Zevra Therapeutics, Inc.
Q1 2016 Earnings Call Transcript

Published: 13 May 2016

[Executives:]

Travis C. Mickle - President, CEO and Chairman; Co-Founder R. LaDuane Clifton - CFO Jason Rando - Tiberend Strategic Advisors, Inc.

[Analysts:]

Ken Cacciatore - Cowen & Company Ashley Ryu - RBC Capital Markets Andrew Lynn - Canaccord Genuity Rohit Vanjani - Oppenheimer & Co.

[Operator:]

Good day, ladies and gentlemen, and welcome to the Q1 2016 KemPharm, Inc. Earnings 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]. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Jason Rando of Tiberend Strategic Advisors. Sir, you may begin.

[Jason Rando:]

Thank you. Good afternoon, everyone, and thank you for joining our call today. 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 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 Web site at www.kempharm.com, under the Investor Relations section, and we encourage you to review these documents carefully. Speaking on today's call will be Travis Mickle, President and CEO, who will provide an update on KemPharm's corporate and clinical development achievements including the recent events involving Apadaz. Following Dr. Mickle, LaDuane Clifton, CFO, will review KemPharm's first quarter 2016 financial results. At the conclusion of the remarks, we will then proceed to a question-and-answer session. I will now turn the call over to Travis.

[Travis C. Mickle:]

