La Jolla Pharmaceutical Company
Q3 2018 Earnings Call Transcript

Published: 25 Oct 2018

[Operator:]

Welcome to the La Jolla Pharmaceutical Company Third Quarter 2018 Financial Results Call. On today's call, La Jolla will be making forward-looking statements, as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to expectations regarding future events or future results of operations. These statements are only predictions or statements of current expectations and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from those anticipated by the forward-looking statements. La Jolla cautions listeners not to place undue reliance on any such forward-looking statements, which speak only as of today’s date. Certain of these risks, uncertainties and other factors are described in greater detail in La Jolla’s filings with the US Securities and Exchange Commission, all of which are available free of charge on the SEC’s website at www.sec.gov. These risks include, but are not limited to, risks relating to La Jolla’s ability to successfully commercialize, market and achieve market acceptance of GIAPREZA and other product candidates; potential market sizes, including for septic or other distributive shock; the success of development activities for the LJPC-401 and other product candidates, including post-approval studies for GIAPREZA; the successful and timely completion of clinical trials; unforeseen safety issues from the administration of product and product candidates in patients; the expected duration over which La Jolla’s cash balances will fund its operations; and other risks and uncertainties identified in La Jolla’s filings with the SEC. La Jolla expressly disclaims any intent to update any forward-looking statements to reflect the outcome of subsequent events. I will now turn the call over to Sandra Vedrick, Director of Investor Relations and Human Resources at La Jolla. Please go ahead.

[Sandra Vedrick:]

Thank you, operator. And thank you for joining our third quarter conference call. I would like to introduce the members of La Jolla’s management team that are present on our call today. Mr. George Tidmarsh, our President and Chief Executive Officer; Dennis Mulroy, our Chief Financial Officer; and Jennifer Carver, our Chief Operating Officer. Now, I will turn the call over to George.

[George Tidmarsh:]

Thank you, Sandra. Good afternoon and thank you all for joining us. At the end of March 2018, we announced the US commercial launch of GIAPREZA, which is a synthetic version of a naturally occurring peptide, angiotensin II, that acts as a vasoconstrictor and increases systemic arterial blood pressure. Low blood pressure results in insufficient blood flow to the body’s organs and tissues and is associated with a mortality rate exceeding most acute conditions requiring hospitalization. GIAPREZA was approved by the FDA in December 2017, which was in advance of its February 28, 2018 priority review PDUFA data, and this approval included a broad label for adults with septic and other distributive shock. Distributive shock is the most common type of shock in the inpatient setting with approximately 800,000 patients impacted by distributive shock in the US each year. Of which an estimated 90% are septic shock. Approximately 300,000 patients do not achieve an adequate blood pressure response with standard-of-care vasopressor therapy. This includes catecholamines and vasopressin. In the European Union, the annual incidence of sepsis in adults is estimated to be more than 500,000 patients with more than a 170,000 progressing to septic shock. Prior to the approval of GIAPREZA, there were no new treatment innovations for these patients over the past 50 years. Our commercial strategy is to target formulary approval for the hospitals that treat about 70% of the patients suffering from distributive shock. Of these, we have already obtained formulary approval for more than 300 hospitals. This is up from 150 formulary approvals we reported at the end of Q2. We continue to receive encouraging feedback from physicians and KOLs that are already using GIAPREZA. In commercial use, the clinical profile of GIAPREZA has remained quite favorable with no new safety signals identified. We expect that like other hospital product launches, the first 12 months will be a period of groundwork as it takes time to go through the standard multi-tiered process for hospital-based therapies. Beyond the US launch, as we announced in June 2018, the Marketing Authorization Application for GIAPREZA was validated by the European Medicines Agency. Validation of the MAA confirms that the submission is complete and starts the EMA’s centralized review process. We submitted the GIAPREZA MAA for the treatment of hypotension in adults with distributive or vasodilatory shock who remain hypotensive despite fluid and vasopressor therapy. The MAA is based on data from the ATHOS-3 Phase 3 study which establishes the safety and efficacy of GIAPREZA in the proposed indication. If approved, GIAPREZA could be available for marketing in the European Union in the second half of 2019. Lastly, this month, we effected a company-wide realignment to increase our focus and efficiency on achieving our corporate goals. La Jolla’s highest priorities remain the effective commercialization of GIAPREZA and development of its product pipeline, including LJPC-401 for multiple indications. I will now turn the call over to Dennis who will review our financial results before I conclude the call with a discussion on our development stage investigational product, LJPC-401. Dennis?

