PLx Pharma Inc.
Q3 2017 Earnings Call Transcript

Published: 10 Nov 2017

[Operator:]

Good day ladies and gentlemen and welcome to the Q3 2017 results conference call. At the time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Lisa Wilson, Investor Relations for PLx Pharma. Please go ahead.

[Lisa Wilson:]

Thank you Charlotte. Welcome to PLx Pharma's Q3 2017 earnings results call. This is Wilson, 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. 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 the PLx Pharma's management as of today and involve risks and uncertainties, including those noted in our press release released yesterday after the close of market and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual result 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. A telephone replay of the call will be available shortly after completion for two weeks. You will find the dial-in information in yesterday's press release. The archived webcast will be available for one year on our website plxpharma.com. For the benefit of those who maybe listening to the replay or archived webcast, this call is held and recorded on November 10, 2017. 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. With that, I will turn the call over to PLx's CEO, Natasha Giordano.

[Natasha Giordano:]

Thank you Lisa and good morning everyone. Welcome to PLx Pharma's first conference call as a public company. I am excited to provide you with an update on the PLx business and the significant progress we have made towards our goals. As a late-stage specialty pharmaceutical company, our objective is to improve the efficacy and safety of selected existing oral nonsteroidal anti-inflammatory drugs or NSAIDs, beginning with Aspirin. Using our patented PLxGuard platform technology, we can selectively release drugs in targeted portions of the GI tract, which we believe results in positively impacting patient health. Prospects for our lead product, a next generation novel aspirin called Aspertec are excellent. Clinical data on Aspertec 325 mg supports the best-in-class aspirin positioning over the widely used enteric coated aspirin because it clinically demonstrates better absorption and antiplatelet efficacy as well as improved acute GI safety. Aspertec 325 mg has been approved by the FDA through a 505(b)(2) application for over-the-counter or OTC distribution. It is the first ever FDA approved liquid filled aspirin capsule. We believe this product will become the best-in-class alternative to enteric coated aspirin for physicians treating patients at risk of having a cardiovascular or cerebrovascular event. As I will discuss in more detail shortly, Aspertec with its patented mechanism of action selectively releases acetylsalicylic acid into the duodenum through its lipid-based formulation. This leads to more predictable and reliable absorption compared with the traditional enteric coated aspirin, which is absorbed erratically in the GI tract as normal gastric reflux occurs. With better absorption and lower acute risk of GI complication, we believe Aspertec holds the potential to be the new standard of care for high-risk cardiovascular patients. Upon approval of the supplemental NDA for our 81 mg dosage, we intend to target both over-the-counter and the prescription markets. Currently we expect to file this submission as a manufacturing sNDA with the FDA by mid first half of 2018. I would like to now turn the call over to our CFO, Rita O'Connor. Rita?

[Rita O'Connor:]

Thank you, Natasha. As you may be aware, we completed our merger with Dipexium Pharmaceuticals in April of this year, becoming a publicly listed company on the NASDAQ, providing us with greater access to the capital markets. In June, we successfully raised $18.2 million in gross proceeds through a registered offering of PLx shares. And in August of this year, we secured $15 million in debt financing with Silicon Valley Bank. Now on to third quarter financial results. PLx recognized revenue of $62,000 in the third quarter of 2017 from a federal grant received earlier in the year from the National Cancer Institute in support of PLx's novel formulation of aspirin for chemoprevention of colorectal cancer. The company had no revenue in the third quarter of 2016. Research and development expenses were approximately $1 million for the third quarter of 2017 compared to $13,000 during the same period in 2016. Spending in this category for the quarter includes the initiation of technology transfer, contract manufacturing activities and other product development activities for Aspertec. General and administrative expenses increased to $3 million in the third quarter of 2017 from $1 million in the third quarter of 2016, due to increased compensation of $1.4 million and other professional and administrative fees associated with being a public company of approximately $600,000. Included in G&A expense was $942,000 of non-cash stock-based compensation expense for the third quarter of 2017 versus $571,000 in the third quarter of 2016. We recorded $118,000 in other income during the quarter as compared to $29,000 of expense in 2016. This increase is related to the fair value of a warrant liability of $252,000 tempered by $168,000 of interest expense related to our new term loan with Silicon Valley Bank. Of this, only $91,000 is cash interest expense and the rest is non-cash amortization of the debt discount and payoff fee at the end of the loan. Net loss for the third quarter 2017 was $3.8 million or a loss of $0.44 per basic and diluted share, compared to a net loss of $1.1 million or a loss of $0.25 per basic and diluted share for the third quarter of 2016. We ended the quarter with $30.4 million in cash and cash equivalents. With that, I will turn the call back to Natasha. Natasha?

