Armata Pharmaceuticals, Inc.
Q2 2016 Earnings Call Transcript

Published: 15 Aug 2016

[Operator:]

Good afternoon, and welcome to the AmpliPhi Biosciences Financial Results Conference Call for the Second Quarter 2016. Today’s call is being recorded. For opening remarks and introductions, I’d like turn the call over to Mr. Matt Dansey, Business Development Manager. Please go ahead sir.

[Matt Dansey:]

Thank you. During the call, we will make statements related to our business that may be considered forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based upon AmpliPhi’s current expectations and involve a number of risks and uncertainties including the risks and uncertainties described in AmpliPhi’s Annual Report on Form 10-K for the year-ended December 31, 2015 and on Form 10-Q for the quarter-ended June 30, 2016 as filed with the Securities and Exchange Commission. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the time they were made. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update any forward-looking statements. Now, I’ll turn the call over to Scott Salka, AmpliPhi’s Chief Executive Officer.

[Scott Salka:]

Thanks, Matt. I’m pleased to have Steve Martin, our CFO on the call with us as well. I’ll begin by reviewing AmpliPhi’s progress in the second quarter of 2016 discussing several important recent advancements that have occurred subsequent to the quarter’s end and describing the milestones we expect to attain by year’s end. Then, I’ll turn the call over to Steve to review our second quarter financial results. We’ll then take your questions. Our entire team including employees, consultants and all collaboration partners, have been diligently working to deliver on our aggressive development timelines. Our progress in the second quarter of 2016 was marked by the achievement of several important milestones, and we’ve generated significant momentum in our clinical development programs, momentum we believe will drive us toward reaching additional important development milestones later this year. On the clinical front, we made two important advances in the development of AB-SA01, our phage cocktail targeting Staph aureus infections. First, we announced that AB-SA01 treatment was well-tolerated and that there were no reported drug-related adverse events in the first cohort of our Phase 1 trial in patients with chronic rhinosinusitis or CRS for short. CRS accounts for more than $350 billion in direct and indirect treatment costs in U.S. and AB-SA01 is designed to address the substantial unmet medical need of the estimated $2.5 million CRS patients in U.S. alone who do not respond to current antibiotic or surgical treatments. In May, we initiated our first Phase 1 trial under a U.S. IND. We designed the trial to evaluate the safety AB-SA01 administered topically to the intact skin of 12 healthy adult volunteers. The trial is now fully enrolled and is being conducted at the clinical trial center at the Walter Reed Army Institute of Research under a collaborative research and development agreement with the U.S. Army. Staph aureus is a leading cause of skin and soft tissue infection, especially among the individuals with underlying health conditions. Despite vigorous eradication efforts, Staph aureus is one of the most common causes of hospital acquired infections. It can cause pneumonia, infect prosthetic joints, skin and other soft tissues and is the leading cause of bloodstream infections typically as a consequence of traumatic injuries, surgery or the use of catheters and injectable drugs, where the pathogen can then go on to infect and damage the heart, the joints and the bones. AmpliPhi remains on track to complete both, Phase I study soon and expects to share the complete study reports before the end of the year. We also have continued the development of AB-PA01, our proprietary investigational phage cocktail targeting Pseudomonas aeruginosa. Sandra Morales, our VP of Research presented data at the European Congress of Clinical Microbiology and Infectious Diseases, demonstrating that in a lung infection model AB-PA01 had activity levels similar to that of meropenem, a broad-spectrum antibiotic frequently used to treat Pseudomonas lung infections. AB-PA01 was shown to be active in vitro against 87.2% the 429 global and genetically diverse clinical isolates that we tested, including multi-drug resistant strains and strains isolated from patients with cystic fibrosis. The need for alternative therapies is urgent, the CF agent’s bacterial populations have become increasingly resistant to broad-spectrum antibiotics. And we are excited by the potential for AB-PA01 to provide more efficacious treatment options to patients and caregivers. We’ve broadened our portfolio of intellectual property related to our bacteriophage platform through the grant of two new patents. First, the European patent covering the treatment of antibiotic resistant infections through the staged use of bacteriophage preparations followed by the antibiotic to which the bacteria were initially resistant. In the first stage of treatment, bacteriophage exert a strong selective pressure on the bacterial population killing much of it. Though a small proportion may survive the phage onslaught by shedding genes that confer to antibiotic resistant leaving these bacteria once again vulnerable or re-sensitized to antibiotics used in the second stage of the treatment. Second, a Japanese patent covering the same sequential treatment regimen I just discussed but specific to the treatment of Pseudomonas infections. Pseudomonas infects almost 50% of cystic fibrosis patients overall with approximately 80% of patients over the age of 18 chronically infected by the pathogenic bacteria. Recurrent Pseudomonas infections cause severe lung damage and can lead to bronchiectasis and the need for lung transplants. Current standard of care treatment for CF patients includes inhaled antibiotics that tamp down but may not eliminate the infection. AmpliPhi’s investigational drug therapy, AB-PA01, is designed to broadly target both CF and non-CF Pseudomonas isolates and potentially eradicate the infection instead of merely keeping it at bay. Both patents address the potential of AmpliPhi’s phage based therapies to resensitize bacteria to antibiotics to which they have developed resistance. We’ve observed this effect in both in vitro and in vivo experiments, and it has recently been described by independent groups including a team of scientists from Yale in the journal article published this May. We believe this phase mediated phenomenon has a potential to turn back the clock on antibiotic resistance and reinvigorate all the antibiotics where can long go by the proliferation of resistance pathogens. The critical importance of novel approaches for defeating antibiotic resistant bacteria continues to gain recognitions in the scientific, medical and global policy agreements, as evidenced by the recent establishments of the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator or CARB-X, one of the world’s largest public private partnerships. This is just one of the many potential funding options for the important work that so urgently needs be conducted at the global community as to avoid the disastrous consequences of falling behind the antibiotic resistance curve. During the quarter, we also successfully closed two transactions that simplified our capital structure and increased our financial resources. In April, we announced a conversion of all 7.5 million shares of AmpliPhi’s outstanding Series B Convertible Preferred stock to common stock. This occurred automatically upon the receipt of elections by more than two thirds of the preferred stock holders in accordance with AmpliPhi’s articles of incorporation. In June, we successfully completed the registered direct public offering of common stock and warrants which yielded aggregate net proceeds of approximately $4.2 million after fees and expenses. This offering comprised the sale and issuance of an aggregate of 2.1 million shares of the Company’s common stock and warrants to purchase 1.1 million shares of the Company’s common stock at a purchase price of $2.35 per unit. I’ll now turn the call over to Steve, who will review our financial results for the second quarter.

