Xeris Biopharma Holdings, Inc. (XERS) Q2 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Strongbridge Biopharma plc Corporate Update and Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I’d now like to introduce one of your hosts for today’s conference, Lindsay Rocco of Elixir Health Public Relations. You may begin.

Thank you, and good morning, everyone. We are pleased that you could join us today for Strongbridge Biopharma’s second quarter 2019 earnings conference call. Joining me from Strongbridge this morning are Matthew Pauls, President and Chief Executive Officer; Scott Wilhoit, Chief Commercial Officer; Dr. Fred Cohen, Chief Medical Officer; and Brian Davis, Chief Financial Officer. Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Reference to these risks and uncertainties are made in today’s press release and disclosed in detail in the company’s periodic and current event filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Matthew Pauls.

Thank you, Lindsay. Good morning, everyone, and thanks for joining us. For today’s call, I will begin by providing a brief summary of our second quarter 2019 highlights and results, and then turn the call over to Scott Wilhoit to provide an overview of the key commercial activities that are driving our business. Scott was recently promoted to Chief Commercial Officer after serving as Senior Vice President of Global Market Access and Patient Services with Strongbridge for nearly three years. Dr. Fred Cohen will then discuss key updates in clinical development and medical affairs related to our rare neuromuscular and endocrine franchises. And will also review the status of the LOGICS study and RECORLEV NDA filing. Before we open up the call for Q&A, Brian Davis will provide an overview of our financials. With regard to our rare neuromuscular franchise, we are pleased to report $6.1 million in net revenue for KEVEYIS in the second quarter of 2019, representing a 42% increase from $4.3 million in net revenue for the first quarter of 2019. We believe that a few key refinements made in the field contributed to this uptick in sales. Scott will discuss this in greater detail shortly. Importantly, if KEVEYIS sales trends continue, we believe full year revenues could be at the top end of our 2019 revenue guidance of $18 million to $20 million. At the end of the third quarter, we will revisit our projections and consider making potential upward adjustments to our revenue guidance, if warranted. Additionally, the company continues to anticipate a positive KEVEYIS contribution margin by the end of the first quarter of 2020. Given our recent performance, our strategic priorities for KEVEYIS in 2019 and beyond remain unchanged. We will continue to organize and construct this ultra-rare disease market, while focusing our commercial investment on activities that will accelerate the pathway to profitability. We’re also pursuing life cycle opportunities, and anticipate that we will have clarity on these efforts in the first half of 2020. With that, I will turn the call over to Scott Wilhoit.

Thank you, Matt. Good morning, everyone. As Matt shared, we are encouraged with the continued progress that we have made with KEVEYIS to date, and we are proud of the ongoing work we’ve done to build out this ultra-rare disease market, which was underserved before Strongbridge acquired KEVEYIS few short years ago. This morning, I want to provide some color on the quarter’s positive performance and then talk about some of the key refinements and focused investments that we have made and are making to continue to grow KEVEYIS. First, we continue to evolve our CareConnection physician-patient services program. We have enhanced the content and coordination and communication with patients who’ve enrolled in the program and their treating physicians prior to and during the first 90 days of therapy. We believe that earlier communication with both patients and physicians who are in the process of initiating therapy is helping to manage treatment expectations, which in turn support patients getting on therapy and help them stay on therapy. Importantly, this effort is largely led by our Patient Access Managers, or PAMs. An increase in touch point between of our PAMs with our area business specialists, physicians and patients before and during treatment, coupled with improved educational materials are helping to create a more open, transparent collaborative environment between Strongbridge and the PPP community we serve. Second, we believe that our focused investment and key activities to increase awareness of PPP and KEVEYIS is contributing to the positive trends we are seeing in the market. PPP Mentor Connect, an offering through our 11% ambassador program, consisting of KEVEYIS patients actively serving as mentors to other patients with PPP who may be considering KEVEYIS as a treatment option. Meanwhile, patient and physician education through live events, webinars, our unbranded Paving My PPPath website and social media channels are helping to expand the knowledge base of the signs and symptoms of PPP and how to manage the disease. Turning to RECORLEV. Based on the previously reported positive results from the Phase III SONICS study, we’re in the process of conducting additional precommercial work to further assess the U.S. Cushing’s syndrome market and the product opportunity. We plan to share some of the initial findings later this year. Although the Cushing’s market is more organized and structured than PPP market, the learnings that we have garnered over the last couple of years with KEVEYIS are certainly applicable to Cushing’s syndrome market and RECORLEV. Our 23 endocrine field organization – 23-person field organization funded by Novo Nordisk is established in our commercial presence in the rare endocrine space. This combined with the learnings from KEVEYIS have the potential to accelerate RECORLEV uptick at launch. In closing, I want to underscore that the commericial model Strongbridge has built and continues to refine can be successfully leveraged across multiple rare disease franchises and markets. The rare-disease talent and experience across organization is outstanding, and we feel confident that we have the right resources in place to continue to drive KEVEYIS, while also effectively preparing the market for RECORLEV. With that, I’ll turn the call over to Fred.

