Zosano Pharma Corporation
Q1 2017 Earnings Call Transcript

Published: 13 May 2017

[Operator:]

Good afternoon and thank you all for joining Zosano's Q1 Financial Results and Operational Update Conference Call. At this time, all participants are in a listen-only mode. Following management remarks, we will hold a brief question-and-answer session and at that time the lines will be open for you. I would now like to turn the call over to Miss. Georgia Erbez, Zosano's Chief Business Officer and Chie Financial Officer. Please go ahead.

[Georgia Erbez:]

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 on the changes in management we announced after the market closed today. 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 May 22, 2017. Joining me on the call today from Zosano is John Walker our Interim Chief Executive Officer, Don Kellerman, our VP of Clinical Development and Medical Affairs; and Hayley Lewis, our VP of Regulatory and Quality. Before we begin, let me remind you that today's call may include forward-looking statements regarding management's expectations and beliefs in future events. These statements are subjects to risk and uncertainties and are difficult to predict an actual outcome maybe differ materially. Forward-looking statements give our current expectations and projections relating to the anticipated progress of M207 and the projected timelines of our research and development activities. Our ability to obtain FDA approval of M207, our expectations regarding the relative benefits of our product candidate versus competitive therapies, our business strategy, our expectations regarding potential market or market sizes, our expectations regarding the therapeutics and commercial potential of M207 and the Company's future or financial results. These forward-looking statements do not constitute guarantees of future performance. These forward-looking statements involved assumptions that may never materialize or may prove to be incorrect. Actual results and timing of events could differ materially from those anticipated in such forward-looking statements. We assume no obligations to update or revise any forward-looking statements contain herein to reflect any changes in our expectations with regard to thereto or any change in events, conditions or circumstances on which any such statement is based except its required by law. For a detailed description of the risks and uncertainties regarding our business, please refer to the risk factor section of our Form 10-K filed with the SEC on March 1, 2017 as amended on March 6, 2017. I'll now turn the call over to John.

[John Walker:]