[Dennis Mulroy:]

Thank you, George. For the three months ended September 30, 2018, GIAPREZA net product sales were $3.5 million. This compares to $1.6 million for the three months ended June 30, 2018 and the $0.8 million for the three months ended March 31, 2018. La Jolla launched GIAPREZA in the US in March of 2018. For the nine months ended September 30, 2018, GIAPREZA net sales were $5.9 million. In December of 2017, GIAPREZA was approved by the US Food and Drug Administration as vasoconstrictor to increase blood pressure in adults with septic or other distributive shock. La Jolla's net loss for the three and nine months ended September 30, 2018 was $50.7 million and $154.1 million or $1.93 per share and $6.15 per share respectively, compared to $26.3 million and $76.3 million or $1.19 per share and $3.65 per share respectively for the same periods in 2017. As of September 30, 2018, La Jolla had $204.3 million in cash and cash equivalents compared to the $90.9 million as of December 31, 2017. The increase in cash and cash equivalents was the result of $109.8 million of net proceeds from the March 2018 common stock offering and the $124.3 million of net proceeds from the May 2018 royalty financing offset primarily by cash used from operating activities. Cash used for operating activities for the three and nine months ended September 30, 2018 was $36.9 million and $120.3 million respectively compared to $18.5 million and $59.7 million respectively for the same periods in 2017. As a result of the realignment that George mentioned earlier, we expect our cash and cash equivalents as of September 30, 2018 will be sufficient to fund our operations at least into the second half of 2020. I will now turn the call back over to George.

[George Tidmarsh:]

Thank you, Dennis. Before opening up the call to questions-and-answers, I would like to briefly review our product development program with our second product candidate LJPC-401, a synthetic human hepcidin. Hepcidin is a regulator of iron absorption and distribution helps to prevent an excessive iron accumulation in the organs. Our first study is a randomized Phase 2 trial in patients with beta thalassemia, characterized by the underproduction of hemoglobin due to a genetic mutation. Patients with this disease are dependent on blood transfusion to supplement their hemoglobin levels. However, these frequent transfusions as well as endogenous low hepcidin production results in an excessive accumulation of iron in critical organs. This can be fatal. If this study is successful, we would anticipate filing an MAA for LJPC-401 in the European Union. The EMA has designated LJPC-401 as an orphan drug for the treatment of beta thalassemia and sickle cell disease. This Phase 2 study design was reviewed and agreed to by the EMA as a registration enabling study. The second ongoing study of LJPC-401 is a randomized Phase 2 study in patients with hereditary hemochromatosis, a genetic deficiency in the production of hepcidin that leads to excessive iron accumulation in critical organs. The current standard-of-care for these patients a phlebotomy procedure, is cumbersome, unpleasant and involves removal of about a pint of blood on a regular basis. At the European Hematology Association meeting in Stockholm this June, our investigators reported data from our Phase 1 studies. The investigators concluded that LJPC-401 was well tolerated at doses between 1 milligram and 30 milligrams, and demonstrated a significant dose dependent decrease in serum iron levels which was sustained in many patients for up to eight days. We believe that GIAPREZA has the potential to be a leading therapy in the treatment of patients with septic or other distributive shock. Additionally, we believe our development program, including LJPC-401, hold promise to help fulfill our goal to bring important new therapies to patients in need. We will now open the call to questions. But as a reminder, we are not going to be able to provide much detail to our commercial progress beyond what we have shared on this call. And we appreciate your patience during this early launch period. Operator?

[Operator:]

[Operator Instructions]. Your first question comes from Joon Lee with SunTrust Robinson. Your line is open.

[Joon Lee:]

Hey, guys. Thanks for the question and congrats on the quarter. I understand that the first 12 months will be laying the ground. But what do you think could catalyze an inflection in the uptake of GIAPREZA near-term? Or do you think the uptake would be more gradual and more consistent with the trajectory thus far? Thank you.

[George Tidmarsh:]

Thank you for that question. We believe that as word gets out about the effectiveness of GIAPREZA, more and more people will understand its clinical value. It is clearly a drug that is experiential. And by experiential, I mean that the physician and healthcare providers are able to see the effect immediately at the bedside. When a patient is struggling to maintain the blood pressure and the doctors, nurses and other healthcare providers, pharmacies are struggling to find ways to support organ perfusion and maintain blood pressure and they start GIAPREZA, literally within minutes. And before their eyes, they can see an increase in blood pressure. That's consistent with all of the data and our label is consistent with our clinical experience. And there's very few drugs in which you can immediately see the effect as you start the drug and you can attribute the effect to the drug. And we believe that as more and more healthcare providers see this effect, the word will spread and it already is. And as that spreads, more and more will be comfortable to utilize the drug and -- GIAPREZA. So we think that there is a real need for the drug. We think that it is highly differentiated from existing therapies. And we think the fact that it is an experience that literally in front of their eyes they can see, we know already the word is spreading. It’s important also to recognize that there’s been no new therapies in this field for over 50 years, so last vasopressor was approved and enrolled out in the 50s and early 60s. And so there’s tremendous excitement from healthcare providers to have the new therapy to support blood pressure. So the answer to your question is, we think that the effect of the drug itself will help to catalyze the utilization as more and more healthcare providers see the value to their patients.

