Chiasma, Inc.
Q1 2016 Earnings Call Transcript

Published: 12 May 2016

[Operator:]

Good afternoon and welcome to the Chiasma First Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Jason Fredette, Investor Relations for Chiasma. Please go ahead, sir.

[Jason Fredette:]

Thank you, Laura and good afternoon everyone. I am joined here by Chiasma’s President and CEO, Mark Leuchtenberger and our Chief Financial Officer, Mark Fitzpatrick. Before we begin, please note that certain statements made on today’s call maybe deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Chiasma’s beliefs and expectations as of today and they are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those set forth in or implied by such forward-looking statements. For a discussion of those risks, uncertainties and other important factors that could cause our actual results to differ from those contained in the forward-looking statements, please refer to today’s press release and the risk factors section of our SEC filings, including our most recent annual report on Form 10-K and our subsequent filings with the SEC. These filings can be accessed from our website chiasmapharma.com or the SEC’s website. Now, let me turn the call over to CEO, Mark Leuchtenberger. Mark?

[Mark Leuchtenberger:]

Thank you, Jason and good afternoon everyone. Thank you for joining us today. So, we have yet to meet with the FDA since we received the complete response letter, or CRL a few weeks ago regarding Chiasma’s new drug application, or NDA from Mycapssa octreotide capsules. So, our formal remarks will be fairly short today. However, we have been working virtually nonstop since our April 15 PDUFA date both to prepare for this meeting, which we plan to request within the next week and also to develop plans for our future beyond that meeting. As a reminder, Mycapssa is a novel oral somatostatin analog we developed as a potential replacement for monthly somatostatin analog injections, which today serve as the standard of care for patients with chronic acromegaly. We believe there are about 8,000 of these patients in the United States and that many of them not only suffer from the symptoms of this rare disease, but also the burdens associated with their current medications. Upon completion of its review of our NDA, the FDA advised in its CRL that Mycapssa did not warrant approval for two reasons. First, it stated that the FDA noted certain deficiencies during a recent site inspection that were conveyed to a representative of one of our suppliers that would need to be resolved before approval. The CRL was the first time we learned that there were deficiencies with the supplier potentially impacting the approval of Mycapssa. Before getting into the details here, I would like to point out that we have established certain supplier redundancies in our manufacturing process. So, we would not have expected this finding to be a gating factor to launching Mycapssa had we been approved. However, since receiving the CRL, we have worked closely with the supplier to better understand the nature of FDA’s concerns. According to this supplier, the FDA issued to them a Form 483 following a systems inspection at one of its sites in February 2016. But at the time, the supplier believes that findings were not associated with Mycapssa. We understand from this supplier that it is already submitted response to the FDA addressing the Form 483 and is awaiting completion of the FDA’s review. The supplier has assured us that the quality of our product was not impacted by the deficiencies identified by the FDA. The second issue identified in the CRL was that according to the FDA, our application did not provide substantial evidence of efficacy to warrant approval. More specifically, the FDA expressed concerns regarding certain aspects of the single arm, open label Phase 3 clinical trial upon which our NDA was based and it advised that we conduct another trial. The agency strongly recommended that this additional trial be randomized, double-blind and controlled that it enroll patients from the United States and that it be of sufficiently long duration to ensure the control of disease activity is stable at the time point selected for the primary efficacy assessment. Since the CRL arrived late on April 15, our legal, clinical and regulatory affairs teams working in close concert with our external regulatory council and other consultants have spent countless hours assessing the CRLs and determining an appropriate path forward with the FDA. We continue to respectfully disagree with the FDA’s decision and we continue to believe that our NDA as filed demonstrates the efficacy and safety of Mycapssa. At the suggestion of FDA, we plan to request an End of Review meeting with the Division of Metabolism and Endocrinology Products, the FDA division that reviewed our NDA. Like all interactions with the agency in this context, it’s difficult to predict what precisely will come out of this meeting, but our objective going into it will be to gain further clarity from the FDA and to highlight and provide clarity regarding our data in order to potentially overcome the concerns raised by the FDA in its CRL. As I mentioned, we plan to submit our request for this meeting within the week. If granted, we would expect it to take place before the end of the second quarter. Of course until this meeting occurs, we are unable to predict its outcome, determine our path forward and/or update our business plan. If the outcome is not acceptable to us, we may pursue dispute resolution with the agency. For the moment, however, we believe that further dialogue with the agency could prove productive and we appreciate that the agency has encouraged us to request this meeting. In the meantime, we plan to continue opening new sites and enrolling more patients from the United States, Europe and certain other countries in our MPOWERED Phase 3 trial. The design for this trial was accepted by the European Medicines Agency, or EMA, and is intended to support a Marketing Authorization Application, or MAA submission that is targeted for 2019. We currently plan to open approximately 25 sites here in the U.S. and 35 international sites to enroll approximately 150 patients in total. The trial seeks to demonstrate the non-inferiority of Mycapssa to monthly injectable somatostatin analogs with respect to efficacy, with the time-weighted average of IGF-1 levels in subjects on Mycapssa versus monthly injections serving as the primary endpoint. We also will plan to assess both safety and patient reported outcomes. Now, before I turn the call over to our CFO, Mark Fitzpatrick, I would just like to share a bit about the Acromegaly Community Conference, which is a biannual event as in every two years that was held within the past couple of weeks in Chicago. I have the great pleasure of attending this event along with a team from Chiasma and well over 100 patients and their loved ones and caregivers from around the world. Sessions provided insight about many aspects of acromegaly, including surgical procedures, medical treatment options, ongoing clinical trials like MPOWERED and how patients and their loved ones can better cope with the disease. At Chiasma, we have learned to recognize some of the challenges these individuals face, but to be immersed in their world for a weekend was gut-wrenching, incredibly gratifying and I would say very, very moving. On a personal note, I have met a few of these patients in the past year, but I met many more and I am staggered by their courage and the way in which they have had to fight for every inch of their future, whether it’s fighting to be diagnosed correctly and then fighting for the proper treatment. So, we are in complete support of their battles and one of the key reasons why we are moving forward here with Mycapssa. The FDA’s complete response to our NDA was announced prior to the conference and it was quite clear that the patients were just – at the meeting that the patients were disappointed by the outcome, yet also very energized and engaged. So, I would like to thank them right here as well as our team at Chiasma for their perseverance and their continued support. And now, Mark will talk to our financials. Mark?