Thank you, Georgia. And thank you to all of you for joining our call today. As you most likely already know, I have been named interim CEO to replace Konstantinos Alataris, who resigned both his board and management positions. Also today Georgia Erbez, who since June of 2016 was the Company's interim CFO and also Chief Business Officer, has assumed permanent responsibilities for the CFO function. I have served on this company's board as chairman since May 2016, and I am confident that this company has never been in a better position to achieve its milestone and importantly in brining M207 forward through the commercial approval process. I would first like to comment on the highlights of the period ended March 30, 2017. In February, we announced the results of our ZOTRIP, pivotal efficacy trial of M207 as a treatment for acute migraine. The study met the co-primary end points to establish fast and durable pain relief for migraine sufferers. In March, we successfully completed a 29.3 million follow-on offering of our common stock, bringing cash on hand sufficient to fund up initiation of a required 12 months safety study and also required pre-commercialization CMC manufacturing activities. These two important accomplishments coupled with today's changes in management positioned Zosano to achieve strategic milestones that will add value for all of our shareholders, and we are planning to update you on a regular basis to give you a measure of how we are doing. I believe that the pivotal study results validate our technology platform and if approved by the FDA that M207 may provide acute migraine sufferers a non-oral treatment option. Finally, I want to emphasize you that Zosano's team can move forward to leverage a seller collection of proven drug development, regulatory, manufacturing and operational capabilities that are resonate within the Company. Together, we have been placed the foundation upon which we can build a commercial success story for M207. I won't walk you through my experience expect to say that I bring to Zosano more than 40 years of experience as a Chief Executive Officer and Board Member at a variety of life science company. You can read more about me in our press release and related filing. Suffice it to say that some of this experience that tells me the Company has been a better place than ever to achieve its goal and to move our pipeline forward. On behalf of the Board of Directors, I want to thank Konstantinos for his efforts and commitment to the Company over the past two years. We wish him well in his future endeavors. I'd like now begin with a short recap on the results of our pivotal study and the status of the M207 program. In February, we announced statistically significant results from the ZOTRIP trial, which demonstrated that the 3.8 mg dose of M207 met both co-primary endpoints, achieving pain freedom and most bothersome symptom freedom at 2 hours. The 3.8 mg dose achieved a p value of less than 0.05 in the secondary endpoints of pain freedom at 45 minutes and 1 hour, and showed durability of effect on pain freedom to 24 and 48 hours. These results demonstrated that M207, not only provided fast onset, but also a durability of effect, up to 2 days and hence freedom from recurrence of migraine. Additionally, M207 demonstrated a similar safety profile as other triptans and no Serious Adverse Events or SAEs were reported in the trial. If you allow me to step back at it, M207 is our proprietary formulation of zolmitriptan coated onto our patented intracutaneous microneedle patch. The patch is applied with our proprietary applicator to ensure uniform and consistent application. In a Phase 1 trial, M207 demonstrated markedly faster absorption kinetics compared to oral zolmitriptan. These data were presented at the 2016 Annual Meeting of the American Headache Society and our posted on our website. Looking at the migraine market, we see a huge unmet need that we believe M207 can fill. Migraine is the leading cause of disability among neurological disorders in the United States according to the America Migraine Foundation. Migraine symptoms can include moderate severe headache pain combined with nausea and vomiting or abnormal sensitivity to light and to sound. According to the Migraine Research Foundation, migraine affects 36 million men, women and children in the United States. Most migraines last between 4 and 24 hours but some lasts as long as three days. According to published studies, 63% of migraine patients experience between one and four migraines per month. In addition according to Decision Resources, prescription drug sales for migraine in the top seven countries were estimated to be 3.3 billion in 2015, and are expected to grow to 4.4 billion in 2020. Triptans, a family of tryptamine-based drugs first sold in the 1990s, account for almost 75% of anti-migraine therapy prescribed at office visits. The path forward for Zosano is clear. The FDA has indicated that a single, positive, pivotal efficacy study in addition to a safety study as M207 will be sufficient to file for approval under our 505(b)(2) pathway. We have worked hard and now we plan to initiate the safety study in the second half of this year. This will be an open label safety study which means we will be able to update you regularly on what we are seeing. Importantly, we do not expect any safety surprises based on our record today, but the better part of valor is to be cautiously optimistic In addition to safety, we will be able to get a glimpse to palpation for using our drug. We expect to gain further perspective on how the therapy will be used in the real world which translates to important side for us as we move M207 towards regulatory approval and eventual commercialization. Again, our commitment to you is to keep you informed with the trials progress, both through abstracts submitted to medical meeting as well as quarterly financial call. Before turning the call over to Georgia, I want to say that I look forward to meeting many of you in person in the days to come. Fortunately as a Board member, I am up to speed on where we are and what needs to be done. And the next few weeks will be busy one in which the team will be evaluating the most expeditious path forward to regulatory filing and approval. We all believe strongly that this is a therapy that will make a big difference for patients, and we look forward to all of the work that awaits us and needs to be done in the interim to make this vision a reality. I'll now ask Georgia to review our financial results for the first quarter ended March 31st.

[Georgia Erbez:]

Thank you, John. Zosano reported a net loss for the first quarter of 2017 of $7 million, or $0.34 per share on a basic and diluted basis, compared with a net loss of $8.1 million or $0.68 per share on a basic and diluted basis for the same quarter in 2016. Research and development expenses for the first quarter of 2017 were $4.6 million, compared with $5.6 million for the same quarter in 2016. The decrease was primarily driven by decreased cost for M207 efficacy study upon completion of the pivotal efficacy trial and by the workforce reduction cost associated with our strategic realignment in the first quarter of 2016. General and administrative expenses for the first quarter of 2017 were $2.1 million, compared with $2.2 million for the same quarter in 2016. G&A expenses were essentially unchanged or primarily composed with personal, consulting cost and stock compensation expense. As of March 31, 2017, we had cash and cash equivalents of $37.3 million and debt of $11.2 million. As of March 31, 2017, we had approximately $39.2 million common shares outstanding. In March as John already mentioned, Zosano announced the completion of a public offering of common stock that generated aggregate gross proceeds of approximately 29.3 million. The financing provides funding for the continued advancement of M207 towards an NDA submission.

[John Walker:]

We thank you again for your participation and hope that we have conveyed to you our continued progress toward an NDA for M207, and our enthusiasm for the benefit it will bring to migraine sufferers. Thank you.

[Operator:]

[Operator Instructions] Our first question comes from the line of Charles Duncan from Piper Jaffray. Your line is open.

[Charles Duncan:]

Quick question, when do you anticipate being able to start the open-label extension study and provide feedback from the agency? Second question is, with the recent management changes, it's a little disconcerting and I'm kind of wondering what was the driver for the recent CEO change?

