Zevra Therapeutics Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 14, 2023

There are 8 speakers on the call.

Operator

Good morning, and welcome to the Zevra Therapeutics Second Quarter 2023 Corporate and Financial Results Conference Call. In a listen only mode. And following management's prepared remarks, the call will be opened up for questions from the company's covering Please be advised that today's call is being recorded. I will now turn the call over to Nicole Ochsner, Zevret Therapeutics' Vice President, Investor Relations and Corporate Communications. Thank you.

Operator

You may begin.

Speaker 1

Good morning, and thank you for joining us today to review Zevra Therapeutics' in the Q2 of 2023, outlining our clinical progress, operational achievements in financial results. Before we get started, let me take a moment to provide some important information. First,

Speaker 2

on the call.

Speaker 1

I encourage you to access the webcast slides and the press release, both of which were released this morning and are available in the Investors section of Zevor's website. These documents provide comprehensive insights into our results for this quarter. As we move forward with the presentation, it is important to highlight that today's discussions will include forward looking statements. On various topics, including updates on clinical development and regulatory journey of aramaklamal, the achievements and revenue milestones of Astaris and our French Early Access Program or EAP program on the achievement of our pipeline program, timelines for clinical trial enrollment, initiation, completion and data reporting from our clinical trials. However, forward looking statements are not promises or guarantees and are inherently subject to risks, uncertainties and other significant factors that may lead to actual results differing materially from those projections made.

Speaker 1

For a comprehensive understanding of these factors, please refer to the Risk Factors section of our Annual Report on Form 10 ks. I am pleased to welcome Zevra's management team members participating in today's call. On the call. I'm joined by Crystal Mickle, our Co Founder, Chief Development Officer and Interim Chief Executive Officer with Duane Clifton, our Chief Financial Officer and Josh Schaeffer, our Chief Commercial Officer and Executive Vice President on the call today. Now, I'd like to turn the call over to Crystal Mickle.

Speaker 3

On the call. Thank you, Nicole. Good morning and thank you all for joining us today. The year to date has been a dynamic time for Zebra and second quarter was quite productive for our team. We're very encouraged by the continued advancement of our rare disease pipeline programs towards multiple near term on the call for the call.

Speaker 3

As well as by the progress that we are making to add in house commercial capabilities needed to bring therapies to market directly. In addition, we continue to enhance our patient advocacy efforts, which include ongoing support of our early access programs for Air Mogamol.

Speaker 2

On the call.

Speaker 3

Our balance sheet remains strong and we believe that we have made solid progress towards our strategic mission of delivering much needed innovative therapies to people with rare diseases. On the call. An important update today is regarding our progress with the recent addition of the NDA for Eremarkable, on our product candidate for the treatment of Niemann Pick disease type C or MPC. Earlier this month, we participated in a pre submission in meeting with the FDA, which focused on a preview of the complete package that we anticipate resubmitting for review. On the call.

Speaker 3

The meeting was productive and collaborative and we gained valuable insights that we believe will help us to complete the package and give us our best chance for success. On the call. Regarding the development program for KP-ten seventy seven, our product candidate intended for the treatment of IH in narcolepsy, in our Phase 2 trial in IH is advancing with interim data expected by the end of this quarter, and we look forward to sharing that information as soon as it's available. On the pace of enrollment, top line results for the Phase 2 trial are expected to be available during the first half of twenty twenty four. In addition, the IND opening Phase 1 trial in our narcolepsy program has been initiated with enrollment now underway.

Speaker 3

In the Q2. We ended the Q2 with a solid financial position. As of June 30, 2023, cash, cash equivalents and investments were $87,400,000 which supports our forecasted operating cash runway into 2026. In addition, year to date net sales of Astaris surpassed $25,000,000 triggering the 1st net sales milestone payment of $5,000,000 which was received after quarter end this month. Earning the 1st net sales milestone for the Astarz program was an important milestone, providing momentum towards the possibility of earning a second net sales milestone in 2023.

