Decoy Therapeutics Inc. (DCOY) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Flex Pharma Call to discuss ALS Data and Q3 Business Update. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Elizabeth Woo, SVP, Investor Relations and Corporate Communications. You may begin.

Thank you, Gigi. So, thank you everyone for joining us this morning to discuss exploratory Phase 2 ALS study and the Q3 results. Earlier today, we issued two press releases and these press releases and the accompanying slides can be found on our website at flexpharma.com. Today, we will be making certain forward-looking statements about future expectations, plans, events and circumstances, including statements about our strategy, future operations and the development of our consumer and drug product candidates, plans for future potential product candidates and studies and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations, and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factors section of our 10-K filed with the SEC and other filings we make with the SEC from time-to-time. Flex Pharma disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. After we walk through the slides, we’ll open it up for Q&A. Joining us for this part of this call is CEO Bill McVicar and Chief Medical Officer Tom Wessel. John McCabe, Chief Financial Officer will join for the Q&A. I’m now going to pass the call to Flex Pharma’s CEO Bill McVicar.

Thank you, Elizabeth. Thank you for joining us on the call today. This is an exciting time for Flex Pharma, we’re pleased to be sharing this very encouraging although unexpected data that represents clear signs of the anti-cramping activity of Flex 786, our dual trip channel activator and for the first time in patients with severe neurological disease. From the small study, we’d expect it to learn about inter and intra subject variability. To confirm our power assumptions for the ongoing U.S. trial but we were pleasantly surprised to learn much more. Just to remind you, we had started study Australia in ALS patients in 2016. This study was a randomized double-blind placebo controlled cross-over study to evaluate efficacy and tolerability of Flex-787 in patients with motor neuron disease. This study design in patient inclusion criteria are shown on slide number three. However, we announced in July of this year that this Australian ALS study was terminated early because enrollment was slow due to the small population in Australia, 23 million with only 800 ALS patients diagnosed per year spread over a large geographic range. So, we decided to focus our resources on the larger, more robust US ALS trial which is now enrolling and terminate the Australian ALS study early. A summary of the results of the trial are shown on slide number 4. In eight patients who completed the trial per protocol, Flex-787 treatment resulted in a statistically significant PE less than 0.05% reduction from baseline in both cramp associated pain intensity and stiffness relative to the placebo control. These end points were based on daily assessments by the patients using a numerical rating scale or NRS. Strong and consistent trends were demonstrated on multiple endpoints including percent reduction in the number of cramps from baseline, PE 0.08 increase in cramp free days from baseline, PE equals 0.09 and improvements in both the patients and the clinician's global impression of change both with PE values of 0.06. We are very encouraged by the consistent positive impact of Flex-787 across multiple efficacy endpoints related to cramping and the associated pain, particularly given the small number of patients completing the study. These data, the first in patients with serious neurological disease indicates the potential of chemical neuro-stimulation with FLX-787 to alleviate cramps and cramp related symptoms. Flex was generally well tolerated in this patient population. These data demonstrate the potential for FLX-787 to benefit ALS patients who suffer from severe debilitating cramping in our ongoing larger more robust Phase 2b trial the commend study. We are excited to advance the development of FLX-787 under fast-track designation or ALS related cramping and look forward to 2018 with data readouts expected in MS, ALS and CMT. Slide 5, summarizes the efficacy results from patients completing both crossover periods per protocol. In these data we can see the effect of the drug on cramping and ALS payments in the first two rows on the slide. We have included the running data because each subject was compared to their own baseline behavior, every subject is their own control. Anti-cramping effects seen were number one, FLX-787 showed a medium 31% reduction in cramps from baseline versus a 1% reduction for patients while on placebo control. patients had a median 4.4 cramp free days versus 0 for the placebo control. And as mentioned before FLX-787 demonstrated a statistically significant P less than 0.5% reduction from baseline in both cramp associated pain intensity and stiffness relative to placebo control based on daily assessments by numerical rating scale. Slide 6, provides details on the clinical and patient global impression of change endpoints. The FDA has told us that demonstrating a decrease in the frequency or cramping is likely an acceptable endpoint for registration, but they would also need to see that this change was meaningful to patients. For example, using a payment reported outcome, the PGIC data on slide 6 is just that kind of endpoint and we see from these data that 50% of patients reported feeling an improvement following FLX-787 treatment compared with 12.5% of those receiving the placebo control. The clinicians were also blind and have no way of knowing which treatment the subject was receiving evaluated the patients and also reported improvement in 50% of subjects following FLX-787 treatment compared to 0% for the controlled group. This consistency between the patient's perception of improvement and the clinicians is encouraging. Slide 7, is the reminder of the design of our ongoing Phase 2b ALS and CMT studies which were designed to deliver robust results. The commend trial which focuses on ALS has many advantages over our smaller exploratory Australian ALS study including longer run in and treatment periods, a higher dose 30 milligrams three times a day, a parallel design and of course a much larger population from which patients can be recruited. The Phase 2 Commend trial is currently enrolling and is designed to evaluate FLX-787 in approximately 100 patients with motor neuron disease who suffer from frequent cramping. This randomized controlled, double blind parallel design trial in the US includes 28 days run in period to establish a base line in cramp frequency. Patients are then randomized to 30 milligrams of FLX-787 administered three times a day or control for 28 days. Patients will be evaluated for changes in cramp frequency as the primary endpoint with a number of secondary endpoints including cramp related pain, the PGIC, CGIC and spasticity. The Commit trial in CMT patients is essentially identical in size, scope and design but is in frequently cramping Charcot-Marie-Tooth patients. Consistent with our goal to deliver high quality data from well-designed trials in a timely manner, these two robust Phase 2 studies will provide important data readout in the third quarter of 2018. And now I'll ask our Chief Medical, Officer Tom Wessel who was a treating neurologist for many years to comment on the next few slides. Tom?