[Steve Martin:]

Thanks a lot,, Scott. Revenues related to sublicensing agreements from our former gene therapy program were approximately $0.1 million for the three months ended June 30, 2016 and for the same period in 2015. Research and development expenses for the quarter ended June 30, 2016 totaled $1.2 million compared to $1.1 million in the same period of 2015. The increase was primarily related to an increase in personnel cost in 2016. For the six months period ended June 30, 2016, we have incurred research and development costs of $3.2 million, which is $1.2 million higher than in the same period of 2015, as we accelerate our clinical trial spending. General and administrative expenses for the three months ended June 30, 2016 were $2.5 million compared with$1.6 million for same period of 2015. The increase was primarily attributable to higher compensation costs, predominantly for non-cash stock-based compensation expense charges associated with 2015 and 2016 stock option grants. Loss from operations the quarter ended June 30, 2016 was $3.6 million compared with $2.6 million in the same period in 2015. Net loss recorded during the three months ended June 30, 2016 was $3.9 million, inclusive of the changes in the fair value of certain derivative liabilities recorded for warrants and other possibly dilutive securities. Cash totaled $7.1 million as of June 30, 2016. Based on our current operating plan, we believe our existing resources will be sufficient to fund our planned operations into the fourth quarter of 2016. We are currently evaluating opportunities to raise additional capital. I’ll now turn the call back to Scott.

[Scott Salka:]

Thanks, Steve. This completes today’s update. We’re happy to take questions at this time. Operator, please begin the question-and-answer session.

[Operator:]

Thank you, sir. [Operator Instructions] Keith Markey with Griffin Securities.

[Keith Markey:]

Just wondering how broadly applicable do you think the use of phage might ultimately be for rejuvenating antibiotics that have developed resistant -- that drugs -- or drugs have become resistant to them? And obviously P. aeruginosa is a serious one and one that affects -- in fact, there are plenty of them out there.

[Scott Salka:]

We’re very optimistic about how broadly applicable the strategy will be since we’ve seen it across a number of different pathogens including as we mentioned Pseudomonas but also with acinetobacter. So, again, we have good examples across a number of different pathogens. And our expectation is if we can develop cocktails that we can use to administer two people with these drug resistant pathogens, we believe that there’s a great shot that we’ll be able to apply the strategy of re-sensitizing those bacteria to existing antibiotics, even some very old antibiotics.