Thank you, Scott. Good morning, everyone. On the medical front, we are supporting the awareness of KEVEYIS and RECORLEV with presentations and publications derived from clinical studies. I would like to highlight examples of each from the most recent quarter. In May, Dr. Nick Johnson, Associate Professor and Division Chief of Neuromuscular Medicine at the Virginia Commonwealth University School of Medicine presented new findings at the American Academy of Neurology Annual Meeting, or AAN, from a Strongbridge-led post hoc analysis evaluating the long-term efficacy of KEVEYIS in the HypoPP study of adult patients with PPP. As a reminder, the HypoPP study was the pivotal clinical trial that supported FDA approval of KEVEYIS. The results show that long-term treatment with KEVEYIS is efficacious and provides durable reduction in attack frequency and severity in patients with PPP up to 61 weeks after initiating treatment. PPP is a chronic condition that often leads to permanent muscle weakness. It is important for a chronic treatment like KEVEYIS to have durable efficacy and these data provide strong evidence of durability. Regarding RECORLEV, we continue to progress our efforts to educate the medical community via data generated from the recently completed Phase III SONICS study. In April, Strongbridge- sponsored research was presented at the 2019 American Association of Clinical Endocrinologists, or AACE, Annual Scientific & Clinical Congress by Dr. Maria Fleseriu, Professor of Medicine and Neurosurgery at Oregon Health & Science University. This research presentation described results of secondary endpoints from SONICS, which demonstrated meaningful improvements in clinical signs and symptoms of Cushing’s syndrome, including hirsutism, acne and peripheral edema among patients receiving levoketoconazole maintenance therapy for six months. These findings complement prior results from SONICS, which demonstrated sustained biochemical improvement in patients taking levoketoconazole. Turning to LOGICS. Consistent with our guidance to announce top line results at the end of the first quarter of 2020, we anticipate reporting completion of enrollment to finance the last patient randomized into the withdrawal phase of the study in early January. We are also reiterating our guidance to submit a New Drug Application to the U.S. Food and Drug Administration at the end of the third quarter of 2020. And finally, I would like to provide a brief update on veldoreotide. First, as a reminder, Strongbridge wholly owns the global rights to veldoreotide, which is a novel somatostatin analog, a class of therapeutics with established uses in rare endocrine diseases and other more common conditions. Second, veldoreotide has – had positive Phase II results in acromegaly using an immediate-release injectable formulation. Due to the pharmacogenetic profile, Strongbridge developed a comedically viable long-acting formulation, which provides patent protection to 2037. The combination of positive clinical results of the immediate-release formulation and veldoreotide’s unique somatostatin receptor binding profile support our belief that veldoreotide is a compound capable of potentially yielding differentiated therapeutic benefits. Therefore, we are performing cost-efficient non-clinical experiments to determine the most appropriate development path forward, and we look forward to sharing more information in 2020. With that, I will now turn the call over to Brian Davis for a financial overview.

