PLx Pharma Inc.
Q2 2020 Earnings Call Transcript

Published: 14 Aug 2020

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the PLx Pharma Q2 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to introduce your host for today's conference call Ms. Lisa Wilson, Investor Relations at PLx Pharma. You may begin.

[Lisa Wilson:]

Thank you, Kevin. Welcome to PLx Pharma's Q2 2020 earnings results call. This is Lisa Wilson of In-Site Communication Investor Relations for PLx. With me on today's call are Natasha Giordano, President and Chief Executive Officer; and Rita O'Connor, Chief Financial Officer of PLx. You can also access the webcast of this call through the Investors section of the PLx website at plxpharma.com. Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to PLx Pharma's management as of today and involve risks and uncertainties including those noted in our press release issued this morning and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. PLx specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. The archived webcast will be available for 30 days on our website plxpharma.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 14, 2020. Since then PLx may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to PLx's CEO, Natasha Giordano.

[Natasha Giordano:]

Thank you, Lisa. Good morning everyone and thank you for joining our call today. As our new world continues to evolve, we've all had to learn how to live and work in these trying times. At PLx, we continue our focus and commitment on regulatory and commercialization process to advance VAZALORE, our novel aspirin product to market. Since our last call, I'm pleased to report that we made significant progress on several fronts to bring VAZALORE to market. We received the minutes of the Type C meeting with the FDA confirming the design of the bioequivalence or BE study on the VAZALORE 325-milligram dose strength and importantly, the BE study is on track with topline data demonstrating bioequivalence to immediate release aspirin further supporting the change in the formulation. We believe that the results of this study, together with the additional requirements for a CMC supplemental filing, will form the basis for a strong submission to the agency. We're now finalizing the sNDA filings for VAZALORE 325 and 81-milligram dose strengths including incorporating the final BE study report. I'm also delighted to share that we've now shifted the timing of the submissions to mid-November, ahead of our previously committed timeline of the end of the year. We're excited about the promise of VAZALORE and the potential to transform the aspirin category giving health care professionals and their patients with vascular disease a unique alternative treatment option. I'll now turn the call over to our CFO, Rita O'Connor to discuss our second quarter results. Rita?

[Rita O'Connor:]

Thank you, Natasha. We recognized revenues of $28,000 for the quarter ended June 30, 2020 compared to revenues of $183,000 for the quarter ended June 30, 2019. Revenue in both periods is attributable to work performed under a federal grant from the National Institute of Health which came to an end in the second quarter of 2020. Research and development expenses totaled $1.4 million for the three months ended June 30, 2020 versus $1.6 million in the prior year period. The 2020 quarter includes clinical-related expenses primarily for the BE study on VAZALORE 325 milligram and continued manufacturing spending for stability and pre-validation activities. The second quarter of 2019 consisted mainly of expenses related to the manufacture of the registration batches combined with reimbursable grant expenses. For the remainder of the year, R&D spending will decrease as the BE study report is completed and incorporated into the sNDA submission. Validation and commercial production of VAZALORE is expected to begin once the sNDAs are submitted and additional capital is obtained. General and administrative expenses totaled $2.2 million in the three months ended June 30, 2020 compared to our $2.4 million in the prior year period. The decrease primarily reflects lower compensation expenses and reduced spending on conferences and related travel due to COVID restrictions offset by higher spending on prelaunch activities for VAZALORE. G&A expense is expected to remain at current levels for the remainder of the year. After submission of the sNDA and additional financing is obtained, spending is expected to increase as we prepare for the launch of VAZALORE. Pre-launch activities will include developing professional and consumer messages and planning for retail trade merchandising and support. Interest income declined significantly due to the lower cash balance and lower interest rates versus the prior year. Interest expense also declined due to the lower principal balance combined with lower interest rates on our term loan. Our remaining term loan balance is $2.5 million as of the end of June. This loan is expected to be paid off in the first quarter of 2021. The expense related to the change in fair value of the warrant liability declined to $1.9 million in the second quarter of 2020 from $5.4 million in the prior year period. The decrease is largely attributable to the fluctuation of the price of the company's common stock. As a reminder, an increase in the stock price at the end of the quarter compared to the end of the previous quarter causes an increase to the liability thus an increase in the expense. Preferred stock dividends increased to $407,000 in the second quarter of 2020 versus $302,000 in 2019 due to the addition of the Series B preferred stock dividends. After receiving stockholder approval on May 15, we completed the $8 million Series B convertible preferred stock financing with Park West and MSD Partners. Series A and B preferred stockholders are entitled to a dividend of 8% per year which will stop accruing on the date of FDA approval of both dose strengths of VAZALORE. Net loss attributable to common stockholders for the second quarter of 2020 was $6 million or $0.66 for basic and diluted share compared to a net loss of $9.6 million or $1.10 per share for the second quarter of 2019. The decrease in the net loss of $3.6 million or $0.44 per share was due to the lower expense related to the change in the warrant liability of $3.4 million or $0.40 per share and lower operating expenses of $430000 or $0.04 per share. As of June 30 2020 cash and cash equivalents were $13.3 million reflecting the addition of the net proceeds of $7.7 million from the Series B financing in May. We expect the quarterly cash burn to be around $4.5 million for the remainder of the year. The company plans to obtain additional financing upon submission of the sNDAs to fund pre-launch marketing spending and commercial inventory build prior to approval of VAZALORE. Regarding the COVID outbreak, we are fortunate that we have not experienced any significant impact to our supply chain. Thermo Fisher Scientific, our manufacturing partner is U.S.-based and is currently fully operational as it relates to VAZALORE. With that, I'll turn the call back to Natasha to elaborate on our progress.

