Savara Inc.
Q4 2019 Earnings Call Transcript

Published: 13 Mar 2020

[Operator:]

Welcome to the Savara conference call. At this time, all participants are in listen-only mode. An audio webcast of this call will be available on the Investors section of Savara’s website at savarapharma.com. This call is subject to copyright and is the property of Savara.All recordings, reproduction or transmission of this call without the expressed written consent of Savara is strictly prohibited. As a reminder, today’s call is being recorded.I would now like to turn the phone over to Anne Erickson, Head of Investor Relations and Corporate Communications at Savara.

[Anne Erickson:]

Good afternoon and thank you for joining us today. A press release reporting our fourth quarter, end of year 2019 financial results was issued earlier today, March 12, 2020, and can be found on the Investors section of our website at savarapharma.com. If you’ve not received this release or if you’d like to be added to the company’s distribution list, please e-mail me at [e-mail] call is also being webcast live. And approximately one hour after the call, a replay will be available on the company’s website and will remain available for the next 30 days. A telephone replay will also be available through March 19.Please note that today’s conference call and webcast contain forward-looking statements within the meaning of federal securities laws, including statements regarding the company’s strategy, goals, product candidates, clinical studies and financing matters. Such statements are subject to significant risks and uncertainties, including those described in our press release issued today, Thursday, March 12, 2020, and our recent SEC filings on Forms 8-K, 10-K and 10-Q.Actual results or performance may differ materially from expectations indicated by our forward-looking statements due to those risks and uncertainties. We caution you to not place undue reliance on any of the forward-looking statements, which speak only as of today.As usual, we’ll take analyst questions at the end of the call. However, we also encourage shareholders to submit questions by e-mail to [e-mail]. Time permitting, we will address these questions alongside any of those received.Joining me on the call today are

[Rob Neville:]

Well, thank you, Anne. Good afternoon, everybody, and welcome to our fourth quarter and year-end call. I do appreciate you joining us.And today, we will provide a recap of the last quarter and summarize results we just announced today from clinical studies in Molgradex, including positive data from the open-label period of IMPALA study that showed clinical outcomes was sustained or improved over a longer duration on drug.Finally, we’ll share our plans for advancing our pipeline in 2020. I am pleased to say, we ended 2019 with positive momentum. Notably, we secured additional financing by closing a private placement with total potential proceeds of up to $75 million. We strengthened our Board of Directors and executive leadership team; and announced Molgradex for aPAP, our lead development program, was granted Breakthrough Therapy Designation by the FDA.Regarding the financing, the deal was led by Bain Capital Life Sciences with participation by existing and new investors. The additional funding means we find ourselves entering 2020 in a very strong cash position and able to execute on all our corporate priorities, specifically the net proceeds from the financing should sufficiently find the second Phase 3 study for the Molgradex aPAP program, as well as other operational expenses.As always, we’re grateful for the support of our investors like yourselves, that believe in the company and our vision. In order to help us achieve this vision, we recently broadened the depth of our Board of Directors. Last December, we announced that Dr. An van Es-Johansson was appointed to our Board.An has deep expertise in orphan drug developments and an extensive background in the development of FDA and EMA approved orphan drugs. Additionally, as part of the financing, we welcome Dr. Ricky Sun, partner of Bain Capital Life Sciences to our Board. Ricky’s experience includes leadership roles within biotech companies as well as healthcare investment funds and equity research on Wall Street.Beyond the boardroom, we expanded our executive leadership team with the appointment of Badrul Chowdhury as Chief Medical Officer, sitting with me here in Austin. Badrul’s appointment comes at a pivotal time as advance Molgradex aPAP program through the next regulatory milestones.Badrul’s two decades of regulatory leadership experience as Director of the FDA’s Pulmonary, Allergy and Rheumatology division, the very division responsible for reviewing Molgradex in aPAP, where he presided over numerous drug development programs and approvals for pulmonary and orphan disease medicine.We’re glad that he is on Board as he will be instrumental in devising our regulatory strategy for development programs and guiding our interactions with regulatory bodies. For more information on Badrul’s impressive background and to hear about why he joined Savara, I encourage you to read our most recent blog post that you can find on our IR page of our website.We’re pleased to have attracted these highly experienced and then thoughtful industry leaders to Savara. Each of their respected talent complement our existing team and will no doubt prove invaluable as we capitalize on the many opportunities that lie ahead.Rounding out the events from last quarter, I’ll quickly touch on the Breakthrough Therapy Designation that the FDA granted to Molgradex for the treatment aPAP. We believe this designation, which was announced at the end of 2019 reflects the significance of Molgradex as an investigational product and is an important development as we embark on the second Phase 3 study for the program.Breakthrough Designation is granted to drug candidates, for which preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over available treatment. Additionally, this designation allows for us to have increased collaboration and more frequent dialog with the FDA, as we enter this critical development period.I will now ask the Badrul to summarize the IMPALA open-label results we announced today and share his perspective on what this all means for the Molgradex aPAP program in 2020.