Thank you, Jason, and welcome everyone. I appreciate your time this afternoon. I just want to give a very brief synopsis of the company and what we do. For those listeners that would be encountering this call for the first time, first and foremost you should recall that KemPharm’s technology is designed, reengineered previously approved products into new forms referred to as prodrugs. Those prodrugs once ingested or used as directed will then impart the therapeutic activity for that particular product. And highly successful organization at discovering and developing these particular prodrugs and currently have eight different products in our pipeline with a goal of submitting an NDA for each one of those products starting in '17 with at least one per year following that. We did receive some very welcome news this particular week with the granting of the Fast Track for KP511, one of our prodrugs that we’ll discuss in a little more detail later in the call. I would like to transition over and discuss a little more on Apadaz, as Jason mentioned. Apadaz is our lead product currently being reviewed by the FDA as well as sNDA and the potential for approval. It is a combination of benzhydrocodone and acetaminophen where benzhydrocodone is a prodrug of hydrocodone. For those that are aware, hydrocodone/acetaminophen combinations are the most prescribed opioid in the United States and represent what’s known as an immediate release profile or immediate release class of opioids typically used in acute pain. This particular prodrug of hydrocodone imparts abuse deterrent properties at the molecular level that being that in this particular instance there’s no additional formulation that was added but the prodrug itself only digest down to hydrocodone once taken as directed that is it would be orally. So other routes of abuse particularly intranasal and intravenous, the prodrug is inefficient or delayed and thus doesn’t create the same rewarding effects that we’ve seen in the past with combination products. Last week, many of you know that we had an advisory committee meeting on the particular product. Advisory committee meetings can be again an opportunity for the FDA to seek outside council on any particular issues related to the drug development, drug discovery, clinical data, whatever the FDA can need in this particular instance. Many times it’s advice seeking, so there can be votes associated with those but the votes are not binding to the agency and only help inform what their decisions may be. In a particular instance of our advisory committee meeting, we did receive a positive vote for approval but a negative vote for the abuse deterrent language that was added as a last minute question. We think that was of course unexpected because that vote wasn’t there in the previous briefing documents, and also the fact that it was negative was disappointing to the organization. The reason really why we’re discussing and focusing on this is we still believe very strongly in that Apadaz represents the first immediate release product that can potentially address abuse in this space that has no abuse deterrent products. While the data in this particular instance is related to the immediate release profile of a prodrug, we think in fact it does provide benefits above currently available products. Certainly, we’re in full agreement with both the FDA and the committee that it’s both safe and effective. We’ve demonstrated bioequivalence, so there seems to not be any confusion there. But there was some confusion both with the committee and the FDA related to some of the data on tampering and clinical studies that were done. It is our hope and intension to work closely with the FDA to clarify any potential confusion and work forward to next steps, which would be discussion of the label in this particular instance. To really briefly summarize where we are with the NDA, we have a target action date, a PDUFA date of June 9. So typically at this stage in drug development, you would expect to have interactions with the agency where in fact you’re now going to be negotiating the label, having final discussions around what that should look like and we hope those will be very interactive and collegial as they have been through the entire course of drug development of Apadaz. Next steps for this particular product, I really highlighted already here. One thing that we should note is the organizational experience we have with prodrugs. Certainly, this isn’t the first time we’ve encountered this level of confusion. I think there’s very reasonable approaches that you can take to help and recalibrate positions around what is a prodrug, how does it work, why is the tampering relevant or irrelevant, and what is the relevance of the clinical data? And again, those experiences belong to the organization with our past histories and our current histories with the products that we’re currently developing. So while we think there’s a really good path forward, we are by no means indicating that we know what that end result will be. Certainly that ultimate decision will still lie with the agency. Looking a little bit more forwardly beyond Apadaz, so thinking about KP511, our prodrug hydromorphone now for severe pain with an extended release profile. As I mentioned before, we did receive a Fast Track designation, the IND was accepted earlier this year as well. We have initiated clinical trials. That study is ongoing and we expect to have our first in man proof-of-concept data this quarter. So in the second quarter, we expect to have data back from that program. Depending on the results of that data, we have additional data looking at some of the abuse deterrent properties in the clinic later this year as well. If you may recall the key attributes that we’re really looking at for a product like KP511 are different than what we’ve seen with Apadaz. This is an extended release product as we develop it, not an immediate product like Apadaz. And the profile that we’re looking for here is similar when you think about intranasal and IV abuse, but additionally we’ve seen preclinical data that strongly suggest the potential to mitigate overdose and perhaps oral abuse as well as the potential to reduce opioid-induced constipation. Again, a much needed patient benefit for this potential product. The next product in our pipeline is KP201 immediate release without acetaminophen, so essentially an acetaminophen-free version of Apadaz. I think there was a very good feedback on the properties of the prodrug. As many of you know in this particular instance, acetaminophen actually creates a little bit of a burden for Apadaz in that it makes most of the dose that would be taken intranasally go down the back of the throat. We’ve seen very good indications in our study KP201/AO3 where we just look at the pharmacokinetics of this product, alone without the formulation now, just the benzhydrocodone itself and we see drastic differences in both liking and drug exposure. And we think that potential product has some tremendous advantages over even Apadaz, but certainly over current technologies. We’re still planning an IND submission this year. There will be additional clinical studies and clinical data that we’ll finish very rapidly after that. So we plan to file the NDA in 2017. As well this year, we will be working diligently towards KP415, our first foray outside of abuse deterrents. Now we’re focused on a prodrug of methylphenidate. This particular prodrug is designed to be very similar to Vyvanse and how it delivers its effectiveness to patients. So here we’re looking for a 13-hour duration of use and potentially being built under the label, as well as a robust pharmacokinetic profile that can deliver effective and reliable therapy, which as you can imagine would be very critical for treatment of ADHD. Next steps in our drug development would be IND submission this year as well as human proof-of-concept data late this year. So we expect this to happen in the second half for both of those milestones. Again, this has been again quite a year already for KemPharm and our potential products. Many of us know having been through this many times with different products, drug development is never a straight line. You usually have some twists and turns and I think we’ve encountered one of our very first with this particular product. Our goal is still ultimately to have a truly differentiated pipeline, develop those products and then either through commercial collaboration or commercial launch to take those products forward. So I’m going to turn the call over now to LaDuane Clifton who will give you a brief overview of KemPharm’s current finances. LaDuane?

[R. LaDuane Clifton:]

Thank you, Travis. Results for Q1 2016, we had a net loss of 2.9 million or $0.20 per share. That’s compared to a net loss in the prior year Q1 2015 of 6 million or a loss of $2.50 per share. The difference there is driven primarily by a non-cash fair value adjustment, which was an increase of 12 million to the warrant liability associated with those derivatives, offset by a $4.7 million loss and the extinguishment of the term notes that we completed during the quarter. Again, those are non-cash adjustments that reduced that to $0.20. Total cash and cash equivalents and marketable securities at March 31 were 111 million and the cash used in operations was about 3.9 million, which included receiving the PDUFA fee refund for the Apadaz NDA, which was approximately 2.4 million. If you account for that adjustment, the cash used during the quarter was about 6.3 million, which was in line with where we expected to be. Thank you very much.