[Mark Fitzpatrick:]

Thank you, Mark. I will start by reviewing the financial results for the quarter. Research and development expenses for the first quarter were $7.2 million, which compares with $2.2 million for the first quarter of 2015. The increase was primarily due to our recently initiated MPOWERED trial activities associated with manufacturing process validation and greater salaries and related expenses due to the hiring of research and development employees. Marketing, general and administrative expenses were $10 million for the quarter ended March 31, 2016, which compares to $1.9 million for the same period of 2015. The increase was largely due to pre-commercial activities related to octreotide capsules, greater compensation related expenses associated with our expanded U.S. office as well as increased professional and consulting fees associated with being a public company. For the first quarter, we recorded a net loss attributable to common stockholders of $17.2 million or $0.71 per basic share which compares to a net loss attributable to common stockholders of approximately $4.3 million or $59.73 per basic share for the same period of 2015. These per share figures are based upon approximately 24 million weighted average common shares outstanding for the quarter ended March 31, 2016 versus approximately 73,000 weighted average common shares outstanding for the first quarter of 2015. Please note that in connection with our IPO all of Chiasma’s redeemable preferred stock was converted into common stock. Prior to our IPO redeemable preferred stock was excluded from this calculation. Chiasma’s cash, cash equivalents and marketable securities as of March 31, 2016 were $134.3 million, which compares with $148.8 million as of year end 2015 equating to approximately $14.5 million of cash utilized for the first quarter. Now, let me move to address our previous financial guidance. On our Q4 2015 earnings conference call, we said we expected our total aggregate GAAP research and development and selling general and administrative expenses for the full year 2016 to be in a range of $80 million to $88 million inclusive of stock-based compensation expense. This planned level of spending was based in large part on our expected U.S. launch of Mycapssa, our plans to initiate a clinical trial for the potential treatment of patients with neuroendocrine tumors in late 2016 and preclinical work to enable us to announce the second product candidate by the end of 2016. Based on these prior plans, we said we expected that our cash should be sufficient to operate the business as then currently planned through at least mid-2017. In light of the CRL, we have received from the FDA, we are currently revisiting all areas of investment and resources to potentially enable an overall reduction of our 2016 expenses and an extension of our cash runway beyond mid-2017. We plan to issue updated guidance regarding our planned product development activities, expenditures and cash forecast after we have met with the FDA, determined our path forward and completed our analysis. And now operator we are prepared to take questions. Thank you.