Thank you, Fred. Our press release contained details of our financial results for the second quarter of 2019. Rather than read through all of those details, my comments today will provide some context on our cash spend and runway. Strongbridge ended the quarter with $86.2 million of cash and cash equivalents and no outstanding debt. As is customary in our industry, our quarterly net cash spend will vary sometimes significantly, depending on the timing of payments for such things as clinical and regulatory expenses, inventory purchases and annual bonuses. For example, during the second quarter, our cash spend included approximately $6 million for the purchase of KEVEYIS inventory. In addition, as we have discussed previously, our quarterly net cash spend will also be impacted by the timing of reimbursement we received from Novo Nordisk for funding our endocrine commercial field force. Those payments to us will occur semiannually and over years. Therefore, although the revenues and expenses for the first six months of 2019 related to the Novo agreement are included in other income and expenses on our statements of operations. Our cash reimbursement from Novo Nordisk will be reflected in the third quarter and should be approximately $3 million. We are reiterating our guidance that we have sufficient cash resources along with anticipated KEVEYIS revenues and payments from Novo Nordisk, utilizing modest assumptions for each to fund our operations through at least the first quarter of 2021, which is beyond the projected timing for receipt of RECORLEV LOGICS top line data and anticipated submission of a U.S. NDA for RECORLEV. And, operator, with that, we are ready for questions.

Thank you. [Operator Instructions] And our first question comes from Annabel Samimy with Stifel. Please proceed.

Hi guys, thanks for taking my question. And glad to see that KEVEYIS is having a nice uptick. Just on RECORLEV, I want to know – obviously, you are in the midst of the LOGICS trial right now and flushing a lot of that out. Are there any other secondary endpoints that you’re trying to flush out in the LOGICS trial outside of what you’ve already shown, like on the metabolic side, on patient reported outcomes, et cetera? Is there anything specifically meaningful or must have – or anything like must-haves that you need to flush out from a marketing perspective to position yourself – very well from a regulatory perspective as well as from a commercial perspective? Thanks.

Thanks, Annabel for the question. This is Matt. So I’ll have Fred comment on this. I do want to note that Fred and his team with the SONICS data have done a very nice job in secondary analysis and data generation on clinically relevant and meaningful data related outcomes. So, Fred, I don’t know if you have anything else to add beyond that?

Yes. I would just – just as a reminder, Annabel, that the LOGICS study is a randomized withdrawal study. There is a beginning component of that, which includes the titration period. Of course, we are going to be measuring similar outcomes as secondary and exploratory endpoints as we did in the SONICS study. But because the randomized withdrawal period is fundamentally a different design, we wouldn’t necessarily expect clear-cut sort of differences, if you understand what I mean, it’s an eight-week treatment period. Yes. So that’s – it’s mostly UFC focused.

Okay. So maybe you can just help us understand, of the various secondary – excuse me, of the various secondary endpoints that you have read out, what would you say are the most meaningful from both the commercial and a regulatory perspective that you absolutely need to have and sustain going forward?

So I think we already have the important endpoints of SONICS. I’m quite sure that in the titration maintenance phase and randomized withdrawal phase, we’ll see reinforcement, particularly around the cardiac risk factor markers that we outlined for you previously. So things like improvements in LDL cholesterol, for example, body weight, maybe on the glucose. So those are the main ones that we’ve been focused on. Those are the ones important because the mortality and a lot of the morbidity in this condition is driven by cardiovascular disease.