[Badrul Chowdhury:]

Thank you, Rob, and hello, everyone. This is my first quarterly call with Savara. I’m happy to be here and pleased to be speaking with you. Let me take a few minutes to introduce myself. I’m a medical doctor. U.S. Board certified in internal medicine, and in allergy and immunology, and also have a PhD in immunology.I’ve spent a large portion of my career in public health, having served nearly 20 years at the FDA. During my last 16 years at the agency, I was the Director of the Division of Pulmonary, Allergy and Rheumatologic Products, Center for Drug Evaluation and Research.Just prior to joining Savara, I was a Senior Vice President at AstraZeneca and the Chief Physician Scientist in AstraZeneca’s Respiratory, Inflammation & Autoimmunity group.I’ve been asked why I left big pharma to join Savara. For me, the decision was simple. Savara focuses in developing drugs for rare respiratory diseases and that is aligned with my expertise and interest.[Earlier] [ph] of the small biotech like Savara is different than big pharma as it gives me the opportunity to be involved in many aspects of drug development and to have a broader impact across the organization. And perhaps, most importantly, Savara have an attractive pipeline with multiple programs like Molgradex in aPAP. Having had the opportunity to evaluate the IMPALA data even before joining Savara, and now having reviewed the impressive open-label data from the study, I truly believe Molgradex has the potential to transform the live of patients living with aPAP.I hope that my experience and expertise can help usher this investigational therapy through the final phase of development and gain regulatory approval. Today, I will provide you with an update of both the open-label period of the IMPALA study as well as IMPALA-X our extension study.Let’s start with the highlights for the open-label IMPALA data we just announced. This data, which demonstrated sustained or continued improvement after a longer exposure to drug, reaffirm our confidence in the aPAP program. As a reminder, IMPALA consisted of 2 treatment period

[Taneli Jouhikainen:]

Thank you, Badrul, good afternoon, everyone. Rounding out the update on Molgradex, I would like to touch on the microbiology results we announced today from OPTIMA, our 48-week exploratory, open-label, non-controlled Phase 2 study that assess Molgradex for the treatment of nontuberculous mycobacterial or NTM lung infection in patients not affected by cystic fibrosis. The study which enrolled patients with either Mycobacterium avium complex or MAC, or the more difficult-to-treat Mycobacterium abscessus was divided into 2 treatment groups, both of which received Molgradex administered once daily.Patients in both treatment groups were sputum culture positive with patients in treatment group one being on anti-mycobacterial regimen, while patients in group two were not. All patients in the study were quite sick. They suffered from chronic infection and with treatment refractory. The primary endpoint of the study was sputum culture conversion, defined as at least 3 consecutive time points of sputum samples without growth of NTM during the treatment period.Results from the ITT population showed that 5 out of 24 patients with MAC or 21% achieved a sputum culture conversion with 2 of those patients remaining culture negative through the 12-week follow-up period. Such culture conversions were not observed in patients with abscessus infection. Among the 32 patients, 14 experienced serious adverse events, 1 of which was considered potentially treatment related.The most common SAE was infective exacerbation of bronchiectasis, as one might expect. Reflecting the severity of the disease in this patient population, 3 patients died during the study with all debts unlikely related to the study drug. While the results were not quite what we had hoped for, we will continue to assess the full data set of OPTIMA to better understand the clinical outcomes. Once we have results from our other NTM study called ENCORE, which is evaluating Molgradex for the treatment of NTM in people living with CF, we will review our options and make decisions about the future of our NTM program. In the meantime, we expect to submit comprehensive data from OPTIMA at an upcoming scientific conference.In closing, I’ll provide you with a quick update of AVAIL, our pivotal Phase 3 study evaluating AeroVanc for the treatment of MRSA lung infection in people with CF. As we have guided on previous calls, the target enrollment for the study is 200, and we are nearing completion. The adult population has been fully enrolled for quite some time.And as of this month, the primary analysis population, which is patients between 6 and 21 years of age, has enrolled 133 patients out of a target of 150. So this leaves 17 to go. Given our past enrollment speed and considering the coronavirus concerns, we will only continue to enroll patients in AVAIL until the second quarter of this year.Taking into account our current enrollment over the last few quarters, we believe we will be able to enroll approximately 140 younger patients. AVAIL has a 24-week placebo-controlled period followed by an open-label period. Thus, we anticipate sharing top-line results with you early next year.Thank you. And I’ll now turn the call over to Dave, who will provide you with a financial update.

