Zevra Therapeutics Inc. Q1 2023 Earnings Call
Good afternoon, and welcome to the Zebra Therapeutics first quarter 2023, corporate and financial results Conference call. Currently all colors had been placed in a listen only mode and following management's prepared remarks, the call will be open for questions from the coffee is covering analysts.
If you're already covering analysts that would like to ask a question at that time. Please press star one on your telephone keypad, if you need to remove yourself from the queue Press star two.
At any time should you need operator assistance press Star Zero. Please be advised that this today's call is being recorded I would now.
I'll turn the call over to Nicole Ochsner separate therapeutic Vice President Investor Relations and corporate Communications. Please go ahead ma'am.
Good afternoon. Thank you for joining us today to review updates related to Zephyrus first quarter, 2023, clinical and operational progress and financial results.
Few housekeeping items before we start.
I invite you to view the webcast slides and the press release, both of which were issued this afternoon and can be found in the investors section of our website.
During today's call, we will be making statements. Several forward looking statements. These forward looking statements include but are not limited to the clinical regulatory and commercial path for air Moslem I'll start with <unk>.
Revenue milestones and expected reimbursements from the French EAP program. The plan next steps and our pipeline programs the timing for enrollment initiation completion and reporting of data from our clinical trial.
Senior leadership and board members transition and refreshment and other corporate update.
These statements are neither promises nor guarantees and involve risks and uncertainties and other important factors that could cause actual results to differ materially from those discussed here important factors that could cause actual results to differ from any forward looking statements can.
And be found in the risk factors section of our quarterly report on Form 10-Q for the three months ended March 31st.
2023, which is expected to be filed later today with the SEC.
Yeah.
Moving on to the agenda for today's call I am pleased to welcome Cerberus Board Chair and management team members participating in today's call I'm joined today by our board chair camera favor Ito.
Our Chief Development Officer, and cofounder Crystal Mitchell, our Chief Financial Officer would weigh in question and our Chief Commercial Officer, and Executive Vice President of business development, Josh Shafer.
I'll now turn the call over to Tamara.
Thank you Nicole and thank you all for joining us today.
Before the team reviews, our first quarter 2023 progress I'd like to share a few thoughts about where we are today and where we're headed.
This has been a busy and eventful period for Safra is never continues to execute on its corporate strategy focused on developing and commercializing novel Therapeutics designed to address the unmet needs of people with rare diseases.
Poor Dudley bad things ever pipeline remains the company's top priority, it's the cornerstone for value creation upon much our rare disease strategy has been built.
Recently, we completed our 2023 annual meeting of stockholders.
And during that process, we received feedback from many of our stockholders.
Can change.
Which culminated in the election of several new directors to our board.
We welcome them to our team and we intend to continue supporting the company's rare disease strategy unified in our mission to generate long term value for our shareholders.
This has also led to leadership changes.
And I'm pleased to announce today that while we conduct a search for a new CEO christal medical our cofounder and Chief development Officer will be taking on the role of interim President and CEO effective June 1st with.
With her leadership and the support of the entire executive team.
Take from this experience a renewed commitment to bringing desperately needed treatment.
So the patients we serve and.
And we look forward to the achievement of our shared goals.
Goodbye provide more details about the recent changes in April devers shareholders voted to elect John Bodie Douglas Calder Inquiry Watson does every board of directors occur.
Accordingly, Richard Pascoe, Christa propulsion and Doctor, David Tierney stepped down from the company's board.
Additionally, Wendy Dixon was appointed to the board to fill a vacancy.
In addition to that Matthew police car and Joseph Sillery have indicated that they will not stand for reelection at the company's 2024 annual meeting and I intend to retire as soon as replacement program for them.
Last week Rich Pascoe advise the board of his decision to resign from his role as CEO effective June one.
Richard's departure was a personal choice, but he made in response to the outcome of our annual shareholders' meeting.
As I've already mentioned, we're pleased that Crystal Mackall will serve as the interim president and CEO effective June 1st while the board conducts it conducts a search for a permanent replacement.
As the newly appointed chair of the board I'd like to thank rich Pascoe, Chris Posner dive attorney and Travis Mickle for their leadership and numerous contributions through the years helped several become the company. It is today and their commitment to our shared.
The vision of creating a commercially focused.
Rare disease Therapeutics company.
As we look to the future if ever is well positioned for success with a strong pipeline of promising rare disease product candidates with multiple value, creating milestones expected in 2023 and beyond.
We have a leadership team with the depth and experience needed to execute on our strategic goals.
And the priorities to guide the company through this critical period and to ensure that shareholder and patient interest are aligned.
I'll now turn the call over to Crystal to provide an overview of our recent corporate and pipeline highlights Chris.
Crystal.
Thank you Cameron and good afternoon, everyone.
The rebrand of our company is that during the first quarter was the culmination of a series of strategic moves over the past two years to refocus the company toward rare disease therapeutics.
The acquisition of Air Mark them. All in 2022 was a key element of the strategic growth of our company as this program complemented our in House development program K P. 10, 77 for the treatment of rare sleep disorder known as idiopathic hypersomnia.
Our long term strategy has been designed to build upon our expertise in drug development, which is now focused on rare disease with the goal of commercializing our products in the U S. Using a small best in class commercial team as we prepare for Resubmission of the Aramark them all N D. A.
Also in the process of building the commercial capabilities that will allow us to bring a much needed therapy to patients with niemann pick disease type C. Also known as N P C.