Speaker 3

Our balance sheet continues to be a source of strength for our business, in place, especially given the prevailing conditions of the capital market. To round out recent events, just last week, we welcomed Tom on Anderson to our Board of Directors. He is a highly accomplished industry veteran with both commercial and rare disease expertise and his addition is another on the 1st step within the ongoing Board refreshment plan. As we welcome Tom to our Board, we also want to express their gratitude to retiring Board member, Matt Bluster. Matt has been with the company since before our initial public offering in April 2015, in his efforts to play a fundamental role in shaping our growth and advancing our mission.

Speaker 3

As a co founder of Zebra, I want to extend my personal thanks to you, Matt, for your many years in the press release. As we move forward, the Board continues to be unified in its support of Zevra's rare disease strategy. Now more than ever developing and commercializing therapies for rare diseases with a patient's first approach remains our mission as we work to build a best in class rare disease company. On the line. Since acquiring Aramarkamal, our team has been engaged in multiple interactions with the FDA as we prepare and optimize NDA data package showcasing the safety and efficacy of aramaximol.

Speaker 3

As in the press release. As I've mentioned previously, earlier this month, we held a pre submission meeting with the FDA. We were encouraged by the productive and collaborative nature of the meeting and we received important guidance from the agency that we will incorporate in San Diego package. As a result, we have refined our with expectations that we will resubmit the full NDA to the FDA by the end of this year.

Speaker 2

On the call.

Speaker 3

As you may recall, the complete response letter that Orpazyme received from the FDA in June of 2021 identified 3 main issues. On the call. The first issue was related to the validation and reliability of the MPC CSS instrument in measuring MPC disease progression. To address this issue, we plan to provide additional evidence to support the use of the scale as the primary instrument used in the efficacy trial. For the FDA confirmed that it is acceptable to conduct a new analysis of the original 5 domain NPCCSS by removing the cognition domain.

Speaker 3

The FDA also encouraged the company to conduct a qualitative study to assess the validity and robustness of the swallowing in the range of the 2nd issue was related to the appropriateness of how to handle data in the field affected by certain patient events and the method of primary endpoint analysis. To address this issue, we will be using an FDA preferred primary analysis together with additional supportive analyses. The 3rd issue is related to the strength of the confirmatory evidence to support a single efficacy study. To address the 3rd issue, we plan to provide additional data from multiple new non clinical studies as well as data from the 4 year open label in the presentation of the Phase twothree clinical trial. The recent interaction with the FDA was constructive and provided us with additional information that we believe will further bolster the quality of our resubmission and ultimately support regulatory success for the benefit of the MPC community.

Speaker 3

In parallel with the preparation of the NDA resubmission, we are laying the groundwork for the potential commercial launch of in the U. S. If approved, with the goal of making this groundbreaking therapy accessible to patients as soon as possible. There are several strategic imperatives to ensure a successful Aramark Mole launch. We are working to develop the MPC market through disease awareness with payers and prescribers.

Speaker 3

We believe patients can benefit from aramoclonal through key patient finding initiative, on the call, such as genetic testing programs, early diagnosis tools such as newborn screening and the development of other patient identification guidelines in resources. We also worked to establish Aramacamole as a foundational treatment for MPC patients by continuing to engage key opinion leaders and educating treating physicians of its clinical profile. On our call. Our goal is to decrease the time from diagnosis to treatment through market access and create a best in class patient and caregiver experience through education, patient services and reimbursement assistance. We are developing a tailored patient services program to support insurance approval, patient access and positive treatment experiences.

Speaker 3

And we will seek to continue our close collaboration with key stakeholders, including key opinion leaders and patient advocates to establish Zevra as a trusted and committed partner within the MBC community. Throughout this journey, we are committed to working alongside people with MVC, their families and caregivers, advocates and medical community members. We are extremely grateful for everyone who continues to participate in trials, FDA meetings and discussions and all of those who are supporting the development of treatments for MPC. Beginning with idiopathic hypersomnia or IH, we are pleased to report that our Phase 2 clinical trial evaluating KP-ten seventy seven is on the call. We are currently enrolling at over 30 sites across the U.