Okay. Great. And then on any sort of flushes out on KEVEYIS, already it really had a nice uptick. So would you say that this could be a consistent run rate going forward? Do you now feel that these targeted efforts that you’ve made, the patient support that you’ve been providing is maintaining compliance? Or is it that you’re bringing new patients in? So just if you could help us understand that dynamic there. Is it patients staying on treatment? Or is it new patients coming in? Just to give us a sense of how consistent [indiscernible] is going forward?

Yes. Thanks, again, Annabel for that question. So we are encouraged by what we are seeing with regard to KEVEYIS and – from both the demand perspective. So new patient adds as well as keeping patients on therapy. I think you heard Scott mention earlier on the call, the number of very focused tactics that we have implemented on both of those fronts, they seem to be working. With regard to run rate, this was a strong quarter for KEVEYIS that again we saw increased demand as well as retention. We are encouraged. We do think that moving forward, we will, especially at the end of the third quarter, we’ll reevaluate, obviously, based on the results to see if with – after a couple of quarters, is there a consistent kind of uptick. I want to say though that we are very encouraged by the demand as well as the retention of the patients on – currently on therapy and that are coming on therapy.

Great, thank you.

You’re welcome.

Thank you. And our next question comes from Justin Kim with Oppenheimer. Your line is open.

Good morning. Thanks for taking the question. Just maybe to shift gears a little bit towards MACRILEN. Based on the experience that you’ve had commercializing so far, do you have a sense of what the commercial team’s footprint is relative to what a potential launch with RECORLEV might be?

Justin, thanks for the question. So if I can just – if I can summarize paraphrase, your question is, our current 23-person rare endocrine commercial organization is the question is that the team that we intend to launch RECORLEV with, both in current team as well as size, is that the question?

Right. And in terms of the sort of interactions with endocrinologists, sort of how much overlap might that be already?

Yes. So for the size of the potential rare endocrine team to launch RECORLEV, that’s – we’re still in process on that front. I think we have a good foundation with our 23-person team. And to your question about interaction with endocrinologists, we did know and we do know that a large percentage of endocrinologists who diagnose and treat adult growth hormone deficiency also diagnose and treat Cushing’s syndrome. The exact overlap I’m not clear and that will – we’ll have more color on that, obviously, when we have more clarity and definition around our go-to-market strategy for RECORLEV. I think it’s safe to say it’s high. So – and the benefit, of course, of us, Strongbridge, developing relationships with endocrinologists as we speak will obviously do nothing but help with regard to potential launch of RECORLEV here in the United States.

Okay, great. And then maybe as we approach the Phase III LOGICS readout in 1Q, is the enrollment completion point, the point at which the last patient enters the randomized withdrawal phase, at which point there would be sort of 9.5 weeks duration before data?

Fred, do you want to comment on that?

Yes. So the way we’re defining it for this purpose is that the last – as you said, the last patient enrolled will be consistent with the last patient entered in the randomized withdrawal. The randomized withdrawal period is nominally 8 weeks up to 9.5 weeks as needed to allow for visit scheduling. We anticipate a total of 12 weeks from that time point to get the top line data.

Okay, got it. Got it. And then maybe just a last question on – we’ve been hearing from physicians that considering the great commercial potential in switching off label ketoconazole patients to a potentially approved therapeutic like RECORLEV. Are there any means by which the company could gain clinical experience from such patient switches perhaps ahead of a potential approval?

Justin, thanks for that question as well. More to come in the future on that strategy, the potential for off label keto to RECORLEV switch strategy. So more to come on that, but we do appreciate the question.

Okay, great. Thanks, guys.

Thank you. And our next question comes from Liisa Bayko from JMP Securities. Your line is open.

Hi, guys. This is Neil on for Liisa. Just a question on KEVEYIS. Is your thoughts kind of – you wanted to see just another quarter of revenues before you commit fully to potentially increasing guidance for the year?

Neil, thanks for the question. That’s correct. While we are, again, encouraged by the increased demand and new patient adds as well as keeping patients on therapy, we think it’s prudent to wait and see on that front. But again, we are encouraged.

