Zogenix, Inc.
Q2 2018 Earnings Call Transcript

Published: 7 Aug 2018

[Operator:]

Good day, and welcome to the Zogenix Second Quarter 2018 Financial Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Brian Ritchie of LifeSci Advisors. Please go ahead, sir.

[Brian Ritchie:]

Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Chief Executive Officer, Dr. Stephen Farr; and Chief Financial Officer, Mike Smith. In addition, Dr. Gail Farfel, Zogenix's Chief Development Officer, will also be available during the Q&A session. This afternoon, Zogenix issued a news release announcing financial results and providing a business update for the second quarter ended June 30, 2018. Please note that certain information discussed on the call today is covered under the safe harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Zogenix management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These Forward-Looking Statements are qualified by the statements contained in Zogenix's news releases and SEC filings, including in the annual report on Form 10-K and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, August 6, 2018. Zogenix undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. Now, I would like to turn the call over to Steve. Steve.

[Stephen Farr:]

Thank you, Brian, and good afternoon to everyone who is joining us on today's call. This is obviously an exciting time for Zogenix, we were of course thrilled to recently announced positive top-line data from our second global Phase III trial of ZX008 Study 1504 for the treatment of seizures associated with Dravet syndrome in children and young adults. As a reminder, the clinical portion of Study 1504 was a randomized double-blind placebo controlled power group trial to establish the efficacy, safety and tolerability on ZX008 as a adjunctive antiepileptic therapy to a stiripentol regimen. The Stiripentol is approved treatment seizures in Dravet syndrome in Europe, Canada, Australia and Japan and it's used in United States is committed to be expanded access regulations. Study 1504 met the primary efficacy endpoints and all key secondary objectives with high statistical significance. We view this study as a resulting success that collaborates the tiny positive efficacy data reporting from study one, our first pivotal Phase III trial of ZX008 in Dravet syndrome. We discussed the details of the Study 1504 top-line results less than one month ago. So I won't reiterate them today other to remind you that the study achieved its primary objective and showing the ZX008 was superior to the placebo and controlling seizures when outage was with steropencil regiment. This was evaluated based on the change in the meaning frequency of consulted seizures between and the treatment periods. Patients receiving 8.5 milligram per kilogram per day does of ZX008 and maximum 20 milligrams daily, achieve a 54.7% greater reduction in - monthly consulted seizers compared to placebo which was highly statistically significant with PE less than 0.001. Looking ahead, our two completed positive Pivotal Phase III trials of the ZX008 altogether provide the basis for regulating submissions of both United States and Europe with data that reflect global clinical practice and moreover, meet the requirements for open drug exclusivity in Europe. We are now focused on preparing the NDA for United States and the MAA for Europe, which we anticipate will be significant by the end of the year. I would like to remind you that the ZX008 development programs at Dravet syndrome has been granted FDA breakthrough therapy designation. And we have now completed the studies required for the NDA and MAA submissions. In addition, we have an agreed upon time line with the FDA for a rolling NDA submission, an intent to submit completed modules of the NDA beginning in Q4. Also on the regulatory front following a successful meeting in June with the pharmaceuticals and medical device agency in Japan, we now have a clear understanding of the regulatory path for submission of a JNDA of both Dravet syndrome and our second solved indications to ZX008 Lennox-Gastaut syndrome or LGS. We are proceeding with clinical trial tried applications in Japan and anticipate in rolling both Dravet syndrome and LGS patients as soon as they are approved. As a reminder, patients enrolled in the core Dravet syndrome clinical studies who are eligible to continue treatment with ZX008 may roll over into our open label extension trial Study 1503. We continue to see very robust participation in the open label extension trial. In fact, the vast majority of patients enrolled in Phase III Dravet by randomized trials have continued into this study. As of the end of July over 300 patients have entered the open label extension trial with 90% of these patients remaining in the study today. Of note, two-thirds of the patients have now been open label treatment for at least six months with 100 patients now exceeding one year. Cardiac safety monitoring in the study is continuing via echocardiography and EGC every three months. To-date there has been no evidence of cardiac valve velocity in any patient and on subject has developed primary hypertension. In support of the planned NDA and MAA submissions, formal interim analysis of the safety and long-term effectiveness in Study 1503 is being conducted and we look forward to sharing these data soon future medical meeting. Now turning to Study 1601, our ongoing global Phase III clinical program for the ZX008 LGS which as have I said in the past, is indication with a patient population approximately three to four times larger than the population of patients with Dravet syndrome. This double-blind placebo controlled three-arm study is targeting a total of 225 randomized children, adult up to the age of 55. Recruitment in the United States and Canada continues to progress well with 22 active sites and we recently activated our first site outside of North America. We will be considering to add sites in Europe and Australia to this global study, as we advance through the rest of the year. As a reminder, 2018 will be a year of enrollment for this study. As such, we do not anticipate top-line data from this study before 2019, but we will provide further guidance on timing for this study top-line data towards the end of the year. In addition to the ongoing investigations of the ZX008 in refractory epilepsy, your team continues to examine the psychological and social economic impact, all epileptic and Encephalopathy like Dravet Syndrome, both in the United States and in Europe. Data from a number of these studies, will be presented at the European Congress on Epileptology taking place in Vienna, Austria, August of 26th to the 30th. Finally, I would like to formally welcome to Zogenix, our new global Chief Commercial officer, Ashish Sagrolikar. Ashish has over 25 years of global pharmaceutical sales, marketing and operation experience. Prior to joining Zogenix, he spent the last 16 years leading commercial strategies for rare disease and specialty pharmaceutical products, most recently at GlaxoSmithKline and Baxter International. Ashish’s appointment is an important aspect of our continued efforts to build the Company’s commercial operations in preparation for potential launches in the United States and Europe. It also reflect our ongoing transformation towards becoming a fully integrated bio-pharmaceutical company. We look forward to Ashish’s participation on future calls, as we continue to build out our commercial plans. With that, I would like now to turn the call over to Mike, for his review of the quarterly financials. Mike.

