Adamas Pharmaceuticals, Inc.
Q2 2017 Earnings Call Transcript

Published: 12 Aug 2017

[Operator:]

Welcome to the Adamas Pharmaceuticals Second Quarter 2017 Financial Results and Corporate Update Conference Call. All participants are in a listen-only mode. At the end of the company’s prepared remarks, we will open the call for questions and will provide specific instructions. As a reminder, this call is being recorded. I would now like to turn the call over to your host, Ashleigh Barreto, Director of Investor Relations and Corporate Communications at Adamas. Please go ahead.

[Ashleigh Barreto:]

Thank you, operator, and good afternoon, everyone. Joining me on the call today are Dr. Greg Went, our Chairman and Chief Executive Officer; Alf Merriweather, our Chief Financial Officer; Richard King, our Chief Operating Officer; and Dr. Rajiv Patni, our Chief Medical Officer. Before I begin, I would like to remind everyone that the call will contain forward-looking statements, which are subject to risks and uncertainties. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We undertake no obligation to revise or update these forward-looking statements in light of new information or future events. Information concerning factors that could cause actual results to differ materially from those contained in or implied by such forward-looking statements are discussed in greater detail in our most recent Form 10-Q and other SEC filings. I will now turn the call over to Greg.

[Gregory Went:]

Thank you, Ashleigh, and good afternoon, everyone. Thank you for joining us today. This is a pivotal time here at Adamas, as we are at the cusp of transitioning to a commercial entity that delivers its medicines to people in need. We are a little more than two weeks away from the PDUFA date and potential approval of the new drug application for ADS-5102, a high-dose, extended-release amantadine therapy taken once daily at bedtime for the treatment of dyskinesia in people with Parkinson’s disease. If approved, ADS-5102 will be the first and only FDA-approved medicine for levodopa-induced dyskinesia, an orphan indication that addresses a substantial unmet medical need in the Parkinson’s disease treatment journey. Parkinson’s disease affects about 1 million people in the U.S., with a widely recognized annual economic impact of over $14 billion and growing. Dyskinesia is a consequence of taking levodopa, the gold standard, and by far most widely utilized treatment for OFF time in Parkinson’s disease. Initially, patients respond well to levodopa and their symptoms are well controlled. But as the disease progresses, the window of response to levodopa narrows, and at the same time the amounts of levodopa needed to control OFF time increases. These competing realities often result in levodopa-induced dyskinesia, as the progressed Parkinson’s brain is unable to appropriately regulate the higher levels of levodopa. Dyskinesia represents a turning point for patients, which is characterized by involuntary movements during waking hours that are non-rhythmic, purposeless and unpredictable. It may cause fatigue, risk of injury, social withdrawal, anger, frustration, depression, a poor quality of life as well as increased care burden and increased costs borne by these patients, the healthcare system and associated indirect costs. Since the introduction of levodopa 50 years ago, physicians and patients have struggled to balance the need for levodopa to treat their OFF with the occurrence of dyskinesia. With ADS-5102, we stand to provide a new and valuable tool to help mitigate this struggle. Adamas has developed the first medicine that has clinically demonstrated to reduce dyskinesia, as well as reduce OFF time, meaningfully reducing the time patients spend in these distinct and challenging disease states. In addition to levodopa-induced dyskinesia, we are planning on taking ADS-5102 forward in multiple sclerosis walking and are evaluating several other indications. And for our third program, we are rapidly progressing ADS-4101 through Phase 1 clinical trials, and expect to read out additional Phase 1 data later this quarter. So today, we are poised to deliver on the value of our innovative products, derived from our deep understanding of and ability to map the complex timing patterns of disease and drug activity. I want to emphasize that the goal of our approach is to drive a larger and more durable clinical effects, without compromising tolerability, thereby providing a meaningful benefit to a greater number of patients. With this approach, we strive to create medicines with novel therapeutic profiles that match the patterns of disease. And we are just getting started. On today’s call, Alf will be reporting our Q2 financial results. Richard will then be highlighting our commercialization plans. And Rajiv will be reviewing recent ADS-5102 data presentations and providing an overview of ADS-4101, our antiepileptic product candidate. Due to the near-term PDUFA date, we will not be commenting or fielding any questions about the progress of the ADS-5102 NDA. I would now like to turn over the call to Alf Merriweather, our newly appointed Chief Financial Officer. We are very pleased to have Alf on the team, as we prepare to transition into a commercial stage company.

