BioCryst Pharmaceuticals, Inc. (BCRX) Q3 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. And welcome to the BioCryst Third Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. John Bluth. Sir, you may begin.

Thank you, Ashley. Good morning, and welcome to BioCryst’s third quarter 2018 corporate update and financial results conference call. Today's press release and accompanying slides are available on our website. Participating on the call with me today are CEO, Jon Stonehouse; CFO, Tom Staab; Chief Medical Officer, Dr. Bill Sheridan; and Chief Commercial Officer, Lynne Powell. Following their remarks we will answer your questions. Before we begin, I want to direct your attention to Slide 2, which discusses our use of forward-looking statements and potential risk factors regarding an investment in BioCryst. As detailed on the slide, this conference call will contain forward-looking statements, including those statements regarding future results, unaudited and forward-looking financial information, as well as the Company’s future performance and/or other 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 these forward-looking statements. For additional information including a detailed discussion of our risk factors, please refer to the Company’s documents filed with the SEC, which can be accessed on our website. Now, I'd like to turn the call over to Jon Stonehouse.

Thank you, John, and thanks to all of you for joining us this morning. We are making great progress towards our goal of delivering the first targeted oral therapy to patients with hereditary angioedema or HAE. The clinical data we have from our APeX-1 and ZENITH-1 trial support a unique treatment profile for an oral drug that works to prevent and treat HAE attacks. For HAE patients, our once daily oral therapy BCX7353 represents hope as their lives today are still terribly restricted as they attempt to manage this disease with home injections or infusions. Unlike many other diseases, HAE patients have a significant say in deciding which therapy is right for them. We know from our deep and long-standing involvement with the physician and patient communities that patients desperately want an oral therapy. Having met many patients and heard their individual stories bringing an oral therapy to HAE patients has become very personal for us. We know this is way more than a small incremental improvement and convenient. It can make a huge difference for them, a normal life and we’re working with a real sense of urgency because we also know they are waiting. For investors we've arrived at an exciting moment with multiple data and program milestones lined up over the next six months. We will touch on these today as we provide you with an update on the progress we’re making towards bringing 7353 to market for preventing HAE attacks. Next steps with the HAE program following our success with Zenith-1 market, research insight we've collected on patients desire for an oral therapy. Our plan is to move early programs into the clinic and lastly our financial results and strong cash position. So let’s start with APeX-2. We’re excited to report the trial has completed enrollment and we remain firmly on track to report results in the second quarter of next year. As we've noted throughout the APeX-2 trial, the pace of enrollment was outstanding and part because of the great work of our clinical team but also because patients want an oral therapy, even at a time when new injectable options are available. With a total of 121 patients randomized, we believe we have a trial that is extremely well powered. We have seen similar patient enthusiasm to participate in our long-term safety trial APeX-S and Bill will have some additional details on both trials in a moment. In September we announced positive results from our Zenith-1 trial evaluating 7353 for the acute treatment of HAE attacks. 7353 demonstrated rapid onset of effect within the first hour of treatment and exceptional duration of activity showing sustained benefit at 24 hours. This is particularly important as the current treatment paradigm is to treat early and stop the attack in its tracks before symptoms are more severe. So to show a benefit early and sustain it is a must for new acute treatment options. We couldn't be happier with the results of Zenith-1 as we now have a second proof-of-concept trial showing the drug works in HAE. As we look ahead to 2019, we see a transformative year for BioCryst. We plan to complete the Zenith-1 trial in the first quarter and then start the Phase 3 over the summer, report data for APeX-2 in the second quarter, and file the NDA in the fourth quarter and lastly refill our pipeline by advancing at least one of our new programs into the clinic in the first half of next year. These important milestones coupled with a strong cash position to get there and the capability to successfully launch our first oral drug for rare disease, provide a unique opportunity. With these milestones coming in the near term our employees are more engaged than ever to deliver value for patients, physicians and shareholders. Now I like to turn the call over to Bill.