[Travis C. Mickle:]

Thanks, LaDuane. I’d like to thank everybody for attending the call. Just a brief summary and we have upcoming and near-term milestones related to the review and potential approval of the product Apadaz. We are looking forward to working strongly with the agency to make sure that those milestones go according to their plan and that we’re able to work with them towards a beneficial goal for both us and the FDA. Remember that we’ll have some very near-term data on our pipeline here with KP511. Expect if that goes well, we could have additional data this year. You may have heard on other calls as well and I forgot to mention it during the main call is we may have some additional data related to the safety of KP201. That data looks like it’s going to start and perhaps finish some early pilot studies this year. So we’ll be looking forward to that as well in the coming months and quarters. I’d like to thank everybody again for your time this afternoon. And I’ll now turn it back over to Q&A.

[Operator:]

Thank you. [Operator Instructions]. Our first question comes from Ken Cacciatore of Cowen & Company. Your line is open.

[Ken Cacciatore:]

Thanks, guys. Just a couple of questions. Just first and just trying to nuance this a little bit. Can you be a little bit more specific on the areas that you thought there was the biggest difference? I think the word confusion is maybe not the right word, but misunderstanding or disagreement between the agency or the panelists and yourselves and how you will clarify that between now and the PDUFA, or at least try to clarify it? And then also, can you talk about if that can’t be clarified and the label is given to you maybe at a little bit different than what you were hoping for, can you talk about how you might be able to improve or work on that label, maybe post-approval? Get into a little bit about are there any other studies you can run? I know you had run some hypoxia studies. Maybe you could talk about those, the data you have and maybe further data that could be generated or other data that could be generated to continue to differentiate a label, just in the case that you’re not happy with the original label you receive? Thank you.

[Travis C. Mickle:]

Sure, no problem. So I can’t go into detail, of course, about what – maybe there may have been some differences of opinion. I think in this particular case, there’s no disagreement here. The data is what the data is. It’s really about confusion around the interpretation. And I mentioned on the call, tampering data and some of the clinical data I think in most cases there was full agreement on the pharmacokinetics, the differences that were seen there over multiple studies and some endpoints that were met as far as drug liking over time. So with those particular ones, I think there’s little disagreement. Here it’s just again about clarifications as opposed to a true disagreement between the agency and ourselves. Many times those can be easily resolved. On the second part of your question, for those listeners that don’t recall, we did see last year in a study AO1 a statistically significant difference in the exposures from hydrocodone released from benzhydrocodone when we dosed at super therapeutic doses. So doses that would be used in abuse or overdose settings of both 8 and 12 tablets taken all at once. And with that exposure we saw a safety indication with Apadaz that was interesting enough that we want to pursue looking at respiratory depression and respiratory drive. So we haven’t initiated the study yet but there is a study that was planned and will be starting shortly around looking at respiratory drive and how that may be affected at the high dose level here. Again, it’s a pilot study. And a newer model has been used before by other organizations, but is to see if there’s a strong enough safety signal for further investigation. I think that’s one thing that we could do. Besides that, we really have to wait for the agency feedback. If there’s something they wanted to see that somehow was not divulged during the development cycle, we just don’t know that yet.

[Ken Cacciatore:]

Thank you.

[Operator:]

Our next question comes from Randall Stanicky of RBC Capital Markets. Your line is open.

[Ashley Ryu:]

Hi. This is Ashley Ryu on for Randall. Thanks for taking the question. So I guess just to start, will you still launch the product if you don’t get the label but the product is approved just given how generalized genericized the market is? And can you also provide some examples of when the FDA maybe went against the AdCom’s recommendation that you think might be a good comp for this situation with Apadaz? Thanks.

[Travis C. Mickle:]

Sure. I think in the first situation, we don’t know enough yet about what the potential label would look like. If it’s no different than Norco, I can tell all the listeners very honestly I see no value moving that product ahead. But if there are potential studies in paths that we think are low risk and can be negotiated with the agency, then that could be certainly tempered or differentiated at that point. What was the second question that you had?

[Ashley Ryu:]

Can you just provide some examples of when the FDA went against AdCom’s recommendation that you think might be a good comp for this situation with Apadaz?

[Travis C. Mickle:]

I think in this particular instance, the one that comes to mind is the Zohydro instance and I hate to associate ourselves with that particular case. But here was an organization that clearly defined and demonstrated both safety and efficacy but the panel felt that abuse deterrent was necessary for these types of products. Here you kind of have a similar instance where the panel actually agreed that safety and efficacy were both met but the abuse deterrent properties weren’t what they had seen with other products. So I think there is a very relevant comparable because it was the same division that reviewed both products.

[Ashley Ryu:]

Got it. Thank you.

[Operator:]

Our next question comes from John Newman of Canaccord. Your line is open.