[Michael Smith:]

Thank you, Steve. I will now review our financial results for the three months ended June 30, 2018 as compared to the corresponding period, in the prior year. Beginning with a reminder, Due to the wind-down of Sumavel DosePro operations in September 2017, we currently are not involved in production or sales of any commercial products at this time. And as such, the company recorded no revenue for the three months ended June 30, 2018 which compares to a total revenue of $7.1 million in the second quarter ended June 30, 2017. Research and development expenses for the second quarter ended June 30, 2018 totaled $26.7 million up from $14.9 million in the second quarter ended June 30, in the prior year. As the company expand clinical trial activities in both the U.S. and EU, related to our ongoing Phase III development program of ZX008 in Dravet Syndrome and LGS. Selling, general and administrative expenses for the second quarter totaled $8.6 million compared with $5.5 million in the second quarter ended June 30, 2017. We reported a total net loss for the second quarter ended June 30, 2018, of $29 million or a net loss of $0.83 per share compared with a net loss of $23 million or a net loss of $0.93 per share in the second quarter ended June 30, 2017. For the six months period, ended in June, the Company recorded no revenue. This compares with total revenue of $9.8 million in the six months period ended June 30, 2017, consisting entirely of contract manufacturing revenue for Sumavel Dosepro. R&D expenses for the six months period totaled $49.7 million up from $28.2 million in the six month ended June 30, 2017. And again reflecting the aforementioned increase activity in our Phase III programs for Dravet syndrome and LGS. SG&A expenses for the six month period totaled 60.6 million and this compares its 12.1 million in the six-month ended June 30 in the prior year. We reported a total net loss for the six months ended June 30, 2018 to $59.2 million or net loss of $1.59 per share compared to a total net loss of 44.3 million or $1.79 per share in the six months ended June 30, 2017. We ended the quarter in cash totaling $272.1 million as compared to $293.5 million at the start of 2018. During the three months ended June 30, 2018, the Company issued total 740, 417 shares of its common stock under its existing ATM offering program for net proceeds of approximately $30.3 million. We now have reported results from two pivotal Phase III studies of the ZX008 that demonstrates high going clinically significant efficacy in controlling debilitating seizures in children and young adults of today. As we enter the second half of 2018, we are focused on preparing a regulatory approvals commission for ZX008 in Dravet syndrome continuing to enroll patients in our second Phase III program in LGS and ramping our commercial preparations for the U.S. and EU, including bringing an experience and successful global and rare disease commercial leadership. We are very much looking forward to upcoming milestones in 2018 and beyond as we transform Zogenix into its next phase. I will now turn the call over to the operator to begin the Q&A session. Operator would you please provide instruction.

