Zevra Therapeutics, Inc.
Q3 2017 Earnings Call Transcript

Published: 9 Nov 2017

[Executives:]

Dan Cohen - EVP Travis Mickle - President and CEO LaDuane Clifton - CFO Rusty Johnson - CBO

[Analysts:]

Randall Stanicky - RBC Capital Markets

[Operator:]

Good day ladies and gentlemen and welcome to the KemPharm Third Quarter 2017 Corporate Update and Financial Results Conference Call. At this time, all participants are in a listen-only mode. And later we would conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today's presentation Mr. Dan Cohen, Executive Vice President. Sir, please begin.

[Dan Cohen:]

Thank you and good afternoon everyone. Thank you for joining our 2017 third quarter financial and corporate results call. At this time, I would like to remind 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 the 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 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. 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. This presentation is accessible via the Investor Relations section on KemPharm's website and is also included with the webcast. Joining me on the call today will be Travis Mickle, President and CEO, who will provide an update on KemPharm's corporate and clinical development achievements and LaDuane Clifton, our CFO, who will review KemPharm's third quarter 2017 fiscal results. At the conclusion of the remarks we will then proceed to a question-and-answer session. I will now turn the call and the presentation over to Travis.

[Travis Mickle:]

Thank you, Dan, and welcome everyone. As Dan mentioned, we have provided a brief slide presentation to accompany today's remarks. The third quarter continued what has been an active 2017 for KemPharm and was highlighted by several advances which we believe demonstrate the progress of the potential of our proprietary ligand activated therapy or LAT prodrug development platform. On the clinical development front, we submitted and received FDA clearance for the IND application for KP484, our newly discovered super-extended release prodrug for the treatment of ADHD. During the quarter, we also announced the completion of the FDRR process for Apadaz and the submission of an amended new drug application for which FDA assigned a PDUFA date of February 23, 2018. Lastly, we are pleased to have announced a technology licensing agreement with Genco Sciences to potentially leverage our LAT platform to develop a prodrug for the treatment of pediatric Tourette's Syndrome when accompanied by ADHD. We are still in the discovery phase, we are hopeful that this agreement with Genco will not only enable us to expand our ADHD product pipeline, but will also serve as a model for future licensing agreements involving our LAT platform. Collectively, these developments set the stage for what we expect to be an active close to 2017 and the beginning of 2018. As discussed on prior quarterly conference calls, KemPharm's mission is to build a portfolio of projects that are an improvement on currently improved drugs and address unmet medical needs in large established markets or in treatment indications that are significantly underserved. In our estimation prodrugs offer an attractive risk cohort profile and that projects can improve their performance of the parent drug and offer development time horizon that is vastly shorter than a traditional new chemical entity. This is because the active ingredient is usually known to be safe. Therefore extensive safety studies and clinical trials are typically not necessary. Our ADHD portfolio exemplified this strategy and the potential of managers that prodrug products could offer. With KP415 and KP484, KemPharm announces it as two differentiated ADHD product candidates that have the potential to meet key patients and prescriber needs potentially enabling KemPharm to capture a large portion of the growing ADHD patient market. KP415, our extended release methylphenidate prodrug for the treatment of ADHD is one of our highest priority pipeline candidate and we believe our greatest near-term value driver. The prodrug is designed to address the unmet needs we currently marketed methylphenidate ADHD treatments including earlier onset of therapy, longer total duration of therapy and consistency of the therapeutic effect. In addition the pro-drug offers the possibility of a lower abuse potential. Recognizing the significant opportunity, we are rapidly advancing the development of KP415 and expect to meet several important milestones in the fourth quarter and early 2018. Namely, we plan to advance KP415 into the single required human efficacy trial which we expect to initiate prior to yearend. The intent with the efficacy trial is to produce data that demonstrates a very early onset with a potential duration of up to 13 hours, a profile that we believe is well suited for a number of ADHD patients for typically require a better total duration than available methylphenidate product. Data from the KP415 human efficacy trials are expected in the first half of 2018. And should the results align with prior studies, including the favorable phase 1 study data announced in conjunction with our second quarter update. We continue to anticipate filing a new drug application for KP415 prior to the close of 2018. In parallel to the end of the efficacy studies, we have initiated a human abuse liability program for KP415 to assess the abuse potential of the project relative to methylphenidate via the intravenous, intranasal and oral routes of abuse. Initial intravenous HAL data should be available in early 2018 with intranasal and oral abuse data later in the year. As mentioned earlier in the call, the KP484 s moving ahead as planned with the filing and recent acceptance of the IND. Developed as a super extended release project version of methylphenidate, KP484 is designed for the treatment of ADHD in patients that respond best when a much longer duration of therapy is required, which is more typical in adult patients. Having received IND clearance from the FDA, our plan is to develop KP484 along a similar pathway as KP4145 with efficacy studies of KP484 initiating in 2018. Of importance, the KP484 program is expected to leverage data from our current and ongoing KP415 research including the PK and HAL study, which should allow us to progress along an expedited development timeline and towards a potential NDA in 2019. We consider KP415 and KP484, our fully development product candidates not only because each has rapidly advancing in the clinic toward potential near-term NDAs, but also because the products could offer the opportunity to address important patients and prescriber need as well as to fill key voids in ADHD therapeutic landscape. Despite the movement of generic therapies into ADHD space, there's clear evidence that clinicians and ADHD patients desire innovative therapies that offer improved and consistent duration of effect. This is exemplified by the early success of Shire's new extended release amphetamine based product MYDAYIS, which launched in late August. According to Shire's recent financial results, MYDAYIS accounted for 19,000 prescriptions and 10.2 million in revenue in approximately two months on the market. This is quite a strong start and we believe speaks to an interest among clinicians and patients for differentiated ADHD medications that provide meaningful benefit. Our strategy with KP415 and KP484 is to address this demand within methylphenidate portion of the ADHD market, which in 2016 accounted for approximately 19.8 million prescriptions and 3.8 billion in sales. For KP415 there is potential alignment with several market dynamics. KP415 has a potential to deliver key advantages for the ADHD market as indicated by prescribers. These include duration of therapy, lower abuse potential and early onset of action. Further, the prodrug design of - weighing all these factors, we believe that KP415 if approved has the potential to be one of the first truly differentiated methylphenidate product launched in the ADHD market in the past several years. The same is true of KP484 which we're developing primarily addresses the large and growing population of adult ADHD patients. It is estimated that approximately 10.5 million adults have ADHD, making adult patients the largest segment of the ADHD market. KP484 offers the potential to meet this increasing demand in adult ADHD treatment, which we believe has been largely underserved. Prior to MYDAYIS, the last seven products launched in ADHD space have been fully focused on the pediatric patient and namely as patient compliant dosage forms. KP484 has the potential to be the first new methylphenidate based product which is typically developed for the adult ADHD market. Additionally, KP484 could provide an opportunity to address several potential indications beyond ADHD where stimulant based therapies have shown effective. While KP415 and KP484 represent two of our most advanced products, we're now exploring the new opportunity to add a product to our ADHD portfolio. As announced in early October, we entered into a technology licensing agreement with Genco Sciences with the goal of creating a new prodrug product for the treatment of pediatric Tourette's syndrome when accompanied by ADHD. Although still in discovery phase, we are very excited by the opportunity to harness our LAT prodrug discovery platform to potentially develop a new product for an orphan-drug area of the ADHD market. Additionally, this agreement is the first of what we hope will be replicated as a model for our strategy to leverage LAT to enhance the performance of an active pharmaceutical ingredient and increase the marketability of the parent drug. I would like to now hand the call back to our EVP of Government Affairs and Public Relations, Dan Cohen who will review the developments of the Apadaz FDRR and our pain portfolio.