Thank you, Bill. I've been fortunate in my career to help develop a number of successful neuro drugs, Razadyne, Lunesta while I was at [indiscernible] and [Ampera]. Based on these strong signals I believe that we will be able to develop FLX-787 into a drug that will benefit many patients starting with ALS patients but expanding to numerous others who suffer from debilitating and painful muscle cramps. As we have discussed before Slide 8 and 9 address the unmet medical need. Nearly all ALS patients report cramps and these cramps are responsible for the majority of pain felt by patients suffering from this progressive neurodegenerative disease. Cramping interferes with activities of daily living and sleep and reduces the quality of life for these patients causing the majority of them to seek treatments to control their cramping. There are however no approved therapies for cramping in the United States forcing clinicians to rely on drugs approved for different symptoms that either work poorly, have significant side effects some of which can be life threatening or both. A list of the medications used off label for cramping appears on Slide number 9. All of the options available today for treating cramps come with considerable drawbacks. Both mexiletine and Quinine have FDA black box safety warnings as seen on the slide here. [indiscernible] and benzodiazepines are both modestly effective and highly sedating and can cause ataxia and imbalance which is obviously challenging for ALS patients who may be struggling to remain ambulatory. And I think the FDA recognizes this clinical dilemma and granted us fast track designation for this reason. In terms of safety FLX-787 has been well tolerated to date in both healthy subjects and ALS patients with only mild and transient GI effects. On slide number 10. I am excited about the FLX-787 data coming from our Exploratory MS Spasticity Study in Australia late first quarter of next year. The literature reports that roughly 85% of MS patients experience spasticity with about 40% experiencing moderate or severe spasticity which progresses with the disease. For these reasons spasticity impacts the quality of life of even more patients than cramping. Compared to the ALS population there are more than 10 times more patients that suffer from MS and the associated spasticity giving many effective treatments for MS related spasticity, an extremely valuable tool for neurologists. In counteractive cramping where we have supportive activity data in humans from both electrically induced and spontaneously cramping models, the only human data that would predict at a specific activity with FLX-787 comes from the ALS data we are reporting today. While the data does provide evidence of anti-spasticity effect in the patient reported NRS scales in respect to being stiffness, spasticity assessed by Modified Ashworth and Tardieu scales did not show a treatment difference. However, we note that these ALS patients had a relatively low incoming spasticity burden compared to the MS population being enrolled in the ongoing Australian study. This higher level of spasticity in the MS study would provide a better opportunity to test the potential of FLX-787 to improve spasticity. So, while the MS study is a small exploratory crossover study with a liquid formulation and was designed to look for activity in spasticity rather than definitively improving efficacy, the results could be quite interesting. Our plan is to enroll approximately 50 subjects in this exploratory study and report what we find in the first quarter of 2018. If the data are supportive, we would then trial a separate IND for spasticity and initiate a larger definitive Phase 2 MS study. As a reminder, on slide 11, vagular stimulation is a validated mechanism with approved indication and treatment resistant epilepsies, treatment resistant depression and most recently this year for cluster headaches as electrical neurostimulation. We believe that FLX-787 and its mechanism which uses chemical neurostimulation, illustrated on the slide, has a similar potential but is a more elegant and selective way to activate V1 and A1 TRP ion channels on the vagal, glossopharyngeal and facial nerves and to reset the levels of descending inhibition in the spinal chord blocking the repetitive firing of alpha-motor neurons that cause cramping. Slide 12 shows other potential applications of chemical neurostimulation. We are excited to be exploring the expansion of this technology via proof-of-concept study in the neurologically impaired population of ALS looking at dysphagia or difficulty swallowing as well as studying its potential to help hemodialysis patients with normally functioning nervous systems who experience cramping during or between dialysis sessions. On slide number 12, just a recap thus far in 2017 we have achieved a number of important milestones including submission of our INDs and FDA agreement to proceed in receipt of the fast track designation for ALS cramping that I just mentioned. We have also initiated our definite trials in ALS setting up 2018 to be a year of many important data readouts. We look forward to evaluating the potential to expand our chemical nurse stimulation technology into new large areas of unmet need including dysphagia first in ALS then possibly in Parkinson’s disease in stroke as well as cramping in hemodialysis patients between or during renal dialysis sessions. The data we have share with you today are an important step in revealing the potential of this technology to impact the lives of patients with neurological disease as well as those with normally functioning nervous system. And with that, I’ll hand it back to Bill.