[Dave Lowrance:]

Thanks, TJ, and hello, everyone. Let me begin by updating you on our cash position following our recent financing. As of December 31, 2019, we had cash, cash equivalents, and short-term investments of approximately $122 million, which includes receipt of the first tranche from our most recent financing. The second tranche from the financing includes milestone warrants that are exercisable any time prior to the earlier 30 days following a defined clinical milestone for 2 years after the closing date of the financing.We ended the fourth quarter of 2019 with approximately $25 million outstanding in debt on our balance sheet, which, as reported in the subsequent event section of our 10-K, was refinanced with Silicon Valley Bank in January of 2020.With respect to the fourth quarter, Savara’s net loss was $31.7 million or $0.72 per share in 2019 compared with a net loss of $10.5 million or $0.29 per share of 2018. Research and development expenses were $8.7 million for the fourth quarter of 2019, compared with $9.9 million for the fourth quarter of 2018. General and administrative expenses were $3.3 million for both the fourth quarter of 2019 and 2018.And now with respect to our yearly results, our net loss for the year ended December 31, 2019, was $78.2 million or $1.95 per share, of which, $26.9 million was a noncash charge to goodwill compared with a net loss of $61.5 million or $1.85 per share for the year-ended December 31, 2018, of which $21.7 million was a noncash charge to in-process R&D.Research and development expenses were $38.8 million for the year-ended December 31, 2019 compared to $37.2 million for the year-ended December 31, 2018. The increase of $1.6 million or 4.3% was primarily due to development and regulatory costs associated with Molgradex for the treatment of aPAP, NTM, and NTM in patients with CF as well as development costs associated with the enrollment and other Phase 3 study activities of the AeroVanc program.General and administrative expenses were $13.1 million for the year-ended December 31, 2019 compared to $10.7 million for the year-ended December 31, 2018. The increase of $2.4 million or 22.8% was primarily due to commercial costs related to market research and similar activities for Molgradex as well as increases in personnel, legal, accounting, insurance, business development, and other operating activities.I’ll conclude my remarks by commenting with the recent equity financing, we believe we are well positioned to execute upon our current business plan, including our upcoming IMPALA 2 study.And now back to Rob for closing remarks.

[Rob Neville:]

Thank you, Dave, as well as Badrul and Taneli. While the last year came with considerable challenges, we closed the year on high note and are extremely encouraged by positive data from the open-label period of IMPALA. These data strengthen our belief that Molgradex could be a potential game changer in the lives of people living with aPAP.And I would like to thank all the patients and their families, and the investigators who participated in the study. We’re grateful for your commitments in helping us to advance research in this debilitating disease. With regard to Molgradex and aPAP, we move into 2020 with renewed clarity and how to execute on our priorities, focusing our attention on IMPALA 2. We look forward to keeping you update as we make progress on this front.As for NTM, we will continue to assess the outcomes of OPTIMA in combination with the results from ENCORE once they’re available so we can make a more informed decision about the future of this development program.As always, we appreciate your continued support and thank you everybody for dialing in. And let me hand the call back to Alison for analyst questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from Josh Schimmer of Evercore ISI. Please go ahead.

[Josh Schimmer:]

Good. Thanks for taking the questions and for the update. First on Molgradex for PAP, can you comment on any ongoing discussions with the FDA for potential accelerated approval based off of the IMPALA data prior to running a second Phase 3 trial. And for the NTM indication, can you talk a little bit about some of the – or potential disease features? I know in the past there were some commentary that GM-CSF may improve patient outcome such as anorexia or weight loss and fatigue.And also, could you discuss the balance of the efficacy profile that you’re seeing [reduce the risk of] [ph] pulmonary or disease exacerbations, characterize the exacerbations and their severity into balancing the risk/benefit of that, of the [private] [ph] in that indication? Thank you.

[Badrul Chowdhury:]

Can you repeat the question that you asked on aPAP? The line was not very clear, sorry.

[Josh Schimmer:]

Sorry. I was just asking about the status of FDA dialog for potential accelerated approval filing off of the IMPALA study, prior to running a second Phase 3 trial?

