Zevra Therapeutics, Inc.
Q1 2018 Earnings Call Transcript

Published: 11 May 2018

[Executives:]

Dan Cohen - Executive Vice President Travis Mickle - President, Chief Executive Officer LaDuane Clifton - Chief Financial Officer

[Analysts:]

Randall Stanicky – RBC Capital Markets Dewey Steadman – Canaccord David Solomon – Roth Capital Partners

[Operator:]

Good day, ladies and gentlemen, and welcome to KemPharm’s First Quarter 2018 Update 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 follow at that time. [Operator Instructions] I’d now like to turn the conference over to Dan Cohen, Executive Vice President. Please begin.

[Dan Cohen:]

Thank you, and good afternoon, everyone. Thank you for joining our 2018 first quarter financial and corporate results call. At this time, I would like to remind all of our listeners that remarks made during this call, may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time including, but not limited to, statements about KemPharm’s expectations regarding future operating results. Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of Federal Securities Laws. Information contained in the forward-looking statements is management’s beliefs based on current expectations and is subject to change. Actual results may differ materially from forward-looking statements. KemPharm disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments, except as required by law. There is more complete information regarding forward-looking statements, risks and uncertainties in the reports KemPharm files with the SEC. These documents are available on KemPharm’s website at www.kempharm.com under the Investor Relations section, and we encourage you to review these documents carefully. Before I introduce today’s speakers, I would like to remind listeners that KemPharm is using a slide presentation with the conference call. The presentation is accessible via the Investor Relations section on KemPharm’s website and is included also within the webcast. Joining me today on the call is Travis Mickle, President and CEO, who will provide an update on KemPharm’s corporate, clinical and product development achievements; and LaDuane Clifton, our CFO, will review KemPharm’s first quarter 2018 financial results. We’ll begin this call by reviewing our corporate achievements and upcoming milestones, and then move on to the financial results. I will now turn the call and the presentation over to Travis.

[Travis Mickle:]

