BioCryst Pharmaceuticals, Inc. (BCRX) Q1 2013 Earnings Report, Transcript and Summary

Robert Bennett Jon P. Stonehouse - Chief Executive Officer, President and Executive Director Thomas R. Staab - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer William P. Sheridan - Chief Medical Officer and Senior Vice President

Good day, ladies and gentlemen, and thank you for standing by, and welcome to the BioCryst First Quarter 2013 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to introduce our host for today, Mr. Robert Bennett, Executive Director of Investor Relations and Communications. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome to BioCryst's First Quarter of 2013 Corporate Update and Financial Results Conference Call. Today's press release and accompanying slides for this call are available on our website at www.biocryst.com. [Operator Instructions] Joining me on the call today are Jon Stonehouse, Chief Executive Officer of BioCryst; Dr. Bill Sheridan, our Chief Medical Officer; and Tom Staab, our Chief Financial Officer. Before we begin, I will read a formal statement as shown on Slide 2 regarding risk factors associated with today's call. Today's conference call will contain forward-looking statements, including statements regarding future results, unaudited and forward-looking financial information and company performance or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from any future results or performance expressed or implied in this presentation. You should not place undue reliance on the forward-looking statements. For additional information, including important risk factors, please refer to BioCryst documents filed with the SEC, which can be found on our corporate website. With that, I will turn the call over to Jon.

Thank you, Rob. Good morning, and thanks to everyone for joining us today. So far in 2013, we have reported encouraging development in both our peramivir, influenza and our hereditary angioedema clinical programs and continued to seek government funding for our broad spectrum antiviral BCX4430. Given the progress in our interactions with the FDA in BARDA, as well as the prominence of influenza in the news, today I'll focus first on peramivir. Earlier this year, BioCryst held a meeting with the FDA with the goal of determining whether or not there is a viable path towards an NDA filing for peramivir in the U.S. At the meeting, the FDA agreed that our proposed content for new drug application supports a reviewable submission for an indication of acute uncomplicated influenza. This indication would be similar to the approvals granted for peramivir in other countries and for the other approved neuraminidase inhibitors. Our next steps in the coming months are to receive formal guidance from BARDA regarding our contract following the recently completed in-process review meeting, hold a pre-NDA meeting with the FDA and then compile and submit the NDA. Our goal is to gain approval of peramivir in the U.S. in time for the 2014, '15 influenza season. We believe this is an achievable goal given the time to compile and the time for FDA to review. The H7N9 strain that originated in China is a clear reminder that the influenza virus changes. Accordingly, new treatments such as intravenous peramivir are needed to combat emerging strains that can produce high mortality due to the combination of virulence and lack of population immunity. Influenza experts and government officials are very concerned about the possibility of mutations in age 7 and 9 that may enable sustained human-to-human transmission in geographic spread of the strain. Not long after our FDA meeting, it was announced that China approved peramivir to treat patients infected with influenza A and B. BioCryst invented peramivir and holds composition of matter patents in most major pharmaceutical markets. However, we do not have an issued patent in China where other parties have worked on the development and registration of peramivir. We view the approval as another important endorsement of peramivir as an IV treatment option, adding to the prior approvals in Japan and Korea. Moving onto our HAE program. We began dosing healthy volunteers in the single-ascending dose portion of our Phase I trial of BCX4161 in late March and the trial is proceeding according to plan. 4161 is the first oral kallikrein inhibitor to advance in the human studies specifically as a potential treatment for this orphan disease. The primary goals of our Phase I program are to demonstrate oral bioavailability and safety in humans. We need to show consistent PK with adequate exposure levels that suppress plasma kallikrein. Following satisfactory progress in the SAD portion of the trial, we plan to move to the multiple ascending dose phase, complete the trial and report outcomes soon thereafter. You can expect us to update you regarding the results this summer. If successful, we will start a trial later in 2013 in HAE patients who have high attack rates. We're working with top experts in the field on this study with the main objective of estimating the treatment effect of 4161. In addition, we are on track to select our second-generation lead to advance into preclinical development and tox studies later this year. With our broad spectrum antiviral BCX4430, we have submitted a manuscript on the work with 4430 against hemorrhagic fever viruses and look forward to its publication. Our focus is on securing additional government funding for the further development of 4430. The current sequestration climate makes this more challenging; however, we remain optimistic as the feedback we have received for this molecule is very positive. With that, I will turn it over to our CFO, Tom Staab, who will discuss our financial results. Tom?