[Operator:]

Your next question comes from Ed White with H.C. Wainwright. Your line is open.

[Edward White:]

So I just have a few GIAPREZA and -- but I’ll start with 401. So for the HELIOS study, do you still expect to see enrollment complete in the second quarter fiscal ‘19.

[George Tidmarsh:]

Yes. We’re currently targeting completion enrollment of that trial in the second quarter of 2019.

[Edward White:]

Okay. And a similar question for HERCULES, just I think you’d said before top-line data was expected in the middle of ‘19, does that also still holds up?

[George Tidmarsh:]

Yes. No, no change in that.

[Edward White:]

Okay, great. And so just on GIAPREZA, two things. One, any update what do you expect to do in EU once you get approval, co-promote or out license or maybe tell us how you’re thinking about it. So we expect to hear something before or after potential approval?

[George Tidmarsh:]

Yes, thank you. So Europe we have launched on an out licensing campaign to find a partner who would be the best partner to bring this to patients in Europe. We felt that we wouldn’t begin that outreach until not only we had filed and validated the MAA but that we felt that we were able to answer all of the EMA’s questions. And we feel very confident in that now and we have engaged a number of interested parties and these are pharmaceutical companies that have the experience and they have the wherewithal to bring you present to patients in Europe. It’s our goal to engage a partner in advance of the approval and allow them to bring this to patients in Europe. We feel that it’s much better to put it in the hands of a local pharmaceutical company rather than trying to launch GIAPREZA ourselves in Europe.

[Edward White:]

Okay, great. Thanks, George. Yes, and then the last question I have is, so you’re on the formulary of more than 300 hospitals now. Have you been successful in all your attempts to get on formulary? And if not, what has been the source of the pushback? What’s hindering everybody you’re approaching from putting on formulary? Thanks. That’s all the questions that I had.

[George Tidmarsh:]

Sure. Before I answer that question, let me just clarify a little bit the statement on Europe. I don’t want to be held to a specific date to do a deal with somebody. We’ll do a deal when we think it’s the right time. And we do believe that the further we go along in approval process, the more valuable the asset gets to potential partners and ourselves. So I just want to be clear on that. We're not guiding any timing on a deal for any partnership in Europe. So in terms of formulary approvals, typically what happens is that a meeting is scheduled to put on formulary to review GIAPREZA for formulary approval. We provide information or if it's closed system, they develop their own dossier and it's reviewed. And we may or may not get the feedback. The number that I'm quoting you, are those institutions where we actually have positive confirmation that we are on formulary. Some institutions won't actually tell us. So we don't know it could actually potentially be higher than the number we’ve quoted. Not all formularies have approved it. That is a fact, although it is certainly the majority of meetings that have led to approval. When there has not been an approval, typically what the institution will tell us that they will re-review it with more information. So they will want more information and more data, more economic data or they just want to wait until there is more clinical experience with other institutions. Some institutions are slower adopters, some institutions are faster adopters. Some institutions have wanted to have a contract in place before they actually will approve it on the formulary. And we're working through those contracts and making success there. So there is no one answer about why a hospital will at least initially reject the formulary addition. And again, almost all or I will say that it can be reconsidered with more data or with time.

[Edward White:]

Okay, great. Thanks, George.

[George Tidmarsh:]

You're welcome.

[Operator:]

Thank you. Your next question comes from Gbolahan Amusa with Chardan. Your line is open.

[Kip Bitok:]

Hi. This is Kip Bitok calling on behalf of Gbola. And thanks for taking my question. One question that I have is, could you give us some color on how many patients so far have been treated with GIAPREZA? And if you could, what is the breakdown between 2Q and 3Q numbers and do you anticipate that this trend will continue through to 4Q?