Thank you, Tom. On slide 14 we summarize the third quarter results we’re reporting also this morning in the press release. The consumer business revenue of $414,000 with a total revenue of $978,000 through three quarters we are well on our way to exceeding $1 million for the year. We look forward through 2018 to define the potential of our hotshot business by testing refreshed branding and an expanded consumer target with the repeatable marketing model. And I just like congratulate our hotshot brand ambassador Sherlyn Flannagen who won the New York City marathon yesterday. Sherlyn is the first American women to do that in 40 years and we are just so pleased and proud of her. We know Sherlyn likes to use hotshot before a hard work and all that hard work has now paid off. As of September 30th, our cash balance is approximately $39 million which carrier both into early 2019 based on our current operating plan. With that I will turn the call back to Elizabeth.

Thanks Bill. We will now prepare to open up the call for the Q&A portion and I will ask the operator to provide the instructions and just ask that those asking questions state their name and affiliation. Thank you and go ahead.

[Operator Instructions]. And our first question is from Mara Goldstein from Cantor Fitzgerald. Your line is now open.

Great, thanks very much for taking the question. On TE-6 where do you have the CGI scores. It looks like and again I recognize that these are small number of patients in a study but I’m just curious about any information you might have in terms of the onset of action and what not. Just looking at the SKU of the reported outcomes more towards minimally improved as opposed to much or very much improved.