Thank you, Dan, and thanks everyone for joining the call today. As an introduction to those new to the KemPharm story, KemPharm is the prodrug research and development organization. Many individuals here at KemPharm working our labs and our product development have extensive experience in discovering and developing prodrugs. The best example of this is highlighted by our collective experiences at New River Pharmaceuticals. While at New River, we worked on the discovery and development of the product Vyvanse, it’s also a prodrug and it’s a multi-billion dollar ADHD product for Shire. In fact, my own contribution to Vyvanse led New River to place me as the lead inventor on the Vyvanse patent. Focusing on our technology, a prodrug in our hands any ways very simply is a chemically modified FDA approved drug, where we design and develop features to improve upon that original product. In the case of ADHD, we are trying to improve the onset and duration of effect for patients while also attempting to make the new prodrug less abusable. This is just one example of what we can do with our approach. Since this call comes quickly on the heels of our end of the year fourth quarter call, I will primarily focus most of our attention today on our data related to the IV abuse potential for the KP415 prodrug, which ties nicely to the significant advancements we had in the first quarter. On February 23, the FDA approved the new drug application for APADAZ, our prodrug of hydrocodone and acetaminophen for the short term management of acute pain. This marked the first FDA of approval of our Ligand Activated Therapy or LAT developed product. We believe this approval provides validation of KemPharm’s overall corporate vision, prodrug development, and business strategy. More importantly, for patients and physicians, the APADAZ approval should enable the market entry of what we believe is a differentiated product for the short-term management of acute pain. In addition to this approval, we also announced positive results from our pediatric and adolescent PK study with KP415. Data from the study suggested that a single ADHD efficacy trial designed with pediatric patients, may also be applicable to adolescent and adult patient population, thus potentially allowing an initial indication for all patients with ADHD ages six and up. Turning now to our study results. In the KP415.A03 trial, we assessed the abuse potential of the KP415 Prodrug after intravenous injection in recreational stimulant users. In the trial the prodrug was compared to an active control of IV d-methylphenidate and an IV placebo. The study was designed according to the most recent FDA guidelines for assessing abuse potential. In addition, the protocol was reviewed by the controlled substance staff and review division. As required for these studies, a drug discrimination phase was used to enroll these subjects – those subjects able to discriminate between d-methylphenidate and placebo. The double-blind randomized crossover design of the study included 30 subjects, who received molar equivalent doses of KP415 Prodrug, d-methylphenidate or placebo. As you can see for yourself from the data presented on this slide, I am very pleased to report this trial demonstrated incredible results. Represented on this slide on the Y axis is the at-the-moment Drug Liking VAS scores. The X axis is time; the effect from d-methylphenidate is represented in blue while the effect from KP415 Prodrug is represented in orange. Placebo has indicated in green. This scale uses a no or no effect usually associated with placebo as a score of 50. If the abuser experiences any Drug Liking or positive effect, then the scores will be higher than 50 up to a score of 100 representing the best effect. As you can see from this graph, the at-the-moment Drug Liking was very similar to placebo through the entire time course of the study out to 24 hours. The dramatic differences in Drug Liking scores were achieved due to the fact that d-methylphenidate exposure was significantly reduced following intravenous administration of the KP415 Prodrug, as compared to IV d-methylphenidate. There was little to no conversion of the KP415 Prodrug to d-methylphenidate when injected relative to the extensive exposure to d-methylphenidate after injection. The primary endpoint of this study was maximal Drug Liking or Drug Liking (Emax) as measured on the bipolar VAS scale. Our preliminary top-line stats indicate that Drug Liking (Emax) was significantly higher for d-methylphenidate versus placebo, which demonstrated the study was valid. More importantly, Drug Liking (Emax) was significantly lower for KP415 Prodrug versus d-methylphenidate and non-statistically is different for the KP415 Prodrug versus placebo. Additionally, overall Drug Liking has measured on the same scale bipolar VAS scale showed that the same results with statistical significance between KP415 Prodrug and d-methylphenidate, and no difference between the prodrug and placebo. Another typical secondary endpoint for human abuse potential study is Take Drug Again. Take Drug Again has measured on a unipolar scale, where zero equates to a subject, not willing to take the drug again and 100 days they definitely would. These are typically measured 12 and 24 hours post-dosing and can provide a rough estimate of future behaviors. For Take Drug Again, KP415 Prodrug score was statistically significant lower than that of d-methylphenidate, and which was demonstrated in that study – sorry, excuse me, which demonstrated in the study, recreational stimulant abusers would much rather inject the d-methylphenidate than the KP415 Prodrug even after a time delay. Other VAS endpoints of abuse potential not shown here including Feeling High, Good Effects, and Bad Effects demonstrated similar VAS code differences between each treatment. This profile of pharmacokinetic and pharmacodynamic effects based on preliminary analysis suggests that intravenously administered KP415 Prodrug has a little to no abuse potential when administered up to the highest safe dose in recreational stimulant abusers. As IV abuse represents potentially the greatest risk to the abuser, as well as the greatest reward, nullifying that effect is truly remarkable feature of the prodrug. Let me briefly recap some thoughts I offered on the last call related to KP415, the most advanced of our two ADHD product candidates and we believe our greatest near-term value driver. I’d also like to provide some context to the data I just described. I’ll start with the data and its importance. As seen on this slide, lower or less abuse potential is one of the key unmet needs for methylphenidate products. When we look at this data and compared to our currently – to the currently available methylphenidate products on the market, KP415 is the only potential product with data suggesting the potential for less IV abuse. Usually at this point, we get a lot of questions about abuse-deterrence. Abuse-deterrence is not what we’re seeking here, as a new molecule KP415 Prodrug is currently not scheduled and has been required by the FDA to go through a formal scheduling process. This process involves thoroughly examined abuse potential of the new molecule through human abuse potential studies as well as the stability of the new drug. As this data has been required to be produced for a potential approval, it will be placed on the label. We believe this approach to demonstrate another product may be less abusable is far more straightforward than the abuse-deterrent pathway that can lead to interpretation at times. In direct comparison, the IV data collected for KP415 Prodrug are by far best-in-class for any ADHD indicated stimulant treatment. Vyvanse is also a stimulant prodrug that underwent a similar IV app study prior to approval. These results essentially demonstrated that while Vyvanse at a lower and delayed Drug Liking effect, Drug Liking was present and significant as well as much higher than placebo. On the other hand, KP415 Prodrug is nearly equivalent to a saline injection. In spite of the Vyvanse data, the label includes the results of their study and as we know from our market research, this still currently believed by many physicians that Vyvanse is less abusable than other ADHD treatments. However, really shouldn’t be forgotten that KP415 was primarily designed to address the number of unmet patient needs over currently marketed methylphenidate ADHD treatments including onset of action, duration as well as consistency of a therapeutic effect. All of these attributes alone are significant needs in the minds of physicians together they potentially represent what could be the best-in-class methylphenidate product or even better a best-in-class stimulant product, and with the data released today we are – we believe we are several steps closer to demonstrating these benefits. The KP415 pivotal efficacy trial is the centerpiece of what we anticipate will be several value building announcements during the balance of 2018. The intent of this study is to produce data that demonstrates an onset as early as 30 minutes with a potential duration of up to 13 hours. Most current methylphenidate based ADHD products are only indicated to work up to 12 hours post-dose and in practical terms, don’t last that long. Based on current estimates, we expect that all patients will have completed the KP415 efficacy trial by the end of the second quarter of 2018 with top-line data anticipated thereafter. We are also conducting additional human abuse potential studies for KP415 Prodrug via the intranasal and oral routes of abuse. We continue to expect data later in the year, all of this human abuse potentials data will be used to support the labels of both KP415 and KP484, which in this case, gives us the best-in-class IV human abuse potential data for two KemPharm product candidates. In summary, we anticipate multiple and significant data milestones for KP415 throughout 2018 and remain on target to file a new drug application for KP415 as soon as the first quarter of 2019. The KP484 program is also moving ahead as planned with efficacy studies expected to initiate post-KP415 efficacy data. Our plan is to develop KP484 along a similar pathways KP415 with the KP484 program expected to leverage data from our current and ongoing research with KP415, including the pharmacokinetic and human abuse potential studies I just mentioned. This should allow us to progress along an expedited development timeline and towards the potential NDA in late 2019 as well as provide significant cost advantages. As we’ve stated previously, KemPharm can essentially obtain access to two completely unique markets within ADHD with about the cost of roughly one and a half development programs. Lastly, it would be remise if I didn’t offer a brief thought on this week’s announcement of the Takeda and Shire merger. This combination and the announced deal after several weeks of discussion removes a level of uncertainty while the deal still has a way to go, and it’s not expected to close for over a year, we see this action is offering some clarity in the ADHD market as well as the continued need for better treatment option. All of this does not change our intent to advance KP415 and KP484 through development while exploring various business development pathways. On a similar note, progress continues with APADAZ, as we explore a number of commercial options, partners and strategies to best optimize the value of the first approved prodrug of hydrocodone. I anticipate over the next several quarters to be able to add to these developments and to announce additional value enhancing opportunities. Our pipeline consists of multiple products at various stages of development targeting both mass market and orphan indication, our depth and diversity is uncommon for a company of our size and the progress we’re making is nothing short of exciting. With that, now let me turn the presentation over to LaDuane to discuss this quarter’s financials.

