La Jolla Pharmaceutical Company
Q4 2018 Earnings Call Transcript

Published: 5 Mar 2019

[Operator:]

Welcome to the La Jolla Pharmaceutical Company Fourth Quarter and Full Year 2018 Financial Results Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will follow at that time [Operator Instructions]. 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, including but not limited to, statements related to La Jolla’s expectations regarding net sales and net cash used in operating activities for the full-year 2019, the expectations regarding future clinical and regulatory milestones, such as expected NDA submission and approvals and expected timing for commencement and completion of clinical studies. These statements relate to expectations regarding future events or La Jolla’s 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 materially different from those anticipated by forward-looking statements. La Jolla cautions listeners not to place undue reliance on any such forward-looking statements, which speak only as of the date they were made. Certain of these risks, uncertainties and other factors are described in greater detail in La Jolla’s filings with the U.S. Securities and Exchange Commission SEC, all of which are available free of charge on the SEC’s Web site at www.sec.gov. These risks include, but are not limited to, risks relating to

[Sandra Vedrick:]

Thank you, Operator. And thank you for joining our fourth quarter and full year 2018 conference call. I would like to introduce the members of La Jolla management that are present on our call today; Dr. 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 for joining us. In 2018, we made important strides towards fulfilling our mission of developing and commercializing innovative therapies intended to significantly improve outcomes in patients suffering from life threatening diseases; first, we launched our first commercial product GIAPREZA at the end of March 2018; second, our Marketing Authorization Application or MAA for GIAPREZA was validated by the European regulatory authorities; and finally, we achieved important milestones in our development stage programs that we expect will lead to an NDA filing for LJPC-0118 and a key data readout for LJPC-401, both in the second half of this year. I'll begin by reviewing GIAPREZA, which was approved by the U.S. Food and Drug Administration as vasoconstrictor indicated to increase blood pressure and adults with septic or other distributive shock. GIAPREZA mimics the body’s endogenous regulatory peptide angiotensin II that is central to the renin-angiotensin-aldosterone system to increase blood pressure. Shock occurs when the organs and tissues of the body do not receive adequate blood flow, and it is associated with the mortality rate exceeding most acute conditions requiring hospitalization. Distributive shock is the most common type of shock in the inpatient setting with approximately 800,000 distributive shock cases in the U.S. each year. Despite the availability of catecholamines and vasopressin, approximately 300,000 patients a year are not able to achieve adequate blood pressure. And prior to the approval of GIAPREZA, there had been no new treatment innovations for these patients over the past 50 years. We launched GIAPREZA in the U.S. in March 2018 to support commercialization. We built sales, marketing, medical affairs and pharmaco-vigilance capabilities among others. The sales organization includes health systems access, clinical nurse educator and critical care specialist teams. Together, these groups work in tandem to educate healthcare providers regarding the value that GIAPREZA brings to patients with distributive shock. Since launch, we continue to build a strong reputation with the clinical community that treats distributive shock patients. To-date, approximately 380 hospitals have ordered GIAPREZA. And we have heard anecdotally from these hospitals that GIAPREZA is performing favorably and consistent with what we expected based on our earlier clinical findings. Our commercial efforts this year are focused on securing formulary approvals at the hospital at the hospitals that collectively will give us access to approximately 70% of the patients that are treated for distributive shock. Turning our attention the European Union. The marketing authorization application for GIAPREZA that was validated by the EMA was for the treatment of hypotension in adults with distributive or vasodilatory shock, remaining hypotensive despite fluid and vasopressor therapy. Our MAA is based on data from the ATHOS-3 Phase 3 study, which establishes the safety and efficacy of GIAPREZA in the proposed indication. In January, we announced that we expect to receive the EMA's decision on the MAA in June of this year. If approved, GIAPREZA could be available for marketing in EU in early 2020. In the European Union, the annual incidence of sepsis in adults is estimated to be more than 500,000 with more than 170,000 patients progressing to septic shock. Beyond our commercial progress, we had a number of data presentations at the Society of Critical Care of Medicines Congress last month. First, in a subset analysis of patients enrolled in ATHOS-3, GIAPREZA was found to improve Mean Arterial Pressure or MAP in patients with post operative vasoplegia catecholamine-resistant shock. Separately an independent analysis of time below threshold showed a strong association between the time low blood pressure threshold and morbidity and mortality. These data emphasize the need for rapid improvement in blood pressure, which is a core strength of GIAPREZA. In another presentation and analysis of data from ATHOS-3 show that patients who experienced a significant reduction in catecholamine dose after treatment suffered fewer adverse events, and this was more pronounced in the GIAPREZA treated group compared to placebo. Finally, in support of a potential pediatric indication for GIAPREZA, data from an animal model was presented showing that GIAPREZA raises MAP levels in juvenile animals, and was well tolerated with no treatment related clinical abnormalities or effects on any developmental tissue by microscopic assessment at the end of the 28-day recovery period. I will now turn the call over to, Dennis, who will review our financial results before I conclude the call with a discussion or of our investigational product candidates. Dennis?