[Dan Cohen:]

Thank you, Travis. The key development in our pain portfolio during the third quarter was the completion of the formal dispute resolution requests or FDDR process for Apadaz, the filing of an amended NDA for Apadaz and the assignment of a February 23, 2018 PDUFA date. As a reminder, we began the FDDR process for Apadaz in November of last year with the expectation to provide an open forum to discuss questions of science and public policy, involving appropriate labeling language for Apadaz. Following a very professional and thorough discussion of the issues related to the interpretation of science, legal issues related to potential labeling and public policy objectives of the agency, we believe the FDA has outlined a pathway for a possible product approval that we believe may offer a commercially viable product label, including information that informs the physician of the product potential we expect to demonstrate in the commercial environment. While this was a very important accomplishment for KemPharm, we believe we are in a significantly better position with Apadaz. As a result, there remains several risk to Apadaz approval over the course of the NDA review. These include a failure to reach agreement on the product label language, a changing environment in the consideration of approvals for opiate products and even the possibility of a second adcom to review our existing data. Given this, it should be noted that our continued investment in abuse deterrent opioids is a strategic and iterative decision process. The resubmission of the Apadaz NDA is part of that decision-making process, as is the advancement of our other pain prodrug products, including KP201/IR, KP511/ER and KP511/IR. Regarding KP511 program, we announced on Monday that the USAN council has approved the use of a nonproprietary name, Asalhydromorphone, for the use as the descriptor for the active pharmaceutical ingredient. Asalhydromorphone is a prodrug of hydromorphone being developed as a potentially less abusable hydromorphone product for the treatment of pain severe enough to require daily, long-term opioid treatment. Chemically, Asalhydromorphone is a conjugate of hydromorphone and two aspirin moieties. It is believed that the resulting compound may lead to a lower abuse potential than hydromorphone by itself. The assignment of Asalhydromorphone of USAN marks the second opiate product developed with our LAT prodrug platform to be granted an officially recognized new chemical structure. The first occurred in 2013 with the assignment of the non-proprietary name, benzhydrocodone or KP201, the prodrug in Apadaz and KP201 IR. I will now return the call to Travis.

