Zosano Pharma Corporation
Q2 2018 Earnings Call Transcript

Published: 10 Aug 2018

[Operator:]

Good afternoon and thank you all for joining Zosano's Second Quarter Financial Results and Operational 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 Lizak, Senior Director and Corporate Controller. Please go ahead.

[Carol Lizak:]

Good afternoon and welcome to Zosano's second quarter financial results and operational update conference call. Today's call will focus on our financial results and highlights of the quarter ended June 30, 2018, as well as important milestones achieved shortly the 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 website approximately three hours after the call, and available through September 9, 2018. Joining me on the call today from Zosano is John Walker, Chief Executive Officer; Dr. Don Kellerman, Vice President of Clinical Development; and Dr. Pete Schmidt, Senior Director of 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 relates 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 the 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. Now let me turn our attention to our actual financial results for the second quarter and year-to-date. Zosano reported a net loss of $8.8 million or $0.75 per share on a basic and diluted basis for the second quarter and $17 million or $2.47 per share on a basic and diluted basis for the six months ended June 30, 2018. This compares to a net loss of $6.7 million or $3.44 per share on the basic and diluted basis and $13.7 million or $9.22 per share on the basic and diluted basis for the same periods in 2017. Research and development expenses were $6.5 million for the quarter and $12.3 million for the six months ended June 30, 2018, compared to $4.4 million and $9 million for the same periods in 2017. The increase in research and development expenses was primarily attributable to an increase in clinical trial costs related to the M207 long-term safety study and to support production of the registration batches which are necessary for the timely filing of our NDA by the end of 2019. General and administrative expenses were $2.3 million and $4.5 million for the three and six months ended June 30, 2018, respectively, compared to $2.2 million and $4.3 million for the same period in 2017. The increase in general and administrative expenses was due to the increased rent, franchise taxes, and other general corporate activities. As of June 30, 2018, we had cash, cash equivalents and marketable securities of $37.6 million, debt of $3.6 million and approximately 12 million common shares outstanding. In April 2018, Zosano announced the closing of a 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 $45.6 million after deducting underwriting discounts and legal and accounting expenses. Cash usage with due to our long-term safety study of M207 to support the production of the registration batches, our pre-commercialization manufacturing activities and for working capital. I will now turn the call over to John Walker, our CEO.

[John Walker:]

Thank you, Carol, and thank you all who have joined our call today. We continue to make excellent progress towards completion of our long-term open label safety trial. In the second quarter we completed enrollment with a total of 344 subjects enrolled at 31 U.S. investigators sites. This number of subject should be sufficient to ensure that at least 150 subjects complete six months of treatment and 50 subjects complete one year of treatment. Both groups having an average of two treatments per months. Today trial subjects have treated more than 2,800 migraines with study drug. Similar to the publish placebo controlled efficacy trial of the migraines treated 42% pain freedom was reported at two hours and 84% pain relief was reported at two hours. M207 continues to well tolerate and today is the date on both reported efficacy and tolerability is consistent with what has been seen over the course of development. Additionally, there have been no drug related serious adverse events in the trial. We continue our efforts to inform the clinical community of our progress and results. At the American Headache Society meeting in June, in San Francisco, we reported additional analysis from our efficacy trial as well as some new data related to receptor binding of zolmitriptan. Dr. Alan Rapoport of UCLA presented data showing as many as 44% of subjects experienced pain relief within 15 to 30 minutes post treatment with M207 and greater than 80% experienced pain relief at two hours post dose. In addition, the incidence of migraine pain recurrence to a moderate or severe intensity was significantly less in the M207 group compared to the placebo group. This profile of relatively fast onset and low migraine recurrence maybe in part explained by the receptor binding kinetics of zolmitriptan which was the topic of a presentation by Dr. Graeme Martin, one of the original developers of zolmitriptan. His presentation showed a longer duration zolmitriptan compared to sumatriptan in binding affinity to both the 5-HT1B and the 5-HT1D receptors which are the targets for triptans. In May of 2018, we announced the publication of most bothersome symptom, MBS data from the ZOTRIP pivotal study in Headache

[Operator:]

Thank you. [Operator Instructions] And our first question comes from the line of Bert Hazlett from BTIG. Your line is now open.

[Robert Hazlett:]

Thank you. Congratulations on the progress. Thank you for taking the question. The safety study, the progress seems to be good there. Could you describe anything - any more detail at all with regard to maybe the number of treatments per month that you're seeing? And then what format John would you expect the final results to be delivered? And is that something your press release or is that medical meeting information?