[Natasha Giordano:]

Thank you, Rita. Once we aligned with the FDA on the BE study design we were able to commence the study immediately as we had already engaged a CRO. We quickly obtained IRB approval and successfully recruited qualified healthy subjects required for the study. Fortunately, we were able to recruit patients conduct the study and keep to the timeline without any delays related to COVID. The topline results demonstrate the new formulation of VAZALORE is bioequivalent to immediate release aspirin further supporting the change in the formulation. The next step is to prepare the BE clinical study report with all the required data and analysis to be included in the VAZALORE 325-milligram submission, while preparing the 81-milligram submission in parallel. We're eager to bring this innovative therapy to market and pleased to be able to shift the timing of submissions to mid-November ahead of the previously announced year-end timeline. Once submitted the typical FDA review period for these types of CMC submissions is about four to six months. We are now targeting the launch of both VAZALORE dosages for the third quarter of 2021 assuming FDA approval, adequate capital funding and no COVID-related delays. We're executing our commercialization activities focused on healthcare professionals, retailers and consumers. Central to our commercial strategy is including the appropriate communication platforms with healthcare professionals and consumers in this evolving virtual world. We are maintaining our presence of prestigious conferences to engage with the experts in the field and to highlight VAZALORE's unique attributes. Additionally, we've maintained an active dialogue with our Scientific Advisory Board to strategically partner on how to continue to raise awareness with the medical community about VAZALORE's innovative mechanism of delivery and its potential to help the millions of vascular patients who can benefit from a new aspirin therapy. Furthermore, we're developing our pre-launch marketing activities for the consumer and our retail partners, including messaging and planning for trade merchandising and support. In closing, our highest priorities at PLx are to complete the remaining regulatory steps, submit the sNDA filings mid-November and target launching VAZALORE in the third quarter of next year. With that, I'll open the call for questions. Operator, please go ahead with the instructions.

[Operator:]

[Operator Instructions] Our first question comes from Elliot Wilbur with Raymond James.