[Operator:]

Thank you. [Operator Instructions] And we will take our first question from Annabel Samimy with Stifel.

[Annabel Samimy:]

Hi guys thanks for taking my questions. Actually I was wondering first if you can give us a sense of the overlap between the Dravet syndrome sites and LGS sites that are conducting a Phase III for LGS and to what extent is this going to facilitate or cannot facilitate enrolment and now that you had two very successful Phase III trial, and you an LGS trial on going, do you have a more explicit expansion strategy to the broader group of development on epileptic encephalopathies, since I guess the group is called now and I have another follow-up. Thanks.

[Stephen Farr:]

Hi Annabel, thanks for your questions. I will take the second question and then ask Gail to talk to you about our experience with sites that we selected for LGS. So, as I have mentioned before, we are clearly focusing in on former developments in Dravet as well as Lennox-Gastaut syndrome. But we do have an interest in potentially looking at the utility of a drug in other epileptic and Encephalopathy. We are electing to do that in beginning through investing the shady trials that we are supporting, but are really sponsored by physicians and as I have said [Technical Difficulty] syndrome and we will continue to look at others as well as they become of interest to investigators. So it’s actually the way that we are approaching, boarding its utility outside of LGS and Dravet. And I will ask Gail to talk about the facts.

[Gail Farfel:]

Hello Annabel. Answering your first question about the similarity of seizure types across BS and LGS, they do both has a convulsive seizure types, both having GTC, generalized chronic as well as the tonic and chronic. And also what we call a tonic, atonic or the classic drop seizure, the LGS patients have a predominance of the drop seizure, but they also have GTC which are counting for the primary and intraday, it was predominantly GTC. But they also had drop seizure types. So we do believe that this rings positively toward seeing a positive outcome in LGS, but of course, we have got a long way to go in enrollments and we will be keeping you all informed as we go along.

[Annabel Samimy:]

I was asking more about the sites, if there are going to kind of overlap between the GS sites and LGS sites that would facilitate on-boarding of these different centers? Facilitate enrollment.

[Company Representative:]

Yes. [Technical Difficulty] U.S. and Canada and most of our sites in that country who had previously negotiated contracts with us on board for LGS. The same is true in Europe and Australia, the Contracting and the Ethics Committee approvals take a little bit longer, but we do have a quite a number of sites that are participating in the LGS program to move it up for Dravet.

[Annabel Samimy:]

Okay. And if I could just ask a question to your new Chief Commercial Officer. I guess what I'm wondering is right now and maybe not necessarily to ask you this right now maybe it's more - scientific thing, but there is a large disconnect in the level of education between your products confirming dialogues right now and just awareness of it. So what is going to be the educational strategy at the upcoming medical conferences? What are you planning and doing to change perception around the drugs? Obviously you have very strong data, but it seems like that have dialogues still seems have taken most the dialogue amongst physicians. So maybe you can help us understand your educational strategy going forward?

[Stephen Farr:]

Hi Annabel this is Steve. As Asish is not with us today. He is on the road and doing work for us in order to see what you are saying, but actually about the activity, right. But we now have really compelling data. So I can't assure you that we will be doing everything to ensure that everyone is educated about the safety and efficacy of the product. And we actually have seen, I think a lot of encouraging signs in terms of physicians realizing where this drug potentially fits into that treatments of Dravet syndrome and potentially LGS. So more to come.

[Annabel Samimy:]

Okay, great. Thank you so much. Congratulations.

