Zosano Pharma Corporation
Q4 2015 Earnings Call Transcript

Published: 29 Mar 2016

[Patti Bank:]

[Call Starts Abruptly] such as the words believe, may, estimate, continue, anticipate, design, intend, expect, potential and similar expressions as well as the negative version of these words and similar expressions. These forward-looking statements do not constitute guarantees of future performance. These forward-looking statements are based upon our current expectations and involve 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 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, or 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 today. Now, I’ll turn the call over to Dr. Konstantinos Alataris, the Company’s President and Chief Executive Officer. Konstantinos?

[Dr. Konstantinos Alataris:]

Thanks Patti. Good afternoon and welcome on the call. I will be providing an update on clinical product [ph] objectives for 2016 in addition to a review of our progress so far; I’ll then pass it over to Winnie Tso, Zosano’s CFO, to review the Company’s financial performance. Over the last two years, Zosano has demonstrated proof of concept with three clinical programs, namely, ZP-Triptan for the treatment of migraine; ZP-Glucagon for the treatment of severe hypoglycemia; and ZP-PTH for the treatment of osteoporosis. The clinical evidence so far supports the ability of our microneedle patch technology to provide not only consistent and reliable delivery of our proprietary drug formulations but also fast absorption. After a strategic review of our programs and resources, we have decided to prioritize our efforts on advancing ZP-Triptan for the treatment of migraine. Our discussions with key opinion leaders have identified that our unique delivery mechanism has a potential to provide rapid resolution of migraine symptoms and address a significant unmet need in the migraine space. After consultation with the FDA on the regulatory requirements for approval, we believe a single pivotal efficacy study, in addition to a safety study, will be sufficient for FDA approval. Migraine headaches are estimated to affect more than 30 million patients in the U.S. Of those, more than 4 million patients are estimated to be on migraine specific medications. Our discussions with key opinion leaders reinforce the need for new therapies that provide faster pain relief. Special emphasis was given to morning migraines and migraine that starts with nausea or vomiting symptoms; as segments where non-oral delivery mechanism might offer a significant advantage. The existing market for migraine drugs exceeds $1 billion in sales and triptans are the most commonly prescribed in migraine specific medication. Non-oral formulations are estimated to account for less than a quarter of the market although priced at a premium to oral medications. The availability of non-orals highlights the demand for alternative formulations but their market sales also shows the limitations for marketed products. We recently completed a Phase 1 clinical trial of the ZP-Triptan that delivers our proprietary formulation of zolmitriptan. In this Phase 1 study, ZP-Triptan was able to enable fast absorption as demonstrated by pharmacokinetic profile with short Tmax compared to oral tablets. The interactions with the FDA to-date on the regulatory path for ZP-Triptan have been very collaborative and insightful. The agency has indicated that the one positive pivotal efficacy study would be sufficient for approval for ZP-Triptan for the treatment of migraine. A safety study will also be required as customer with any product developed under 505(b)(2) pathways. This pathway provides us the opportunity to reach pivotal efficacy data in the short term. ZP-Triptan’s unique delivery mechanism has the potential to provide the rapid resolution of migraine symptoms and may, if validated in the clinic, address a significant unmet need in the migraine space. The potential for such a product coupled with a timely path to an NDA, makes ZP-Triptan an attractive asset. As a result of our focus in the ZP-Triptan program and we complete the pivotal efficacy trial, we are restructuring the organization. This will enable us to properly monitor cash while creating value for the Company by driving towards the significant near-term clinical milestone. A work force reduction of 24 employees, representing approximately 38% of the Company’s total work force has been implemented. We expect to reduce our headcount related expenses by approximately $2 million net of severance costs for fiscal year 2016 and will redeploy the amounts saved to support our planned ZP-Triptan clinical development. We have made significant progress with our technology and our drug candidates during the past several years. We’re extremely grateful to all of our employees for their hard work, dedication and their efforts have helped us that helped us to get this point. I will now pass over Winnie Tso, our Chief Financial Officer to provide you with a more in-depth review of our financial results. Winnie?

[Winnie Tso:]

Thank you, Konstantinos. For the full year 2015, Zosano had a net loss of $28.4 million, or $2.49 per share on a basic and diluted basis, compared to a net loss of $14.2 million or $2.78 per share on a basic and diluted basis, for 2014. Our net loss for the fourth quarter of 2015 was $7.6 million or $0.64 per share on a basic and diluted basis, compared with a net loss of $4.3 million, or $0.83 per share on a basic and diluted basis, for the same quarter in 2014. During 2015, Zosano recognized approximately $300,000 in revenue compared with $2.9 million of revenue for 2014. The decrease was primarily due to the completion of the feasibility study and the conclusion of work under our now terminated collaboration agreement with Novo Nordisk. We had no revenue for the fourth quarter of 2015 compared with approximately $400,000 of revenue for the same quarter in 2014. Research and development expenses were $20.4 million for the full year 2015, compared to $11 million for 2014. The increase was due primarily to ZP-Triptan’s Phase 1 clinical trial and related preclinical toxicology studies, ZP-Glucagon’s Phase 2 clinical trial, and Phase 3 GMP manufacturing preparation for our Daily ZP-PTH product candidate conducted in connection with our then collaboration with Eli Lilly. Research and development expenses for the fourth quarter of 2015 were $5.7 million, compared with $2.7 million for the same quarter in 2014. General and administrative expenses for the year totaled $6.3 million as compared to $4.4 million for 2014. The increase was primarily related to additional costs associated with being a public company and additional personnel costs in support of our expanded research and development operations. General and administrative expenses were $1.5 million for the fourth quarter of 2015, compared with $1.2 million for the same quarter in 2014. As of December 31, 2015, Zosano had cash, cash equivalents and marketable securities of $36.9 million. Total debt as of December 31, 2015 was $15.3 million. This concludes my review of our 2015 results. And I will turn the call back to Konstantinos for some closing remarks. Konstantinos?