[Keith Markey:]

So, these are possible reasons for combining your Pseudomonas aeruginosa phage with an antibiotic or is it topically?

[Scott Salka:]

I don’t know that we would actually combine in a formulation because what we have seen is that you get very interesting results if you allow the phage interact with the pathogen first, without the antibiotic there, and then let that evolution take place where the pathogens that remain or those that are now re-sensitized to antibiotics. Remember, you get a big implosion in the population because many of those pathogens are susceptible to the phage, it’s just kind of rump of population that’s remaining that is now somewhat insensitive, maybe not completely insensitive but somewhat insensitive to the phage and now sensitive to the antibiotic.

[Operator:]

[Operator Instructions] We’ll go next to Alan Leong with BioWatch News.

[Alan Leong:]

You actually have in the Phase 1 trial with the -- trial has the results coming out at the end of the year, your chronic rhinosinusitis patients, they’re ill. And although it’s definitely a safety trial, could you review any type of metrics that might -- that are deployed that might suggest effectiveness?

[Scott Salka:]

Yes, Alan. As you mentioned in that study, it’s a safety study much like the topical skin study was primarily a safety study. But in the study in the sinusitis patients, we’re enrolling only patients with an active infection, and we’re making observational measurements that relate to their infection. So, all the patients before they’re enrolled in the study, we confirm that they’ve an active infection. The surgeon places an endoscope in their sinuses and takes images of that active infection, we swab that active infection, and then we dose with the phage. Once the dosing has -- the dosing regimen has been completed, they go back into the surgeon’s office and they go back under an endoscope, and we take images after the dosing period, we swab again. And so, we’ll have that information, pictures that hopefully show some diminishment of resolution of symptoms, evidence that there are fewer bacteria in their sinuses and the patients also complete a diary that describes their symptoms during the course of treatment. So, those are the things that we’ll be able to look to see if we can see any observational evidence that the phage are having an impact on their infection status.

[Alan Leong:]

One other question, I know -- and forgive me because I know you’ve begun to talk about funding some of the activity, but can you talk about how you’re managing the cash burn as you have balancing with the more clinical activity that you’re having in the next year? For example, there’s a talk about lifting off the cystic fibrosis program next year. So, don’t need specific numbers but maybe even color about how you hope to approach it?

[Scott Salka:]

Yes. So, as Steve mentioned, we ended the quarter with a little over $7 million in cash, and we think that’s sufficient to get us most of the way, if not all the way through Q2 -- excuse me, Q4 of this year, through 2016, the second half of this year. So, we will be raising money, as Steve mentioned, in the second half of the year. We expect -- I think it’s a burn rate of just over $12 million a year, and we expect that that burn rate will expand, not tremendously but will expand in 2017 as we start the Phase 1 studies in the cystic fibrosis patient population, and we advance our pseudo facile [ph] program into manufacturing for a clinical study that we would think would start after 2017. So, you’ll see an expansion in our burn rate, but as I mentioned, not a tremendous expansion.

[Alan Leong:]

We’re looking forward to the results and we’ll also look forward to talking to you soon. Thanks.

[Scott Salka:]

Thank you, Alan.

[Operator:]

And we’ll take our next question from David Bautz with Zacks Investment Research.

[David Bautz:]

Hey, good afternoon everyone.

[Scott Salka:]

Hi David, how are you doing?

[David Bautz:]

Doing well, thanks. So, I got a question about AB-SA01. So, we’re looking at getting data in wound chronic rhinosinusitis. And I’m just curious if you guys are thinking about looking at other indications or if you’re happy to just focus on those two and move them forward in the clinic.

[Scott Salka:]

David, that’s a great question. And I think if resources were unlimited, there would be a number of different opportunities. But I think for now, we’re going to focus on potential application in skin and soft tissue infections and expand into chronic rhinosinusitis. And we’ll focus on those two for now. Obviously always looking for other opportunities. And as resources become available, you may see us taking the Staph aureus cocktail into other indications.

[David Bautz:]

Okay. And a quick follow-up about the wound care market. I don’t know if you could quantitate that a little bit more in terms of number of patients that type of thing.