[Dennis Mulroy:]

Thanks, George. For the three months ended December 31, 2018, GIAPREZA net product sales were $4.2 million. This compares to $3.5 million for the three months ended September 30, 2018, $1.6 million for the three months ended June 30, 2018 and $0.8 million for the three months ended March 31, 2018. For the 12 months ended December 31, 2018, GIAPREZA net product sales were $10.1 million. As a reminder, in December 2017, GIAPREZA was approved by the FDA as a vasoconstrictor indicated to increase blood pressure in adults with septic or other distributive shock. And in March 2018, La Jolla’s launch GIAPREZA in the U.S. La Jolla expects 2019 net product sales of $24 million to $28 million. Our net loss for the three and 12 months ended December 31, 2018 was $45.4 million and $199.5 million or $1.73 per share and $7.85 per share respectively compared to $38.5 million and $114.8 million, or $1.74 per share and $5.41 per share respectively for the same periods in 2017. As of December 31, 2018, we had $172 million in cash and cash equivalents compared to $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 our March 2018 common stock offering and $124.3 million of net proceeds from our May 2018, royalty financing, offset primarily by net cash used in operating activities. Net cash used in operating activities for the three and 12 months ended December 31, 2018 was $32 million and $152.4 million respectively compared to $25.4 million and $85.1 million respectively for the same period in 2017. La Jolla has no debt as of December 31, 2018 and 2017. In 2019, we expect our net cash used for operating activities to be $89 million to $94 million. I will now turn the call back over to George.

[George Tidmarsh:]

Thank you, Dennis. Before opening a call for Q&A, I'd like to briefly review our development programs with our other clinical product candidates. LJPC-0118 is our investigational product for the treatment of severe malaria, a serious and sometimes fatal disease caused by a parasite that commonly infects a certain type of mosquito, which feeds on humans. Severe malaria is often complicated by central nervous system infections that may lead to delirium, which may progress to coma. The active pharmaceutical ingredient in LJPC-0118 was demonstrated to be superior to quinine in reducing mortality in patients with severe falciparum malaria infection in two randomized controlled clinical studies. We plan to file an NDA with the FDA in the fourth quarter of this year for LJPC-0118 for the treatment of severe malaria. Next, LJPC-401 is our proprietary formulation of synthetic human hepcidin. Hepcidin and endogenous peptide hormone is the body' naturally occurring regulator of iron absorption and distribution. In healthy individuals, hepcidin prevents excessive iron accumulation in vital organs such as the liver and heart where it can cause significant damage and even result in death. We are advancing LJPC-401 for the potential treatment of iron overload, which occurs as a result of primary overload diseases such as hereditary hemochromatosis, or secondary iron-overload diseases, such as beta thalassemia, sickle cell disease, myelodysplastic syndrome and polycythemia vera. The EMA has designated LJPC-401 as an orphan medicinal product for the treatment of beta thalassemia intermedia and major and sickle cell disease. LJPC-401 is currently being evaluated in two phase 2 studies. The first ongoing study is a pivotal multinational, multicenter, randomized controlled study in patients with beta thalassemia, who despite chelation therapy, have cardiac iron levels above normal. Beta thalassemia is a disease characterized by the under production of hemoglobin due to a genetic mutation. Due to the underlying anemia, these patients accumulate excessive iron in major organs independent of blood transfusions. This iron overload causes organ damage, which may need to death. In addition, patients with this disease are often dependent on frequent blood-transfusions, which adds to the excessive iron accumulation. The primary efficacy endpoint of this study is the change in iron content in the heart after six months' of treatment. We expect to report top-line results from this study in mid-2020. And if successful, we expect to file an MAA in the European Union. The second ongoing study of LJPC-401 is a multinational multicenter randomized Phase 2 study in patients with hereditary hemochromatosis, a genetic deficiency in the production of hepcidin that leads to excessive iron accumulation. There are no FDA approved therapies for hereditary hemochromatosis. And the current standard-of-care is phlebotomy procedures that typically involve the removal of a pint of blood on a regular basis and is associated with significant adverse effects. The primary efficacy endpoint of the study is the change in transferrin saturation, a standard measurement of iron levels in the body and one of the two key measurements used to detect and treat iron overload. We are studying the change from the baseline to the end of treatment. We expect to report top line results from this study in the second half of this year. In summary, over the course of the last year, we transformed our company into a fully integrated organization with active clinical development programs in late stage and the launch of GIAPREZA, a therapy that we believe has the potential to change the treatment landscape for patients with septic or other distributive shock. This year, we expect to file an NDA for LJPC-0118 for the treatment of severe malaria and to report top line results for our Phase 2 study of LJPC-401 for the treatment of hereditary hemochromatosis. We're also excited about the potential for LJPC-401 in treating iron-overload in patients with beta thalassemia and MAA designated orphan drug indication, for which we expect to report top line results from our pivotal study in mid-2020. We will now open the call up to questions. Operator?

