Provention Bio, Inc.
Q4 2018 Earnings Call Transcript

Published: 19 Mar 2019

[Operator:]

Good afternoon and welcome to the Provention Bio Fourth Quarter and Full Year 2018 Financial Results and Business Update Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Jason Rando. Please go ahead.

[Jason Rando:]

Good afternoon everyone and thank you for joining Provention Bio’s fourth quarter and full year 2018 corporate and financial results conference call. At this time, I would like to remind our listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time, including but not limited to statements about Provention’s expectations regarding future operating results. Forward-looking statements on this call are made pursuant to the safe harbor provisions of the federal securities laws. Information contained in the forward-looking statements is management’s belief based on current expectations and is subject to change and actual results may differ materially from forward-looking statements. Provention disclaims any obligation to update any such factors or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments except as required by law. There is more complete information regarding forward-looking statements, risks and uncertainties in the reports Provention files with the SEC. These documents are available on Provention’s website at www.proventionbio.com under the Investors section and we encourage you to review these documents carefully. Speaking on today’s call will be Ashleigh Palmer, Co-Founder and CEO, who’ll provide an update on Provention’s corporate, clinical and business development achievements; and Andrew Drechsler, Chief Financial Officer, who will review Provention’s fourth quarter and full year 2018 financial results. I’ll now turn the call over to Ashleigh.

[Ashleigh Palmer:]

Thank you, Jason, and thank you to everyone for joining today’s call. Traditionally, when developing therapies for immune mediated diseases, our industry has focused on treating symptoms in the latter chronic stages after significant tissue damage has already occurred. Very often such tissue damage is irreversible, debilitating and life-threatening as is the case with type 1 diabetes, which results from the permanent destruction of precious insulin secretion beta cells in the pancreas. At Provention Bio, we imagine a world without auto immune disease. We are dedicated to preventing, interrupting, slowing, or reversing the progression of chronic immune-mediated diseases like type 1 diabetes, ulcerative colitis, lupus, Crohn’s and celiac disease. Our goal is to reduce the morbidity, mortality, suffering and escalating costs of these debilitating chronic diseases. In 2018, we made great strides towards our achievement of this strategic intent, a goal, which when realized will fundamentally change the immune-mediated disease landscape. We augmented our founding pipeline with two clinical stage assets sourced from MacroGenics, the acquisition of PRV-031 or teplizumab for the interception of type 1 diabetes and the in-licensing of PRV-3279, a state-of-the-art bi-specific scaffold for lupus. We also in-licensed from Amgen, PRV-015, an anti-IL-15 monoclonal antibody for gluten-free diet, non-responsive celiac disease. Last year, we also made excellent progress with our founding assets, commencing enrollment in our Phase 2a PRINCE study evaluating PRV-6527, our oral colony stimulating factor-1 receptor inhibitor targeting moderate to severe Crohn’s disease. And we announced both the start and the completion of target enrollment in our 37 patient Phase 1b PULSE study, evaluating PRV-300, an anti-TLR3 monoclonal antibody to intercept upstream disease processes in moderate to severe ulcerative colitis. 2018 also witnessed the completion of our initial public offering, raising more than $63 million in gross proceeds. And via our PRV-015 collaboration with Amgen, we secured Amgen’s commitment to an additional $20 million in strategic equity investment that subject to certain conditions will be made coincident with a significant future non-dilutive or other financing events. With this solid financial foundation, we are now well positioned to continue to execute our corporate plans, including the clinical development strategies for the six carefully selected programs that constitute Provention’s innovative pipeline of immune-mediated disease interception and prevention assets. Over the course of 2019, we expect a steady cadence of data readouts from these programs. In the second quarter, we expect to report top-line data from our PULSE Phase 1b clinical trial of PRV-300 in patients with moderate to severe ulcerative colitis. The primary endpoint of PULSE is safety with secondary endpoints designed to evaluate the effect of PRV-300 on endoscopic and histological outcomes and a biopsy based mucosal gene expression signature. In addition to our PRV-300 PULSE study, we expect data from our PRV-6527 PRINCE study in Crohn’s disease to readout in the second half of this year. We’re also looking forward to the anticipated midyear results from a study of Provention’s teplizumab conducted at TrialNet sites by the National Institute of Diabetes and Digestive and Kidney Diseases or NIDDK, evaluating teplizumab in non-diabetic subjects who have type 1 diabetic relatives, and as a result a higher risk of developing the disease. This at risk trial is designed to determine if a single course of teplizumab can delay or prevent the onset of clinical stage type 1 diabetes. If successful, this study could indicate a path towards delaying or preventing a lifetime of daily glucose monitoring and insulin therapy. Individuals diagnosed with type 1 diabetes before the age of 10 have a 30 times greater risk of serious cardiovascular outcomes than the general population, resulting in decreased life expectancy as compared to healthy individuals. The life expectancy of patients with younger onset type 1 diabetes is on average 16 years shorter than for non-diabetic individuals. We believe that the result of the at-risk study could further reinforce our rationale for acquiring teplizumab from MacroGenics. As we advance our Phase 3 PROTECT study, evaluating teplizumab a newly diagnosed type 1 diabetes patients. We expect to begin enrollment for the PROTECT study next quarter well ahead of schedule. PROTECT will evaluate teplizumab in type 1 diabetes patients that have recently been diagnosed with the disease. If administered within the first six weeks, we believe that teplizumab can rescue and revive a newly diagnosed patients remaining functional beta cells and reduce the need for exogenous insulin therapy. Ultimately, as we continue to learn more and more about type 1 diabetes as well as the subjects who are at risk of developing it and the patients, clinicians and caregivers who deal with it every day. So we have a greater understanding and appreciation for the disease being a continuum of autoimmunity. And we believe that prevention has within its clinical stage pipeline, the differentiated approaches necessary to prevent, delay or intercept the disease from progressing. I would now like to hand the call over to Andy Drechsler, Provention Bio’s Chief Financial Officer, who will discuss our financial results. Andy?