[Travis Mickle:]

Thank you, Dan. With the inclusion of Apadaz and the addition of the Genco program, our pipeline consists of multiple products at varying stages of development, targeting both mass market and orphan indication. For a company of KemPharm size and such depth and diversity is unusual. Value potential is an overused term in the biotech and pharma industry and I do believe that our current programs combined with the ability to harness our LAT platform offer KemPharm, an abundance of growth opportunities, both near term and longer range. With that, I would like to now hand the call over to our Chief Financial Officer, LaDuane Clifton, who will review our financial results.

[LaDuane Clifton:]

Thanks, Travis and good afternoon, everyone. I will provide a brief overview of our results for the third quarter 2017. Additional details are available in our press release, which was published just prior to this call. For third quarter of 2017, we reported a net loss of $10 million or $0.68 per basic and diluted share, as compared to a net loss of 9.8 million, or $0.92 per basic and diluted share for the same period in 2016. The net loss for Q3, 2017 was driven primarily by a loss from operations of 9.6 million, and net interest expense and other items of 1.7 million. These were partially offset by non-cash fair value adjustment income of 1.3 million that was recognized during Q3. Loss from operations was 10.4 million for same period in 2016. The decrease in loss from operations compared to the same quarter in the prior year was primarily due to severance expense recognized last year of $3 million, which did not reoccur in the current quarter. This decrease was partially offset by an increase in research and development and general and administrative spending of $2 million and $200,000, respectively, period over period. As of September 30, 2017, total cash, cash equivalents, restricted cash, marketable securities, trade date receivables and long-term investments, was $55.6 million, which reflects a decrease of about 10.2 million compared to June 30, 2017. This leaves KemPharm in a solid capital position with existing resources expected to fund our development and operating activities through the second quarter of 2019. I will now return the call back to Travis.

[Travis Mickle:]

The third quarter of 2017 continued a strong wave of momentum from KemPharm, which should only increase as we approach several key milestones later this year and early 2018. With that, I would like to thank you for your time and turn it over to see if there is any question.

[Operator:]

[Operator Instructions] Our first question comes from the line of Randall Stanicky of RBC Capital Markets.

[Dan Busby:]

This is Dan Busby on for Randall. So now that you have a PDUFA date for Apadaz on February 23, could you provide any color on when you could potentially launch, assuming approval and then related to that, you've talked about a couple of different potential commercial strategies. Can you elaborate on your current thinking around that and specifically touch upon positioning with regard to pricing and formulary status?

[Dan Cohen:]

Yeah. I'll actually take the first item on that with the potential launch and then I'll turn it over to Rusty Johnson, our Chief Business Officer to answer your second part of that question. But with the launch, once the product is actually approved, the next stage after that, we actually have to go and seek DA quota. In this particular case, it's not a straightforward process because we have a new molecule and that new molecule has to be placed in the Controlled Substance Act. And based on the current process, which is roughly a 90-day window, we are hopeful that we can get that accomplished quickly. Additionally, there may be additional dosage strengths we want to include. We haven't provided specific guidance about a launch time, but you can expect it anywhere from 90 days or later after the potential approval date.

[Rusty Johnson:]

And thanks for your question, Dan. With regard to commercialization strategy, I think we've been talking to people some time for us pursuing really two paths, okay. And both of them involved partners slightly in a different direction. The first one obviously, as you might know, when a drug that has a PDUFA rate in fairly close range, potential pharma partners begin to take a look at that product and then try to determine how it might fit within their portfolio and as you could imagine, the discussions are going on and as they do in the background all the time around Apadaz. The second alternative and we've talked to people about this as well is looking at a novel partner, that being PBMs in general with the idea of a PBM helping sponsor, so to speak, Apadaz as its selected and sole generic equivalent of hydrocodone/APAP combo and here we would take a very aggressive pricing posture and work with the PBM across its members and various plans to make it the selected product, the selected hydrocodone combo for that PBM. Then the plan would be obviously to replicate that model across the various PBMs that are serving patients in the United States.

[Operator:]

[Operator Instructions] And at this time, I'm showing no further questions. I'd like to turn the conference back over to Mr. Dan Cohen for any closing remarks.

[Dan Cohen:]

We want to thank everyone for their participation on our call this afternoon and we look forward to the continued discussion over the coming weeks and months. Thank you and have a good afternoon.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.