Speaker 3

S. As you may recall, the trial is a dose optimizing, double in placebos controlled, randomized withdrawal study to evaluate the safety of KP-ten seventy seven as well as potential efficacy endpoints such as sleepiness, brain fog and sleep inertia. Interim Phase on the Q3, 2023. On the call. Potential key differentiators include alignment of peak efficacy with patient need through dose optimized timing an expanded exposure range through Unique Pharmacokinetics.

Speaker 3

Based on the current pace of enrollment, we anticipate reporting top line data for the Phase 2 trial sometime during the first half of next year. In the past. In addition to the ongoing Phase 2 trial in IH, we expanded our KP-ten seventy seven clinical programs in April by opening in the press release. With the goal of exploring the possibility of adding an indication for narcolepsy and thereby expanding the potential that KP-ten seventy seven could address multiple sleep disorders. In the press release.

Speaker 3

The IND opening study, which is a Phase 1 clinical trial in healthy adults was initiated during the Q2 and enrollment has begun. As we move forward with programs in both IH and narcolepsy, we plan to evaluate the potential to initiate a Phase 3 in the trial in narcolepsy by seeking to leverage key data points from our IH program as well as leaning on the robust data generated for with SERDESX methylphenidate or SDX as part of the Astara's development program. As you may recall, SDX is the sole active on a pharmaceutical ingredient in KP-ten seventy seven. This strategic approach is aimed at enhancing our efficiency in developing KP-ten seventy seven and bringing this potentially life changing therapy to people in need across both indications. On the call.

Speaker 3

As you can see, we have been working diligently to drive progress in our regulatory and development programs. Now, I'll hand the call over to LaDuane, who will provide an update on our financial results and outlook. Duane?

Speaker 2

Thanks, Crystal, and good morning, everyone. On the call. As Crystal mentioned, we are pleased to announce that Astarus has reached a key milestone in the 2nd quarter, surpassing $25,000,000 in annual net sales for the first time. This achievement triggered a $5,000,000 milestone payment to Zebra, which has also been received at quarter end in August 2023. This underscores the growing demand for this important therapy within the ADHD treatment landscape.

Speaker 2

We also earned royalties on net sales of $800,000 for the Q2 and we are encouraged to see Astaras continuing to attain new record weekly prescription counts. With the momentum that Astarus is exhibiting through 2nd quarter, the trend towards the potential to earn a second net sales milestone by the end of 2023. We also anticipate that the quarterly royalties on net sales will continue to grow over the next several years. Beyond the first and second net sales milestones, there are several more we believe are attainable in the near future, bringing the potential to drive increased value for our shareholders. For Q2 2023, net revenue was $8,500,000 which was driven by the $5,800,000 from Astaris, on the call, including the net sales milestone and royalties earned in the 2nd quarter and $2,800,000 in reimbursements from the French early access program for Aeromocimel.

Speaker 2

In the press release. We ended with a net loss for Q2 of 2023, which was $5,100,000 or $0.15 per basic and diluted share, in the quarter, driven primarily by R and D expenses of $7,400,000 and G and A expenses of $7,000,000 offset in part by the $8,500,000 in revenue and $1,500,000 in other income. R and D expenses reflect the ongoing investments in the on KP-ten seventy seven clinical program as well as our ongoing work to prepare the Eremacqua NDA for resubmission to the FDA. On the call. G and A expenses reflect the investments we're making in our in house commercial capabilities as well as operational support needed to underpin the needs of our team as we prepare for in the press release.

Speaker 2

As of June 30, 2023, total cash, cash equivalents and investments were 87,400,000 a decrease of $7,900,000 compared to $95,300,000 as of March 31, 2023. On the call. The decrease was driven in part by increased third party R and D costs related to the ongoing Phase 2 trial for KP-ten seventy seven, on the Aeromakimel program and increased G and A expenses during the period. Of note, our available cash as of June 30, 2023 does not include cash payment of the $5,000,000 net sales milestone from Astarus, which was received at the quarter end. On the call.