[Scott Salka:]

David, I think for that particular question, right now, we are focused on advancing that care [ph] for wound care with the U.S. army. And I would like to -- I’ll get back to you with perhaps some additional numbers there, but I would like to kind of keep that little close to the rest for now. Now, in the broader wound care market, Staph aureus in skin soft tissue infections in civilian market, it’s quite a broad market. But as you might imagine, selling to the particular physicians to use the drug to treat skin soft tissues, infections even outside the hospital would be a tremendous undertaking and probably something we do in partnership with a large pharmaceutical company if we got that part.

[David Bautz:]

Okay. Thanks for taking the questions.

[Scott Salka:]

Thank you, David.

[Operator:]

[Operator Instruction] We will go next to Sal Saraceno with BTIG. [Ph]

[Unidentified Analyst:]

Pre-clinically speaking, the phage’s ability to potentially penetrate the biofilm for Pseudomonas is very intriguing. Is there some guidance perhaps that you can provide in regards to the initiation of a Phase 2 study in that trial? That would be very exciting for further patients. Thank you very much.

[Scott Salka:]

Yes, we too are excited about the natural ability of these bacteria phage to penetrate biofilms. As you know, biofilms are bacterial defense. And if that was a perfect defense, bacteria would have won the battle with bacteria phage eons ago. But bacteria phage develops very effective countermeasures against those bacteria biofilms. And so, we are really looking forward to taking advantage of that natural ability to degrade biofilms and kill the bacteria that are laid out in those biofilms using bacteria patient the Pseudomonas infected population. So, as we mentioned, we expect to start the Phase 1 CF study in 2017, the middle part of 2017. So, assuming that the trial enrollment goes as we expect, then that would set us up nicely to start a Phase 2 study in 2018 in patients with this chronic infections where biofilms are really important part of why that infection is so hard to get rid of.

[Operator:]

And we do have a follow-up question from Alan Leong with BioWatch News.

[Alan Leong:]

Yes, I just had to ask a third question. I am really -- I think like the other people excited about your cystic fibrosis program. You’ve had -- you been I think heading for the nebulized administration and you’ve had some pretty interesting animal and lab studies involving the direct use of the phage and then also with the -- some interesting work with the nebulized administration on animals. I wonder if you can give us a little bit of color at where you are at and what the -- how you view the preclinical results?

[Scott Salka:]

Thanks Alan. And now I want to make clear that we have administered phage to the lungs of animals infected with Pseudomonas and those data we shared. We haven’t nebulized phage into the lungs of animals. It’s very, very difficult to do, almost I think maybe impossible to do with the animal [ph] models that we have conducted those experiments in. But what we have done is we have nebulized the phage and shown that they maintain their fitness, they go through the nebulization process and then they land on our prey, they’re so very effective at killing that prey. And so by combining what we see as efficacy in these animal models, and combining with the fact that we know with that we can mechanically nebulize those phage and they maintain their fitness, we remain quite confident that by administering nebulized phage to human lungs with Pseudomonas infection that we can have an impact on that infection with those phage.

[Alan Leong:]

Sorry about that. It was nasal administration to the mice if I’m not mistaken?

[Scott Salka:]

Exactly Alan, you’re right.

[Alan Leong:]

Also, there were some investigators that administered phages to Pseudomonas infected patients, I know it wasn’t to the lungs, and there was some special use with individual cases. Did you have any commentary on that?

[Scott Salka:]

Only that I can -- we’ve seen those anecdotal -- reports of anecdotal use of phage, as you know Alan, phage has long been used behind the former iron curtain, patient can buy plane tickets for the country of Georgia, go to the Eliava Institute and get cared for by the folks of the Eliava Institute using phage. They’ll even send phage around the world. And so, there’re people who have reported that the use of phage has helped with their infection. So, those are anecdotal. And again, what we’re attempting to do with our phage product and going to clinical trials is show that under a modern regulatory regime and requirements for getting drugs approved that we can get phage there approved to treat these serious infections.

[Operator:]

As there are no further questions, I’d like to turn the call back over to Mr. Salka for closing remarks.

[Scott Salka:]

Thanks, Tom. AmpliPhi has had a very productive first half of 2016, and we’re poised for continued progress in the second half of the year. We look forward to updating you on the results of the AB-SA01 Phase 1 trials for CRS and the topical administration to skin and to providing additional information on the advancements of our other programs including AB-PA01. Thank you again, and thank you for your time today.

[Operator:]

And ladies and gentlemen that concludes our call for today.