[Operator:]

Thank you [Operator Instructions]. Our first question comes from the line of the Joon Lee with SunTrust Robinson. Your line is now open.

[Joon Lee:]

For the hepcidin assets, what amount of iron induction in the heart would you need to see in order for the drug to be commercially viable? And can you remind us what the magnitude of heart iron induction you see is with the chelators? Thank you.

[George Tidmarsh:]

So to the second half of that question, it's highly dependent upon the chelators used and how it's used. Some chelators really are very poor at removing iron from the heart, they're much better from for removing iron from the liver, and so none of them have an indication for removal of iron from the heart. And oftentimes it actually requires two chelators used simultaneously to shovel from the heart to the circulation to be excreted out of the body. So there's no current optimal chelation therapy for iron overload in the heart. And also just remember for the design of this trial, these patients are already on chelation therapy and failing as evidenced by abnormal levels of iron in the heart. So in terms of the significance of this trial, if we reach the primary endpoint with only 100 patients in the trial, then it will be clinically meaningful. The clinically meaningful is really highly intrinsically associated with the size of the trial you need to meet a statistical significance on the primary endpoint. And as you know, many studies are hundreds of patients large to have the power to reach statistical significance. So again, we expect that should we reach statistical significance on our endpoint and this is all agreed upon with the EMA, then we will have a clinically meaningful improvement in cardiac iron.

[Joon Lee:]

And I have a quick follow up. In your previous study, I think you had a mix of hemochromatosis and beta thalassemia patients where you showed that you have a reduction in iron serum for a week. Have you ever disclosed the data based on stratified by the disease type? Thank you.

[George Tidmarsh:]

I believe that in one of our posters or presentations at EHA, we had individual patient data but I could go back and look at that. What I can tell you is that there was in that cohort of patients, which wasn’t large. We didn’t see any difference in the disease type in terms of the effect of LJPC-401. That is it was equally effective for iron reduction in all of the different disease types that were studied.

[Joon Lee:]

And one last question. Can you remind me what the cash runway is?

[George Tidmarsh:]

Currently, based on our cash balance and our expected net burn, we have cash into the second half of 2020.

[Operator:]

Our next question comes from the line of Phil Nadeau with Cowen and Company. Your line is now open.

[Phil Nadeau:]

I guess first on the GIAPREZA launch. Could you give us an update on what proportion of patients who have distributive shock today have access to GIAPREZA? I think you said the goal is 70% this year over the next couple years. So where are you today?

[George Tidmarsh:]

Could you repeat the question?

[Phil Nadeau:]

What percent of patients having distributive shock have access to GIAPREZA today?

[George Tidmarsh:]

So we're aiming to have access to 70% of the patients in the U.S. that have distributive shock this year. That's our goal this year, that's always been our stated goal. With 380 ordering institutions out of the little over 1,000, we're probably in 40% range -- 35%, 40% range but I could follow up with that exact calculation. Obviously, that represents -- you say we are in an institution it's ordering it's not to say that we fully penetrated that institution. But in terms of the ordering, we're well into that 70%, which we've targeted.

[Phil Nadeau:]

And back in January, I think you said that one of the other goals for 2019 was to increase the penetration of those hospitals that are ordering already. Could you talk a little bit about what we expect to do to increase that penetration?

