Zosano Pharma Corporation
Q1 2018 Earnings Call Transcript

Published: 16 May 2018

[Operator:]

Good afternoon. And thank you all for joining Zosano’s First Quarter Financial Results and Operating Update Conference Call. At this time, all participants are in a listen-only mode. Following management’s remarks, we will hold a brief question-and-answer session and at that time the lines will be opened for you. I would now like to turn the call over to Ms. Carol Isaac [ph], Senior Director and Corporate Controller. Please go ahead.

[Unidentified Company Representative:]

Good afternoon and welcome to Zosano’s first quarter financial results and operational update conference call. Today's call will focus on our financial results and highlights of the quarter ended March 31, 2018, as well as important milestones achieved shortly after our quarter close. Copies of our press release are available on the Investor Relations, press release section of our website at www.zosanopharma.com. Today's call is being recorded and a replay of our webcast will be available on our Web site approximately three hours after the call, and available through June 15, 2018. Joining me on the call today from Zosano is John Walker, Chief Executive Officer and Hayley Lewis, our Senior Vice President of Operations; and Dr. Pete Schmidt, Senior Director Medical Affairs. Before we begin, let me remind you that today's call may include forward-looking statements regarding management's expectations and beliefs and future events. These statements are subject to risks and uncertainties that are difficult to predict and actual outcomes may differ materially. Forward-looking statements give our current expectations and projections relating to the anticipated progress of M207 and the projected timelines for our research and development activities, our ability to obtain FDA approval of M207, our expectations regarding relative benefits of our product candidates versus competitive therapies, our business, partnering and capitalization strategy, our expectations regarding potential markets or market sizes, our expectations regarding the therapeutic and commercial potential of M207, and the Company's future financial results. These forward-looking statements do not constitute guarantees of future performance. These forward-looking statements involve assumptions that may never materialize or may prove to be incorrect. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements. We assume no obligation to update or revise any forward-looking statements contained herein to reflect any changes in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based, except as required by law. For a detailed description of the risks and uncertainties regarding our business, please refer to the Risk Factors section of our Form 10-K filed with the SEC on March 12, 2018. I will now turn the call over to John.

[John Walker:]

Thank you, Carol, and thank you to those joining our call today. As noted in our 10-Q, Zosano reported a net loss for the first quarter of 2018 of $8.2 million or $4.16 per share on a basic and diluted basis. This compares with a net loss of $7 million or $6.89 per share on a basic and diluted basis for the same quarter in 2017. Research and development expenses for the first quarter of 2018 were $5.8 million this compares with $4.6 million for the same quarter in 2017. The increase was primarily attributable to an increase in clinical trial costs for the long term safety study, in addition, we have been scaling up manufacturing and keeping with our planned NDA filing and required CMC support. General and administrative expenses for the first quarter of 2018 were $2.3 million compared with $2.1 million for the same quarter in 2017. This increase was primarily attributable to legal as we had special shareholders meeting in January as well as some increases in tax expenses. As of March 31, 2018 we had cash and cash equivalents of $3.5 million debt of $5.2 million and approximately $2 million shares of common stock outstanding. In April 2018, Zosano announced the completion of a public offering of common stock that generated aggregate net proceeds of $45.7 million, and as noted in our 10-Q the pro forma cash balance at quarter end giving credit to capital raise would equal $49.2 million. In addition to our financial performance, we are please whether other accomplishments in the first quarter. In March of 2018, Zosano announced that the notice of allowance of our patent application titled Method of Rapidly Achieving Therapeutic Concentrations of Triptans for Treatment of Migraines has resulted in the issuance of U.S. patent number at 918,932. This provides protection through 2037 for M207 in treating both migraines as well as cluster headaches. the latter is an additional indication for M207 that the company may elect to pursue through additional clinical studies depending on cash availability and our success in meeting current timelines for our initial indication to treat migraines. in March of 2018, Zosano announced that the 100th patient was enrolled and received M207 study drug in our long-term safety study for the treatment of migraine. I am very pleased to report that in the following six-week period, we now have over 250 patients, who are qualified and who have received study drug. this is an average of 25 new subjects per week since we reached our initial goal of 100. Study patients have now treated over 1000 migraines with no reported serious adverse events and importantly, pain freedom scores as reported by the subjects are at 42% at two hours and pain relief at 85% at two hours post dosing. Both of these observed results compare favorably to our pivotal data as reported in Cephalagia in November 2017 and as presented at both the International Headache Conference and American Headache Society meetings last year and most recently, at the American Academy of Neurology meeting in April. Also in April, Zosano announced the closing of the registered public offering of 10 million shares of its common stock at a price of $5 per share. the net proceeds to Zosano from this offering were $45.7 million after deducting underwriting discounts, commissions and estimated offering expenses payable by the company. We have started the manufacture of our registration batches and plan to have these on stability in the third quarter of this year. this is in keeping with one of our stated goals for 2018 as our 12-month stability data is a gating item for our NDA filing. That concludes our prepared remarks and operator; I’d now like to turn it over for Q&As.

[Operator:]

[Operator Instructions] Our first question comes from the line of Bert Hazlett from BTIG, your question please.

[Bert Hazlett:]

Yes. I’ve got one or two. John, thank you for the update. Could you remind us of any upcoming data presentations or publications that you’re pursuing with M207?

[John Walker:]

Yes. Bert, I’ll ask Dr. Peter Smith, who is the Head of Medical Affairs Group to answer that.

[Peter Smith:]

Hi, good afternoon. We have upcoming article to be published in headache, the journal of the American Headache Society examining our use of the most bothersome symptom endpoint. We expect that to hit process every any day now. And then upcoming at the AHS meeting in San Francisco we'll have two posters as well. The posters will…

[Bert Hazlett:]

Terrific.