[Natasha Giordano:]

Thank you, Rita. So aspirin is one of the most common NSAIDs available today. It is widely used for the treatment and prevention of cardiovascular disease. About one-third of the U.S. population or roughly 107 million people falls within categories for which aspirin would be recommended by a physician. Unfortunately, fewer than half of the individuals that need it actually use aspirin leaving over 50 million people who could benefit from aspirin use vulnerable to cardiovascular events. This lack of compliance is generally believed to be due to the GI complications associated with NSAIDs. Enteric coated aspirin was developed to address the GI complications of NSAID use. It is widely considered the current standard of care and has more than 90% market share. However, enteric coated aspirin is far from ideal. Not only does it not offer better GI safety than regular aspirin, enteric coated aspirin demonstrates variable and incomplete antiplatelet activity and with antiplatelet protection that it does offer is not equivalent to regular aspirin. It's worth noting that every important clinical study supporting the cardiovascular benefit of aspirin has been conducted using immediate release or regular aspirin, not enteric coated aspirin, with the exception of one study, which used regular aspirin for the first dose and then enteric coated aspirin thereafter. Furthermore, a Japanese study published in December 2014 in JAMA, which included more than 14,000 high-risk primary prevention patients, comparing 100 mg of enteric coated aspirin with no aspirin was stopped after five years. The study concluded that enteric coated aspirin offers no benefit compared to regular aspirin. The reason enteric coated aspirin does not protect the GI tract and in fact may cause gastric ulceration is because it only offers unidirectional protection as it enters the stomach. Once the tablet passes into the duodenum, it disintegrates releasing free aspirin, which refluxes back into the stomach, potentially inducing surface injury. In contrast, our novel PLxGuard delivery platform works by delivering active pharmaceutical ingredients directly to various portions of the GI tract. This targeted delivery most importantly improves the absorption of aspirin and reduces acute GI side-effects. Our clinical trials were designed to show greater efficacy versus the market leader, enteric coated aspirin and to demonstrate improved acute GI tolerability versus regular aspirin. The overall goal of antiplatelet therapy is to suppress surges of thromboxane completely at the 99% inhibition level. This provides for a complete aspirin response. Thromboxane inhibition is considered the surrogate marker for aspirin effectiveness by both the FDA and in clinical practice. Our clinical studies showed that Aspertec 325 mg had predictable and reliable absorption in antiplatelet activity whereas 25% of enteric coated aspirin treated patients in the study had minimal absorption of aspirin. Nearly 84% of patients treated with Aspertec had a complete aspirin response compared to only 42% of patients treated with enteric coated aspirin. Based on these clinical results, Aspertec 325 is three to five times more likely to achieve a complete aspirin response compared to the current standard of care offering a clear benefit to patients and physicians. Furthermore, our data suggests that Aspertec 325 has a 65% lower risk of acute gastric ulcerations than regular aspirin. Aspertec's lipid matrix release, which is based on a patient's individual pH level, presence of bile and enzymatic digestion results in both a predictable release pattern and fewer gastric erosions and acute ulcers. We have developed Aspertec to address the needs of four high-risk populations, which in aggregate, comprise about 47 million people with a potential retail market size of approximately $12 billion. Achieving just a 1% market share translates in potential retail revenue of $125 million. We believe the improved efficacy and acute safety of Aspertec justify premium pricing and our market research suggests physicians and patients would accept a higher price point given the distinct benefits of the drug. We believe Aspertec has the potential to be the best-in-class aspirin treatment option for acute coronary syndrome. Our optimism reflects the positive responses that we have received when polling physicians about their intent to prescribe. We performed both qualitative and quantitative studies with 1,000 specialists and 2,000 consumers. The results were highly encouraging. 80% of specialists said they would prescribe Aspertec. On the consumer side, our research found that consumers are far more likely to find and purchase a specific OTC product when it is prescribed or recommended by a physician. In recent discussions with the FDA regarding the requirements for the approval of the 81 mg dose, we confirmed that the 81 mg will be filed as a manufacturing supplement which gives us confidence that we could be in a position to launch Aspertec by the end of 2018. As we prepare for the launch, we will continue our efforts to expand our profile with the scientific community including building out our scientific advisory board and bringing together highly regarded thought leaders in cardiology, neurology and endocrinology. At the same time, we are developing an integrated multichannel commercial strategy that will focus on the specialists that care for these high-risk cardiovascular patients. Specifically, we will target 12,000 to 15,000 specialists who write the highest prescription volume by decile with an appropriately scaled sales force. We will also focus on educating pharmacists and are targeting dual placement, meaning that patients would be able to access Aspertec behind the pharmacy counter or at the front of the store on their own. To advance our commercial strategy, we have assembled a highly experienced management team with demonstrated track records in launching and successfully marketing OTC and prescription drugs. We are also working with Dr. Deliargyris, our Chief Medical Advisor, an internationally recognized expert in thrombosis to build a world-class scientific advisory board of prominent thought leaders in the industry. As we move forward, we will be scaling manufacturing to ensure that we have product available for distribution and to ensure that we have Aspertec on the shelves of drugstore chains. Our milestones for the next 12 months include manufacturing sNDA submission and approval, continuing our strong precommercial focus on the scientific community, continuing to expand our global patent landscape, advancing a clinical study for our 81 mg dose. While this is not required for regulatory purposes and will not be included in the sNDA dossier, we believe it will be useful for commercialization. Topline results should be available prior to launch. Next, building out the commercial team of sales force reps focused on key metro markets. And finally targeting the end of 2018 for a launch into the specialists market, focusing on high-risk patients in a $12 billion addressable market. This is an exciting time at PLx with significant opportunities ahead of us. We are poised to offer a best-in-class aspirin treatment option for nearly 50 million at-risk patients and we look forward to updating you on our progress. With that, I would like to open the call for questions. Operator, please go ahead with the instructions.

