Zosano Pharma Corporation
Q2 2017 Earnings Call Transcript

Published: 11 Aug 2017

[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 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 Ms. Georgia Erbez, Zosano's Chief Business Officer and Chief Financial Officer. Please go ahead.

[Georgia Erbez:]

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, 2017. 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 August 22, 2017. Joining me on the call today from Zosano is John Walker our Chief Executive Officer, Don Kellerman, our VP of Clinical Development and Medical Affairs; and Hayley Lewis, our new promoted Senior Vice President of Operations. 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 that are difficult to predict and actual outcomes 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 partnering and capitalization 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 containing 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. I'd like to begin by saying that I'm delighted to be given the opportunity to join Zosano's as the permanent CEO. And want to thank the Board of Directors for the faith they have shown in me to take the helm at this transitional stage in our growth as we finish development, file our NDA and commercialize M207 to aid migraine sufferers. It is also important for me to recognize today that Hayley Lewis who was recently promoted to our Senior Vice President of Operations has taken on a critical role at this juncture as in addition to her responsibilities for quality, regulatory and FBA communications. She has also assumed the important role to carry out our manufacturing not only to serve the clinical trial that we have scheduled but also through the first several years of commercialization. In June, the FDA confirmed that the previously announced design of our long-term safety study and the recently completed single positive efficacy study are sufficient to support an NDA filing for M207, which conforms to relative -- relevant regulatory guidelines, and that this should be adequate for registration for M207, which we believe can be positioned in the market as a better triptan and providing for the fast onset of pain freedom and the durability of effect that the patients want for. Operationally, we're on schedule to initiate the safety study as planned. Several months ago, we engaged a CRO and contracted with an e-diary provider that have now completed selection of 30 clinical sites and have scheduled our investigator meeting for September. We expect to commence site initiations visits in September and to have all sites up and running by the end of November. We continue to make progress this quarter on communicating our clinical data to the physician community. In June, Zosano presented additional data from its pivotal Phase 2, 3 ZOTRIP study evaluating M207 is in acute treatment for migraine during the 59th Annual Scientific Meeting of the American Headache Society in Boston. In addition to having met our co-primary end points, the 3.8 mg dose also achieved significance in the secondary end points of pain freedom at 45 minutes and 1 hour and shows durability of effect on a sustained pain freedom at 24 and 48 hours. Subsequent to the quarter and Zosano announced the publication of positive Phase 1 data of zolmitriptan delivery in Future Medicine's Pain Management Journey -- or Journal, I'm sorry. Well, I know that some questioned to press release of Phase 1 results when we already completed our efficacy study, I would simply like to comment that that’s a result of the very fast movement that we had around completion of Phase 1 through the completion of the efficacy study, which is due to the execution under the leadership of Don Kellerman, and we anticipate that we will equal success in enrolling our safety study and then completing that study and having the appropriate 12 months of safety information before the end of 2018, and therefore able to file our NDA in the second half of 2019. I would also like to comment that we have also received some office action from the U.S. Patent Office on a patent pattern filing that we made in February of 2016 to claim the use and method of our combined device and zolmitriptan for the treatment of migraine. We are hopeful that this will eventually be allowed, and if it is allowed, this will extend the patent protection for M207 through 2036, which we believe is significant in increasing the net present value of this asset as it will be exclusive in the market for an extended period of time. This last quarter we also completed an independent market research study that suggests we do address the key issues that patients have with their current therapies, mainly the fast freedom from pain and the durability of its effect. This quarter we undertook a long range strategic planning process and now have a developed plan to take us through launch and the first several years of revenue ramp. We recognized that we will need to raise significant capital in order to successfully reach our objectives, but I do not believe at this time that we can look to the traditional equity, capital markets to provide the funds needed. As a result we have recently initiated discussions that explore more strategic sources and based on our recent discussions with our Board of Directors now plan to expand those efforts through a more concerted process. Before turning the call over to Georgia, I want to say that here at Zosano we all believe that this therapy can make a big difference for patients and we look forward to all of the work and effort that must be done in the interim to make this vision a reality. I'll now ask Georgia to review our financial results for the second quarter ended June 30th.

