Zosano Pharma Corporation
Q1 2016 Earnings Call Transcript

Published: 13 May 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the Zosano Pharma First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Patti Bank of Westwicke Partners. Please go ahead.

[Patti Bank:]

Thank you all for participating in today's call. Joining me are Konstantinos Alataris, President and Chief Executive Officer; Don Kellerman, Senior VP, Clinical Development and Medical Affairs; and Winnie Tso, Chief Financial Officer. Earlier today Zosano released financial results for the quarter ended March 31, 2016. Copy of that press release is available on the Company's Web-site. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the federal securities laws which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical fact should be deemed to be forward-looking statements. All forward-looking statements including, without limitation, our examination of historical operating trends and our future financial expectations, which includes full-year 2016 guidance, are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please see our filings with the Securities and Exchange Commission. Zosano disclaims any intention or obligation, except as required by laws, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 12, 2016. Now, I'll turn the call over to Dr. Konstantinos Alataris, the Company's President and Chief Executive Officer. Konstantinos?

[Konstantinos Alataris:]

Thanks Patti. Good afternoon and thanks for joining us. We are making progress towards initiation of our ZP-Triptan pivotal efficacy study. We plan to enroll a total of 360 subjects who experience two to eight migraines per month. Multiple doses will be tested as subjects will be randomized to either of the four treatment arms; ZP-Triptan 1 mg, 1.9 mg, 3.8 mg or placebo. Each migraine sufferer will have to treat a single qualifying migraine. The primary efficacy analysis will be the proportion of subjects with pain freedom at two hours post dose and the proportion of subjects with most bothersome symptom freedom at two hours post dose. Secondary endpoints include pain relief at 15 minutes, 30 minutes and two hours, sustained pain freedom for 24 and 48 hours, photophobia free at two hours, phonophobia free at two hours, and nausea free at two hours, among others. At this time, more than half of the planned 35 U.S. clinical sites have been confirmed. After consultation with the FDA, we believe this single pivotal efficacy study in addition to the required safety study will be sufficient to enable us to seek FDA approval under the 505(b)(2) pathway. The safety study is anticipated to follow the completion of the efficacy study, once the efficacious and well-tolerated dose has been selected. The patient population will be similar to the efficacy study, with 150 subjects completing treatment for six months and 50 subjects for 12 months, per the FDA guidance. This will be an open-label design with visits at 1, 3, 6, 9 and 12 months to record adverse events. We plan on having approximately 20 sites in the U.S. to achieve the enrollment goals. The primary endpoints will be adverse events and local tolerability during repeated administration. Our goal is to complete the pivotal efficacy study by Q1 2017, and we believe based on the current clinical plan, that we have kept our resources adequate to accomplish this. We would require additional funding to initiate the subsequent safety study. We continue our outreach to key opinion leaders as we look to constitute our Advisory Board. During our discussions with our migraine experts, the need for a new setup that overcomes the challenges of current treatment options has been reinforced. Slow onset of action, inconsistent response due to gastric stasis, limited utility when taken late in migraine or in the presence of nausea and vomiting are some key limitations of the existing therapies frequently mentioned. As an example, orally administrated migraine drugs, which are the most frequently used by patients, result in only 9% to 12% of patients experiencing pain relief at 30 minutes. Market estimates show that approximately 30 million patients in the U.S. suffer from migraines annually, characterized by throbbing pain and often accompanied by sensitivity to light, sensitivity to sound, nausea and vomiting. According to published estimates, roughly 19 million patients are diagnosed and just under 14 million patients are being treated. Triptans are the most frequently prescribed migraine-specific medication and account for the majority of scrips. ZP-Triptan could be uniquely positioned within the migraine market as it has the potential to provide rapid pain relief to migraine patients. Our clinical efforts aim to validate that a differentiated therapeutic effect can be achieved by enabling rapid absorption of a proven drug with known efficacy through a novel delivery mechanism. Earlier this week, we announced that John Walker has been named as our new Chairman of the Board. We are honored to have John joining us at such a transformative time. John's 40 years of experience in the life science industry as well as his experience serving as Chairman and CEO of a number of development and commercial stage companies will provide valuable perspective to our operational and strategic initiatives. I am happy to welcome John to the Company. I will now pass the call over to Winnie Tso, our Chief Financial Officer, to provide you with a more in-depth review of our financial results. Winnie?

[Winnie Tso:]

Thanks Konstantinos. Zosano reported a net loss for the first quarter of 2016 of $8.1 million, or $0.68 per share on a basic and diluted basis, compared with a net loss of $4.6 million, or $0.47 per share on a basic and diluted basis, for the same quarter in 2015. The Company had no revenue for the first quarter of 2016, compared with $200,000 of revenue for the same quarter in 2015. The decrease was due to the completion of work under our previous collaboration with Novo Nordisk. Research and development expenses for the first quarter of 2016 were $5.6 million, compared with $3.1 million for the same quarter in 2015. The increase was primarily driven by an increase in manufacturing personnel cost in connection with the production of clinical trial materials, ZP-Triptan's efficacy study start-up preparation and certain preclinical studies related to the submission of ZP-Triptan's IND application, and certain one-time termination benefits provided to former employees in connection with a workforce reduction program associated with our strategic realignment. General and administrative expenses for the first quarter of 2016 were $2.2 million, compared with $1.3 million for the same quarter in 2015. The increase was primarily due to an increase in compliance, infrastructure and insurance expenses to support our operations as a public company and certain post-employment benefits provided to our former CEO. As of March 31, 2016, we had cash, cash equivalents and marketable securities of $28.4 million, debt of $15.3 million, and 12 million common shares outstanding. This concludes my review of the first quarter 2016 results, and I will pass the call back to Dr. Alataris for some closing remarks. Konstantinos?