[George Tidmarsh:]

So our main objective for this year is to present contracting opportunities to hospitals that have utilized GIAPREZA and want to increase that utilization but are understandably cost sensitive. Our contracting efforts typically involve a volume discount tier, which is fairly standard in the industry. So that as the volume of a given institution goes up then they get an increasing percent discount over that increased volume. So we are presenting those contracting opportunities to the major health systems and institutions. And typically, it's those institutions that already have experience with GIAPREZA. For those institutions that don't have experience with GIAPREZA yet where we hear that cost is a barrier to entry, we have other contracting opportunities for those institutions. They tend to be short-term discounts and it really take its design to take cost off the table to drive volume. And we're very confident that as these institutions get experience with GIAPREZA that they will see the full value of the use of GIAPREZA and the treatment of septic or other distributive shock.

[Phil Nadeau:]

Same questions on 401. What are your plans for beta thalassemia in the U.S., is there any update on the ability to take that pivotal data to the U.S. regulators?

[George Tidmarsh:]

No update from what we said before. The FDA is aware of our protocol and has signed off on it. We have not engaged in any special protocol assessment or other approval discussions with FDA. We do believe that our endpoint is a clinically meaningful endpoint that the FDA is very comfortable with. And should we reach statistical significance, I have confidence that we will have a good chance at approval in the in the U.S. as well.

[Phil Nadeau:]

And one last question on the finances. The cash burn guidance seems to imply a pretty big cut in quarterly operating expenses; one is, is that a fair assessment; and two, if so, can you give us some sense where that expense is coming from? Is it coming from R&D or SG&A?

[Dennis Mulroy:]

Yes, there is going to be a significant change in our spending in 2019 versus 2018. And we took those -- made those changes in the fourth quarter. And they are pretty evenly spread throughout the company to reduce spending in the various areas. And yet still maintain our focus and the efficiency of generating the GIAPREZA sales.

[Phil Nadeau:]

Perfect, thanks for taking my questions.

[George Tidmarsh:]

And I'll just expand on that a bit. We have done fairly sophisticated analyses on the team needed to commercialize GIAPREZA. And we are very confident that our organization currently and with some changes, additions and some changes in terms of the direction of the organization, we're very confident that we have sufficient commercial effort behind GIAPREZA to maximize sales.

[Operator:]

Our next question comes from the line of Kyung Yang with Jefferies. Your line is now open.

[Kyung Yang:]

I have a question on quarter one for hereditary hemochromatosis. So now we are expecting data in the second half of this year. What do you think you would need to show in order to capture market share or replace current standard-of-care phlebotomy. From talking to physician, it seems to me that although the genetic mutation is relatively common but disease penetrance is low. And our phlebotomy since is quite exceptive, we do once monthly or by monthly dosing on major. So wondering what would you need to show to compete in the marketplace if approved?

[George Tidmarsh:]

So of course, first of all, Kyung, thank you for the question. And to reiterate, there are no approved therapies currently for the treatment of hereditary hemochromatosis. So in terms of FDA approval, there really is nothing out there to compare to. Phlebotomy is used and there is a general perception amongst physicians that it can adequately control the iron levels in patients. I think, unfortunately, that perception is not routinely shared with the patient -- amongst the patient population and we've done a significant amount of work there. If you speak with the patients, they are looking for an alternative to phlebotomy, because phlebotomy not only is it inconvenient, you have to travel to a infusion or blood donation center, you have to take several hours out of your day. It is associated with significant adverse effects, including the insertion of a large board needle. And interestingly enough, there are many publications showing that phlebotomy actually worsen some of the symptoms of hereditary hemochromatosis, most specifically the joint pain and the joint discomfort. And so I think that with our once weekly subcutaneous injection without the need to leave your place of work, to be inconvenienced, to suffer some of those adverse effects, we think that LJPC-401 has the potential to displace phlebotomy significantly for the treatment of hereditary hemochromatosis. And it to our knowledge, there really is nothing else in development for HH. And so if successful we would likely be the first approved therapy. So I think that we will significantly improve the outcome for these patients. Now to your point about the penetrance, so we estimate -- while the data suggests there is over a 1 million patients in the U.S. affected genetically with the mutation that causes low hepcidin. But to your point, we estimate there're only about a quarter of a million of these patients are recognized and undergo treatment. So it's not unusual actually that a patient will get diagnosed somewhat accidentally by either presentation of an incurred adverse effect, such as organ failure or on a routine blood test. So we will certainly launch a significant effort to more broadly educate and diagnose patients start with HH. So that they can potentially be treated with LJPC-401 before they incur the organ damage that necessitates very frequent phlebotomy that again is attendant with significant adverse effects. So did I fully answer your question?