[Andrew Lynn:]

Hi. This is Andrew Lynn on for John. Thanks for taking the question. Can you discuss some of the formulation work for KP511? Will there be any physical abuse deterrent barriers in addition to your prodrug technology that will be included in the formulation?

[Travis C. Mickle:]

Yes. I have discussed in the past the possibility of us adding a physical abuse deterrent technology. We all know of several people that have these types of technologies. Because of the prodrug itself, we don’t know what it ultimately will do in the clinic. We’re still not a 100% sure what we’re going to do. But what we’ve seen pre-clinically is that it’s an immediate release prodrug and we want to make it an extended release product. So in this particular instance, I think it’s more than likely we would use some sort of physical abuse deterrent formulation that could help us impart both ER characteristics and some of the tamper-resistant properties. Certainly, the prodrug doesn’t need it but in this instance, we do have a lot of drug on board and we would like it to stay in the formulation for as long as possible.

[Andrew Lynn:]

Okay. And your first in man proof-of-concept data, will that determine the technology that you’ll use in your next study?

[Travis C. Mickle:]

No so much the technology but perhaps what formulations would work best, so the feasibility is there. In this particular case, we do not have a partnership on board yet. We are currently evaluating several of the best-in-class technologies available.

[Andrew Lynn:]

Great. Thanks.

[Operator:]

Our next question comes from Rohit Vanjani of Oppenheimer. Your line is open.

[Rohit Vanjani:]

Hi. Good afternoon. Thanks for taking the questions. I just wanted to confirm. I think there were two panelists who presented at the AdCom on behalf of the FDA from the Office of New Drug Products and one from the Control Substance Staff. I just want to make sure, are those people separate from the division of anesthesia, analgesia and addiction products? Will the division director be solely responsible for approval and labeling for Apadaz apart from those two other presenters?

[Travis C. Mickle:]

I think the other divisions certainly give guidance but ultimately I do believe that the division makes that determination. But again, I’m not fully familiar with the entire regulatory process here. So I think that’s my belief right now but I’ll have to verify that.

[Rohit Vanjani:]

Okay. And then I think I asked you this last week, Travis. So in the presentation you talked about 1,600 combinations of solvents. Last year when the press release came out, you talked about 1,000 different combinations of solvents. Was the combinations that you talked about the solvent plus the temperature used plus the agitation of the solvent? Was that the combinations that you’re referring to?

[Travis C. Mickle:]

It was all the different combinations; so different solvents, different pHs, different buffers. There was crushed product. There was intact product. And there was extracted product. And then on top of that, we took all of that and did hydrolysis, experimented at different temperatures. So if you look at the combination and I believe the original statement was it was over 1,000. We didn’t want to give the exact number. But when you combine in the IV studies that we did and the smoking study that we did, it was over 1,600 different tests and all of those were done in triplicate. And it was --

[Rohit Vanjani:]

And – sorry, go ahead.

[Travis C. Mickle:]

I was just going to say that in this particular instance there was only four conditions in the best-case scenarios that would release greater than 50%. All of them took two hours or longer to even get close to that. And none of them in our view were something than an abuser had ready access to or could ingest or abuse right after that.

[Rohit Vanjani:]

Okay. And do you remember or have you ever released how many – just the solvent number, how many solvents you actually tested? I think in the slides, I counted five ingestible, 14 advanced non-ingestible and seven advanced buffers. I didn’t know if those were all mutually exclusive and all inclusive, or was there more on top of that?

[Travis C. Mickle:]

There was more on top of that. There was a very comprehensive list. The agency actually paired it down and said, nobody’s going to be able to even get this because we don’t know what it is or we’ve never seen this in any of the literature as something somebody has access to. So they paired it down from what our original list was. But we worked closely with the CSS and actually they reviewed the protocol, the list of solvents and conditions. They requested additional ones during their review cycle. We did all those studies with still the same results. Just a handful, again, four or so conditions gave you anywhere close of 50% release and all of those required advanced solvents or conditions that couldn’t be ingested and took more than two hours.

[Rohit Vanjani:]

Okay, great. Thanks.

[Operator:]

I would now like to turn the conference over to Travis Mickle for closing remarks.

[Travis C. Mickle:]

Again, we’re very appreciative of everybody that was on the call this afternoon. Look forward to providing updates as we are able to. Many times folks need to recall that labeling discussions are deemed to be confidential and we don’t want to do anything to jeopardize our relationship with the FDA or the potential approval of Apadaz. So we look forward to giving you the right information at the right time as soon as we possibly can, and I appreciate your continued support.

[Operator:]

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