Altimmune, Inc.
Q3 2017 Earnings Call Transcript

Published: 10 Nov 2017

[Operator:]

Good day and welcome to the Altimmune Inc. Third Quarter 2017 Earnings Conference Call. Today’s call is being recorded. At this time, I would like to turn the conference over to Ashley Robinson. Please go ahead, sir.

[Ashley Robinson:]

Thank you, operator and thank you everyone for participating in today’s third quarter 2017 earnings conference call. Leading the call today will be Bill Enright, Chief Executive Officer of Altimmune and Elizabeth Czerepak, Altimmune’s Chief Financial Officer. A press release with today’s third quarter financial results was issued after the market closed can be found on the Investors page of the company’s website. Before we begin, I would like to remind everyone that remarks about future expectations, plans and prospects constitute forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Altimmune cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. For a discussion of some of the risks and factors that could affect the company’s future results, please see the risk factors and other cautionary statements contained in the company’s filings with the Securities and Exchange Commission. I would also direct you to read the forward-looking statements disclaimer in our quarterly earnings release, which was issued last night and is now available on our website. Any forward-looking statements made on this conference call speaks only as of today’s date Friday, November 10, 2017 and the company does not undertake any obligation to update any of these forward-looking statements to reflect events or circumstances that occur on or after today’s date. Today’s call also includes a discussion of adjusted net loss and adjusted net loss per share. In each case adjusted for the loss due to a goodwill impairment charge. The company believes that these non-GAAP measures when taken into consideration with the corresponding GAAP financial measures provide investors with meaningful comparisons of current results to prior period results by excluding items that the company does not believe reflect its fundamental business performance. A reconciliation of these non-GAAP measures to the corresponding GAAP number is attached to our press release issued last night. As a reminder, this conference call is being recorded and will be available for audio rebroadcast on Altimmune’s website, www.altimmune.com. As the operator mentioned, all participants are currently in a listen-only mode and there will be a brief Q&A session following the company’s prepared remarks. With that, I would now like to turn the call over to Bill Enright, CEO of Altimmune. Bill, please go ahead.

[Bill Enright:]

