to initiate CAPSTONE and enough clinical trial supply to initiate CAPSTONE but the current amount on the balance sheet owing the time it takes to actually complete CAPSTONE it's probably alone not sufficient but we have plans to a variety of different financing mechanisms to assure in our means that we bring on enough cash to actually complete CAPSTONE in the time that we promise and the time that we think is reasonable to complete the study.

Thank you. Our next question comes from Tim Lugo with William Blair. Your line is now open.

For CAPSTONE I think you mentioned you had initiated an early Q2, how many patients are you targeting for the trial and do you have a group of patients already identified which maybe around watch and wait therapy which you could quickly enrol into the study and similar for switch do you have already groups of patients identified which will be likely enrolled into the study?

So, in terms of CAPSTONE at the first site where we will be initiate and we will report that shortly. We have patients already identified and that is ready to go and we won't disclose the exact numbers until we disclose more details of the trial but to remind you we have agreed already with the FDA on the size of the safety and efficacy data base and it's smaller than in fact the Triumph study is done by Alexion for the pivotal study for Soliris which was 80 patients and arguably overpowered. So I can tell you that overall our clinical trial numbers will be less than that but we don’t yet disclose them but in so far we have a site qualified and other sites on the go we have at the first site patients we sort of pre-screened and ready to go. Your second part of the question for ASSET. ASSET will begin later until we're not at the same stage of clinical readiness for ASSET at this point but as we get closer to team up ASSET as we have earlier announced and continue to guide we will tell you more. Our first priority however is to really lay chart on CAPSTONE, the naïve study and that is a study that looks a lot like what we did with COBALT in terms of patient sites inclusions and exclusions and so given our positive results with COBALT and Phase 2 we are excited to begin the CAPSTONE study.

Great. Maybe a question on COBALT it did look like there was a trending of LDH kind of increase between day 60 and day 90 in that study. Can you just comment on what you think was occurring clinically and also how is patient compliance during the complete dosing of the study was did a similar variability maybe reflect the self-administration?

Yes, so I wouldn’t say that say that any trend line you know if you look at that -- you know it’s a small end of course so the trend line is sort of necessarily exactly necessarily trending up but I take your point, it's often the case in subcutaneous administration trials whether it's in our study or in PNH or even in studies in diabetes I'm familiar with using basal insulin daily etcetera, etcetera that there tends to be a trendline overtime of drift upwards and that’s usually a compliance thing that people are feeling good and they are in good control, in this case the clinically meaningful endpoint of reduction of transfusions is really there so sometimes the patients are little more lax in terms of compliance but that’s something that we're going to be actively pursuing because we have active compliance programs in place that includes and are not only limited to programs that might involve text reminders etcetera. So compliance is a key issue for us and we will assure that things go well, you noticed it in the conserve database some of the patients in conserve had LDH is entering conserve after COBALT have even 1.5 or 1.2. So there are patients who are extremely compliant and do very well and others that drift up a little bit.

Understand. And maybe can you comment on the recent 12, 10 data and PNH obviously it looks like an effective therapy but how do you see the PNH market evolving over the next few years as 1210 emerges?

Yes, another good question. I won't comment too much, it's Alexion's product and for them to discuss in more detail but obviously for those following their studies it was done non-inferior, their conclusion was non-inferior to Soliris and our result at 45 milligrams today is approximately equivalent to Soliris in terms of both approximate LDH numbers but most importantly reduction of transfusions and so you know 1210 is a good idea because it's less frequent dosing but it's still IV infusion and ours is subcu and we think ultimately the differentiation of subcu dosing in patient self-control is very important for patients. I think ours is a very, very good medicine in terms of reduction of transfusions on the other hand and I think the other you know important feature is that we have not yet formally addressed but we look forward to addressing is pricing, we know that the pricing is stable for Alexion and we think that there is room to discuss that pricing as we move forward.

Our next question comes from Madhu Kumar with B. Riley FBR. Your line is now open.

I wanted to be clear about CAPSTONE, so we say Coversin [indiscernible] does that include Eculizumab or is it just what exactly is definite care you're referring to?

Let me be extremely clear, the CAPSTONE study because it’s a naïve study is done primarily in geographies where Soliris, Eculizumab is not reimbursed and therefore all the patients have a standard of care transfusion if they are transfusion dependent and so the patients are only of two stripes, they will be patients that are transfusion dependent that remain on transfusion as the standard of care or patients that are randomized to Coversin and so we will be comparing in the after Coversin versus the standard of care transfusion.

Okay, and then I know lot of details on the kind of trial design but what are the powering assumptions in terms of kind of present difference and I guess the other issues in line with that what is the primary endpoint of CAPSTONE?

Well what I can tell you is that what we're focused on is similar to where Triumph was focused and that is on transfusion reduction of transfusion, transfusion avoidance in general and haemoglobin numbers as primary endpoint and as a secondary endpoint LDH as you know LDH is a great tracking biomarker but by itself it's not a clinically meaningful endpoint and so we'll follow exactly what Alexion did in their Triumph study at their appropriate time we will talk about the percent differences, empowering and all that kind of stuff but this is not the forum for that discussion yet.

Thank you. And I'm not showing any further questions at this time. I would now like to turn the call back over to David Solomon for any closing remarks.

Good. Well thanks to everyone for joining the call and taking the time to listen to our update and we look forward to reporting our progress with you in the future and then offline to addressing many of your questions as we meet many of you throughout the course of the next quarter. Thank you again.

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