Thank you, Jon, and good morning, everyone. Today, I'd like to summarize the key elements of our first quarter 2013 financial results, as well as to reiterate our 2013 financial guidance. Following BioCryst's December 2012 restructuring, our guiding principle remains unchanged, which is to focus our cash resources on advancing our key development programs to value-creating milestones, while minimizing noncritical and non-project spending. I believe we have made significant strides towards this goal in the first quarter. I am happy to report that we closed the quarter with the following positive results: One, total revenues exceeding budget; two, total operating expenses, below budget; and three, operating cash utilization, below budget. These results allowed us to close the first quarter of 2013 with a higher actual cash balance than anticipated and to significantly lower our cash use, operating expenses and net loss as compared to the first quarter of 2012. While we budgeted the first quarter to have the heaviest cash burn in 2013, we were pleased to outperform all financial metrics through disciplined financial management and to achieve meaningful progress in our programs. On Slide 4, you will notice revenue for the first quarter of 2013 decreased to $3.6 million as compared to $12.2 million in 2012. This decrease is due primarily to a onetime recognition of $7.8 million of forodesine-related revenue in 2012, as well as a $2.8 million reduction in 2013 revenue associated with reduced peramivir development activity. In regards to the individual components of 2013 revenue, we recognized $1.9 million of RAPIACTA royalty revenue and approximately $1.7 million in collaborative and other R&D revenue, which was largely comprised of peramivir-related revenue received under our development program with BARDA/HHS. First quarter 2013 R&D expenses were $7.4 million, down 52% from $15.5 million in the first quarter of 2012. This decrease was associated with reduced development activity in the peramivir, ulodesine and BCX5191 programs, as well as avoidance of $1.9 million of deferred expenses associated with the corresponding onetime forodesine revenue recognized in the first quarter of 2012. With our restructuring and more concentrated drug development activities, we expect R&D expenses to remain at much lower levels in 2013 as compared to 2012. Also, as mentioned in previous calls, we do not intend to fund additional development of ulodesine until we are able to secure a partner for that program. First quarter 2013 G&A cost of $1.4 million decreased from the $1.7 million incurred in the first quarter of 2012. This decrease resulted primarily from the continued realization of cost containment measures and the beneficial impact of the company's corporate restructuring. Moving below the operating line, we incurred $1.2 million of noncash interest expense in both the first quarter of 2013 and 2012. We also recorded a mark-to-market hedge-related gain of approximately $2 million in 2013 as compared to a gain of $38,000 in 2012. The Japanese yen has devalued considerably against the U.S. dollar in 2013 and this devaluation has resulted in a significant foreign currency gain, as well as the return of cash collateral on the company's hedge arrangement. Both interest expense and the mark-to-market gain related to our nonrecourse notes and related hedge arrangement enacted in conjunction with the RAPIACTA royalty monetization. In summary, we successfully decreased our net loss per share to $0.09 in the first quarter of 2013, representing a $0.04 reduction from the $.13 loss per share incurred in the first quarter of 2012. From a dollar perspective, we were able to decrease our net loss 26% from 2012 for our first quarter of 2013 loss of $4.5 million. Once again, we were pleased with our financial discipline in the quarter. Moving onto Slide 5. I'd like to discuss our cash balance and cash usage. We ended the quarter with cash and investments of $28.9 million. Our operating cash usage for the first quarter of 2013 was $8.9 million and represented a 26% decrease from the $12 million utilized in 2012. As a reminder, operating cash use excludes any impact of our royalty monetization, hedged collateral posted or returned, sales stock in the marketplace and any other nonroutine cash outflows or inflows like restructuring and transaction costs. As mentioned in our December restructuring conference call, we were able to significantly extend our operating cash runway by restructuring our operations and changing our cost structure. Based upon our restructured operations, our existing cash provides us liquidity into the second quarter of 2014. This liquidity extension allows us the opportunity to achieve a greater number of value-creating milestones. In regards to financial guidance, our operating outlook for 2013 remains unchanged from the information provided in February of this year. Accordingly, we expect operating cash usage to be in the range of $22 million to $26 million, and operating expense to be in the range of $25 million to $35 million. Now I'd like to turn the call back over to Jon.

Thanks, Tom. After a challenging end to last year, it's good to again see progress in our programs. We believe we have a path forward with peramivir, and we are moving closer to testing BCX4161 in HAE patients. The next few months will be important ones for BioCryst, as we conclude discussions with the government regarding peramivir funding and finished our 4161 Phase I trial. We also look forward to sharing additional proof of principle efficacy results for 4430 and updating you regarding government funding as the year progresses. We will do all of this while carefully managing our cash to rebuild value. So that concludes our prepared remarks. Now we'll open it up for your questions.

[Operator Instructions] It looks like our first question will come from the line of [indiscernible] with JMP Securities.

Just a couple of questions. One, did you give us the timing on the pre-NDA meeting with FDA yet; is that scheduled?

It's Bill. Yes, that meeting is scheduled. And it's really a technical meeting. We've already had the substantive discussion about the efficacy and safety and quality information required to file an NDA.

Okay. That's helpful. And then I just have one question on the HAE, the Phase I data that we'll be getting this summer. Is there a benchmark that you're looking for or a threshold level as far as the PK PD relationship to move this compound forward?

Sorry. I think that's a great question. The goals of the study are, first and foremost, safety and, next, exposure to the drug. This is a drug that in preclinical development we spent quite a lot of effort in creating a formulation suitable for oral use. So we need to check that we're getting exposure. And finally, are we getting the levels that might work in HAE patients. So we do know that this compound is about 15-fold more potent than normal plasma C1 inhibitor in inhibiting kallikrein in our assays. And we also, from the literature, know that levels of C1 inhibitor that are associated with 99% prevention of attacks and close to 100% prevention of attacks. So on that basis, we can shoot for about, say, 25 nanograms per mil or something like as a goal. At the end of the day, we're going to have to do a study in HAE patients to make sure that, that arithmetic is appropriate, of course, but yes, we have something in mind in terms of shooting for an exposure of the drug.