[Georgia Erbez:]

Thank you, John. Zosano reported a net loss for the second quarter of 2017 of $6.7 million, or $0.17 per share on a basic and diluted basis, compared with a net loss of $6.6 million or $0.54 per share on a basic and diluted basis for the same quarter in 2016. Research and development expenses for the second quarter of 2017 were $4.4 million, compared with $4.3 million for the same quarter in 2016. Increased cost in the second quarter of 2017 for labor, medical affairs and the M207 long-term safety study, were largely offset by decreased cost for the M207 efficacy study upon completion of the pivotal efficacy trial. General and administrative expenses for the second quarter of 2017 were $2.2 million, compared with $2.1 million for the same quarter in 2016. G&A expenses for the second quarter of 2017 were up slightly due to primarily to the severance cost paid to former executives. As of June 30, 2017, we had cash and cash equivalents of $21.2 million, short-term investments and marketable securities of $7.1 million, and debt of $9.6 million. As of June 30, 2017, we had approximately $39.2 million common shares outstanding. As a reminder in March, 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. Operator, could you please open the call now for questions from the participants.

[Operator:]

[Operation Instructions] Our first question comes from the line of Charles Duncan with Piper Jaffray.

[Charles Duncan:]

The progress with the long-term safety study, I guess I'm wondering if John you could clarify. It wasn’t clear to me when you would have the data from that study and then to the NDA. Is that both by the end of '18?

[John Walker:]

No, the data you know Charles this is a 12 month safety study. And so, we would anticipate that we would have the data early in the fourth quarter of 2018 and our anticipation is that we would be filling the NDA around midyear of 2019.

[Charles Duncan:]

Okay, that’s helpful. I thought it was little bit more stretched out, which didn’t make sense to me. So, the other things is, I think that you mentioned that you have selected a CRO and identified sites et cetera. And I'm wondering, if this is a different CRO then was used in the past for the Phase 3, and what your thinking is there also, if you could update us of the number of sites that you plan to open for that study.

[John Walker:]

I'm going to let ask Don, to answer that question, Charles.

[Don Kellerman:]

Hi, Charles. We did select a different CRO it's I guess I would call him one of the major CROs, one of the larger ones and so for the collaboration has been going very well. We selected 30 sites that confirmed now that there are 30 other sites approximately half of the sites were one that did a great job on the previous pivotal trial and showed a lot of interest in participating again. I think they got positive feedback from their patients. And again we think it's been an attractive proposition for a prospective patient. It's an enabling drug. We know it's effective, they get free drug for a year. Everybody gets active. So I think pretty optimistic about our prospects for enrolling into this study. But yes, we have selected 30 sites, and I'm sorry. Was there a third quarter, Charles?

[Charles Duncan:]

No, really I just want to go then you still believe that the number of patients are similar or dissimilar than that you have previously on long terms of long term exposure?

[Don Kellerman:]

Yes.

[Charles Duncan:]

And can you remind us what those numbers are?

[Don Kellerman:]

I'm sorry, what was that Charles?

[Charles Duncan:]

Can you remind us what those numbers are?

[Don Kellerman:]

So, what -- you're talking about our agreement with FDA for 150 subjects for six months and 50 for a year, who views the product at least twice a month during that period of time.

[Charles Duncan:]

Perfect and finally with regard to the upcoming International Headache Society Meeting, do you plan to have presence there? And what information just generally off course, if you plan to present at that end?

[Don Kellerman:]

Great question, we do. We have submitted the original abstract back when they fairly back -- when we got the results certainly thereafter. So that abstract was accepted for oral presentation on Saturday morning. Subsequently, we submitted to later breakers, one with our experience with most bothersome symptom. I think we're the one of the first sponsors to use that as a co-primary. And the other one looking at more difficult to treat patients and those are also -- those will be posters also Saturday morning. And I think this will be the first time we'll actually have a boost where again seeking to increase our awareness in the migrating communities just now introducing Zosano, here well as John, we are relatively new to the party and this program has gone pretty quickly and we're just now at meeting acquainted with all the experts in migraines .