[Andrew Drechsler:]

Thank you, Ashleigh. Good afternoon, everyone. Before I begin, I would encourage you to read our 10-K that was filed today. The 10-K includes our financial statements, management’s discussion and analysis of our financial condition as well as the risks associated with our business. I would also like to call to your attention the earnings press release, which was issued prior to this call. During the three months ended December 31, 2018, we generated a net loss of $5.7 million or $0.15 per diluted share. This loss was composed of $5 million of development expenses, primarily related to PRV-6527 and PRV-031 as well as internal development expenses. We also incurred $1.2 million of general and administrative expenses during the fourth quarter of 2018. Offsetting these expenses was a one-time benefit of $0.2 million from the sale of certain New Jersey net operating losses. The proceeds from the sale of our New Jersey NOLs were received in December. On an annual basis, we incurred a loss of $26.8 million or $1.19 per diluted share. This loss was primarily composed of development expenses of $22.6 million and includes approximately $4 million of non-cash stock-based product acquisition expense related to the issuance of warrants for our acquisition of PRV-031 and PRV-3279 from MacroGenics. Development spending for the year was concentrated in the PRINCE clinical trial for PRV-6527 and the PULSE clinical trial for PRV-300. As well as the development of PRV-101 and internal spend. We incurred $4.2 million of general and administrative expenses in 2018. I’m pleased to report that we ended the year with $58.5 million in cash. Our cash used in operations totaled approximately $22.6 million for the year ended December 31, 2018. In 2019, we expect to continue to invest in all six of our programs. We expect to have a cash burn from operations in the range of $35 million to $45 million for 2019. We believe our cash balance will provide operating runway through 2019 and to the middle of 2020. As a reminder, Amgen has agreed to make an investment of $20 million in prevention equity. Amgen’s obligation to purchase $20 million of our equity can be triggered in two ways, either in connection with our next potential financing or buy our seat of non-diluted funding such as the potential $50 million payment from Janssen related to PRV-6527. In either case, Amgen will purchase the equity at fair market value subject to certain terms and conditions. As you can see, we have six exciting programs and a solid balance sheet to carry out our operating plan in the near term. With that summary, I will now turn the call back over to Ashleigh.