[Badrul Chowdhury:]

Yes. This was an ongoing discussion within the company and we also had discussions with regulatory bodies. At the end, this was a decision taken into consideration everything including business decision, our priority going forward with the second study and the strength of the buyback from the IMPALA study itself.In large part, we took into account our priorities internally with the focus on IMPALA 2, as well as with the prior precedence of approvals up there in the FDA with the type of data that we had from IMPALA. So at this point, our path is very clear, to do a definitive Phase 3 study. And use that study along with the IMPALA study to have a clear path for approval. The IMPALA study itself has shortcoming that we did not feel very strongly committed for regulatory filing.

[Rob Neville:]

And then, Josh, the second part of your question was on the NTM study. So I’ll hand over to Taneli, but we didn’t quite hear all of your questions. Did you catch – did you get it Taneli?

[Taneli Jouhikainen:]

Yeah, so Josh, thank you for your question. As I heard your question, you wanted to know little more about the non-microbiology findings and specifically made point about potential improvement of anorexia and maybe some other outcomes. And so, we have looked at some of the secondary endpoints systematically in terms of the descriptive statistics and we have no clear sign that on average we could see improvements in factors such as weight-loss or six-minute walk distance.And this being an open-label study, it is of course incredibly hard to make judgments in small patient populations for endpoints such as this in NTM. So we feel the microbiology result is the most relevant here. But we will be looking into anecdotes in the single patient cases more carefully to see if there is some pattern that isn’t obvious in the averages. And this is what we mean when we say that we’ll be still evaluating the outcomes more and putting back together eventually with the ENCORE data as well.

[Josh Schimmer:]

Got it. And then, a comment on, about exacerbations in the NTM study and [your study] [ph] and the extent to which [anybody else’s clinical benefit] [ph].

[Taneli Jouhikainen:]

So this would fall into the same category of patient anecdotes so no – like it’s very difficult in this type of a study to make a judgment as to like are we reducing exacerbation rates when we have in our control group. But that said, like I spoke about the other types of clinical outcomes, we will be looking into some cases, where perhaps regardless of the microbiology there might still be some suppression of infection and there could be some impact on exacerbation frequency. So that’s definitely a possible [act] [ph].

[Josh Schimmer:]

Got it. Thanks very much.

[Rob Neville:]

Thank you.

[Operator:]

[Operator Instructions] Our next question will come from Suji Jeong of Jefferies. Please go ahead.

[Suji Jeong:]

Hi, this is Suji. Thanks for taking my question. So I have a question about the AeroVanc Phase 3 trial. You said, you’re going to enroll about 140 patients for the primary analysis group instead of 150 originally planned. So I was wondering if they would impact the powering assumption.

[Rob Neville:]

Well, obviously, any adjustment of sample size downwards has some effect. In this case, it is a few percent point, so it is not a very big impact.

[Suji Jeong:]

Okay. And then my second question is on the IMPALA, the second IMPALA study. Could you guys comment on the interactions with the EMA so far?

[Badrul Chowdhury:]

On the second IMPALA study, our initial interaction will be with the FDA. And through that interaction we would like to come up with a design that is agreeable with the FDA. And then, we will consider to discuss that with the EMA.

[Suji Jeong:]

Okay. That’s good to know. And my last question is the number of deaths that you saw in the OPTIMA study. So I was just wondering if that 3 deaths that you saw, is that similar to – is that what you would have expected, given the severity of the disease?

[Badrul Chowdhury:]

Yeah, I mean, obviously, small study, so the numbers just reflect the severity. We have often old subjects who have chronic disease and advanced disease as well. So there is not much more to it.

[Suji Jeong:]

I see. All right, great. Thank you.

[Operator:]

Ladies and gentlemen, this will conclude our question-and-answer session. At this time, I’d like to turn the conference back over to Rob Neville for closing remarks.

[Anne Erickson:]

And actually we got one question over e-mail, so I’ll just read it out. Have you seen the Coronavirus impacting your business at all? And if so, what are you doing about it?

[Rob Neville:]

Thank you for that question. The exact impact of the outbreak obviously is a concern. We’re doing all the necessary precautions from company standpoint. The impact as you heard earlier on the AVAIL study, especially in patients living with cystic fibrosis, travel is going to be an issue. So the exact impact is unknown. And this is why we’re going to – we made the decision to close the enrollment for that study at the end of Q2 versus waiting until we get to 150.But we are monitoring the situation and implementing whatever practices are needed to protect safety of our employees, our business operations, as well as our patients. I think that’s it. Thank you, everybody. We will always be here for conferences with investors, should it be needed. Thank you. Bye-bye.

[Operator:]

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