Hi, Mara. Thanks for your question. I think the only observation I would make to that point is that we’ve looked at some of the data longitudinally, we graphed out cramps per day and cramp free days. And while it’s not statistically significant, my impression is that week two of the treatments seems to look slightly better than week one. So, I don’t know whether this is a true sort of accumulation or the building of the effective of the drug, but I do know that it makes me enthusiastic to see what the four-week treatments that we have in our ongoing US studies will produce.

Okay. And if I could also just ask, the drugs that are used off label for cramp and [indiscernible] and what not, can you have a sense from market research perspective in terms of what the absolute number or percentage of prescriptions written that are off label for things like alleviation of cramps and what not?

No, I wish I could know that Mara, it’s an interesting question for us as well as very hard of course to kind of get those – that kind of data sorted by treatment code. What we do know is that if you look at the Quinine, that they far exceed the number of scripts you would expect to need to treat the burden of malaria. So, that’s all the little something that indeed these products even with the significant safety warnings are being used to an extent in the US.

On slide 17, would you have the patient disposition and analysis population, there were four that were not included. What exactly is meant by three treatment repeated subjects?

Yeah. To clarify that Mara, what happen was there was an error at the pharma sites which caused those three subjects to receive the same treatment during the first and the second period. So, they accidently didn’t get crossed over to a new treatment. So, they got either active or placebo in both in the first and the second part of the crossover.

Okay. All right, that’s what I thought. But I just wanted to confirm that. I’ll step back and let somebody else ask the questions. Thank you.

You’re welcome. So, just one more follow up on that, Mara. That set of patients actually gave us a unique opportunity to look at the relative consistency of the response in the first and second part of the crossover. And our view is that it’s actually pretty comparable, so was one to active patient and two placebo patients and you see the same type of response in the first treatment period and the second treatment period which gives us some comfort relative to the design of the trial.

Thank you. Our next question is from Michael Higgins from ROTH Capital Partners. Your line is now open.

If I could ask on the number of pills per day, did you notice any difference in the results, I understand there was eight patients to look at, but if there is any variability that you noticed in the results that would be helpful to hear.

Yeah. I think you’re – you hit the nail on the head there Michael, there was just too few patients to sort that way especially when you look at treatment A, versus treatment B. I can tell you that our plans for the new studies is to treat everyone three times a day and everyone is getting a higher dose at 30 milligrams, so I look at these data set as an indication that even with a little bit of BID mixed in we seem to be able to see a clear signal of activity.

Also, there's a bit of a difference between the mean, the median results. What will the FDA be looking for in a pivotal, will that be the mean and if so how would you potentially adjust the design of the pivotal trials to reach a broad effect and hit that big difference in those trials, thanks.

And the reason of course that we put the mean and the medians in these slides is because when you do have a small patient population you want to be able to compare those numbers to kind of give you a sense that both of those are leaning in the right direction. The reason that medians were used in that analysis Michael was that it was a non-parametric analysis using Wilcox analysis source ranked order analysis of the data. So, in those types of analyses you always use a median and I think we would expect that for again this type of data set that those would be acceptable for an analysis of a pivotal trial as well.

Okay, that's helpful here, can you give us an update on your thoughts for the ongoing trials, what is your cost for those ongoing trials.

I don't think we've given specific guidance about the cost of those trials but suffice it to say that we are funded into early 2019 and those data will be coming in the third quarter of 2018.

And the lion's share of our investment is in the trial.

Right, right, and then last question for me would be over the quarter you announced trials in renal dialysis, cramping and dysphasia. What drove those decisions to conduct those trials, what others might be run besides MS, CNT and ALS?

That's a great question. I think when we look at the potential of chemical neuro stimulation we thought about all of the different muscle groups that could be hyper active and we wanted to make sure that we weren't restricting our thinking and the investigation of the potential of this technology to for example just skeletal muscle. So, we have actually got together with our group of researchers internally and leveraged our scientific advisory board and started thinking about for example indications where was not a cramping endpoint like dysphasia and we found that there is indeed some literature data that is already shown that molecules with a similar pharmacology that is a dual acting trip activator can increase swallowing in the elderly. So, for us it seemed a natural extension of the potential of this technology. And then the real interesting thing in patients on renal dialysis is that these patients actually have nervous systems that are normal and intact and so this gave us a chance to say okay, here's another normal nervous system that we can try to affect cramping in and we know we have some preliminary data in both electrically induced cramps and nocturnal leg cramps that would predict success and we thought that would be a great unmet medical need to try to test the technology on.