Thank you, Jon. With APeX-2 enrollment now completed, I’d review the details of this study and discuss the exciting implications of the clinical profile we see emerging for 7353. The design of the APeX-2 trial was shown on Slide 12 was informed by the outcomes of our APeX-1 Phase 2 trial which were recently published in New England Journal of Medicine and are in fact two discussions with FDA and EMA. APeX-2 is a randomized double-blind placebo control three arm trial testing to two dose levels of once daily oral 7353, 110 mg and 150 mg, the prevention of angioedema attacks in patients with type 1 and type 2 hereditary angioedema. The primary efficacy endpoint of APeX-2 is the rate of angioedema attacks over 24 weeks of blinded study drug administration. The pace of enrollment in APeX-2 was much faster than either we or our investigators had anticipated. In fact, we over enrolled the study with 121 patients randomized in the United States, Canada and Europe, about two-thirds of those from North America. As a result, the final sample size results in overall power of 99%. We had originally planned to enroll 96 patients, which would have provided 90% power. The robust enrollment in APeX-2 is yet another strong indicator to us that patients want an oral option to control their disease. Our long-term safety study APeX-S is also seeing very strong enrollment. We added up both APeX-2 and APeX-S, we have already met the goal of at least 100 subjects enrolled at each dose level of 7353 in order to support safety analysis for the NDA. We look forward to completing follow up through 48 weeks, and we remain on target to submit the U.S. NDA in the fourth quarter of 2019 followed by a European marketing implication in early 2020. As Jon noted, we are already hard at work on the core sections of the NDA. We look forward to completing the clinical trial program for HAE prophylaxis and to advancing the first targeted oral therapy to launch. Turning to our acute treatment program, we're very pleased that the ZENITH-1 trial is now fully enrolled. With the success of the 750 milligrams single-does cohort, we're moving quickly to complete data collection for the additional dose on ZENITH-1 and commence the Phase 3 study. We plan to meet with regulators in the summer of 2019 to discuss the Phase 3 trial design, and to begin that trial after mid-year. What's been especially exciting about the clinical outcomes in ZENITH-1 is that the results validate at PKPD profile, showing both a rapid onset of clinical activity from the self-assessment time post dose one hour and sustained benefits over 24 hours. From both the clinical and patient perspective, these are both critical attributes because the treatment paradigm for acute attacks has changed completely since the prior licensing trials for acute treatments were conducted. From intervening many hours after an attack in a hospital setting or a clinic, to immediate self-administered treatment in order to limit the progression of the attack. You can see this dramatic shift illustrated on Slide 17, which compares the study parameters of ZENITH-1 for the study parameters in other acute trials. Instead of injectable treatment in the clinic, subject in ZENITH-1 self-administered oral 7353 at home. Instead of 4 to 12 hours of symptoms before study drug treatment, instead of finding all subjects treated within one hour of onset symptoms infect the median was 35 minutes. As shown in Slide 18 through 21, our results in Zenith-1 showed clear cut clinical benefits and a dose that's generally safe and well tolerated. 7353 was discovered and developed by using the disciplines of structural biology and structural based drug design in order to meet an urgent medical need for a targeted oral treatment for a rare disease. Oral treatments for rare diseases are very hard to combine. Fortunately, our research team in Birmingham continues to invent and progress new oral product candidates in other rare disease settings and we are very excited to be progressing two non-clinical programs in separate disease areas. One of these diseases is Fibrodysplasia ossificans progressive or FOP, a very rare condition that results in irregular formation of bone in muscles, tendons, and other soft tissues, resulting in devastating loss of function deformity and early mortality. There are currently no approved treatments for this disease. We have advanced two compounds into life pre-clinical development which work to inhibit the mutated ALK2 kinase that is responsible for this disease. For competitive reasons, we have not yet disclosed the molecular target or indication we plan for our second non-clinical programs. Unlike FOP, this undisclosed condition is more prevalent and it can be treated by repeated IV infusions. The treatment could be fundamentally transformed with an oral drug. We are very excited by what we are seeing emerge pre-clinically. It's a very active time for us at BioCryst as our pipeline progresses. The clinical data with 7353 continues to reinforce the attractive profile as an oral kallikrein inhibitor that can be safely and effectively used to prevent and treat HAE attacks, meeting an urgent patient demand for a targeted oral therapy. Now I'd like to turn the call over to Lynne, to further describe this patient demand from a commercial perspective.