[Peter Smith:]

Sorry. Do you want details on the posters as well? I can give you some.

[Bert Hazlett:]

That would be great, thank you.

[Peter Smith:]

So one poster is going to focus on the receptor kinetics of zolmitriptan is compared to sumatriptan. We've gone some interesting differences there on a pre-clinical study. And the other one will focus on specifically the pain relief and sustain pain freedom we found in our pivotal trial.

[Bert Hazlett:]

Okay. Thank you for that additional color.

[Peter Smith:]

Sure.

[Bert Hazlett:]

Then with regard to the some of the other efforts that you mention John, could you describe some of the ongoing work with regard to manufacturing that you've been engaged in and maybe what are any guiding items there?

[John Walker:]

Yes. I'm going to ask Hayley Lewis who is our Senior Vice President of Operations to answer that, just give you a general update on where we are regard to the registration back to this as well as some of our prospective interest in terms of continuing the manufacturing process with the different types of manufacture for subassemblies and so on.

[Hayley Lewis:]

Hi. Yes. So we've been able to develop operations to the point that we were able to manufacture registration batches and they form the basis of an NDA. We will then take that same process and scattered that for our proposed commercial manufacturing. And there are stable phases in our commercial process and our registration process that you've been able to identify potential manufactures that you could take that on at a largest scale for us should be determined indeed for that.

[Bert Hazlett:]

Okay, thank you very much. And then third, could you describe John maybe additional efforts underway to engage partners – potential additional partners with regard to the ADAM technology more broadly.

[John Walker:]

Yes. Thanks for that. As I indicated when we were visiting with investors during our road show, my belief that we have really a significant opportunity to use the ADAM platform in a number of other indications and with other molecules. And so one of the efforts we have underway at this point in time is to identify new head of business development, someone who has a little bit more of a scientific background, as well as the experience in doing a variety of different types of deals. And the thrust there will be several fold. First we will be engaged in speaking with companies, where we believe that our technology is particularly applicable for improving clinical outcomes. And a good example of that would be the data that has been generated by our company, as well as some others involved in microneedle research in regard to vaccines, a very clear evidence that you get an increased antibody titer with the delivery of the vaccine antigen through the dermis, due in large measure to the number of antigen presenting cells within the dermis. In addition to that, we have been approached by several companies regarding placing their proprietary molecule on this platform for preferential delivery. We want to explore those types of opportunities more fully, as we do believe that that could represent an additional portfolio extension for Zosano. And lastly, we do intend to take much more of an outreach in meeting with other companies in regard to life cycle extension by using this delivery methodology as a way to both enhanced clinical outcomes and in addition to that provide additional patent protection for our partner in the market. So we have a number of areas what that we feel we can profitably pursue and we clearly believe that one of the important strategies for the company is to pursue these opportunities as a way to develop but non-dilutive sources of capital for the company. So that we’re not totally reliant on equity capital, it’s a way to finance our business and operations.

[Bert Hazlett:]

Okay. Thank you for that. I will look forward to that development. And I guess just one more brief one on 207 specifically. As you see the long-term safety data roll in and with the pain relief scores and the pain freedom scores matching or even exceeding what you saw in the pivotal study. Has that reinforced or augmented or altered the positioning of 207 – the potential positioning in the market as you see it in terms of the migraine – migraine market itself.

[John Walker:]

I don’t feel that it’s going to alter our perspective only further solidify our view that the way for us to address this market as a fully developed and the best outcome producing triptan. I’ve made the comment previously that I believe our data suggest that this is the “best triptan” and we know that triptans continue to represent the largest segment of the current migraine market. And we believe that with our performance being substantially better than others that have reported to date they will find a very good position from that standpoint. And I would further comment further in response to your question, I was going to say this for my closing comment. That we certainly believe that the strength of the clinical data which is how we do believe we can best address the market. That we believe M207 if approved represents a multiply $100 million per year opportunity in the market for treating migraines. Our therapeutic gain, in other words the difference between the placebo-control group and the active, which is 27.2% for M207 in pain freedom at two hours and of 26% therapeutic gain in freedom for most bothersome symptoms at two hours are the best currently reported by any program or product, which is use these end points per the new FDA guideline in their clinical studies. So we certainly believe that we compete very favorably with new mechanisms of vaccine that are being developed. And importantly, we know that we deliver for those drugs that were approved previously via pain relief scores. We know that we deliver pain relief scores that are very attractive, in regard to the comparison with at least the data that is in the labels of other forms of Triptan delivery.

[Bert Hazlett:]

Well, terrific. Thank you for the comments and now we look forward to more progress. Thank you.

[John Walker:]

Thanks very much.

[Operator:]

Thank you. [Operator Instructions] And this does conclude the question-and-answer session. I'd like to have the program back to management for any further remarks.

[John Walker:]

Great. Thank you. Well, I already provided some of the comments, I had intended to include that related really to the therapeutic gain that we do see and how that compares to others, that have reported data under those FDA guidelines. So from our perspective, Zosano continues to execute extremely well in our drive to file an NDA for M207 in the fourth quarter of 2019. We are also focused on our efforts to continue educating both the clinical and financial markets on the compelling clinical data of M207 and its ability to offer relief to migraine sufferers, if approved by the FDA. So we appreciate again your participation in this call and we hope you will continue to follow our progress along with M207 and recognize the significant upside opportunity that our clinical data suggest as in front of us, in regard to continued awareness in the financial and critical markets as to the strength of the clinical outcomes in M207 can produce. Thank you very much.

[Operator:]

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Good day.