[Alfred Merriweather:]

Thanks, Greg, and hello, everyone. It’s great to be here. Let me highlight some key aspects of our quarterly financials. For the second quarter of 2017, we reported a net loss of $20.7 million compared to a net loss of $16.9 million for the second quarter of 2016. The increased net loss was the result of increased spending in preparation for the potential commercialization of ADS-5102. Our research and development spending this year has been driven by our ADS-5102 program, primarily ongoing clinical costs, establishment of a manufacturing capability, along with our Phase 3 program in multiple sclerosis walking. These ADS-5102-related activities represented approximately three-quarters of total R&D expense year-to-date. We also dedicated significant funding to our Phase 1 program for ADS-4101 for the treatment of partial onset seizures in patients with epilepsy, representing approximately a quarter of R&D spend for the first half of the year. Overall, research and development expenses for the quarter were $7.2 million, down slightly from $9.2 million for the prior-year period. The decrease was largely due to the timing of the various activities described previously. General and administrative expenses for the quarter were $13.1 million, up from last year’s second quarter G&A expense of $8.1 million. This increase reflects cost associated with building the administrative and commercial capabilities in preparation for commercialization. Turning to our cash position. On June 30, 2017, we had $145 million of cash, cash equivalents and available-for-sale securities compared to $136 million at year-end 2016. Use of cash was 12.6 million in the second quarter and 27.1 million for the first half of the year. The June cash balance includes the initial $35 million tranche of our $100 million royalty financing. This financing is a critical aspect of our strategy to optimize near-term commercial opportunity and advance our existing development programs. I’ll now turn the call over to Richard for an update on our commercial plans.

[Richard King:]

Thank you, Alf. Across the Adamas organization, as you can imagine, there is excitement at the prospect of the approval of ADS-5102 since the availability of the product has the potential to impact a patient population in significant need. From a marketing perspective, we have defined our critical success factors for commercialization, and we have identified and validated a differentiated value proposition for ADS-5102 in the context of the treatment journey for people with Parkinson’s disease. In addition, we are in the final stages of validating our commercial communications and are very pleased that they appear to resonate with prescribers, payers and people with Parkinson’s disease. Turning to the sales arena. We have confirmed the location of the territories for 59 U.S. neurology specialist sales representatives that can address 95% of the target market for physicians treating our population. We have also identified the six regions where we will appoint field-based sales leaders to oversee the activities of these territories, and are currently recruiting for these positions. We’ve seen very strong interest with over 600 high-quality applicants from the industry having applied for our six regional business director positions. Our plan is to make these offers as soon as possible, conditional on approval. With respect to the 59 neurology sales specialists, we have decided to employ our own sales team rather than staff through a contract sales organization. Approval of ADS-5102 will trigger the recruitment of the broader sales team, whom we plan to appoint by mid-November 2017 in time for our launch in January 2018. In terms of market access, we have begun to reach out to payers to introduce them to Adamas and to raise awareness to the anticipated approval of ADS-5102. We are very pleased with the reception we’re getting from payers, and the interest in treating the currently underserved Parkinson’s disease population with dyskinesia. Turning towards our distribution strategy. We are finalizing our exclusive specialty pharmacy network who will manage reimbursement support, patient assistance and adherence support for Parkinson’s disease patients with levodopa-induced dyskinesia. In summary, Adamas is ready to introduce ADS-5102, if approved, and we are looking forward to offering people with Parkinson’s disease the first medicine for the treatment of dyskinesia. Let me now turn the call over to Rajiv.