[Ashleigh Palmer:]

Thank you, Andy. So 2019 is going to be a very exciting year for Provention. As we continue to pursue the creation of a new disruptive pharmaceutical category for autoimmunity. The data emerging from our programs will provide valuable insights as we work to interrupt the disease process before it begins reappears or progressive. We look forward to sharing top line results from both our PULSE and PRINCE studies in the coming months. And we are eagerly anticipating the data from teplizumabs At-Risk trial later this year. Before we open the call for questions, I would like to thank my fellow Provention Executives and our amazing team of employees and consultants. I would also like to thank the patients participating in our PULSE and PRINCE trials as well as the subjects who have participated in the NIDDKs At-Risk study conducted at TrialNet sites. These patients and their families inspire us to excel. It is also worth recognizing that over the next few weeks the parents of children to be enrolled in our teplizumab Phase 3 PROTECT study in new onset disease. We’ll begin finding out that their loved ones have Type 1 diabetes. They and their precious children keep us focused and motivated every day. Jason.

[Jason Rando:]

Operator, we are now prepared to take questions.

[Operator:]

[Operator Instructions] The first question comes from Ram Selvaraju with H.C. Wainwright. Please go ahead.

[Ram Selvaraju:]

Hi, thanks very much for taking my questions. Just a few on the clinical development front if I may and then just a couple of financial ones. I was hoping you could give us some additional insight into the enrollment techniques you intend to use in the 031 study, the Phase 3 study particularly considering the nature of the target patient population and the intervention points that you’re going after. Also, I wanted to better understand whether you are likely to do anything significant with PRV-015 this year, and if so, what specific activities are likely to occur? And then the financial related questions were as follows. Firstly, could you give us a sense of what the operational runway might look like if Johnson & Johnson, Janssen were to exercise its option on the molecule where they have the possibility of taking the rights back after Phase 2 data, if Phase 2 data are positive. And also if you could give us a sense of what you expect stock-based compensation to look like this year relative to 2018? Thank you.

[Ashleigh Palmer:]

Thank you Ram. So, we have on the call today our Chief Scientific Officer, Francisco Leon, and I’m going to ask Francisco, if you could kindly speak to Ram’s first question regarding the enrollment for patients in our 031 study. Francisco?

[Francisco Leon:]

Yes. Good afternoon, Ram. Thank you for the question. So in order to access patients who are newly diagnosed with T1D we are leveraging two big strengths of our program. One is, we have access to the sites who are the most experienced worldwide in T1D early onset clinical trials. We have those sites lined up. We have hired as was made public, the CRO, who conducted the most recent clinical trial with teplizumab PRV-031 that is Parexel. So the combination of an experienced CRO with the top experienced sites, is a key competitive advantage. Secondly, we are working with the patient groups, patient advocacy groups. Most importantly the JDRF, Juvenile Diabetes Research Foundation, who is an investor in Provention through the T1D fund, and other patient advocacy groups. We have a very active presence in the community. We announced that we joined C-Path. C-Path is a consortium with companies like Novo Nordisk, Johnson & Johnson and the NIH and other organizations to advance the development of end points in T1D. So we are really at the center of the action and we will educate the community to accelerate enrollment in our trial.

[Ashleigh Palmer:]

Thank you. And, Ram, the second question was with regards to whether there would be any significant clinical development activity this year for PRV-015.