[Operator Instructions]. And our next question comes from Roger Tung from Jefferies. Your line is now open.

Thank you and congrats on the data. So, I have a couple of questions related to the study. So, I see you saw the cramp associated pain intensity and the stiffness show the significance. Do we have the number of the reduction or percentage of the reduction?

I don’t think we reported it on the slides but you can see that the numbers basically on slide 8 Roger. So, you can see the baseline pain intensity and then how much it decreases on treatment. And let me just make one comment about that which is that remember this pain that we are measuring in this trial is not just a general look back at pain over a period of time. This is the pain associated with the most painful cramp. And the reason I think that’s important for us to keep in mind is that we look like the drug is actually improving two things. It’s improving the number of cramps and then the ones that are still left, the ones that are still present, are less painful. So, it’s really kind of a two-pronged effect that we are measuring with the drug in this study. So, did you find the data on slide 5, that look at the sort of run in and then the amount that it decreases during treatment?

Got it. Maybe I did not have this slide, I can find it later. Thank you.

Sure. You want them. So just to expand upon that a little bit, the fact that we see an increase in cramp free days, I think that’s related to the fact that many of these patients that have lower frequencies of cramping actually experience this benefit of then having an increase where the cramps are entirely suppressed and they have a whole day that is cramp free.

Got it. The cramp free data is very encouraging. Great. So next question so we know we have some kind of off-label drug use in the cramping, Quinine. So, do you have some public data or anecdotal data, let’s say, how -- what’s the efficacy of those data and how do they compare to our 787?

Yes, I mean we have a lot of data from the Cochrane Database which actually looks at the effects seen across a number of different studies with Quinine and as you know Quinine is by far still the most used anti-cramp drug worldwide. Just to give you one data point, in the UK, still today we are generating over 4 million scripts a year. So that’s an enormous number. We had similar script levels in the late 1980s and 1990s in the United States but then of course the FDA clapped down on the use of Quinine. So, it was broadly used in the United States, many patients just received it through internet pharmacies and so forth. So, using it off label despite the black box warning.

Yeah, how is the Quinine effective in those patients?

Well you know if you look at the effects across these various studies is actually very small, so it's about on the order of 0.13 if I remember correctly. You can look that up and I’ll send you that data if you like. We are seeing effect sizes here that are substantially larger and we will report those at upcoming neurology conferences.

Correct. Thank you. So, my last question, so I think you mentioned that so you will apply not only see the interim variability. So, what other learning you from this study you think can apply to commence study?

Well I think I would just say again what I commented on before which is I think the longer treatment, the four-week treatment with the four-week run-in is going to give us a really robust look at those patients cramping behaviors. And the other thing that I think is very encouraging about this data set is that despite the fact that there is a high variability between subjects, so you may have one subject that cramps 50 times a week and one that cramps 20 times a week. The consistency in their cramping behavior week-to-week is actually pretty good. So, what that means is the guys that’s at 50 is living between sort of 45 and 55 and the guy that’s in 20 is bouncing up and down a bit. What that means is that in these types of study designs where every patient is compared to their own baseline, that you can get a lot of power out of these studies and I think that’s really why we were surprised with these data that we would see so much with just eight patients.

[Operator Instructions] At this time I’m showing no further questions. I would like to turn the call back over to Bill McVicar, CEO for closing remarks.

Thank you very much. I just wanted to thank everyone for joining our today and for their interest in their good questions. And I look forward to updating you in the future. Thank you.

Ladies and gentlemen thank you for your participation in today’s conference. This concludes the program, you may now disconnect.