[Rajiv Patni:]

Thanks, Richard. Let me start with ADS-5102. In June, we were proud to announce that our Phase 3 EASE LID clinical study was published in JAMA Neurology. This is the first publication of a placebo-controlled Phase 3 study with an investigational drug that significantly reduced both dyskinesia and OFF time at both three and six months in Parkinson’s disease patients with levodopa-induced dyskinesia. Two additional manuscripts of our remaining Phase 3 studies have been accepted and will be published later this year. Additionally, in early June, we presented an expanded analysis from the open-label, long-term study at the 21st International Congress of Parkinson’s Disease and Movement Disorders Meeting. The expanded open-label safety data, out to 88 weeks, were consistent with the previously reported safety profile of ADS-5102. The efficacy measure used was the MDS-UPDRS Part IV score, which is a measure of dyskinesia and OFF time. The treatment benefit of ADS-5102 was rapid, substantial and durable out to 88 weeks. We also presented data from a group of patients who switched from amantadine immediate release to ADS-5102. These data showed that patients previously on amantadine immediate release experienced a 35% reduction in dyskinesia and OFF time when switched to ADS-5102. This treatment effect was comparable to that experienced by amantadine-naive patients switched from placebo to open-label ADS-5102. Turning to ADS-4101. ADS-4101 is an investigational, modified-release, high-dose lacosamide therapy in development for the treatment of partial onset seizures. Lacosamide is an FDA-approved, anti-epilepsy drug currently marketed by UCB as VIMPAT. The motivation behind ADS-4101 is to allow for much higher lacosamide concentrations during the day when most seizures occur. To accomplish this, ADS-4101 is designed to have a lower initial rate of rise in lacosamide concentration to reduce slope-related adverse events, coupled with a prolonged time to maximum concentration allowing for nighttime administration. Early in the second quarter, we presented Phase 1a data, which showed that healthy volunteers had a lower rate of adverse events with a single dose of 400 milligrams of ADS-4101 compared to the equivalent dose of VIMPAT, confirming the results from our prior preclinical studies that the adverse event of lacosamide is partially related to slope. Based on the single-dose data, we initiated a multi-dose Phase 1b study to evaluate the tolerability and pharmacokinetic profile of three ascending doses of ADS-4101 up to 600 milligrams per day administered once daily at bedtime compared to ascending doses of twice daily of VIMPAT. We expect to announce top line data from this study in the third quarter. If successful, we plan to meet with the FDA to discuss a registration program. We look forward to updating you on the ADS-5102 and ADS-4101 development programs in the fall. With that, I’ll turn the call back over to Greg.

[Gregory Went:]

Thanks, Rajiv. We are very proud of the broad portfolio we’ve created thus far, as evidenced by an imminent PDUFA date for ADS-5102 with an additional indication for MS walking on deck, ADS-4101 nearing completion of Phase 1 studies and NAMZARIC sales continuing to show solid growth with Allergan. We believe that these multiple programs and multiple therapeutic areas, each with a clear story of clinical differentiation, validates the power of our time-dependent biology approach. As we go forward, we intend to build on these successes and transform Adamas into a multi-product pharmaceutical company that has the capability to improve the daily lives of people suffering from a variety of CNS disorders. To conclude, we are very excited about the potential approval of ADS-5102 later this month and look forward to communicating the FDA’s decision. If approved, we plan to host an Investor Day to provide more details on the commercialization plan for ADS-5102, as well as the progress of our development programs. We look forward to having a robust conversation with you as we continue to operate our business and execute on our strategies for success. With that, I would like to open up the call for questions. Operator?

[Operator:]

[Operator Instructions]. Our first question comes from the line of David Amsellem with Piper Jaffray. Your line is open.

[David Amsellem:]

Thanks. Just had a few questions. First, a commercialization or actually payer question related to 5102. And my question here is what are your thoughts on the extent to which payers are going to force patients to step through immediate-release amantadine in order to get access to 5102? Is that something that you’re planning for? And then secondly, in terms of 4101, can you elaborate on next steps beyond the Phase 1 data? And given that we’ve seen the once-a-day antiepileptic drugs have some success commercially, have you given thought based on the safety data to-date to accelerating your development timeline for 4101? Thanks.