Speaker 2

The total shares of common stock outstanding as of June 30 were $33,925,000 and the fully diluted common on shares outstanding for $49,315,197, which includes about $4,300,000 shares issuable upon exercise of warrants. The company's current operating forecast existing cash and cash equivalents and investments are expected to support our cash runway into 2026. Our forecast includes the ongoing reimbursements from the French early access program for Aramakimel, on the completion of the Aramacol NDA resubmission, commercial activities to support the launch of Aramacol, if approved, and completion of the 1077 development program for IH up to and including NDA submission. On our forecast, notably, does not include revenue from Aramacamole or the potential sale of the priority review voucher, on the call, which would be received upon approval of veramakimole. It also does not include the investments needed if we determine to proceed with a Phase 3 trial for KP-ten seventy in narcolepsy.

Speaker 2

Zevo remains committed to strategic financial management, focusing on on a prudent approach to capital allocation to support the advancement of our pipeline programs and ensure the successful development of transformative therapies. In addition, we continue to be vigilant in our business development efforts. We continue to scan for opportunities where in addition to our internal in development programs, we may be able to add other rare disease product candidates to our pipeline. As we look forward to the second half of this year and into next year, there are multiple catalysts that have the potential to deliver value for our shareholders. We are encouraged by our progress to date.

Speaker 2

On the call. And with that, we will now return the call to the operator for questions.

Operator

On the call.

Speaker 2

Thank you.

Operator

We will take our first question from Louise Chen with Cantor.

Speaker 4

Hi, good morning, everyone. This is Charlie on for Louise and Tanner. Thank you for taking the questions. My first question is on a potential second net on the last sales milestone you might achieve in 2023, how big is this potential milestone? Secondly, What are the expectations heading into the In and around Phase 2 IH readout?

Speaker 4

What caused it to be a home run scenario? Thank you so much.

Speaker 2

Well, thanks for your question and I'll take the first one, Crystal. The second milestone, we've not been able to disclose its magnitude or the on the sales threshold that we have to achieve in order to earn that milestone, but I think it's safe to say that it will be larger than the one we just earned in Q2, which was $5,000,000 So I'm a bit limited there, but I think that we can look forward to a continued sort of growth, not only in net on the balance sheet, but also in royalties and the size of the milestones. Crystal?

Speaker 3

Yes, great. And as far as your question regarding the interim data, As you may remember, the point of the interim data is really to inform us on the Phase 3 trial moving forward. And so what we're really interested in is looking at on the multiple dosing that we're looking at. So if you remember, we're looking at either a once dosing in the evening, prior to going to sleep or twice dosing, once in the evening and before waking. So looking at that and then also looking at the doses that are being used and seeing that those doses are higher than what is being used for other on a stimulants that are out there and making sure that we're in the right range for us as we move forward.

Speaker 4

Got it. Understood. Thank you so much and congrats on the results.

Speaker 2

Thank you.

Operator

And our next question comes from Oren Livnat with H. C. Wainwright.

Speaker 5

Congrats on the there at progress, but I wanted to focus on Aramaklamal. I just want to make sure I'm hearing correctly and not misinterpreting. I I think you said in terms of how to deal with missing data and certain patient events, You said you're going to move forward with the FDA preferred primary analysis. I can't remember if that's like a change from your prior expectations or ambitions. I I know there was a couple of different cuts you had highlighted earlier when you did the deal sort of like a rescored without cognition, some swallowing changes versus sort of an FDA analysis, which I think originally had a different P value.

Speaker 5

And so can you just help us understand What compromises were made? What changes, if any, were there? And I have a follow-up then.

Speaker 3

Appreciate the question. So, no, we actually are continuing with our strategy as we're moving forward with this resubmission. So, going with The FDA recommended analysis is not something that is new. And then when you're we're talking about the Validation and those other points, those are also things that will be included in the NDA. So Those are all still moving ahead as we have originally planned to do.

