PLx Pharma Inc.
Q3 2019 Earnings Call Transcript

Published: 8 Nov 2019

[Operator:]

Ladies and gentlemen, thank you for standing by and welcome to the PLx Pharma Q3 2019 Earnings Conference 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] Please be advised that today’s conference is being recorded. [Operator Instructions]I would now like to hand the conference over to your speaker today, Lisa Wilson, Investor Relations of PLx Pharma. Please go ahead ma’am.

[Lisa Wilson:]

Thank you, Josh. Welcome to PLx Pharma’s Q3 2019 Earnings Results Call. This is Lisa Wilson, of Insight Communications 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 to 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 November 8, 2019. 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. This is an especially exciting time for us at PLx as we approach the final phases of the regulatory process for VAZALORE and make progress toward our planned launch in the middle of next year.We are tracking well against our milestones as I’ll share in a few moments and we are particularly encouraged by the growing enthusiasm for our innovative products, both within the clinical community and from the retail trade.We are engaged in typical interactions with the FDA to clarify labeling and data requirements for our supplemental new drug application submission. In the time leading up to our commercial launch, we are implementing our publication strategy to raise awareness in the medical community with data supporting the efficacy and safety of VAZALORE.There is a great deal of interest in aspirin therapy today and we believe the market is ready for a novel therapeutic agent that provides faster, more reliable aspirin absorption and better platelet inhibition compared with the current standard of care while reducing GI side-effects associated with aspirin.Now I will turn the call over to our CFO, Rita O’Connor to discuss third quarter results. Rita?

[Rita O’Connor:]

Thank you, Natasha. We recognized revenue of approximately $41,000 in the third quarter of 2019, compared to revenue of $216,000 in the third quarter of 2018. All the revenue recognized is attributable to work performed under an award of a National Institutes of Health grant.In May of 2017, we have announced that we have been awarded a $1.9 million grant to support our formulation of aspirin for chemo prevention of colorectal cancer. This grant is nearing completion with less than a $100,000 remaining through early 2020.Research and development expenses were approximately $1.2 million for the third quarter of 2019, roughly unchanged from the third quarter of 2018. The expenses in both periods include a continued development and manufacturing activities for VAZALORE. The spending in the third quarter was related to continued stability testing of the registration batches manufactured last quarter.Spending in this area for the fourth quarter will remain at the same level as we move from registration batches to validation batches at our contract manufacturer Thermo Fisher Scientific. Spending for the first quarter of 2020 in R&D will be reduced as we complete validation and then move into commercial production to compare for the launch of VAZALORE in mid-2020.The cost of commercial production will be included in inventory and not just the P&L upon shipment to the trade as cost of goods sold.General and administrative expense totaled $2.5 million in the third quarter of 2019, compared to $1.8 million in the third quarter of 2018. This increase is due to commercial-related activities to support the upcoming launch of VAZALORE.G&A expense is expected to increase for the rest of the year, and into next year as we increase sales and marketing spend. This spend will focus on the healthcare professional, retail trade and consumer.Other income and expense net was $5.4 million of net other income in the third quarter of 2019, compared to $0.6 million of net other expense in the third quarter of 2018. This change is largely attributable to the non-cash change and fair value of the warrant liability, primarily due to the fluctuation of the price of the company’s stock.This change in the warrant liability was $5.5 million of other income in the three months ended September 30, 2019, compared to $0.4 million of other expense in the comparable 2018 period.Net income attributable to common shareholders for the third quarter of 2019 was $1.4 million or $0.09 per basic and diluted share, compared to net loss attributable to common shareholders of $3.4 million or $0.39 per share for the third quarter of 2018.This includes a non-cash gain of $5.5 million or $0.55 per share, compared to a charge of $0.4 million or $0.05 per share in 2018 related to the change in the warrant liability.The third quarter of 2019 also included $0.3 million or $0.03 a share for preferred stock dividends related to the Series A $15 million convertible preferred stock financing completed in February of 2019.As of September 30, 2019, we had cash and cash equivalents of $18.5 million. Our net cash burn for the quarter was a little over $2.7 million, which reflects $3.4 million of operating expenses, and includes $0.9 million of debt principal repayments, partially offset by $1.5 million of net proceeds from the issuance of our common stock under our equity distribution agreement or ATM.Going forward, we expect our cash burn to be around $6 million for the fourth quarter and increase by a few million dollars in early 2020 as we build commercial inventory and increase our sales and marketing expenses.We have cash on hand to finance operations through the anticipated date of FDA approval of VAZALORE. To finance the U.S. market launch, we intend to review non-dilutive financing alternatives such as debt and royalty-based financing. Prior to FDA approval, we may also opportunistically raise additional capital to accelerate certain pre-commercial activities.This could be in the form of debt or equity and might include issuing stock under our ATM. To-date, we have raised just over $2 million under the ATM.With that, I'll turn the call back to Natasha to provide more details of our commercialization activities. Natasha?