Thank you, Ashley and good morning everyone. I appreciate the opportunity to provide you with an update on Altimmune’s progress and accomplishments. And joining me on the call today is our Chief Financial Officer, Elizabeth Czerepak, who will review our third quarter 2017 financials. We are pleased with the progress we have made this quarter and moving forward our four clinical stage programs. We remain on budget and on target to have data readouts from all of our programs before the end of June 20, 2018 consistent with our projections and plans from earlier this year. Let me move to a more detailed update on our programs. Let’s begin with our HepTcell program, which we will report data later this quarter. We are happy to report that our Phase 1 study in chronic hepatitis B that has been enrolling patients in both the UK and South Korea is now fully enrolled and we remain on track to that initial data towards the end of this quarter. This study is a double-blind placebo-controlled trial in 60 patients chronically infected with hepatitis B, now all formally a Phase 1 study, it will provide a preliminary look at endpoints relative to disease outcome. We dosed patients on days 1, 29 and 57 with either a low or high dose of HepTcell plus or minus an adjuvant in patients well controlled with their current antiviral therapy. The primary endpoint in this trial is safety and tolerability with T-cell response as our secondary endpoint. We believe a win here is a specific T-cell response against the targeted peptides that we are using get breaking immune tolerance in chronically infected Hepatitis B patients is start to be a key to functional cure. We will also look for surface antigen decline and all of those data won’t be until next quarter that would be a significant achievement in this first study. We have a larger Phase 2 planned for late 2018 designed to confirm the dose level and evaluate the treatment again. HepTcell is an immune therapy for patients chronically infected with the hepatitis B virus and has the potential to provide a cure against this problematic disease, something not achievable with currently available treatment. HepTcell is completely synthetic peptide product candidate based on a proprietary Densigen technology, which is designed to stimulate the immune system to clear infected cells from the liver. HepTcell is designed to work as a universal HBV immunotherapy and we expect it to be effective in all ethnic groups and against all HBV genotypes. Moving to our NasoVAX program, our intranasally administered recombinant flu vaccine candidate, late last quarter, we initiated our Phase 2 clinical trial with NasoVAX which is evaluating three dose levels of a monovalent version of our vaccine in 60 subjects. We are measuring the antibody response to both matched and divergent influenza strains along with mucosal and cellular immune responses against influenza. This low level was to get a good indication whether the vaccine is likely to be protective and at what doses and we will provide some data on potential breadth of this protective response. We are currently enrolling the second of three cohorts of patients in the trial and continued to expect data from this study in Q1 of 2018. In the second half of 2018, we plan to evaluate a Quadrivalent seasonal formulation of NasoVAX in healthy young adults and elderly subjects. This dose-ranging study will include approximately 150 subjects stratified to include healthy elderly adults, followed by a dose confirmation study of approximately 350 subjects. The risks from flu and flu-related complications are well known. Vaccination against the influenza virus can be an effective way to prevent infectious. However, the effectiveness of vaccination can vary greatly from year-to-year and the overall level of protection is poor. NasoVAX uses an adenovector to achieve expression of the influenza antigens in the target cell, thereby potentially stimulating a broader and more rapid immune response than traditional flu vaccines. Additionally, NasoVAX has a number of important advantages over traditional vaccines, including the potential for rapid protection in a matter of days instead of weeks, broader protection against changing virus strains, the ability to elicit mucosal immunity at the site of the infection, the ability to produce the vaccine in less than half the time and at anticipated lower costs with greater worker safety compared to traditional egg-based manufacturing. We look forward to continuing to develop this important vaccine. Now on to our externally funded programs. Altimmune has two complimentary government-sponsored programs, NasoShield and SparVax-L, in the anthrax vaccine space. These programs are fully funded by government contracts and we do not use Altimmune’s dollars to move either program forward. Additionally, the contract provides other benefits in terms of cash flow, overhead and fringe support, as well as a small fee. We also see some potential synergies as it relates to CMC developments, quality infrastructure, assay development and other items since NasoShield is built on the same RespirVec platform as NasoVAX. We are on track with our NasoShield program to initiate a Phase 1 safety study in the first quarter of 2018. The study will be a placebo-controlled and will evaluate escalating dose cohorts with a single intranasal dose and one cohort will receive a repeated dose at day 21. This $127 million contract runs through September of 2021. And if all options are exercised, we will provide funding through the end of Phase 2. In our SparVax-L program, where we have a $15 million NIAID contract fully funding the development of this next-generation lyophilized anthrax vaccine through August of 2018, we remain on track to initiate a bridging study in the gold standard animal model this year, with data expected in the first half of 2018. This asset was acquired through the merger with PharmAthene and we have demonstrated over 6 years of stability with this new lyophilized version of the product. The current contract runs through August 2018 and we intend to use the data from this study to initiate discussions with BARDA and NIAID for continued support of this program. It’s an exciting time at Altimmune. Looking forward, we have several important near-term milestones with all four clinical stage programs expecting to have data readouts in the next 8 months. That includes the initial Phase 1 data and our HepTcell program is expected by the end of the year with full top line in the first quarter. Phase 2 data from our NasoVAX trial expected in the first quarter of 2018, Phase 1 data from our NasoShield trial remains on target for the second quarter of 2018, key bridging data from our SparVax-L program remains on target for first half of 2018 and we are looking forward to present these data at several upcoming scientific conferences such as ISVHLD or the Global Hepatitis Summit and ASM or IDB. With that, it’s my pleasure to turn the call over to Elizabeth for an update on our financials. Elizabeth?

[Elizabeth Czerepak:]