[Elliot Wilbur:]

Thanks. Good morning. My first question will be common. It's nice to see timelines moving in the other direction meaning being pulled forward rather than push back, so duly noted. Just a couple of quick ones here. With respect to additional gating factors prior to submission of the sNDA, it sounds like basically you have everything you need, essentially entirely in the company's control at this point. It's just a matter of assembling everything and submitting to the FDA. But I want to see if there were any other items outstanding that maybe are somewhat outside the company's control that need to be checked off before the package gets submitted. And then what will we see or hear from you with respect to the filing or data in advance of the expected submission in mid-November if anything?

[Natasha Giordano:]

Okay. Thanks, Elliot. We're pretty excited about this call as well. Shifting a timeline is always terrific and always something that we try to achieve. So we're really happy about today's call and what we can share with you. I think you have it right, in terms of additional gating factors. As the BE study comes to the top line results, we feel very confident in those results that VAZALORE shows bioequivalence to immediate release aspirin. And so now we're in the process and we continue to be in the process of administratively preparing these filings, writing the documentation and all the required elements that have to be submitted for both submissions. So we've been working on that all along and so we feel pretty confident that we're going to be able to submit these filings by mid-November. In terms of what you may see, I think certainly will let you know and confirm that we've submitted those filings. As far as the data, we'll think about it. But the most important thing I think for everyone to understand is that for the approval of VAZALORE, we need to demonstrate bioequivalence to immediate release like we did years ago and that's why the bioequivalence study was such a critical milestone for us to achieve.

[Elliot Wilbur:]

Okay. And I guess based on the results of the BE study, any change in results of the BE study? And then also conversations with the agency and the receipt of the actual FDA minutes, any changes to the originally approved proposed labeling?

[Natasha Giordano:]

Yes that's a great question. No there are no discussions with the FDA that would suggest that there would be changes in the labeling. Remember, we did receive approval for the labeling. And in the OTC spaces you know, the packaging and the labeling – packaging is the labeling. And we've invested a lot of time market research, we incorporated feedback from the retail sector from the FDA itself. So we're pretty excited about our labeling and our packaging. It's quite differentiated and we'll of course submit that as part of the CMC supplement but we don't anticipate any changes there.

[Elliot Wilbur:]

Okay. And then just one last question before I hop back in the queue. So once the sNDA is submitted, you expect to be in production validation of commercial batches. How do we think about the investment necessary to generate launch quantity? It's, obviously, the incremental cost of active and the like are relatively small, but not sure what type of capital is required in order to command share of manufacturing facility time and the like, but just maybe your preliminary thoughts around that subject matter obviously dependent upon future financing? And then just as a follow-up to that. I mean Patheon, obviously, they're pros on the CMO side but any unique aspects of the manufacturing process that you think might require FDA sign off in advance of approval. You need a pre-approval inspection at the facility or are there any other additional FDA-related requirements maybe related to the supplier of the key inactive that might need to be checked off before you can get final approval? Thanks.

[Natasha Giordano:]

Okay. So a lot in that. So we are working with Patheon. As you said, they are pros. They're really fabulous partner to work with and speak to them almost daily and go out there. So they've been a true partner to us and we've been working with them in terms of our forecasting and production and we're also working with the retail trade. So our team is doing a great job of selling it in. So in the next couple of months we're going to back out now that we have a date and really try to firm up the purchase commitments. And so we think this is going to be so big. So I'm preparing the team to really gear up for manufacturing and that could take a couple of months and quite a lot of money considering how much we think this product is really going to get uptake in every store in the country. So I don't have really numbers for you in terms of what it will cost, but I will in the next couple of months. Once we submit the sNDAs and have had those preliminary meetings with the retail trade, we'll get a better feel for the inventory needs and prepare accordingly and try to do as little as at-risk as possible as you said. We can manufacture the capsules, but do we hold off on packaging and make sure the FDA has approved the package. They have approved 325. So we'll make sure that -- we're assuming that we're going to be the same with 81, but we'll try to hold off as much of risk as possible. And as you said, it will depend on the financing as well. How much do we want to do at-risk and how much do we obtain prior to approval. So a lot of that will shake itself out over the next couple of months, while we focus on the sNDA submission. You asked about the FDA's inspections. Yes typically they require a pre-approval inspection. As you said Patheon is great at this. They've been inspected a lot with a lot of their clients, so we don't foresee any issues there. So now my understanding is that the FDA has really put a hold on foreign inspections, but the good news is it seems like the U.S. based ones are continuing as planned. And as you know we are manufacturing VAZALORE in their Cincinnati, Ohio plant. And our excipients, we don't -- excipients as well as the API, we don't anticipate that they would need to be inspected, but we'll see, but we're not expecting that as a requirement. We're doing our audits and inspections as required of all of our raw material sources, as well as doing our own audit and inspections of Patheon themselves. Do I miss anything in your questions?