[Natasha Giordano:]

Thank you, Rita. The aspirin market is in need for innovation and we are eager to be part of this important transformation that has the potential to benefit millions of patients. As you know, our target population for VAZALORE is the secondary prevention market defined as people who have experienced a heart attack, stroke or have undergone a vascular procedure.We are also targeting diabetics who are at a higher risk for having an initial vascular event and are considered to be candidates for aspirin therapy. We believe VAZALORE can play an important role in treating both groups, which together represents more than 40 million patients or a $10 billion market opportunity representing a huge potential target audience for VAZALORE.Our prelaunch activities are centered on raising awareness, education and engaging our three key constituents, the healthcare professional, the retailer and the consumer. It’s important to keep in mind that even though VAZALORE is an over-the-counter product the doctor will play a critical role in recommending VAZALORE to patients who can benefit from life-long daily aspirin therapy.And as our research confirms for the patients we are targeting, when a doctor recommends an OTC product for their patient, they will seek out that product in the store and will be willing to pay a premium for it.I would like to discuss each one of these important groups a bit further. We know that the healthcare professionals are data-driven when it comes to making prescribing decisions critical to our launch and to the specialist community is that we continue to provide them with data and information supporting VAZALORE and its unique mechanism of action and performance versus both enteric-coated aspirin and regular aspirin.Part of this is clarifying which patients benefit the most from aspirin therapy and to affirm its foundational use for secondary prevention. Some of the key metrics that really resonate with physicians are that VAZALORE offers up to five times higher absorption and two times better platelet response than coated aspirin and 71% lower risk of ulcers than regular aspirin.To share this data, we’ve increased our presence at major cardiovascular and neurology conferences and have developed a publication strategy to inform physicians of the compelling data they will need to understand in treating their patients at risk for cardiovascular disease.In early September, our abstract was presented at the European Society of Cardiology, the ESC Congress in Paris. Dr. Dominick Angiolillo, a world-renowned interventional cardiologist and esteemed member of our scientific advisory board was the lead author and presented the abstract entitled Pharmacokinetic and Pharmacodynamic Assessment of a Lipid-Based Aspirin Formulation, results of a prospective, randomized crossover study.The data presented at ESC is the data that supported the FDA’s approval of VAZALORE 325 mg and demonstrated that its novel liquid formulation delivers fast and reliable aspirin absorption which is bioequivalent to vaccine with immediate relief aspirin.These findings, together with results from previous studies showing significant reductions in the risk of gastric erosions and ulcers with VAZALORE suggest that our novel compound has the potential to provide a superior benefit risk profile compared with currently available aspirin options.The presentation was very well received by cardiologists in attendance and we are happy to share that the abstract was simultaneously published in the Journal of Thrombosis and Thrombolysis.Following ESC, we attended the Annual Transcatheter Cardiovascular Therapeutics, the TCT Conference, while where we sponsored a continuing medical education event entitled Aspirin for the Interventionalist

[Operator:]

[Operator Instructions] Our first question comes from Donald Ellis with JMP Securities. You may proceed with your question.

[Donald Ellis:]

Thank you. Good morning.

[Natasha Giordano:]

Good morning.

[Donald Ellis:]

I have three questions. I’ll ask them all at once and then I’ll listen for the response. The first question is regarding the PK and the PD data you presented at ESC and basically, are there any differences between the acceptance of your technology U.S. versus Europe physicians?Second question is regarding the medical education at the TCT Conference. What kind of turnout do you get for events like this?And what are your medical education plans for the first half of 2020? And my last question is about the approval, I guess, is going to happen in the middle of next year.What type of activities have to be completed between the actual approval and the launch and how much time will that take? Thanks.

[Natasha Giordano:]