Thank you, Bill and good morning everyone. For today’s call, I will provide an update regarding our third quarter 2017 financial results. Altimmune revenue for the third quarter of 2017 were approximately $4.6 million, consisting primarily of revenue from BARDA for our anthrax vaccine product candidate compared to $900,000 in the same period in 2016. Revenue from BARDA represented a $3 million increase over last year. Revenues during the quarter also included $624,000 in revenue from the contract with NIAID that was acquired from the merger with PharmAthene. Research and development operating expenses were $5.9 million for the third quarter 2017 compared to $2.4 million in the same period last year. The increase was the combined result of an increase of $2.5 million in spending on the development of the NasoShield asset on behalf of BARDA, an increase of $800,000 in manufacturing and other costs in preparation for the NasoVAX Phase 2 trial and an additional $400,000 in research and development expenses for SparVax-L. All of which were partially offset by $400,000 reduction in other R&D costs. General and administrative expenses were $3 million for third quarter compared to $3.3 million in the same period last year. The decrease was the result of a $1.5 million increase in general and administrative and legal and professional costs from the mergers, a $600,000 increase in stock compensation and other general and administrative expenses, all of which were offset by a $2.3 million write-off of deferred operating costs in the same period 2016. Net loss attributable to common stockholders for the three months ended September 30, 2017 was $30 million compared with $4.9 million in the same period in 2016. As of September 30, 2017, we determined that our goodwill was impaired and a non-cash goodwill impairment charge of $26.6 million was recorded during the quarter and was classified as a component of operating expenses. This non-cash charge resulted from an assessment of goodwill based on our market capitalization compared to the carrying value of our net asset. The non-cash charge has no effect on our current cash balance or operating cash flow. Excluding the goodwill impairment charge, net loss attributed to common stockholders for the three months ended September 30, 2017 was $5.4 million compared with $4.9 million in the same period of 2016. Net loss per share attributed to common stockholders for the three months ended September 30, 2017 was $2.05. Excluding the goodwill charge, net loss per share attributed to common stockholders for the three months ended September 30, 2017 would have been $0.34 compared to $0.71 in the same period of 2016. As of September 30, 2017 we had approximately $17.1 million in cash and cash equivalents. We believe that this amount together with expected revenue is sufficient to support our operations through third quarter 2018. We also expect to receive a tax refund in 2018, which would extend our funding into first quarter 2019. We had approximately 15.6 million common shares outstanding as of September 30, 2017. For further details on our financials including the financial results for the 3 and 6 months period ended September 30, 2017 and ‘16 please refer to our Form 10-Q which was filed with the SEC yesterday. And now, I would like to turn the call back over to Bill. Bill?

[Bill Enright:]

Thank you. Thank you everyone for joining us today. I would like to thank our employees for the tremendous work they have put and our board and our shareholders for their ongoing support. With that, I would like to open the call now for Q&A. Operator?

[Operator:]

Thank you, sir. [Operator Instructions] We will go to Charles Duncan with Piper Jaffray.

[Charles Duncan:]

Good morning, folks. First of all, congratulations on the progress in the quarter and thanks for taking our questions.

[Bill Enright:]

You bet, Charles. Thanks.

[Charles Duncan:]

So Bill, my first question is that we have a couple of press releases possibly coming up with T-cell. And I am just kind of wondering what expectation should be, it sounds like safety get this year and then perhaps efficacy next year. What would you like to see in terms of safety and then perhaps any other pharmacodynamic kind of markers of activity yet this year?

[BillEnright:]

Yes, thank you, Charles for that. So, we do intend to – we issued a press release some point later this quarter on the HepTCell. We will talk about what we have seen as far as safety goes as well as hopefully we will see a signal when we see the results of this study and we will be able to at least give some indication that we have a signal by Ellis Scott that there is some activity going on. These will be blinded data that we are looking at, at this point, it will un-blind the data next quarter and we will have a more thorough look at the data.

[Charles Duncan:]

Okay. So, limited downside risk, I mean, presumably you would tell if there was a safety issue, because it twould have to be reported at this point. If I could transition over to NasoVAX, I have just had a couple of questions from investors since we initiated on its profile that I think reflect a market inefficiency and that would be along the lines of NasoVAX versus say comparing to the existing flu vaccine, which is administered intranasally if you could get that managed FluMist. What precautions could be taken to avoid some of the efficacy issues that you have seen with regard to FluMist, is it above the technology that frankly makes it a much better drug that should survive not only evolution of the virus this year, but over time?

[BillEnright:]

Thank you for that question, Charles. So, FluMist is actually allied move actually, it’s attenuated so that it only grows in the cold, but that does give it a chance to replicate a couple of times in the upper airway. And so the NasoVAX product is actually only incorporates the HA gene of the flu program. So, it’s not an entire flu virus. So, you have no chance it’s actually adding any replication of the flu going on. So, while you get the same kind of response because the adenovirus gets into cells and produce it to payload inside the cells, so it acts very similarly as flu getting into cells, then into the body respond in a very similar way, you don’t have the issues that you have with the FluMist. The other issue there is FluMist is grown in eggs. If so, we have the advantage of our NasoVAX candidate being grown in culture, which is being due much more rapidly than the egg-based process, with less chance of the mutations occurring, because again, we are not using in flu virus. So, that’s one of the issues and there has been some recent literature on that fact that one of the problems with some of the current [indiscernible]. It actually has to be limitations going on during manufacturing.