Thank you, Bill. I'm delighted to talk about recruitment of APeX-2 and our one step closer to bringing the first target with oral therapy to HAE patient. In the past I've seen that when Phase 3 studies grew quickly, it can be an encouraging indicator of interest in the commercial product especially in a competitive market like HAE. I'm not surprised APeX-2 enrollment exceeded our expectations because even with better injectable therapies available, patients wants an oral therapy that will enable them to control their disease and live a more normal life. It is different from many other diseases because patients have great inputs into choosing their therapy. As you can see on Slide 24, our market research confirms strong demand for once daily oral HAE therapy compared to injectable options. Slide 25 indicates that the majority of HAE patients without specification for a drug with the profile of 7353. And the vast majority of biologist would prescribe it. Significant majorities of both physicians and patients side unaided, ease of use and/or lack of injection as the top reason for wanting on oral option. I encourage you to listen to HAE patients to better understand this and to go online and view some of the videos of HAE patients taking newer injectable therapies. This really gives you a sense of the burden of refrigeration, significant preparation time, and the pain of needle administration. Over the past 12 months, the $2 billion HAE market has grown to rates of more than 20%. And we see prophylaxis emerging as the largest segment. We now see more than 50% of revenues being derived from products with a labeled indication for prophylaxis. In practice, the use of prophylactic therapy is even greater as some of the products registered with the acute indication are using a prophylactic or semi-prophylactic manner. It's an exciting time, by Christmas we advance our launch preparation for our once daily oral therapy and actively build a highly skilled commercial theme with proven rare disease launch experience. Now I'd like to turn the call over to Tom.

Thank you, Lynne. I am pleased to report we are in a strong position as we head into a milestone build year for 2019. With the additional cash we raised in our successful oversubscribed August equity offering and the efficient debt refinancing we completed in July, we ended the third quarter with $151 million in cash and cash equivalents, which is roughly the same amount in which we would begin the year. This provides us with a cash runway into 2020 and past our APeX-2 data and expected 7353 NDA filing. Importantly, it provides us the financial resources to prepare for 7353s launch and to refill our pipeline by advancing our new orphan disease preclinical compounds. I do not intend to repeat the financial detail in the press release issued today but I'd like to add some additional color to certain commentary. Revenue for the third quarter of 2018, decreased to $1.5 million as compared to $8.8 million recorded in the third quarter of 2017. The decrease was primarily due to two infrequent events in 2017 that did not recur in 2018, namely an inventory sale to one of our collaborative partners and recognition of a product approval milestone under our Seqirus agreement. However, when engaging revenue for future quarters, you should expect collaborative revenue to be recognized at lower levels than in prior years with collaborative revenue more in line with the three quarters of 2018 ranging between $400,000 to $900,000 per quarter. In addition there are no remaining milestones under the Seqirus agreement. So there will be no future milestone revenue associated with this collaboration. Third quarter 2018 R&D expenses increased to $22 million from $17.5 million incurred in the third quarter of 2017. This increase was primarily due to increased spending on our HAE and preclinical programs. As we complete the ongoing APeX-2 and APeX-S clinical trials, continue the Acute 7353 program and progress our programs into the clinic and pivotal trials, we expect our future R&D expenses will be at least equal to our current quarterly run rate and will likely increase as we continue to advance our programs. General and administrative expenses of $7.9 million increased significantly in the third quarter of 2018 as compared to $3.3 million for the third quarter of 2017. The increase was largely the result of merger related costs incurred in association with our terminated merger. We do not expect to incur any future merger related costs. However, as we get closer to APeX-2 data and the commercial launch, we anticipate our administrative expenses will increase. Finally, for our 2018 forecast we continue to expect our cash utilization to be in the range of $85 million to $105 million and our operating expenses in the range of $90 million to $110 million as we have previously guided. Consistent with previous quarters, our operating expense guidance excludes equity based compensation due to the difficulty in reliably projecting this expense as it is impacted by the volatility and price of our stock, as well as by divesting of the Company's outstanding performance based stock options. In summary, we are pleased that we have completed two very focused and efficient financial transactions in the third quarter that strengthen our balance sheet and provide operating runaway well past APeX-2 results. With our current level of cash and investments, we can now focus our attention on trial completion, regulatory filings, and preparing for a successful commercial launch of 7353. Ashley, we would now like to turn the call over to the Q&A section.

[Operator Instructions] And our first question comes from the line of Maury Raycroft with Jefferies. Your line is now open.