Speaker 5

Okay. And so the timing change, which is not material necessarily, but I'm just curious if that's just more calibrating after your meeting with the FDA or is there new stuff you've been working on whether it was non clinical stuff in animals or just analysis for a reanalysis of the data.

Speaker 3

So it really boils down to we had our FDA meeting very recently. And so it's a refinement of making sure that we present the data in a way that the FDA would like to see it. And so with that, there are a few additional analyses. There's refinement and the way that we're presenting our arguments and our data. So even though what we're planning to present hasn't changed, there is some nuances there that we are going to look at and so that pushes that a little bit out from that end of Q3 that we had originally talked about.

Speaker 5

Okay. And I guess you characterized this meeting as I think collaborative or productive or both, which is great. I think in the past, I don't know if it's in response to questions or if you volunteered upfront. You talked about, if necessary, you could take a, I guess, less collaborative or more aggressive approach with dispute resolution, things like that, if necessary. Am I detecting a change in tone here, because on the deck.

Speaker 5

I don't think that you feel actually more optimistic now, maybe after your meeting with the FDA than you did before and that you don't think you're going to have to pursue anything like that. And do you back to requesting the AdCom sort of upfront.

Speaker 3

So to answer your first question, those Options are always still available and still on the table. We do we were hopeful with this meeting that we had because it was a collaborative meeting. We were appreciative of the tone that the FDA had and so they do seem to be working with us to get this resubmission in. And then as far as what was your second point there or your last point?

Speaker 5

Whether you'd expect, I guess, upfront to request an FDA and AdCom meeting for this.

Speaker 3

So that's an interesting question. I don't think We will ask for it upfront. We welcome it if it comes from the FDA and that's still consideration if the FDA does not ask for it that we may ask for it ourselves, but it's not something that we'll ask for immediately upon resubmission.

Speaker 5

Okay. And if I just may look a little further down the line, assuming this all goes well, any progress that you are interested talking about on Aramarkamal Lifecycle Management. I think there was some hopes to improve dosing, get some more additional IP around the project, anything to report there?

Speaker 3

So right now we are focused on approval, but Those are always things that we will look for as we move forward.

Speaker 5

I appreciate the answers. Thanks.

Operator

And our next Question comes from Sumant Kulkarni with Canaccord.

Speaker 6

Good morning. Thanks for taking my questions. I have a couple. So on the resubmission of the aramaximol NDA, on the line. You mentioned the productive and collaborative process with the FDA.

Speaker 6

Which portion of the three parts of the complete response letter and your ongoing response Would you say that the majority of your last transaction with the FDA was focused on? And then I have a follow-up.

Speaker 3

So we really we presented everything because we did treat this as a pre submission meeting, But we have a large part of it was also focused on the confirmatory evidence that the FDA hadn't seen in the past.

Speaker 6

Got it. And then in the last meeting with the FDA, did the agency state specifically that no additional clinical data would be required? Or did the FDA make any on additional clinical data that may be required, but we're left with the discussion of Zevra on whether to run those or not prior to resubmission.

Speaker 3

There was no discussion about additional clinical data being needed.

Speaker 6

Great. Thanks for the clarification.

Operator

And our next question comes from Jonathan Aschoff with ROTH MKM.

Speaker 7

Hi, thanks. Good morning, guys. I was curious, so that was just a $670,000 booking for Astarus revenue versus 6 130 in the prior quarter. I was just kind of curious if that math is correct, because you said Aramaco Mall was 2,800,000, dollars 5,000,000 milestone just leave 6 evidently. Why was that kind of flat like that after the growth in the last couple of quarters?

Speaker 2

Yes. No. So It was not flat. So I guess when I read through all the components of revenue, when you if you add it all together, there is the cost of revenue of $677,000,000 which I guess if you look at the press release is a detail. So to be clear, we had $800,000 in net sales royalties from Astaars, so it was not flat.