[George Tidmarsh:]

Thank you very much for that question. It’s a very important question because as you know first and foremost in our mind as we work day-in and day-out is to help patients. And so it often times gets lost when we’re just talking about revenues and sales, what’s the patient impact. Unfortunately we do not have the level of data to say how many vials per patient are used and therefore how many patients have been treated. It certainly is in the thousands, I think by any reasonable estimate. And so we are very proud as an institution that we have been able to impact and help so many patients by several different cuts of the data. You look at it, whether it’s the overall survival trend or if you look at the AKI population where there is a statistically significant improvement in survival, we've been a part of helping save hundreds of lives. And that's the most important thing. So we appreciate you asking about the patient, which is really first and foremost what's important here. Unfortunately, we do not have access to the hospital level of data to say how many vials per patient are used, and therefore how many patients are treated.

[Kip Bitok:]

Okay. Thanks for taking my question.

[Operator:]

Thank you. Your next question comes from Laura Christianson with Cowen. Your line is open.

[Laura Christianson:]

Hi, thanks for taking my question. I have a couple on La Jolla 401. So first, I'm just wondering what the protocol is for patients to receive phlebotomy while on trial? And then secondly, how predictive phlebotomy requirement is using serum ferritin concentration, the primary endpoint in the trial? Thanks.

[George Tidmarsh:]

So what we use to guide physicians and mandate in the protocol are the standard guidelines that are outlined for the treatment, it’s hereditary hemochromatosis by the guiding medical institutions, by guiding medical societies and that includes a mandate to phlebotomize the patient for a transferrin saturation above 45 and typically ferritin. It depends upon the transferrin saturation and the individual patient, but either 100 or 200 milligrams per deciliter, a ferritin concentration. So we specify that within the protocol. So how predictive is -- are those values? What we do know is that ferritin is used typically by treating physicians because it tends to be stable over longer periods of time. Although it in and of itself is subject to individual variations based on the state of health of the patient. So for example, it's classified as what's called an acute phase reactant. And so if a patient has an ongoing infection, it will go up unrelated to the amount of iron in the patient's body. But in the long run, ferritin is actually very predictive of outcome and it is what is clinically followed in addition to the transparent saturation. The transparent saturation is the easiest to follow and 45% is a cutoff that is standardly used. So we're targeting a transparent saturation below 45 as the key parameter to guide phlebotomy.

[Laura Christianson:]

Perfect, that's helpful. Thanks

[George Tidmarsh:]

Welcome.

[Operator:]

Thank you. Your next question comes from Kyung Yang with Jefferies. Your line is open.

[Kyung Yang:]

Thanks very much. I wonder, the cash guidance, when you say cash enough or sufficient into second half of 2020, does that include a potential partnership milestone payment?

[George Tidmarsh:]

Thank you for your question. You know it does not include any potential licensing payments or other one-time payments for any out licensing or other considerations.

[Kyung Yang:]

Okay. And then regarding 401, I think I might have missed your comment. So hereditary hemochromatosis, according to the ClinicalTrials.gov, primary completion date is toward the end of this year. Did you say the data in the middle of next year?

[George Tidmarsh:]

Yes. It has been updated and we’ve given that guidance and the guidance that we’ve given is data on the hereditary hemochromatosis Phase 2 study will be in mid-2019.

[Kyung Yang:]

How about the beta thalassemia?

[George Tidmarsh:]

We’ve given guidance that the enrollment for the beta thalassemia Phase 2 trial will be complete in Q2 of 2019.

[Operator:]

[Operator Instructions]. Your next question comes from Anupam Rama with JP Morgan. Your line is open.

[Anupam Rama:]

Hey, guys. Thanks so much for taking the question ad congrats on the progress here. Maybe George, I know you said, you can’t comment too much on market. But wondering if you could give us an anecdotal examples or nuggets from the market on repeat prescriber trends, as well as GIAPREZA use maybe by second line or third line or beyond? Thanks so much.

[George Tidmarsh:]

Thanks for the question. We’re going to stick to the details of commercial launch that we’ve given. I can’t comment -- I won’t comment on sort of same-institution sales trends. In addition, we don’t have as mentioned before, hospital level data to as to what line of therapy is where GIAPREZA is being used. We do know from our physician surveys and market research, that there is a tremendous willingness to use GIAPREZA in the second line, and even some willingness to use GIAPREZA in the first line, which of course is covered by our label. So we know that from extensive market research, literally hundreds of healthcare providers being interviewed. And so, we expect with time as physicians and other healthcare providers get very comfortable with GIAPREZA, that there will be utilization in high -- in earlier lines of therapy. Thank you.

[George Tidmarsh:]

Thank you all very much for your interest in La Jolla and appreciate your attending our call today.