First question is just based on discussion prior around an interim in APeX-2, but I'm guessing that since enrollment is now completed there's no need for resizing or can you comment on how the interim went?

Enrollment was so fast that we overenrolled, and with 121 subjects on study there's now no need to do it. You are correct.

And then I'm just wondering for your Phase 3 and in the real world commercial setting, what therapy do you recommend in case a patient has a breakthrough attack? I guess do you see any potential synergies with current acute treatments that are out there?

Well, I think that the top experts in the field are the ones who are going to create or renew the guidelines for treatment of the disease. And our expectation is that with the launch of new treatments they'll take that into account. I think what we can say is that we've got strong data right now for both prophylaxis and emerging in acute, we're going to wrap up that acute study and report out through the final results in the first quarter and move forward into a Phase 3 program. It would be great to be able to offer patients the option of an oral treatment for both treatment of acute attack, as well prophylaxis. I think it's probably not upto BioCryst or any other company to recommend which order treatments patients would want. I think what we hear over and over again is that patient's want more options and they want oral treatments.

Maury, I'd just add to Bill's comment. It's a real individualized situation on a patient-by-patient basis in terms of what they want. But one of the things that we're hearing a lot since the ZENITH data is all-oral option. And so clearly we're going to be pushing both programs forward and try to make that available to patients in the future.

Then last question is just on commercial strategy ex-U.S., any thoughts around that and will the U.K. PIM designation that you have, will that accelerate timelines with the launch in the U.K.?

So, we're looking to supply this product globally and after the U.S., EU is very important for us. So yes, we're looking at potential for early access in the U.K. and other markets.

And our next question comes from the line of Jessica Fye with JPMorgan. Your line is now open.

Ahead of the Q now that enrollment is complete, are you looking at blinded safety data and if so can you speak to any insight you might be gaining from that. I am also curious if you can speak to the overall discontinuation rate you’ve seen so far. And then with the moment complete, can you also speak more specifically to the baseline attack rate of the patients you’ve enrolled?

Our practices to right to studies and material and we report at all the results together. So we’ll be able to speak to all of those questions in the second quarter when we report out on APeX-2. Historically if you look at other studies the discontinuation rate in studies of similar duration is in the range of that 10% to 15%, that all got factored into our planning for the trials. So if that’s what we see at the end of the day, we can cope with that type of discontinuation rate. So we look forward to sharing the data in the second quarter.

And the patients who maybe have completed the 24-week period at this point can you speak to what proportion have moved on into the extension?

We don’t have practice to give blow-by-blow details of where we are with first enrollment. The enrollment went very fast so you can imagine there are a lot of patients at different stages in the study. And you can obviously figure out that everybody will have to be through 24 weeks in order to do our analysis reported out in the second quarter.

Yes, and when we say our expectation is that we’ll have a dropout rate of 10% to 15% that’s through the full 48 weeks right because an important piece of APeX-2 is also getting 48 week's worth of data for the safety filing to complement APeX-S.

And our next question comes from the line of Gena Wang with Barclays. Your line is now open.

This is [inaudible] for Gena. Thank you so much for taking our questions. Maybe one quick question on your preclinical programs. So can you give us a sense about the next step before you enter the clinic and also what to expect from initial clinical radar, is that indication that you expect rapid clinical benefit you’ll be seeing. And I have a quick question on the accounting the booking of the CDC ordering like how should we work around it for over the next five years?

So thanks for your question I take a shot at the first one Bill, make sure that I get this accurately. So right now what we’re doing is we’re going through toxicology and scale up of drug supply to be able to file an IND and then start the first in human studies. And so we’re in that process it’s not complete yet but we’re making good progress in both programs and so that's where we stand on that and then the accounting.

So I don't know that I got the question if you could repeat it for me hopefully I will be able to answer it.

No for the CDC ordering of about $35 million so like a $7 million for which year we talking about this year?

Yes, I got your question now, thank you. So as you’re right the contract is $35 million and it's over a five-year period. The way that I would look at that is - I would look at a split it proportionally over the five years knowing full well that the government year ends on September 30. So you could have multiple deliveries in a calendar year, but only one delivery in a government year. And so obviously cash is very important to us so we’re going to try to negotiate with the government to get those shipments as soon as we can.