Speaker 7

Okay. So the net Aramarko Mall is not 2 $800,000 It's a little less or it is $2,800,000 It kind of can't be $2,800,000

Speaker 2

There is a cost of revenue associated with the milestone. If you remember, we pay a 10% royalty to Aquestive. And so we had to recognize a 10% reduction based on that. That's the difference that you're thinking of. Okay.

Speaker 7

And I was curious in your response to the first question, you were talking about the interim IH data to inform a Phase 3 trial. But I was thinking, why do you even care about that. The final data is a few months away. Isn't that vastly more important and informative in the Phase 3 than what comes at the end of this quarter?

Speaker 3

So actually, no. The whole point of this Phase 2 trial was to inform the Phase 3 trial. Ultimately, this prodrug is a stimulant and so we know that there's going to be effect. And so what we wanted to to get out of this trial is really those nuances that we'll need to understand as we're preparing for the Phase in preparing the protocol for the Phase 3 trial. So this getting this interim data is going to allow us to kind of refine that Phase 3 trial, move forward with FDA meetings and further preparations for those for the Phase 3 trial while we finish up the Phase 2.

Speaker 7

Okay. And lastly, I guess it's fair to assume, maybe you can say this about your Astarus milestones that they will substantially decrease as a percentage of the sales figure that triggers them. Here it's a 20% ratio, but that should substantially decrease as we go forward. Is that at least fair to say?

Speaker 2

I haven't made that statement. So no, I wouldn't say that.

Speaker 7

So they might actually stay fairly in line with that 20% payout kind of ratio?

Speaker 2

I mean, I think that'd be a great outcome if it did. And I'd say this I would just remind you that when we went back and had a chance to renegotiate these milestones back in April of 2021. We really were looking for a way to pull milestones forward, if you will. And so those ratios are probably a little bit different than what you might think are typical of a market license. So the fact that the first few are in this range, I think speaks to some of those amendments we were able to get agreed to back in that timeframe.

Speaker 2

Yes.

Speaker 7

I mean to have $25,000,000 trigger a sales milestone of any kind is a pleasant surprise for sure. So you guys really did a good job on the front end of that. And that's all.

Speaker 2

Yes. Well, thank you. On the call.

Operator

Thank you. And this does conclude the Q and A portion of today's call. I would now like to turn the call back over to Crystal Mickle for any additional or closing remarks.

Speaker 2

On mute.

Speaker 3

Great. Thank you very much. We're excited about our progress in the first half of twenty twenty three and are looking ahead to continue our momentum. On the call. As we look forward to the second half and into twenty twenty four, we're focused on the following three top priorities.

Speaker 3

1st, to resubmit the Eramocimol NDA to the in the FDA and strengthen key functions and capabilities to support a successful launch if approved. 2nd, to complete the Phase 2 trial in idiopathic hypersomnia and prepare to advance KP-ten seventy seven into a Phase 3 trial sometime next year. And third, to continue our work to expand our KP-ten in the 77 program into narcolepsy. Corporate development also remains a priority as we actively engage in conversations to potentially acquire new pipeline assets that would be complementary to our portfolio and that could benefit from the potential application of our Prodrug technology. On the call.

Speaker 3

We're building something really special here at Zevra. We have a legacy of drug development success upon which we're expanding our capabilities by adding an innovative on a patient first commercial team, which we believe has the potential to drive meaningful value for our shareholders. But not only that, we're fully committed to our

Speaker 2

on a

Speaker 3

mission of bringing much needed therapies to people living with rare disease. Patients, caregivers and all of those for supporting the rare disease communities that we serve are at the forefront of everything that we do. I want to thank our shareholders for your continuing support of our efforts. On the call. Additionally, I want to give a special thanks to our employees for their energy, enthusiasm and relentless commitment to make Zevra a success.

Speaker 3

On the call. We're excited about the prospects, opportunities and potential for success in front of us. Thank you for joining us today and we look forward to speaking with you in the future.

Operator

On the call. This concludes today's Zevra Therapeutics 2nd quarter 2023 earnings call and webcast. You may disconnect your line at this time and have a wonderful day.

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Zevra Therapeutics Q2 2023
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