[Operator:]

Thank you. [Operator Instructions] And our first question will come from Ritu Baral of Cowen.

[Ritu Baral:]

Hi everyone. Thanks for taking the question. So can you give us a little – anymore color on the nature of the 483, that your contract manufacturer received and whether it was a major or minor finding?

[Mark Leuchtenberger:]

Sure, Ritu. Hi, it’s Mark. So I think we really are – have probably said what we can say. We understood from the supplier that they got that 483 in February, that they did not believe that this affected Mycapssa and obviously as we have already said the first we heard of this was from the CRL. We are already in touch with the supplier trying to understand the nature of FDA concerns, but with – we know from the supplier they have already submitted their response and they are waiting completion of the FDA’s review. And we continue to be assured that the quality of our product wasn’t impacted by any of the deficiencies that were identified by FDA. And the bottom line is, as I said upfront we have supplier redundancies here, so this finding even if it – while assuming that it stood, wouldn’t have been a gating factor in our opinion to the launch of Mycapssa.

[Ritu Baral:]

Got it. So is it possible hypothetically for you to put together a complete CMC module or section without this manufacturer?

[Mark Leuchtenberger:]

I don’t – I am not the CMC expert, but my understanding is yes. We had a complete and continue with CMC package without this supplier.

[Ritu Baral:]

Understood. And then just as we think about modeling burn going forward, I understand that you until you meet with FDA you can’t give specific guidance, but is it fair to assume declining G&A over the course of the new few quarters or are you committed to most of what’s sort of built into the guidance?

[Mark Leuchtenberger:]

No I think as I have said we – and I will turn this over to Fitz in just a second and let the professional speak. But the guidance that we had listed earlier was based on the expectation of commercial approval on the 15th, so clearly no longer valid. We will be analyzing our path forward and once we have more clarity from the FDA dialogue, we are going to issue updated guidance regarding the product development, expenditures, probably include some estimate and guidance on G&A. But all of that has to wait for the important meeting and the analysis. But Fitz I don’t know if you want to comment more on this?

[Mark Fitzpatrick:]

No Mark, I don’t have anything more to add to that answer.

[Ritu Baral:]

Got it. Last question, just based on precedent talks that you have had with FDA, do you feel like there have been any discussions or meeting minutes that address any of the points in the CRL specifically, at any point do they mention some would be nice to have number of U.S. patients and how does that relate to the current design of the U.S. study?

[Mark Leuchtenberger:]

Right, so.

[Ritu Baral:]

I am sorry, the EU study?

[Mark Leuchtenberger:]

Yes. So I just really can’t comment on the specifics of the dialogue we have with FDA right now, except that to reiterate that we have gone back, we have taken a look at every element specified or pointed out on the CRL. We have matched that against what we believe to be information in the NDA that they have currently. And it’s our belief that we are stating today that we are going to go into this meeting with the objective of showing them that there are sufficient information to change their minds.

[Ritu Baral:]

Understood. Thanks for taking the questions.

[Operator:]

And our next question will come from Tim Lugo of William Blair.