And his other question was with the first shipment come this year. And the answer is no it takes us about seven to nine months to manufacture so the first one will come in 2019.

On your question about what to expect from the Phase 1 trials, you can expect standard Phase 1 trial basically and we will share the details of those once the projects reach the clinic.

And our next question comes from the line of Brian Abrahams with RBC Capital Markets. Your line is now open.

This is [inaudible] for Brian, thanks for taking the question. Just a couple of quick ones for you. First I’m wondering if you've been able to follow the tax euro [ph] launch dynamics at all and anything you are learning from that either operationally or in terms of clinician and patient engagement with the different mechanism. And then related to Zenith-1, I know you enclosed the full data. Do you have any initial thoughts on what you're seeing about the endpoint you might want to focus on in Phase 3 before you enter into discussions with the FDA? Thanks.

So on the tax euro launch, yes, we are watching it very, very closely. One of the things that when you're coming in lastly and the market is that you get to learn from what those have done before. So yes very early in that launch, but we continue to watch very carefully.

With regard to endpoints for the Phase 3 trial for acute that will be negotiated with regulatory agencies. So what I love about the data is that we’ve got plenty of choice and the endpoints in clinical trial need to mass it to patients and physicians and feeding with the way disease is treated. So at the moment there is nothing more to say except watch this space and we’ll go through finishing the study and meet with the regulators.

And the fact that Bill that we have a number of different endpoints that we've hit and the fact that the treatment paradigm is dramatically changed from when these other drug was approved can only help our situation with the regulators right.

[Operator Instructions] And our next question comes from the line of Serge Belanger with Needham and Company. Your line is now open.

A couple of questions, let me first on APeX-S can you tell us whether or not that study is full enrolled at this point and when do you think you'll be able to report results from that one?

So APeX-S is what I said or what Bill said in his prepared remarks is that combining both APeX-2 and APeX-S we have the 100 subjects necessary for filing. Will we continue to enroll in APeX-S? The answer to that is yes. And then in terms of timing the important part of APeX-S and the second 24 weeks of APeX-2 is all around the filing and our plan is to file the NDA in the fourth quarter and we’re on track for that.

And as we think about the NDA filing about a year from now, are there still ancillary studies that are outstanding at this point and where are you in terms of the CMC component?

We’re in great shape. So the non-clinical and CMC programs are extremely well advanced. The right limiting steps for the filing is actually completing the APeX-S study.

And as Bill said in his prepared comments, we’re already writing some of the sections - parts of CMC and tox and things like that.

And our final question comes from the line of Liisa Bayko with JMP Securities. Your line is now open.

This is John on for Liisa, congrats on the progress and thanks for the questions. Just a couple of follow-ups on APeX as I’m wondering are these the same type of inclusion/exclusion criteria for APeX-2. And I'm wondering what data are you seeing rolling out of APeX as you're getting any attack rate data from that study?

APeX-S is designed as a 48 week safety study so the mature data will come when we have 48 weeks of follow-up on the subjects entering the trial that we then cut that data to file the NDA in the fourth quarter next year. It’s not an efficacy study and we will click to all that information and summarize it for the NDA, but as I mentioned earlier our practice is to report out data when trial complete.

And then the inclusion/exclusion?

Sorry. Your question about inclusion/exclusion, its generally a broad inclusion/exclusion criteria trial that is - for example in APeX-2 we have a requirement for a minimum attack rate because it’s placebo-controlled study with attack rate as the primary efficacy endpoint. So you have to have that in APeX-S that's not a requirement obviously. So people can come in if they and their physician believe that might benefit from an oral targeted therapy and they have the disease and then there are other standard criteria.

And ladies and gentlemen this concludes our Q&A session for today. I would now like to turn the call back over to management for any closing remarks.

So I just like to say thanks again for your participation in the call. Clearly an exciting time here at BioCryst on the home stretch towards filing and approval for our prophylactic program with 7353. We got a second indication opportunity with the acute treatment. Lynne is really gearing up being a great student of those in front of us and what they're doing in terms of switching patients and launching the product and building her team to ensure successful launch and then refilling the pipeline with some other interesting oral drugs for rare disease. So it's extremely exciting time at BioCryst and we thank you for your interest. Have a great day.

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.