[Gregory Went:]

David, it’s Greg. Thank you very much for the question. First question, I’m going to let Richard handle with regards to the amantadine IR step-through.

[Richard King:]

So thanks, David, for the question. We’ve obviously done a fair amount of assessment of ADS-5102 with physicians and with payers. The profile for the product, as I mentioned in the comments, resonates extremely well. And they don’t see this profile as really having much to do with the amantadine IR profile that they – that’s currently on the marketplace. They recognize that amantadine IR is not approved for this indication. And that if ADS-5102 is approved for this indication and with the clinical dataset that is available to support it, that there’s no anticipation of requiring a step-through of amantadine IR to get to 5102.

[Gregory Went:]

Richard, thanks. Second question, Rajiv, over to you with regards to potential for accelerating ADS-4101 development.

[Rajiv Patni:]

Thanks, Greg. So as I commented earlier, we’ll have the results of the Phase 1b study later in 2017. Then based on those data, we intend to meet with the FDA to talk about a registration program.

[Gregory Went:]

And David, I just would add. The motivation behind everything we do is really to provide a better efficacy experience for the patients, while not compromising tolerability. So we’ll continue to evaluate the results of the Phase 1b study, the current market around the epilepsy, including testing profiles as we go out and prepare for the FDA meeting. But we’re pretty excited by the potential for a differentiated product in the antiepileptic market with ADS-4101.

[David Amsellem:]

So just to be clear, Greg, you’re pretty confident that you can move directly into Phase 3 and I guess maybe – if you can point to precedents within the broader neuro space or recent precedents that drives that confidence?

[Gregory Went:]

In general, David, when you have data which underlie the active ingredient where you have some clinical data from which you can utilize that data, along with your own preclinical data and Phase 1 data to power a Phase 3 program, you would not need to convince yourself with a Phase 2 or a Phase 2/3 study. That clearly wasn’t the case with ADS-5102 when there was really no data present for which we could even come close to powering a study for improving dyskinesia or improving OFF. But in the case of lacosamide, as you know, there is a full and robust program that was conducted on VIMPAT with dose-ranging studies that enable – that would enable us to look at that. We’re also looking carefully at development programs, for example, like Oxtellar with Supernus and others as precedent for how we can think this through. But really critically right now, we need to see the data coming out of the Phase 1b study, evaluate it from both a commercial perspective with Richard’s team, and then Rajiv will take forward what we think is really the best value for patients and for our shareholders.

[David Amsellem:]

Okay. Thanks.

[Gregory Went:]

Thanks, David.

[Operator:]

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

[Tim Lugo:]

Thanks for taking the question. It sounds like you’re looking to bring on your own sales team versus previously discussing the contract sales force. Can you maybe go into some of your decisions around both of those options?

[Richard King:]

Sure, I can take that one directly. So as I mentioned in response to the question from David, we’ve obviously done a lot of evaluation of our dataset that supports 5102 and we’re pleased by the very strong positive response that we get to that dataset. That confidence born through that feedback from the marketplace has enabled us to come to a decision to accelerate what we already anticipated, which was by the end of 2018, we would actually bring on our own sales force from a contract stage. We’ve decided to go to that stage right from the work get-go, from launch. We don’t see that decision as increasing our costs significantly beyond those that we envisage for the CSO recruitment concept. And also I will point out that we will continue to utilize some third-party CSO support, particularly in the provision of computer systems and fleet support to our field sales representatives. But it was a relatively straightforward decision based on the responsiveness to the product profile.

[Tim Lugo:]

Understood. And sorry, I’m kind of juggling between calls this afternoon and maybe David asked this as well. But for the epilepsy program, can you talk about some of the hurdles you’re looking for, or kind of the hurdle rates you’re looking for and maybe what you’re looking for coming out of the upcoming dataset by year-end to kind of trigger moving into a Phase 3? And the epilepsy program seems distinctly different than 5102 where there is nothing approved for a LID. However, we have a number of AEDs on the market and potentially the CBDs coming onto the market. Can you just give us some idea about what would be kind of a homerun in terms of product profile for this program?