[LaDuane Clifton:]

Thank you, Travis, and good afternoon everyone. I will provide a brief overview of our results for first quarter 2018; additional details are available in our press release, which was published prior to the call. For the quarter ended March 31, 2018, KemPharm reported net loss of $26.2 million or a $1.77per basic and diluted share, compared to a net loss of $16.3 million or $1.11 per basic and diluted share for the same period in 2017. Net loss for Q1 2018 was driven primarily by a loss from operations of $14.8 million. Net interest expense and other items of $1.7 million and non-cash fair value adjustment expense of $9.7 million. Loss from operation was increased to $14.8 million for Q1 2018, compared to $7.4 million for Q1 2017. The increase was due primarily to an increase of $7.5 million in research and development expenses, partially offset by a decrease of $100,000 general and administrative expenses. As of March 31, 2018, total cash and security-related amounts, which is comprised of cash, equivalents, restricted cash, marketable securities, trade date receivables and long-term investments was $37.2 million. This was a decrease of $11.4 million, compared to December 31, 2017. Based on our current operating forecast, the existing resources are expected to fund operating expenses and CapEx requirements into, but not through the first quarter of 2019. Now, I will turn the call back over to Travis.

[Travis Mickle:]

In summary, the first quarter of 2018 has been extremely busy for KemPharm with APADAZ getting FDA approval and KP415 progressing into its pivotal efficacy study. looking ahead, we foresee several potential value enhancing milestones over the next several quarters including top-line data from the KP415 efficacy study by midyear, intranasal and oral human abuse potential data from KP415 in the second half of 2018, initiation of KP484 efficacy study, NDA application of KP415 in early 2019 and a potential announcement of our partnership or partnerships for APADAZ before year-end. These events combined with the ability to harness our LAT program to develop the additional products offered KemPharm an abundance of growth opportunities both near and long-term. We remain intently focused on pursuing multiple internal and external opportunities to maximize our prodrug expertise and the potential that projects can offer throughout the healthcare fields. With that, I will now open the call to your questions.