[Charles Duncan:]

Okay. And then the other question that I often get is relative to say the current standard of care if you will was flu vaccine, which is intramuscular delivery. And I think that perhaps some investors maybe confused that intramuscular is inherently more potent than intranasal delivery. Could you help contrast that?

[BillEnright:]

Yes. So, if you look on the CVC website, the 10-year average efficacy for the currently licensed vaccines, it’s about 40% and that includes some bad years where it’s gone into the teams, whereas I think the intranasal route of administration, FluMist has shown that you get much higher responses than that in a difficult year now. Obviously, they have had some issues in the last couple of seasons in the U.S. and it’s kind of like clear from my perspective what those issues are, but I think that opens up a nice pool [indiscernible]. There is I know my kids don’t particularly like getting the flu shot, kind of used to getting the intranasal flu vaccine and so I think that opens up a nice opportunity for us.

[Charles Duncan:]

And then my last question sorry for all the questions just to bring a little bit into your conversation, Elizabeth, I am wondering if you could provide a little bit more color, on the balance sheet, you mentioned perhaps receiving a tax refund coming up here that would extend the balance sheet perhaps to cover well into ‘19. Could you help us understand how you are planning to get a tax refund or won’t?

[Elizabeth Czerepak:]

Sure. So, we will have the opportunity to apply for a tax refund, for taxes that were paid by PharmAthene in the year 2016. These taxes were related to the proceeds from a lawsuit which they in turn dividended most of that out to their shareholders, but this produced in time that they had to pay taxes for approximately $10 million to $11 million. We will have the right to apply over the next two tax years, 2017 – for 2017 and 2018 and offset losses that we have against those taxes that were paid and received up to the amount that was paid – that PharmAthene paid in taxes.

[Charles Duncan:]

So, is this something that you can count on 100% or is it a matter of judgment and should we just included in our balance sheet?

[Elizabeth Czerepak:]

At this time, we are assuming that we will apply for the refund and we will receive it. There is of course some range of timing during which we might be able to receive it. It will depend if the government just sees it and so, yes, you are entitled to it. Here is a refund or maybe they will want to take some time to look at it, but our expectation is that some time during 2018 we will receive the portion of it that we can justify from our lawsuit.

[Charles Duncan:]

Okay, that’s helpful. Thank you for the added information today.

[BillEnright:]

Thank you. Thanks for participating, Charles.

[Operator:]

[Operator Instructions] We will go to David Sherman with LifeSci Capital.

[David Sherman:]

Hi, guys. Thanks for taking my questions. First, I was just wondering you had mentioned ISVHLD, I was just wondering in terms of the data that’s going to be presented there, what should we expect at the conference?

[BillEnright:]

So, we are not exactly sure we are going to have everything ready for each of that. We are trying hard to get the data available to put in the late-breaker there and if that’s the case, then we should have un-blinded data in order to present there.

[David Sherman:]

Got it. Okay, thanks. That’s helpful. And then just sort of broader strategy, I was just wondering if you guys see yourselves down the road trying to partner these assets or if you think these are products that you see yourself taking through Phase 3 on your own?

[BillEnright:]

Thanks for that. So, I think we are going to continue to develop these programs as far as we can moving these forward towards commercialization, but we will be a bit opportunistic here. I think from the flu vaccine program in particular, there are a handful of global manufacturers in the world who have significant distribution networks instead of better review with primary care and the other large sales force is required for this kind of products and it’s likely that strategic partnership will result in that space at some point, but we will continue to advance the programs sort of commercialization and so at this time that we feel it’s ready for looking at potential partners.

[David Sherman:]

Okay, thanks. That’s definitely helpful.

[Operator:]

[Operator Instructions] We have no additional questions. I’d like to turn the call back to Mr. Enright for any closing comments.

[Bill Enright:]

So, I would just like to thank everyone for participating and we will look forward to talking to you again at the next earnings call.

[Operator:]

Thank you, sir. Again, that does conclude our call today. Thank you for participating. You may disconnect at this time.