Okay. Thanks, Don. We’ll try to take all three of your questions. So the first question was about the recently published study on PK and PD. And that was against the immediate release aspirin in the market to show bioequivalents and that’s why it gained us our FDA approval in the U.S.In terms of Europe, I can tell you that our presence at several of the larger cardiovascular conferences has shown us that the European cardiologists, in particular is very interested in VAZALORE and is looking to us to say, okay, when are you going to bring this to the European market?And of course, there is a different regulatory process in Europe that we would need to undergo and typically it’s country-by-country. We though, intend to focus on the U.S. market primarily and initially, but we are thinking about strategically how we want to address the European market whether it’d be on our own or through partnerships.In terms of TCT Conference what we sponsored was a CME event and the event was chaired by Dr. Gregg Stone of Mount Sinai and Dr. Dominick Angiolillo from the University of Florida. Gregg Stone is a very, very well-known top cardiologist in the country. This is his conference that he runs and draws a lot of attention from many, many cardiologists.I will tell you that our conference or symposium was in early morning and it was extremely well attended. And I think it’s because of two things. One, the aspirin question and therapy decisions on what patients really need to benefit from life-long aspirin therapy is in every conference right now.It’s a hot topic. Physicians are very interested in understanding how to prescribe or how to recommend aspirin for especially their secondary prevention patients.They are also very eager to hear about a new formulation and in that symposium, Dr. Angiolillo did speak about the options available to the U.S. market and the fact that VAZALORE is coming to the market in next year, but also the benefits of providing better efficacy as it relates to added platelet benefit, but also better GI safety.And it’s a great deal of interest there. I was extremely encouraged and excited to see how many cardiologists came to that very early event that morning.In terms of approval and activities between approval and the actual launch, that will involve hiring on the field force that will involve doing more pre-launch marketing in the markets through different regional and national advisory boards potentially setting up our speaker programs, as well.So, those couple of months will be certainly very robust in terms of resource but preparing the market for the first day that a representative will walk through a physician’s door.Hopefully, I’ve addressed those three of those.

[Donald Ellis:]

Yes. You definitely. Thank you. And if I could add a fourth, VAZALORE seems like an obvious product to be recommended by a retail pharmacy. What are your efforts going to be as far as that part of the channel?

[Natasha Giordano:]

So, recent meeting with the retailers, key retailers over the last couple of years and we’ve progressed from meetings where we are educating the retailers in terms of VAZALORE and its benefits into initiating the real commercial planning phase and so now the retailers that we are meeting with are we are sitting with very regularly is planning on where the product will fit on the shelves.How we will partner to promote the products together, because they look to VAZALORE as a product that can reinvigorate the aspirin therapeutic class. That class has been flat and declining recently and so they are really excited about having a new product, especially that it’s innovative, it’s different and it brings very key benefits in terms of both efficacy and safety, which is such an unmet medical need at the moment for millions of patients.

[Donald Ellis:]

Okay. Thank you. I’ll jump back in the queue.

[Natasha Giordano:]

Thank you, Don.

[Operator:]

Thank you. Our next question comes from Esther Hong with Janney. You may proceed with your question.

[Esther Hong:]

Hi, good morning. So, a couple of questions from me too. The first, can you elaborate on any expectations around labeling in that process with a product like VAZALORE? And then, second, my question is, can you speak about, so there is a lot of good feedback from cardiologists.And so, I was wondering if you could speak about any feedback from endocrinologists who are treating diabetics which is a large population who benefit from a drug like VAZALORE. And then particularly, given that there are GI issues associated with some diabetic medications, what benefits can we expect from diabetics who would seek VAZALORE versus aspirin? Thanks.

[Natasha Giordano:]

Okay. Thank you, Esther. Yes, so, around labeling, we've invested a lot of time and resource into developing the design of the package for VAZALORE 325 mg. And as you know in the Over-The-Counter industry, the packaging that the product sits in is considered its labeling. So we’ve spent a lot of time and a lot of discussions with retailers, consumer market research incorporating that feedback into our packaging.And we have had, what I would call typical interactions with the FDA regarding labeling for 325 mg and as we continue to get their feedback, we will incorporate that feedback and finalize the packaging for 325 and then apply that to the 81 mg packaging and submit that labeling with our submission towards the end of the year.So it’s quite different from the way that an Rx product labeling discussion goes with the FDA, because of the labeling aspects of being the package itself.In terms of feedback, what we are hearing in many of these conferences actually the diabetic is a big topic for the medical community because they are at far greater risk of having a cardiac event than a person that has not has – does not have diabetes. So they are very much encouraged by the data, especially as it relates to efficacy.From a GI perspective, you would imagine that, yes, diabetics are on a number of medications. Some of which may include a PPI. Here you have VAZALORE which has far greater benefit in terms of gastric erosions and ulcers.And specifically, ulcers with a 71% reduction in the risk of having ulcers, I think the feedback that we are hearing is that, the endocrinologists, especially for the diabetic patient is really looking forward to a product that could provide better efficacy, but also potentially eliminate the need for PPI and have less risk of GI upset and that GI upset can range from dyspepsia, all the way through ulcerations.

[Esther Hong:]

Great. Thank you.

[Natasha Giordano:]

Thank you, Esther.

[Operator:]

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back over to Natasha Giordano for any further remarks.

[Natasha Giordano:]

Thank you, Josh. In closing, let me reiterate our enthusiasm for the potential of VAZALORE to disrupt the aspirin markets and to offer patients a more effective and safe alternatives. The market is eager for an innovation in this space and we believe that our proprietary drug delivery platform will enable us to lead this transformation.Thank you so much for your time this morning and have a great day.

[Operator:]

Thank you, ladies and gentlemen. This concludes today’s conference call. Thank you for participating. You may now disconnect.