[Operator:]

[Operator Instructions] The first question is from Randall Stanicky of RBC Capital Markets. Your line is now open.

[Randall Stanicky:]

Thanks. Travis, hey, first follow-up on Shire commentary, does that deal have any potential impact on you or your contractual arrangement with them to spread for refusal at all? That’s the first question and then I have a couple of follow-ups.

[Travis Mickle:]

I mean it doesn’t have any impact other than it would survive and pass along to the new company. So that that’s the direct impact I mean certainly, there is a good opportunity with all the suburbs for us to look at business development opportunity.

[Randall Stanicky:]

And that was my follow-up. Are you hearing interest or seeing interest in having discussions currently, I mean you’re getting close to Phase 3 data. Obviously, the NDA filing, I think you pointed to Q1 of next year. Are you having discussions at this point and then the follow-up to that is should we be viewing KP415 and KP484 as a likely package deal?

[Travis Mickle:]

I’ll answer the last one first, I mean obviously, they’re involved the same IP with the prodrug. So it probably, I mean, just to be honest, logistically will be challenging to separate those two. But the first question we’re in continuous discussions again, the obvious ADHD leader here at Shire, I, of course, consult and work with them regularly, but I think all of this, the attractiveness of a potentially highly differentiated product would make it obvious that there’s a lot of interest in these products.

[Randall Stanicky:]

Got it. And then just on that same topic, when you talk to KOLs, can you just talk about where their level of excitement is between the early onset long duration and abuse-deterrent where do they see the biggest opportunity or area of differentiation for KP415?

[Travis Mickle:]

I think it’s really split with duration; the current methylphenidate products really suffer from a lack of duration and the duration even though it’s labeled as such for all of the current products is lackluster. I think the other one is abuse potential, because there’s none of the methylphenidate that have anything that’s less abusable. The only other option is Vyvanse, which doesn’t apply for many patients. So onset is a great half and I think that’s one of the things we’ve known for a while with duration and abuse potential will kind of be in the top-line drivers.

[Randall Stanicky:]

Okay. Got it. And then my last question just in terms of APADAZ, I know you pointed to year-end. Any progress there in terms of from two perspectives, one in terms of discussions with potential partners. And then two, any discussions that have given you a directional comfort around the commercial opportunity or any feedback from that perspective would be helpful. Thanks.

[Travis Mickle:]

We continue to make great progress. We made great strides since the product actually got approved. I think we haven’t heard anything really from anybody that would make us believe that our potential path either through PVMs and/or with generic partner is anything, but a credible path. So I think there’s nothing, but good affirmation of that approach.

[Randall Stanicky:]

That’s great. Thanks, Travis.

[Operator:]

Thank you. The next question is from Dewey Steadman of Canaccord. Your line is open.

[Dewey Steadman:]

Hi, good afternoon and thanks for taking the question, the human abuse liability studies, the IV studies look great on numerical scale. Do you have any key values to share in terms of [indiscernible] especially for the Emax?

[Travis Mickle:]

The Emax was based on preliminary mean values. So, we didn’t calculate that, but again, given the VAS difference between the numerical values. Statistically, there is a significant difference again; we’re not quite comfortable, because we just start to complete all of our statistical analysis on that. I can tell you there is no statistical difference between the placebo and KP415 on the primary endpoint of Drug Liking Emax.

[Dewey Steadman:]

Okay. Does FDA primarily look at Emax and sort of abuse to turn some valuation? Are they looking at specific hour time point post dosage?

[Travis Mickle:]

In this case, it’s because of the abuse potential. The established criteria are fairly straight forward and there is actually a path that’s driven an analysis that they conduct. Based on your stat plan and so our preliminary analysis of this demonstrates that there is no abuse potential of KP415 when injected.

[Dewey Steadman:]

All right. Great. And then for the other two studies for intranasal and oral, how do we use results play into your confidence about those two studies. Obviously, there are different routes of administration. I would think intranasal may play more like IV and oral may be a little bit different, but what are sort of your initial thoughts there?

[Travis Mickle:]

Well, this was the one that you typically, you would expect the worst scenario. So here, we have absolutely no abuse potential and that’s a one extreme, where the abuser has injected it. The other extreme is where somebody has swallowed large amounts orally, trying to look for a high. We already know that the prodrug has a Tmax out at about six to eight hours and is significantly reduced versus most of the common methylphenidate comparative product. So, we feel very confident that that study based on what we know about the prodrug is going to show a significant difference between the comparatives. So, if you put the intranasal between the two, today, this is great data, because it gives us a lot of confidence that study – those two studies should go very well as well from a human abuse potential’s perspective.