[Kyung Yang:]

Sure. Thank you. Thank you that’s helpful. And 401, what's the subque weekly dosing volume?

[George Tidmarsh:]

The current volume is one ml.

[Kyung Yang:]

And the last question is on GIAPREZA. So you are expecting European approval in June this year. So upon approval when do we expect to have partnership, or would you go alone and start doing a price negotiation with the various governments in Europe.

[Dennis Mulroy:]

So the decision on the MAA is expected in June of this year. And we have begun to undertake all of the necessary groundwork in Europe, such as meeting with some of the individual country pricing authorities. And we will assess as we go along about the value of any potential partnership if we were to do that. We have been approached by multiple entities and we will assess those as they come. But we don't have any stated timeline for any potential partnership.

[Operator:]

Our next question comes from the line of Ed White with H.C. Wainwright. Your line is now open.

[Ed White:]

So just on 0118. Can you tell us a bit more about the data that you've seen there and that you're using for the potential NDA filing? And then also just thinking of priority review voucher. What steps has to be taken to undergo an application for a priority review voucher and the chances for attaining that? Thank you.

[George Tidmarsh:]

So we are in the process of wrapping up the clinical study that was requested by FDA for our NDA submission, and we'll update as we gain further clarity about the timing and the filing that we expect later this year. We have gained additional data from two large randomized controlled trials in the treatment of severe malaria that showed a survival benefit of the active ingredient of LJPC-0118. And so we're confident as we stand today that we have sufficient data based on our communications with FDA and remain on track for that filing timeline. And what was the second part of your question?

[Ed White:]

The second part was just about the priority review voucher?

[George Tidmarsh:]

So typically what happens is part of the NDA submission, there's a separate part of the application for the priority review voucher. And we strongly believe that we meet all of the statutory requirements for the issue and serve PRV. Malaria itself we know is a neglected tropical disease that’s on the stated list of diseases that are eligible for priority review voucher. Secondly, the active ingredient has not had been approved previously. And we believe based on our analyses that that is in fact the case. And then the clinical data has to show significant benefit. And we are very confident that the data does show a significant benefit. So while we can't always be certain until it actually happens, we believe by a very thorough and exhaustive analysis of the statutory requirements for issuance of a PRV that we will be eligible as that process takes place in parallel with the NDA review.

[Ed White:]

And then as far as marketing. Is this something that you would market on your own or would you look for a partner?

[George Tidmarsh:]

Well, since there's about 1,700 malaria patients in the U.S. every year, almost 300 will progress to severe malaria. And since there'll really be no other treatment, we do not believe that this will require much effort in terms of marketing. So we do have the infrastructure currently that would support this. We're working with distributors to get the drug. For GIAPREZA, we have the relationships with distributors to have approved products on the hospital shelve. So if 0118 is approved, we have that infrastructure. We have the infrastructure with our pharmaco-vigilance to support it in medical affairs and so forth. But we do not believe that it would require significant sales and marketing efforts, simply because it would be essential therapy for a very rare condition that is severely life threatening.

[Operator:]

Our next question comes from the line of Anupam Rama with JP Morgan. Your line is now open.

[Tessa Romero:]

This is Tessa on Anupam this evening. I believe you have mentioned that a clinical trial needed for the NDA for LJPC-0118 in malaria is underway and fully recruited. Can you orient us to the trial design and what would be considered a win here? And then maybe really, piggybacking on the last question. Is there a publishing strategy on the earlier clinical trial data? Thanks very much, guys.

[George Tidmarsh:]

Yes, I think for sure. The data that we are collecting currently is a trial that really looks at the pharmacokinetics and the distribution of LJPC-0118, our version of the active ingredient, which has previously been shown to improve outcomes. And yes that trial is fully enrolled and we are finalizing the collection of the last bits of data. And we'll update everyone at the time that we are completed with that trial and update on our expected timing for the NDA. I think we will absolutely publish the data. And I think we do have certainly plan in place to update the public and the medical community about the data and the availability of 0118 should it get approved. So yes, we do have a coherent publication strategy.

[Operator:]

Thank you. And we have no further questions at this time.

[George Tidmarsh:]

Thank you all for attending our conference call today, and appreciate your support of LJPC.

[Operator:]

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