[Stephen Farr:]

Thank you.

[Michael Smith:]

Thank you.

[Operator:]

We will go next to Geoffrey Borgos with Leerink.

[Geoffrey Borgos:]

Thanks very much, I appreciate to taking the question. Two questions if I may. First on age, could you comment or describe the distribution of age in the clinical trial cohort? And what you could say about the responses by different age cohort? And then talk about the label that you expect in terms of age and how that is likely to cover all or is it some portion of the Dravet population? And then Steve, could you just talk about your latest thinking about IP and the duration of the market exclusivity that you would expect, whether you have any strategies based on the data to modify or extend just the standard pattern for exclusivity grants? Thank you.

[Stephen Farr:]

Thank you Geoffrey, I will ask Gail to take your first part of your question, I will pick-up on the IP for that?

[Gail Farfel:]

Sure, with regards to age, we have reported the age distribution in study 1, where children were enrolled between two and 18 years of age, and approximately 25% of the cohort was less than six years of age and so at this point we have not yet discussed with FDA and EMA how we will structure the label, whether there would be an upper limit or, whether it would have an open-ended upper limit as we saw with the GW in April, but we will have those conversations at the appropriate time.

[Stephen Farr:]

Okay and on the IP question, Geoffrey just a comment from me that, we are obviously exploring IP particularly around method of use or method of treatment in Dravet syndrome as well as other applicant philosophy. We have already four issues in U.S. [Technical Difficulty] treatments of seizures associate to Dravet syndrome and we think that as something that will be important particularly as we work on the ultimate label for the product with the FDA. So our primary source of exclusivity beyond those syndrome exclusivity, we think will be through method of use patterns and we are continuing to submit new IP as we are generating data in our clinical trials. So we have don’t have the complete picture on that right now. The patents that has been awarded go out into beyond 2030, 2033 and we will continue to prosecute as I said lower IP in that area. We have two other patent families, one around the distribution system, as well as the family around the method of synthesis of the drugs substance, but no allow claims in those families as of yet.

[Geoffrey Borgos:]

Great. thanks very much.

[Stephen Farr:]

Thank you.

[Operator:]

[Operator instructions]. We will go next to Jason Butler with JMP Securities.

[Jason Butler:]

Hi, thanks for taking the questions. A couple from me as well. First, can you just give us some more color on the times of analysis or information that we can expect you to present from the Echocardiogram dataset in the long-term safety study, as interim, you have always report a lot about there is not being any clinical evidence of valvulopathy but is there any more detail in the echos that we can expect to see? And then just second. Anymore granularity on when we might see top-line results or full results from 1504 presented at the medical meeting. Do you have a late break or abstract submitted for example since the entering August or is a little later date issued for data presentation? Thanks.

[Stephen Farr:]

Yes, Jason I think we should look for the later date than the ECE Conference Indiana. This is clearly a very important data for us and moving forward with the best presentation at a leading conference are important. So we I think you should assume that we are American Epilepsy Society meeting for several presentation around Study 1504, some data from Study 1. And just getting to your first question, an analysis of the Echocardiographic data that we are collecting in the open label study. So, yes you should expect American Epilepsy Society meeting to be where we present most of that data

[Jason Butler:]

Okay, great. Thanks.

[Stephen Farr:]

Thanks.

[Operator:]

And at this time, we have no additional question. I like to call back over to Dr. Farr, for any additional or closing remarks.

[Stephen Farr:]

Thank you operator and thank you for joining us today on the call. Really great place now. We have compelling data from two pivotal trials in Dravet syndrome. We have an ongoing Phase III trial in LGS, which is enrolling well, in the United States and we are looking forward to gain insights in the rest of the world that are running as quick as we can in the second half of this year. So we obviously look forward to keep you informed as we go through this year. I will say our team is focused internally on getting regulatory submissions in place both the NDA was as the MAA and [Technical Difficulty] So thanks again for joining us today and enjoy the rest of your day.

[Operator:]

Ladies, Gentlemen, once again, that does conclude today's call. We do appreciate everyone's participation. You may now disconnect.