Thanks.

Thank you. And our next question comes from Esther Hong with Janney Montgomery Scott. Your line is open.

Hi, thanks. Good morning. So just two questions. The first one KEVEYIS. And can you discuss the type of life cycle management strategy that you’re thinking of on pursuing? And then…

Esther, I think we lost you.

And our next question comes from Francois Brisebois. Your line is open.

Thank you. Just a couple here. So I was just wondering, obviously, MACRILEN is pretty clear-cut how that can help with the potential RECORLEV launch just in terms of knowledge, but can you help explain maybe, Scott, and congrats on the promotion, but how the KEVEYIS knowledge can help out with the RECORLEV potential launch?

I’ll let Scott answer that question.

Sure. Yes. Francois, good question. I think it’s not only the KEVEYIS experience with just the commercial capabilities that we have built as core capabilities here over the last two-plus years. And that’s really around what’s fundamental in launching products in rare disease spaces, right? Patient identification and patient finding, exquisite targeting, identifying physicians who may have patients in their practice. I think that’s the first piece. And then the second piece is how do you acquire those patients rapidly with velocity and how do you keep them on therapies. I think the model we’ve built, which is a high-touch model, which is a patient-by-patient kind of model, is very leverageable as it relates to RECORLEV specifically and other products that we may bring in. So yes, I think the entire model fits very, very well with leveraging – being leveraged for RECORLEV.

Great. Thank you. That’s very helpful. And then in terms of Novo, how much can you comment – I guess, how much are you in touch with them? Just their thoughts on MACRILEN so far? And you have the 23 reps for about three years. Just how much granularity can you give us to help us understand their perspective on helping the MACRILEN so far?

Franc, given the fact that MACRILEN is no longer our asset, we really can’t comment on behalf of our commercial partner. Suffice it to say that again our 23-person team are out in the endocrinology community on a daily basis and we are proud of and appreciative of the partnership that we have with Novo. So we really can’t comment beyond that. I’m – hopefully, you understand.

No. No. I completely understand it. And then just lastly I guess in terms of M&A, can you remind me kind of the sweet spot for you guys? Is this – are you guys just focused on what you’re doing now? Or is this kind of a late-stage development? Or does it have to be commercial already? How late-stage does it have to be? Just remind us the sweet spot in terms of rare disease for potential M&A for you guys?

Yes. Well, first of all, on an ongoing basis, we continue to evaluate BD opportunities. We have strong deal flow from multiple inputs and development in our own outreach. However, our focus really is on driving RECORLEV to get the NDA submitted and continuing to improve the performance of KEVEYIS and driving it to profitability and potentially life cycle management opportunities with KEVEYIS. So organically, we have a lot to do now. I will hearken back to the strategy of the company is to continue over time to build a rare disease company on the foundation of multiple vertical therapeutically aligned rare disease franchises that are highly leverageable, as Scott mentioned, both vertically as well as horizontally. And clearly, rare endocrine and rare neuromuscular are primary focuses. But we are also opportunistic and have been and will continue to be opportunistic in other therapeutic areas. With regard to late stage or commercial, it’s all asset dependent and it’s also franchise dependent.

Understood. Thank you very much. That’s it for me and congrats in progress.

Thanks, Franc.

Thank you. And at this time, this concludes our Q&A session. I’d like to turn the call back over to Matthew Pauls for further remarks.

Thank you. In summary, we are proud of our second quarter performance. Our results demonstrate the progress that the company is making to grow KEVEYIS and more fully address the needs of the Primary Periodic Paralysis community. Through our commercial efforts, we are garnering learnings that are valuable and applicable to the Cushing’s syndrome market, where significant unmet needs exist. We remain focused on completing enrollment in the LOGICS study and preparing for the NDA submission for RECORLEV. Thank you for joining today’s call and for your continued support.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Everyone, have a great day.