Our next question comes from the line of [indiscernible] with Bank of America.

On peramivir, I wanted to know whether you got any anecdotal data on whether it might work on the newer version of the avian flu that's hit Asia. Secondly, what do you think the market opportunity of peramivir could be in uncomplicated flu? And do you think that the government would have any interest in stockpiling it without the complicated flu indication?

I'll take the first part of the question on the susceptibility profile for peramivir. Yes, so we understand that the H7N9 virus that was recently isolated in China is susceptible. That should not be a surprise. It's susceptible to other neuraminidase inhibitors and peramivir has quite a broad susceptibility profile of the whole range of influenza A viruses and also in influenza B.

So on the market opportunity, I think there is opportunity both in stockpiling and seasonal influenza. And so let me start with your uncomplicated question. I don't think an IV is going to compete in this country in doctors' offices when there's oral and inhaled versions of drugs. But where I do see it being used is in urgent care and emergency rooms where patients either can take an oral or they need IV fluids because they're dehydrated and so it's easy to give a single dose, so I could clearly see it being used there. And then I think if you look around the world at how an IV has been approved, how peramivir has been approved, it's been in the uncomplicated setting. I think we all realize now that the complicated setting is just very, very difficult given that you can't do placebo-controlled trials and these studies are very difficult to do. So I still think there's opportunity there. If approved, we would continue to look for ways to advance the understanding of the field by additional studies post-approval, but I think there's a real financial opportunity that maybe a few months ago we didn't think we had.

Okay. And then as far as 4161, can you maybe talk to trends that you're seeing for Cinryze sales that can give you an idea of what you think opportunity could be for 4161?

Yes, I think -- if I recall correctly, they're trending around $400 million in annual sales. And that's pretty impressive. I think the market -- I think they grew quarter-on-quarter by about 40%. So everything is going in the right direction. And at least from what I've read from other analyst reports, peak sales are projected around $700 million. So when you look at the pricing and you look at what they've been able to accomplish, I think this is a highly attractive market. And then for us to be coming forward with the first oral to prevent attacks is a real game changer and I think a real opportunity for us. So we're very excited to be in the clinic and looking forward to getting the results soon.

And as far as your next generation HAE molecules, what kind of an advantages over 4161 do you think those could have?

This is a small molecule drug development program, so it's always a good idea to continue to work on improving what you have. And we're focused on having much better bioavailability and the lead molecule that is in the clinic also does inhibit another enzyme involved in coagulation tissue Factor VIIa in lab assays. That hasn't been a problem in animal studies and we don't anticipate it would be problem in the clinic. But we would prefer to remove that. So that would be a second objective.

Okay. And then lastly on 4430. Has there been any cases of Ebola or Marburg viruses in the U.S, or are you looking at it as just this exclusively a government stockpiling opportunity?

I'd look at this as much bigger than just Ebola or Marburg virus. As an opportunity, the lead indication will be a filovirus, but this a broad-spectrum inhibitor of RNA viruses that could depend for their lifecycle on expressing a viral RNA polymerase in the mammalian cell. And that's replicates the virus and makes the RNA for the virus. So this is an inhibitor of that process. So the first objective is to bring forward an animal rule program funded by the government for a filovirus threat, and that's a threat to the U.S. population from terrorist threats or bio weapons, as well as from accidental importation of the virus. There's an incubation period that can last longer than a week before symptoms. Second, general area would be -- we'd be delighted to make an approved drug available via philanthropic organizations or the World Health Organization or other means to help in outbreaks of Marburg or Ebola virus in Africa. And there have been many deaths from what are really quite terrible diseases and that's something where we would be thrilled if our drug could help. And after the first indication, then we would seek to expand the way the drug is used in -- with additional evidence [ph] of activity in other RNA viruses.

I think the other thing, Tazeen [ph], is if you look at the timing, we're pursuing -- or plan to pursue the animal rule with this drug. And so if you look at that timing, this could be approved around the time that one of our HAE molecules is approved as well. And so if there's is stockpiling order, one of the challenges small companies have at launch is the capital that's required to launch a drug effectively. It'd be great to get a stockpiling order right around the time that we need capital to really effectively launch highly innovative oral prophylactic for HAE.

And are you in discussions with the government on this already?

Yes.

[Operator Instructions] And presenters, there appears to be no additional questioners in the queue at this time. I'd like to turn program back over to Jon Stonehouse, the Chief Executive Officer.

Yes. I guess I just like to close up by thanking those investors that have stuck with us through a challenging period. It's amazing what a difference a few months makes. And I think the rest of the year for BioCryst could play out to be very, very interesting. So we look forward to continuing to make progress and keeping you updated along the way. Thank you very much.

Thank you, gentlemen. And again, ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful day. Attendees, you may disconnect at this time.