[John Walker:]

Peter Schmidt, who is our Senior Director of Medical Affairs, will be hosting a key opinion leader dinner during the conference as well. So, Charles, what I think is important to underscore there is, we do recognize that the period of time from really the start of our clinical study our Phase 1 to completing the efficacy was literally a period of about 13 months. So, we have not had the opportunity to really educate the clinical community on what we believe the benefits of them M207 are and the type of differentiated therapeutic benefit that we believe we can provide to their patients. And so, the reason for bringing Peter Schmidt on Board earlier this year was really to begin to focus on our communication into the medical community. And we know that we do have a lot of work to do in that area so both expanding our presentations in terms of post-talk analysis and the data we believe we can derive from our completed studies, as well as a general outreach to the community is really part of our strategies as we're going forward.

[Charles Duncan:]

Makes sense to us. It's consistent with our diligence as well. Last question is regarding the commentary on financing. I think you mentioned some strategic consider or alternatives that you are considering. Could one of those be a geographic focused partnership for the asset or what your thinking is?

[John Walker:]

Yes, but I would -- so first Charles, let me answer, yes, because actually one of the post discussions that we have by oriented itself around the geographic relationships and so on. But again I want to caution these are very early stage recently initiated, it was my view as I've communicated to our investors that it was important for us to put together a long-term strategic plan. So that as we had discussions with interested third parties that we would be able to provide a game plan that we would have a full understanding of what the issues were in terms of this scale up of manufacturing for this product to support both the initial launch period as well as U.S. beyond that, that we would have a good understanding and the type of commercial undertaking that would be required to at least be able to address the first five or six test files of the prescribing community that we would have a good understanding of how we could position this product in the market. And that was the basis of the market research analysis that we've completed. So this is how we needed to get these types of things in place. We were fortunate to be able to have a couple of people contact us with interest and the program, post our announcement of our FDA minutes, and we have already gone down stream with those discussions to some extent. And the discussion that I was alluding to is that as a Board, we've really made the decision that we need to expand on that effort because we clearly believe. And it's most secret for anyone on this call, but given the difficulty that we've had in terms of our stock performance that we should not look to the traditional equity markets as way to waste the fund set we need and we therefore need to and our opinion really explores strategic options that could bring needed capital to the Company, they could support us in the way of infrastructure and allow us to continue to move our program forward in an orderly and timely fashion in order to bring this therapy to the market.

[Charles Duncan:]

Any goal takes in terms of completing such interact or collaboration or transaction?

[John Walker:]

Well, Charles, I've been cautioned to say too much about that because I think investors have a tendency at times start underestimate the period of time that it does take. Clearly, if you look at our balance sheet you know that we have the need for additional capital by the end of the first quarter next year. Again, that's not to surprise anyone who has been following the Company, and so my intent is certainly to try to bring something forward with in that period of time. Although, I'm also cognizant that we will look for other mechanisms to extent our runway beyond that, but I can only comment here that, I have had in my past experiences, the opportunity to put together a number of different types of transactions. So, I have a pretty broad appetite in terms of exploring variety of transactions because I do recognize that in those not only can we perhaps be providing with the capital we need, but other types of entities can bring capabilities and expertise to the table that can be useful for us, to us as well.

[Operator:]

I'm not showing any further questions at this time. I would like to turn the call back to Mr. Walker for any closing remarks.

[John Walker:]

I would just like to thank everyone for participating on the call. The last comments I will simply like to make is that, I certainly believe that this is a significant opportunity that we're in a transition period and the Company moving from a development stage to commercial organization. And that we will commit whatever efforts and energy are needed in order to try to put together, the right combination of activities and events that will lead to not only a successful effort in getting approval for this drug from the Food and Drug Administration, but positioning in the market in a way that we're able to achieve significant sales, which we believe based on the market research that we have completed is an opportunity that we're able to address. So, I would like to thank everyone again and we will look forward to delivering on and executing on our game plan as we go forward.