[John Walker:]

Well, let me address your second part of that question first and then I'm going to ask Hayley, our Head of Regulatory, to respond to your question regarding regulatory and will try to make sure that we're as responsive as possible. Konstantinos has indicated in our press release tendered his resignation as a Director of the Company and in regarding his management responsibilities within the Company, and other than that I will not comment at this point other than as I did in our my comments earlier to wish Konstantinos the best of luck and success in his future endeavors. But we do not feel that it's appropriate to make any further comment regarding his resignation.

[Charles Duncan:]

I'm sorry to press, but I need to -- I think that investor should know whether or not that had anything to do with the data analysis that spent on or the regulatory strategy on M207?

[John Walker:]

I will respond to those specifics and indicate that neither of those issues was to the best of my knowledge involved in his resignation or in regard to the Board's acceptance of this resignation.

[Charles Duncan:]

Okay, so in terms of the open-label extension. When do you plan to move forward?

[John Walker:]

Hayley.

[Hayley Lewis:]

We plan to move forward with the open-label extension in the third quarter of this year.

[John Walker:]

And in addition to that, we're hopeful that before we obviously move forward that we will be able to share with the investor community any comments that we receive from the agency. But as we have I think guided previously we expect that we will be able to provide you with that update within the second quarter of this year. And again, the target date is the third quarter for the initiation of this study.

[Charles Duncan:]

And do you have any further thoughts on the size of that trial and/or duration?

[Don Kellerman:]

So, this is Don Kellerman. I think we have stated publicly before that that we have agreement with the FDA to study, 50 subjects for a year and 150 subjects for six months to get adequately assessed is the long-term safety of the product. We'll probably roll slightly more than that to complete that number of subjects. So, the people who are in the long list will stand for a year and then another cohort will probably in for six to nine months.

[Charles Duncan:]

That tells Zosano. And then final question is in terms of the data [Indiscernible]?

[John Walker:]

Yes, little bit more responsive I think in the context to one of the questions you asked, there is no change as I tried to comment in my remarks. And regarding to the strategy of the Company, there has been no change in regard to the milestones that we have targeted for 2017. There is no change in our analysis as a data. There is no change in regard to our anticipation of our meeting with the agency. And what we hope will be successful outcome in regard to the efficacy data that we will be discussing with them. And there is no change in regard to the current plans or protocol for our open label safety studies. So, I am trying to reassure you that the change in management does not indicate a change in direction, it does not indicate the change in strategy, and it is not indicate the change in any of the practical operational issues that the Company has underway and has been and we will continue to successfully execute too.

[Charles Duncan:]

That's helpful. And then final question, I am not sure if you've heard it. When do you anticipate presenting the data at AHS or IHS?

[Don Kellerman:]

I am sorry Charles, if I wasn’t clear. We do hope to have a presentation in AHS again then completion of the study, the original abstract deadline had passed, they didn’t ask for a breaker. So, we have not heard from the AHS whether our abstract will be presented, but we are pretty hopeful it will be.

[John Walker:]

And Charles, I'll just add to Don's comment there is the Company clearly recognizes the one of the issues that we have in front of us is to gain greater knowledge within the clinical and patient community of what we feel is truly a very important new entrée into the treatment of migraines. And in that regard, not only as the AHS meeting, but other clinical meetings and initiatives on our own planned to be undertaking throughout the remainder of 2017 and beyond to help ensure that people really recognize the important aspects of the data that we have shared today and how we believe that this will fit importantly into the migraine market.

[Operator:]

[Operator Instructions]

[John Walker:]

As it does appear that we have any additional questions lined up at this point, I just feel that it may be appropriate for me to try to add in my concluding comments that, again, we are not changing directions that the change in management which we do understand, can in fact the upsetting and certainly lead people with a number of unanswered questions, does not in any way relate to the performance of the Company to date. We are very pleased with the results that we generated in our study. We are pleased with the preparation that has gone into the meetings that are anticipated with the agency for the start of the clinical study on a timely basis, and that again, there is no change in the Company. And so to the extent that your investment pieces has been predicated on the technology of the Company. The people that are resident within the Company and the expertise that they bring to the challenge and to the data that we have generated on a product that we believe is efficacious and an important addition to the armamentarium of migraine therapies then I will hope that you will take away from this call a belief that we continue in that endeavor to see M207 through to the market and into the hands of patients where it will provide we believe a very real benefit. So with that, we will thank you for your participation on the call this afternoon. And as indicated, I look forward to having the opportunity to speak with many of you individually and hopefully to meet with many of you in person in the not too distant future. Thank you very much.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does concludes the program and you all may disconnect. Everyone have a wonderful day.