[Elliot Wilbur:]

No.

[Natasha Giordano:]

Okay.

[Operator:]

Thank you. Your next question comes from Jason Butler with JMP Securities.

[Jason Butler:]

Hi, thanks for taking the questions. And let me add my congrats on all the progress. Just wondering, if you could give us any more color on your pre-commercialization plans. And then thinking forward, post-approval what are the steps that need -- that you need to wait for in terms of getting approval before getting the product on the shelf? So once you get approval, what are the steps that you need to go to -- to get it on the pharmacy shelves? I know inventory build out to some degree, but anything else in terms of the commercial agreements that can't happen until after approval? Thanks.

[Natasha Giordano:]

Good morning Jason. Yes, like I mentioned before, we're pretty excited about the progress that we've made. All things are coming together are to -- most important milestones are filing these submissions and then approval and in parallel, developing our commercialization plans. Our commercial strategy is really based on three areas; the health care professionals, the retail partners, and the consumer. And so we continue to develop messaging for those sectors, but also how we're going to communicate through which platforms will we communicate and utilize to best reach and engage all three of those very important stakeholders for us. And in this evolving kind of COVID and virtual world, we're looking at different platforms on how to best do that so that we can differentiate VAZALORE and showcase the uniqueness of its mechanism of delivery because that truly is what makes VAZALORE different and makes it more effective and with less stomach injury risk. Those plans really do center on those three areas. We continue though now to work with the health care professionals. We talk with the Scientific Advisory Board every week. They're very engaged. They remain excited about helping us to raise awareness through their peers and in the medical communities. We continue to execute on our publication strategy. And from a sales and marketing point of view, we are developing the materials that we think are necessary to reach and engage the cardiology community both in the acute and in the chronic areas. And why do we think that's important? It's really about the patient and when they're initiated on aspirin therapy, a secondary prevention patient in particular that that person will remain on aspirin therapy throughout their lives. So, our commercial strategy is really focused on that journey. In terms of post-approval, I think Rita can talk through what we need to get done from the supply chain area.

[Rita O'Connor:]

Right. So, we are -- have been working on the manufacturing process. So, the next steps we communicated are to start the validation -- validate the commercial lines at Patheon and we were actually engaging already in pre-validation activities in advance of that. So, we're all ready to go. And once we submit the sNDAs and they've been accepted by the FDA, we are going to work with Patheon to schedule that validation runs. And so we have to do a couple of validation runs on both dose strengths to make sure that we can manufacture this in the large quantities. And then shortly thereafter, we would move into the commercial production runs of the capsules and based on the forecast that we get from the retailers. So, we'll be pretty busy on the manufacturing front post-submission.

[Jason Butler:]

Okay, great. Thanks again for taking the questions and congrats again on all the progress.

[Natasha Giordano:]

Thanks Jason.

[Rita O'Connor:]

Great. Thank you.

[Operator:]

I'm not showing any further questions at this time. I'd like to turn the call back over to Natasha.

[Natasha Giordano:]

Thank you, Kevin. Thank you for your time this morning. We look forward to keeping you posted on our progress with VAZALORE. In the meantime, I'd like to thank our investors, partners, and employees for their continued commitment to our shared mission during these challenging times and wish that you and your families remain safe. Have a great day. I know we will.

[Operator:]

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.