[John Walker:]

Thanks very much for the question Bert. I'm going to turn this over to Don Kellerman, who heads up our clinical development work to respond.

[Donald Kellerman:]

Right, so thanks for the question. We're getting to the point where a number of subjects have completed six months are first enrollers and again we did have a fairly robust enrollment, February aren't to shape. So we'll see a lot of those people complete six months in - next month October thereafter. In terms of how we'll present the results, I think probably both. We will probably announce the high level results upon completion of the trial. We certainly plan to present this in medical meetings, again I think the highlighted at this point is that we've already treated and we haven't the subject of already treated more than 2,800 migraines and we see that same level of pain freedom and pain relief that we did in the efficacy trial. Yes, we will look forward to presenting this some of these data in future meetings.

[John Walker:]

So I can add just a little bit of additional color, so as you can tell by the phase of the total number of migraines we've treated that we're averaging treatments between $150 and $170 per week at this point in time. On an average basis, it is hard to get to that because of the different timing with which patients enrolled in a subject, but generally it's just under three per month at this point in time based on how we would compute that average vote and we've actually had one subject have treated themselves more than 40 times. So we do see increased utilization on the part of patients particularly those who are within that 42% to 43% group that are achieving pain freedom under the application of M207. And as we look at moving forward the six-month data will probably be a little bit slim and off fairness in terms of what will be able to report at that time because that of course while I'd say defined on a data point from the FDA perspective of having at least 150 patients complete that part of the study. It still would be an interim analysis in regard to any conclusions one would be able to make from the data at that point in time. But we will as Don has indicated continue to present that medical meetings as this is an open label study and we are able to share at least our results on an ongoing basis.

[Robert Hazlett:]

Okay. Thank you for that color. And then just on the manufacturing side of things. Could you just - in general terms that it sounds like you're under construction with the discussions - in general terms what are the goals with the manufacturing outsourcing?

[John Walker:]

Well, as you recall, but we had originally as we moved into this year had anticipated that we would be scaling up manufacturing on our own. And in all fairness when we went out to talk to some subcontractor as you know there are component parts of the pads that being titanium does the adhesive, the ring delivery system et cetera that are made by sub-manufacturers. So we were conducting discussions with a number of folks and we decided that it was worth our time to actually chat with some larger contract manufacturers to see if this would be a program they'd be interested in taking on. And we were very pleased with the response we received from a handful of different manufacturers and through a process of competitive discussions and so, really have ended up with what we think is a very attractive alternative for self-manufacturing and that is to go with a couple of sub-contractors and a major manufacturer to provide both the applicator, the patch assembly and the other coding if the patch itself. And we anticipate that - through that we will be staying in the neighborhood of about $10 million to $15 million in capital cost that we otherwise would have incurred on our own between now and the end of 2020 and based on the current discussions that we have, we also anticipate that it will translate into a more attractive cost of goods ad sales. And so the objective here is folks to align ourselves with manufacturers who have the current capacity and infrastructure to support the logistics, QA and QC components of our manufacturing to be able to adopt our processes and to accept some of the defined equipment that we are in the process of winding up at this point in time for that manufacturer and in doing so to reduce capital cost between now in launch and as I said to hopefully put us in a better position to be able to control costs. Once we are launched in our approaching scale.

[Robert Hazlett:]

Terrific. Thank you for the additional color.

[Operator:]

Thank you. And I'm showing no further questions over the phone lines at this time. I'd like to turn the call back over to John Walker for any closing remarks.

[John Walker:]

I would just like to close by saying that we continue to be very pleased with the progress we're making in terms of executing on the development of M207. We remain on track for the milestones that we had elucidated earlier this year in regards to the registration badges being on stability within the third quarter to have our six-month portion of the trial completed early in the fourth quarter and to track for completion of the 12-month end point in the first quarter of 2019. All of that intended to lead to the filing of an NDA within the fourth quarter of 2019 and if all goes well then to anticipate a market launch by the end of 2020 or the early part of 2021. I'd also like to add that we continue to be very pleased with the commentary in the anecdotal data that we are receiving from investigators as well as patients in regard to the performance of M207 and a tolerability of M207 in the ongoing clinical studies. So we do feel that this in combination with the strength of the clinical data that we have already presented and published and the continued analysis of additional data from that pivotal study puts us in very good position to have an effective launch and to be able to attract a very decent share of the triptan market that currently focused on treating acute migraines. So with that, I'll end my comments and thank everyone for their participation.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.