[Konstantinos Alataris:]

Thanks Winnie. Our preparations in order to initiate our ZP-Triptan pivotal efficacy study are proceeding well. Our goal to complete the pivotal efficacy study by Q1 2017 remains on track. We are also working to finalize our Advisory Board, and we will have the poster presenting the Phase 1 clinical data at the American Headache Society Annual Meeting, which is being held in San Diego from June 9 to June 12. With that, I'll turn it over to the operator so we can take questions. Operator?

[Operator:]

[Operator Instructions] Our first question comes from the line of Scott Henry from Roth Capital. Your question please?

[Scott Henry:]

I just wanted to dig in a little bit on the Triptan study. I guess first, when we do expect your first patient in?

[Konstantinos Alataris:]

I have Don Kellerman with us, our VP of Clinical and Medical Affairs, who will be able to give you a lot more color into it. We haven't announced the date of first patient yet, but we are more than halfway there as far as the preparations in order to enable us to start [indiscernible]. Don, do you want to talk a little bit about the study? It has been published also at clinicaltrials.com.

[Donald Kellerman:]

Right. Thank you, Konstantinos. That's probably the best site to look for the details, because as you know, we are required to register them generally prior to starting enrollment. We have talked to a lot of sites within the U.S., we have engaged a CRO to work with us on the study. And I think you see the design, the endpoints, as Konstantinos mentioned, are very standard, a lot of it is prescribed by the FDA guidance that came out in the fall of 2014. So it's a standard single-dose efficacy trial with the primary endpoints that he mentioned, proportion of patients with pain freedom at two hours, and the new thing that we've gone to is the most bothersome symptom freedom at two hours. As opposed to having to win on all four endpoints, we've now gone to co-primary endpoints.

[Scott Henry:]

Okay. And I want to understand how the safety study worked from the standpoint – can a patient continue directly into the safety study or do you have to re-recruit that trial?

[Donald Kellerman:]

I think the current plans are to re-recruit the trial. The nice thing about migraine is it's a very common disorder. So in the past, we've not had a hard time finding subjects with migraine. For the efficacy study, just to make it a reasonable period of time, they have to have two to eight migraines per month, and that way they're not chronic migraine patients for the safety study. We have really settled on the exact entry criteria, but it could be slightly more liberal, even for that study.

[Scott Henry:]

Okay. How long would it just typically take to recruit 150 patient migraine study, is that something you could do in three months, or just trying to get a sense of the timeline here?

[Donald Kellerman:]

Again, it's partially the setup of doing the trial and…

[Konstantinos Alataris:]

It's probably a reasonable estimate. You know, Scott, it's always about recruitment and how quickly you can enroll the study. The good thing here is that there is an ongoing relationship with 35 sites as part of the pivotal efficacy study. So we expect approximately 20 will continue. So there is a lot of leverage to that fact, but hopefully it will allow us to be in the whole [indiscernible] enrolment times [indiscernible].

[Scott Henry:]

Okay, great. And then just the final question, so we should expect G&A to decline after this quarter, seems like there were some one-time events? As well R&D, how representative is Q1 to the rest of the year?

[Konstantinos Alataris:]

We are not breaking it down by quarter, because some of it is timing and now we have the study ongoing. But what we have said is that we do have the funds in order to ensure we complete the pivotal efficacy study.

[Scott Henry:]

Okay, great. Thank you for taking the questions.

[Operator:]

Our next question comes from the line of Matt Kaplan from Ladenburg Thalmann. Your question please?

[Matt Kaplan:]

Just a follow-up on some of Scott's questions, in terms of the design of the pivotal study, can you talk a little bit about the powering assumptions that you have with respect to the primary endpoint?

[Donald Kellerman:]

Again, if you look at the pain free – there are a lot of published trials with zolmitriptan and many of them reported the pain free number. So it's based on sort of an aggregate of looking at the published literature and what's been reported for pain freedom in those studies. Again, trials used to be a lot larger because of the requirement to win on all four endpoints, particularly nausea-free. And so we'd find that the trials were primarily powered to win on nausea-free because 30% to 40% of patients would already be nausea free at baseline. So we had to account for that. So that's I think why this one might be slightly smaller, but we power what we think is an adequate size based on available literature.

[Matt Kaplan:]

So will you be 80% powered, 90% powered?

[Donald Kellerman:]

I don't think we have announced.

[Matt Kaplan:]

You haven't announced, okay. And just a question in terms of looking at the clinicaltrials.gov Web-site, there is a portion of this where it says it's both a Phase 2 and a Phase 3 study on clinicaltrials.gov. Just wondering is there a Phase 2 component of the study?

[Donald Kellerman:]

It's a dose ranging study with three doses. So I guess in that sense it is a range finding. But again, as Konstantinos said, the only difference between a Phase 2 and a Phase 3 is, they are essentially the same in terms of endpoints and numbers, so we call it a 2/3. I suspect clinicaltrials.gov doesn't give you the option of sort of the aggregate.

[Matt Kaplan:]

Yes, it has both in there. Okay, and then just finally, also on clinicaltrials.gov, it says estimated study completion date is November of 2016.

[Konstantinos Alataris:]

I think that was for enrollment, wasn't it?

[Matt Kaplan:]

It says final date or completion date for primary outcome measure. Maybe that's last patient out? I don't know.

[Konstantinos Alataris:]

This is more has to do with the enrollment. We haven't said anything as far as our plans or our projections for this study.

[Matt Kaplan:]

Great. Thanks for taking my questions.

[Operator:]

Thank you. This does conclude the question-and-answer session, as well as today's program. Thank you for your participation. You may now disconnect. Good day.