[Francisco Leon:]

Yes. The next trial with 015 is a six month Phase 2b clinical trial because prior toxicology was two months in duration, current activities geared towards completing the six months tox study and the preparation of this Phase 2b trial, which will start in the second – in the first half, excuse me, first half of next year. So no patient enrollment, but substantial activity towards initiation of that trial on time.

[Ram Selvaraju:]

Thank you very much.

[Andrew Drechsler:]

Hi, Ram, it’s Andy. I’ll address your two financial questions. So the first question was regarding Janssen and if they do make that a $50 million payment, what kind of impact would that have on the runway. So let me just clarify. We’re still enrolling that trial. We expect to complete enrollment in the first half of this year, which would then lead to a readout in the second half of this year. Once those top line results are made public Janssen has 90 days to make that decision. If they were to provide the $50 million and take the rights back to that asset, that would extend our runway by approximately one year, probably a little bit more than one year. But we’re – we would be comfortable saying by an additional 12 months. The second question regarding stock-based compensation, yes, obviously, this year, we had some increased amounts, they are specifically related to the product acquisition rights, but as we think about stock-based compensation in a normal environment, we’re looking at probably $1 million to $2 million for 2019 of P&L impact. Obviously, it’s a non-cash expense.

[Ram Selvaraju:]

Great. Thank you very much.

[Operator:]

The next question comes from Dylan Dupuis with SVB Leerink. Please go ahead.

[Dylan Dupuis:]

Hi everybody. Thank you for taking my questions. A couple of quick questions around the PROTECT trial. First of all, I was hoping if you guys could discuss the rationale for starting the trial ahead of the completion of the at-risk study that’s being done by the NIDDK. and then second, if you can help me connect the dots just a little bit between what a potential readout would look like in the at-risk trial if it’s good, bad, or whatever and how that might flow through your [indiscernible] trial considering the fact that they’re looking at different patient populations. Thank you.

[Ashleigh Palmer:]

Thank you, Dylan. So, I think your last statement is really the answer to the first question you asked. These are very different patient populations. The autoimmune pathophysiology is a progression, a continuum starting with patients, who are genetically predisposed to the disease and may be underlying subjects, progression for several months or years before you see the clinical stage symptoms manifest themselves. With our PROTECT study, we are looking to see if patients, who are newly diagnosed with significant beta cell function, beta cell – functional beta cell mass can be treated with the therapy to get a good clinical outcome and an improvement on the progression of their disease. This is different from the at-risk study, where patients or subjects, who are at risk based on their family history, their relatives having type 1 diabetes, the appearance of auto-antibodies and dysglycemia, but not yet having clinical stage disease whether teplizumab can conserve the beta cell mass that they have and prevent the progression to the point where they become clinically symptomatic. And so we see these two patient populations as both very deserving and deserving of our study of teplizumab and whether it can make a difference.

[Dylan Dupuis:]

Great. Thank you very much.

[Ashleigh Palmer:]

The second part of your question, I’m sorry, I forgot.

[Dylan Dupuis:]

Help me connect the dots between what we can infer from the result of an at-risk trial and how it might read out on across your PROTECT trial?

[Ashleigh Palmer:]

Well, we believe that the further you go back in the continuum, the more beta cells you will have available to protect. And we hope that this hypothesis will be clearly demonstrated by the at-risk study and we believe that if you then come forward to clinical stage diabetes and you catch those patients soon enough, so that they still have significant beta cell mass to protect that we will see an improvement in their outcome. We’re hoping that a favorable result in the at-risk study would certainly enhance and reinforce the enrollment rate in the PROTECT study and ensure that we deliver that study on schedule.

[Dylan Dupuis:]

Thank you very much.

[Operator:]

This concludes our question-and-answer session. I would like to turn the conference back over to Ashleigh Palmer for any closing remarks.

[Ashleigh Palmer:]

Well, thank you all for your continued support as we work hard to advance our therapeutic pipeline with its potential to fundamentally change the immune-mediated disease landscape. Please join us in imagining a world without autoimmune disease.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.