[Dewey Steadman:]

Great. And then we noticed that there’s a safety study that’s been initiated for KP415, I think it’s about 250 patient study. Can you comment a bit on that and then what – if FDA is mandating that study or if any of that data would be included in the doc?

[Travis Mickle:]

Yes. The FDA is requiring us to do a safety study; it’s based on exposure to the new prodrug. So they want to see the product viewed over time. We’ve designed the study, so it would read out at six and 12 months technically based on guidance and based on PDUFA 5. we should be able to submit that’s still in line with the first quarter with six-month data available to us, still trying to figure out exactly what the agency is going to want to see from that perspective. I actually think the study is good, because having a label, that’s comparative to other ADHD products, is really kind of necessary when you talk about side effects. you want to show that your side effects are similar better than that of the other problems.

[Dewey Steadman:]

Excellent. And then just further doing on R&D and this is my final question, sorry. We noticed a significant take-up from 4Q levels obviously, do it with all the clinical work going on. how should we approach R&D spend through the rest of the year?

[Travis Mickle:]

Q1 was particularly high. we initiated a number of studies as you mentioned including we actually pulled the safety study in a little bit earlier than our original plan. So, Q1 is probably higher quarter relative to the rest of the year. We’re still looking at a burn rate that’s going to keep this in the range of 10 to 14 per quarter, but Q1 is probably a little high.

[Dewey Steadman:]

All right, great. Thanks, guys. Appreciate it.

[Operator:]

[Operator Instructions] The next question is from David Solomon of Roth Capital Partners. Your line is open.

[David Solomon:]

Hey guys. Dave on, thanks for taking my questions. Few were already asked, but I just want to turn the direction towards APADAZ, I’m curious how the recent opioid restrictions could impact APADAZ whether positive or negative, any color would be greatly appreciated?

[Travis Mickle:]

Well, I haven’t seen, we’ve been monitoring volumes and they haven’t – we haven’t seen a significant reduction maybe Dan, you could give a brief thoughts on that question.

[Dan Cohen:]

As you know David, we’ve reached peak opioid in 2011 and overall scripting rates have been dropping. But the interesting thing among that is the rates for the combination products, particularly acetaminophen and hydrocodone products has been fairly stable over the last two or three years. The overall size of the script, there is certainly going to be continuing both congressional and regulatory pressure to right size scripting and that’s where our blister packet design should be benefit within the field, probably noticed the legislation in the Senate that is going to give FDA the authority to mandate blister packs and there is some assurance that that legislation has a likelihood of being included in the ultimate package that goes to the first month of summer, but because hydrocodone and acetaminophen is a primary care physician product for acute short-term pain. There are no alternatives and our approach to the product we feel that we’re fitting in nicely with current practices and we’re, certainly, as Travis indicated earlier, not hearing anything different from the physicians in the market or the payers as well.

[David Solomon:]

Great. Thanks for the color. Just one more on the data presented today, and just kind of curious, I know obviously, IV causes the greatest risk, but just kind of I want some color on how important the IV route is for methylphenidate or stimulant in general, and how important that is for the marketing message, four docs were treating ADHD versus oral or intranasal routes. Thanks for taking my questions.

[Travis Mickle:]

I think overall, stimulant abuse is not as big a problem as opioid abuse. I think the fact that we’re going down the abuse potential route intravenous to turn route actually helps us tremendously. As I said, there’s less interpretation of what is relevant and what is not. All three of these studies have been required to assess the abuse potential through any route, commonly used by abusers. The real key area is really looking at Vyvanse as a surrogate, they have data about their oral abuse potential and they have data about IV and they’re still today viewed by many physicians in our market research, both in pain products, abuse to turn pain products, and ADHD products that Vyvanse is a less abusable option. So, I think we still see this as a key value driver and we still know that the marketplace is in need of it and just focused on completing really all three studies in order to have the best level we can.

[David Solomon:]

Excellent. Thanks for taking my question guys.

[Operator:]

Thank you. This concludes the Q&A session. I would now turn the call back over to Travis Mickle for closing remarks.

[Travis Mickle:]

I’ll keep it brief here. In closing, I appreciate your time and attention. And I look forward to the future updates as we continue to advance KemPharm. Thanks everyone.

[Operator:]

Thank you ladies and gentlemen. This concludes today’s conference. You may now disconnect. Everyone, have a great day.