[Dr. Konstantinos Alataris:]

Thanks Winnie. We have prioritized our efforts on advancing ZP-Triptan for the treatment of migraine. Our unique delivery mechanism may provide rapid resolution of migraine symptoms and address a significant unmet need in the migraine space. After consultation with the FDA on the regulatory requirements for approval, we believe a single pivotal efficacy study, in addition to the customary safety study, will be sufficient for FDA approval. We have restructured the organization to manage our cash while working to create value for the Company. As a result, our current funds allow us to complete the pivotal efficacy study. We look forward to updating you on our progress throughout the year. With that, I will the turn the call back to the operator so we can take questions. Operator?

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Matt Kaplan from Ladenburg Thalmann. Your question, please?

[Matt Kaplan:]

Can you give us a little bit more detail in terms of what you’re thinking with respect to the ZP-Triptan Phase 3 study or pivotal study and give us a little bit of sense in terms of the design of that study or potential design of that?

[Dr. Konstantinos Alataris:]

So, as you know, we had some pretty collaborative and insightful discussions with the agency and we plan on following the restricted guidance for acute treatment of migraines as in the 505(b)(2) pathway. So, what that means is we’re looking at treating a single migraine episode and capturing pain relief at given intervals and relief of the most burdensome symptom. We’re considering having multiple dose arms in order to appropriately select the marketed dose with the optimal efficacy and safety profile.

[Matt Kaplan:]

And then besides the pain relief, are you going to look at other endpoints in terms of photophobia, phonophobia, nausea, vomiting and stuff like that?

[Dr. Konstantinos Alataris:]

Yes. All of the patients will go through a screening period to determine the most burdensome symptom and that would be an endpoint.

[Matt Kaplan:]

So, it’s not really going to be a composite endpoint; it’s really going to focus on pain relief as the primary?

[Dr. Konstantinos Alataris:]

The primary endpoint is pain relief based on the guidance from the agency to address the burdensome symptom.

[Matt Kaplan:]

And then in terms of the size of the study and the timeline, could you describe that a little bit more?

[Dr. Konstantinos Alataris:]

We’re a little bit early as far as our decision to how many arms we will put in the study in order to confidently and appropriately select the marketed dose. So, we’re looking at that.

[Matt Kaplan:]

And you mentioned also safety study. What will the requirements for that study be and the potential design of that study?

[Dr. Konstantinos Alataris:]

We haven’t made any announcements about that at this stage. But usually what the FDA requires and that’s based on the guidance is to take a certain number of patients out to six months, just follow them for six months and 12 months.

[Matt Kaplan:]

And could you describe the ZP-Triptan opportunity from a market point of view for us?

[Dr. Konstantinos Alataris:]

Sure. So, we are -- based on the feedback we’ve got from our advisors, the PK profile that we’ve seen with treatment -- with triptan, with the ZP-Triptan is encouraging given the fact that it seems to provide a rapid onset. What we’re trying to see, as we were discussing the market is for people that are really looking for fast pain relief. And although this is especially true for most migraine patients, specific market segment that have come up with our analysis has to do with morning migraine, which people are waking up with the migraine. So, it’s already ongoing; in many situations you have gastric stasis that inhibits absorption of oral tablets; and/or another segment is late treatment of migraines; a third one would be migraines with nausea and vomiting symptoms, given the fast onset that we could potentially show and the fact that it doesn’t go through the gut.

[Matt Kaplan:]

Okay, great. Thank you for the additional detail. Good luck.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of Scott Henry from ROTH Capital. Your question, please?

[Scott Henry:]

Thank you and good afternoon. I guess Konstantinos for starters, could you give me a sense of what the spending levels should be in 2016 from R&D and G&A standpoint?

[Dr. Konstantinos Alataris:]

So, we’re not prepared to provide specific guidance at this point. But we do feel that we have adequate resources for the next 12 months, so that takes us Q1 of ‘17. And this will allow us to complete this efficacy study that we’re preparing.

[Scott Henry:]

Okay, I’ll see if I can back into that. And then, I guess with regards to the triptan program, when will you expect to file that product? Is it safety or efficacy that would be the gating factor?

[Dr. Konstantinos Alataris:]

Well, it will be the completion of the safety study because the efficacy, we are treating a single migraine episode. So, we expect efficacy to have it completed the pivotal efficacy study -- we expect it to have it completed within the next 12 months. So, there has to be -- we need to follow a portion of those patients out to 12 months.

[Scott Henry:]

It would sound like safety should complete by the end of 2017, just figuring 12 months by your point; is that reasonable?

[Dr. Konstantinos Alataris:]

Well, we have to -- all of that stuff depends on the speed of enrollment, on conclusion of the efficacy study. But you’re right; the period that we need to follow up is 12 months. Usually you need to account for time before and after an enrollment in those studies.

[Scott Henry:]

And when would be your next meeting with the FDA? Would it be a pre-NDA meeting if successful, or will there be any meetings prior to that?

[Dr. Konstantinos Alataris:]

Well, first, we will file the IND, right before we initiate the pivotal efficacy study.

[Scott Henry:]

And that will be paper -- but will there be any meanings beyond that or with regards to the plan or at that point we’ll just wait for the readout?

[Dr. Konstantinos Alataris:]

Yes, I would think so.

[Operator:]

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