[Operator:]

[Operator Instructions]. Our first question comes from the line of Elliott Wilbur from Raymond James. Your line is now open.

[Elliott Wilbur:]

Thank you and good morning, Natasha and Rita.

[Natasha Giordano:]

Good morning Elliott.

[Elliott Wilbur:]

First question, a multipart question, of course. With respect to the sNDA for Aspertec, can you maybe just go into a little bit more detail in terms of what the remaining gating factors are in terms of data generation or stability work, supply chain logistics, just sort of a little bit more on the specifics on exactly what you need to do and whether or not any of that's actually going to be made public before you actually file the sNDA?

[Natasha Giordano:]

Sure. So we are on track, Elliott, for our manufacturing process. We've worked with our contract manufacturer to gear up the tech transfer to do things like putting the product up on stability, all things that we have to do to generate the data to show the FDA that we can manufacture the 81 mg like we did the 325 mg that they already approved. Our recent conversations with the FDA leave us quite encouraged in that we know that this will be a manufacturing supplement. And typically with manufacturing supplements, PDUFA timelines are a bit shorter. So with that, we are confident that upon their approval and of course the FDA always has the right to do the review and ask a question, our plans are to launch both doses by the end of 2018.

[Elliott Wilbur:]

Okay. And then you referenced the additional PK/PD work that you are looking to do to maybe bolster the marketing effort. Maybe just a little bit more detail on what you are looking to generate and hoping to see out of that work?

[Natasha Giordano:]

Yes. So again, you are right. This is not about any regulatory requirements. This is purely for commercial use. I think it will strengthen our story and our marketing claims, specifically as it relates to efficacy. So it's a similar study to what we did with the 325 mg and looking at PK and PD across non-insulin diabetics. And we expect to be able to have some topline results prior to our launch to bolster our launch campaign.

[Elliott Wilbur:]

Okay. And at what point do you think you will be in a position to begin to accelerate the buildout or establishment of the commercial marketing infrastructure in terms of at least bringing in senior members of the management team?

[Natasha Giordano:]

Yes. We have already hired some really deeply experienced with demonstrated success records in terms of trade sales, in terms of sales and marketing and especially with our partnership with Dr. Deliargyris. So I am very excited about the precommercial work that we have already begun with this team. We do intend to bring in some more commercial expertise next year prior to the launch to help us further develop the brand messaging and the positioning. Although the positioning is quite simple and clear, given the compelling data that we have with regard to efficacy in positioning Aspertec as a best-in-class and a new standard of care in treating these high risk patients.

[Elliott Wilbur:]

Okay. Thanks. And just one last question for Rita. I don't think I caught this during your prepared commentary. But what was cash burn in the quarter? And then could you just talk about what the contingencies or terms are, I don't know which you would be able to draw down the additional $7.5 million under the recently established term loan agreement for those out there that may have not actually read the actual credit agreement? Thanks.

[Rita O'Connor:]

Sure. The operating cash burn this quarter was about little less than $2 million but going forward through the launch we will probably run between $5 million to $7 million per quarter and that variability is dependent on some of the things Natasha was mentioning, the gearing up for manufacturing, the prelaunch marketing spend as well as the trials that are going on.

[Elliott Wilbur:]

All right. Thank you.

[Operator:]

[Operator Instructions]. And at this time, I am not showing any questions. I would like to turn the call back over to Natasha Giordano for any closing comments.

[Natasha Giordano:]

Thank you. So thank you everyone for joining us today. And I wish you a great day.

[Operator:]

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