[Gregory Went:]

Tim, let me start that and if Rajiv has something to chime in, he will. With regards to ADS-4101, as you know, it’s based upon two discoveries that we’ve made. First that seizures tend to be biased towards the daytime hours; and second, that there is a part of the adverse event profile of lacosamide that is attributable to its initial rate of rise. So coming out of the Phase 1 study, having confirmed part of that hypothesis, that there is a slope tolerability relationship, we’ve moved forward into Phase 1b really to establish the dose that we can give of ADS-4101 at night. And the differential in the plasma concentration we can therefore achieve during the daytime hours when we believe seizures are most prevalent. And if you look at our investor presentations, anywhere from a 50% to a 70% increase in plasma concentration is potentially possible here without compromising the tolerability of lacosamide. So that would be an important finding coming out of a Phase 1b study, which we would then evaluate in light of your comments, as to what position could the resulting product profile hold in the antiepileptic marketplace. Lacosamide is the largest and fastest-growing brand in the market right now. It is enjoying increasing utilization due to a whole host of factors and we believe we can make it a lot better. Armed with that belief, as you’ve just rightly pointed out, the very different situation than ADS-5102 where we didn’t have the underlying data to base a program on. So we’re going to evaluate that closely and look to bring out a product profile that would have a real clear differentiation, clinical differentiation message.

[Tim Lugo:]

And when you’re looking at the side effect profile, are you expecting reduced dizziness, reduced kind of visual issues, nausea, headache, vomiting?

[Gregory Went:]

I’d say the conduct of the Phase 1b we’re actually operating under a titration schedule that the actual VIMPAT itself will be fairly – should be fairly well tolerated as opposed to the Phase 1a study where we did a 100 – sorry, a 400-milligram single-dose experiment. Here, we’re titrating up the dose pretty much according to the label. Sorry, Rajiv, I --

[Rajiv Patni:]

No, nothing more to add.

[Tim Lugo:]

Okay. All right, that’s great. Thank you.

[Gregory Went:]

Thanks, Tim.

[Operator:]

Thank you. Our next question comes from the line of Jason Butler with JMP Securities. Your line is open.

[Jason Butler:]

Hi. Thanks for taking the questions. First one, just a quick follow up and I think Richard might have mentioned this a second ago. But you’re not using a CSO, but when you think about other resources like compliance, IT, do you plan on building these in-house or will you use third-party resources?

[Gregory Went:]

Well, with regards to the home office resources, Jason, we’ve been building those capabilities since really top line data. Jennifer Rhodes joined us. As the former General Counsel of Medivation, she had done this lift before on the legal and compliance side. And so those activities, you have basically the same – really similar infrastructure in place whether it’s your own sales reps or not. Richard, with regards to the other capabilities?

[Richard King:]

Yes, there’s a couple of additional things that we do need to – and we are sourcing those from a personnel standpoint to be able to stand up our own sales organization. Most importantly, though the standing up of a full computer system that supports the sales organization, we will continue to do through a third-party CSO. That’s probably the most complicated and most expensive of all the lifts. And there is some down in the weeds [ph] stuff, like car support and management, which again we will outsource, that we don’t see any value in bringing that in-house. But all the other elements, with a couple of additional resources, we’re able to stand that up effectively.

[Jason Butler:]

Okay, great. And then thinking about the fact that you’ll have the sales force trained as soon as possible, can you talk about the other gating items to launch and maybe give us an idea of how quickly you think you could launch after a late-August PDUFA date, just thinking about the fact that you’re going to get towards the holiday season in 4Q?

[Richard King:]

Yes, the holiday season is a big impact on the decision. In theory, we probably could stand this up towards the middle to end of November. But the reality is, that going out with a sales force at that stage doesn’t have significant value. So the decision that we’ve taken is we’ll make the product available. There are obviously a lot of needy patients out there that we want to be able to serve. And we’ll do that in the fourth quarter, so that patients can have access to drug. But the actual sales force deployment will occur as of that first week in January 2018. That allows us to basically recruit the sales force post-PDUFA by about the middle of November. And then after training them, put them out into the field in early January.