[Raju Prasad:]

Hi, this is Raju Prasad in for Tim. Thanks for taking the question. When talking to some KOLs, we have seen that there is variability in IGF-1 assays, can you just describe to us the IGF-1 assays in the U.S. study, is it the same as the EMA study?

[Mark Leuchtenberger:]

Yes. We are probably not going to get into the details of the assays, that’s sort of the third level question that’s above my pay grade, Raj. But I appreciate you asking. I think that the various details that we can supply around our new Phase 2 are all up on clinicaltrials.gov.

[Raju Prasad:]

Okay, great. And I mean just as far as the 20% as that relates to the switch study, if that is applied to the switch study, does that change anything with regards to the results that you might present to the FDA?

[Mark Leuchtenberger:]

I am not quite sure what you mean by 20%, I lost you there?

[Raju Prasad:]

The primary endpoint of the MPOWERED study I am referring to?

[Mark Leuchtenberger:]

Yes. I think there is again, we don’t see there has never been in any dialogue with FDA any linkage between the EMA study and our dialogue with FDA. And again we are going in focusing on the information we have in our NDA which doesn’t obviously include anything about the EMA trial and our belief that we have sufficient data to show efficacy and safety.

[Raju Prasad:]

Great. And just last question, I know in your prepared remarks you mentioned potential for a dispute resolution, any color you can provide on what type of scenario you would kind of pursue that strategy?

[Mark Leuchtenberger:]

Not really I think as I think as we said, if we come out of this meeting and we feel that “we are not satisfied” with where we are, we want to preserve that as an option, but really can’t provide anymore color as to how we pursue that.

[Raju Prasad:]

Okay, great guys. Thanks for all the questions.

[Mark Leuchtenberger:]

Sure. Thank you, Raju.

[Operator:]

[Operator Instructions] And our next question will come from Douglas Tsao of Barclays.

[Douglas Tsao:]

Hi, Mark. Just I might have missed it, but just can you sort of walk through your thinking in terms of pursuing dispute resolution with the agency or sort of how that would sort of play out?

[Mark Leuchtenberger:]

As I said to Raj, that is the step that we want to preserve as an option. But we are not going to go into detail on how we pursue that. First step is to request the meeting which we would do very, very soon then hold the meeting which we believe could happen before the end of the second quarter, so sometime in June, most likely. And then accept the response and the next steps from that meeting and it’s at that point we – as I have said we preserve the option to pursue dispute resolution.

[Douglas Tsao:]

Okay. And then in terms of communicating with the investment community in terms of sort of plans as well as sort of the sort of the runway that you have in terms of your financing needs what – how are you thinking about that, is that something that you should be able to give us color when you report 2Q in August?

[Mark Leuchtenberger:]

Yes. The timing is really going to depend on the sequence of analysis and the next step, the fact what happens in that meeting. The outcome of the meeting and our – and then the clarity that we have in our ability to sort of alter and adjust our business plans coming out of that meeting. We certainly will at the appropriate time once we have clarity make that clear to investors. But I wouldn’t want to put a shot clock on that. I think if you look back at the time we had, now since April 15 the team has been fully engaged in doing what I described that is assessing every element of the CRL, assessing our NDA and coming to the conclusion that we have come to. And it is a 1,000 page plus NDA, it takes that amount of time. So similarly we would want to take into account all the information we get from that meeting and then be very, very clear about our future before we put another plan forward. So sorry not to be able to give a specific timeline, that’s the process we follow.

[Douglas Tsao:]

Okay.

[Operator:]

And this concludes our question-and-answer session. I would like to turn the conference back over to Mark Leuchtenberger for any closing remarks.

[Mark Leuchtenberger:]

Thank you, Operator. And thank you all once again for joining us today. Just a quick note, that we plan to take part in the Jefferies Healthcare Conference in a few weeks in New York. And we will be webcasting our presentation from that event. So I hope to see some of you there and we look forward to providing continued updates on our progress. And that concludes our call.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.