[Jason Butler:]

Okay, great. Thanks for taking the questions.

[Gregory Went:]

Thanks, Jason.

[Operator:]

Thank you. Our next question comes from the line of Serge Belanger with Needham & Company. Your line is open.

[Serge Belanger:]

Hi. Good afternoon. A couple of questions for me, first on 5102 and a commercial question. Can you remind us again what’s the breakdown between commercial payers and Medicare and I guess how quickly you think you can penetrate these segments?

[Richard King:]

So Medicare represents 50% to 60% of this patient population; commercial is about 30%, 35%; and there is a small amount in Medicaid and in cash pay and so on, the remainder basically. In terms of penetration of these different segments, obviously the value of deferring the launch date until January 1 of 2018 is that we get effectively four months to go and interact with payers. We’ve actually already begun that per the guidance from the FDA such that we can familiarize them with Adamas and ultimately with ADS-5102. But we are working through that process of engaging with the payer community certainly in the fourth quarter of this year with a view to trying to open up those commercial lines in the first instance. Medicare has, as you know, its own schedule by which products can be approved. We are too late to be added to the 2018 Medicare Part D formulary. However, we are acutely aware of the fact that we can approach Medicare as early as approval of the product and they will start the review process and they will likely add this, given there’s no other product for this indication sometime in 2018 and make it available through Medicare. And it will become a covered item effectively under Part D. So we’d see both of those events happening in the two important populations starting in '17 and moving into full availability and access in 2018.

[Serge Belanger:]

And what are your latest thoughts on pricing of the product?

[Richard King:]

So price obviously is something we’ve talked about historically. It’s obviously going to be consistent with the value proposition for patients. And we believe we’ve got a strong value proposition, given the differentiated clinical nature of ADS-5102. We are testing price bands in market research currently to finalize the price. We’ve talked about somewhere between the AZILECT and NUPLAZID price range, about $10,000 to $30,000 a year as being an appropriate price point for 5102. We’re evaluating in that arena. And we’ll refine our thinking based upon the feedback from that market research and with a view to obviously investing into the strength of the clinical data.

[Serge Belanger:]

Okay. And I think you’ve been doing some disease awareness and education campaigns. I don’t know if they were geared towards more the physician base you’ll be targeting, or is there any plans to do something more direct to patients?

[Richard King:]

Yes, on the disease education process that we have been undertaking for some time now, we’re obviously interested as an NMDA receptor antagonist in the interplay between glutamate and dopamine. So we’ve been doing some education, particularly at the movement disorder specialist level. This is about 800 – 700, 800 of the physicians that specialize in treating this population as opposed to the 6,000 or so physicians who are neurologists, general neurologists who treat a broad array of neurological disorders. But we’ve been gearing towards an educational program around our disease state, and particularly about the interaction between glutamate and dopamine over the course of the last three, four, five months. And we’ll continue to do that in 2017 and into 2018. The second part of your question --

[Gregory Went:]

Patients…

[Richard King:]

Yes, patients. Thank you. So we also see the patient population as a significant energizer of the move towards treating dyskinesia effectively. At this stage, the challenge for many patients is that they don’t realize that the dyskinesia that they’re experiencing is not just a normal part of their Parkinson’s disease. And they’re not encouraged to speak out about it because there isn’t an available treatment to address it. So I think that with the availability of ADS-5102, if it’s approved, we would clearly want to have a broader discussion and support for the patients to ask their physicians about the nature of their disease state, do they have dyskinesia? Is that being experienced and how can it be addressed? And so certainly, we’ll want to engage that patient population in that dialogue.

[Serge Belanger:]

Thanks for the additional color.

[Gregory Went:]

Thanks, Serge.

[Operator:]

Thank you. And I am showing no further questions at this time. I’d like to turn the call back to Dr. Went for closing comments.

[Gregory Went:]

So thanks everyone for your time today. And I’ll just end with, we – very exciting period for us and we look forward to talking with you very soon. Thanks again.

[Operator:]

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