Believe our successful execution of this strategy has the potential to create meaningful long term value for shareholders.
So why is that right or new name is Greek for Zebra, which is the internationally recognized symbol of the rare disease community. We honor that many stripes a rare disease that are reflected in our new branding and we embrace our name as a direct commitment to the rare disease community to that end. We recently joined the corporate council of the National organization for rare disease.
Also known as Nord.
Beyond our name we have established a rare and unique position for zebra in the biotech marketplace as a development stage company with a growing revenue stream and reinforces our already strong financial position.
Collectively we believe that our strategy our team our strong financial foundation, and our diverse portfolio of multiple clinical programs combine to enable us to deliver value to shareholders in 2023 and beyond.
Importantly, we have a fully engaged and supportive board of directors that is positioned to help us advance our company's mission of addressing the unique unmet needs of people with rare diseases.
That was new direction capitalizes on our strengths and our financial position, enabling us to retain the value of our hard earned approvals and control our commercial destiny, while delivering much needed therapies to patients with limited or no treatment options.
As part of our ongoing efforts to build and strengthen our team to execute our rare disease strategy, we announced that Sun Gunther was promoted to chief scientific officer during the first quarter Vantiv.
<unk> continues to lead this effort research team and Leverages his impressive background in drug development and clinical research to advance our programs.
In addition, Josh Schafer was added to our leadership team as our Chief commercial Officer, and Executive Vice President of business development. His expertise and leadership will be invaluable as we grow our commercial team. Finally travelers nickel continues to be fully engaged as a scientific consultant and he is laser focused on the air Mark them all resubmission.
Shifting to our financial results. We ended the first quarter in a strong position with cash cash equivalents and investments of $95.3 million as of March 31st base.
Based on our current operating forecast our available capital is expected to extend our cash runway into 2026, placing separate in a fortunate position compared to many other biotech companies in today's volatile capital markets.
As Tamara stated the entire organization remains fully committed to our rare disease strategy and we are focused on continuing to partner with key opinion leaders patients families and advocacy groups to ensure that our therapeutic approaches are answering their biggest quality of life and disease management concerns, while ensuring that our products are relevant.
Capable of commercial success.
The first quarter of 2023 in recent months were significant for us ever and its pipeline with new positive progress for both development programs well first our focus on air Mark them all.
Aramark is our orally administered product candidate for M. P. C has been extensively studied in multiple clinical trials from phase one to phase III.
Currently Aramark mall has been granted orphan drug designation for N. P. C. In both the United States and the European Union and fast track designation breakthrough therapy designation and rare pediatric disease designation from the FDA if a P.
In the U S Air Mark more would also be eligible to receive a pediatric priority review voucher.
That work continues to advance aramark them out towards the Resubmission of its new drug application to the FDA as early as the third quarter of this year.
The long term goal for air Mark them. All is that once approved is ever plans to commercialize the product ourselves retaining the full market value for shareholders with a small nimble commercial team. We believe we can fully service specialists and medical centers treating the M. P C patient population with low commercial costs.
I'll dig upon our U S and EU early access programs as well as our relationships within the NPC community. We believe we have a strong foundation to help support the adoption of Aramark them all.
Beyond our immediate focus on a successful U S. Commercial launch we also see commercial potential for Aramark them, all outside the U S, including that you and other potential geographies.
Now, let's turn our attention to K P. 10, 77, our lead program for where sleep disorders I'll begin with an update on our idiopathic hypersomnia indication and finished with our narcolepsy indication.
Due to limited treatment options for idiopathic hypersomnia also known as I age and it's small and underserved community of approximately 37000 patients seeking treatment in the U S. K P. 10, 77 has been designated by the FDA as an orphan drug and its potentially eligible for expedited approval pathways.
J P 10, 77 could potentially provide clinical and safety benefits that will help differentiate it from current and future IH products.
K P 10, 77 phase two study is actively enrolling subjects at more than 30 sites in the U S. Interim phase two efficacy and safety data is expected as early as Q3 2023 with potential for top line data as early as year end.
We expect the interim data from this trial will support the advancement of KC 10, 77 into a pivotal phase III study NIH importantly, the interim data will include information from an open label titration phase, which we believe will help us in designing the phase III study.
At the end of last quarters ever submitted an investigative investigational new drug application or I N D to the F. D. A for narcolepsy thereafter, the FDA informs ever we May proceed under our newly opened I N D. Indicating we can initiate initiate our clinical program for K P 10, 77 in narcolepsy.
Studying the potential of the KC 10, 77 program further across the spectrum of sleep disorders.
Phase one studies will be conducted to support our clinical data package in both narcolepsy NIH. In addition, the KC 10, 77 phase two study NIH could support the determination of whether to initiate a phase III trial in narcolepsy in the future.
Now the Duane will provide more details about our first quarter 2023 financial results.
Yeah.
Thanks, Crystal and good afternoon.
During Q1 2023, we saw the prescription trends for stars continue as expected.
With an estimated 8669 prescriptions reported as of the week of May five 2023.
<unk> remains encouraging and gives us confidence to reiterate our guidance that we believe we will achieve the first and possibly a second net sales milestone under the <unk> license agreement during this year.
As you May know <unk> was approved in March 2021 for the treatment of ADHD in patients age six and older. It is being commercialized in the U S. By our partner Corium incorporated who has put together a great team to make this product available with substantial insurance coverage throughout the U S and the sizable field sales force we believe.
Net sales milestones and a growing base of royalty revenue will continue to be a foundational part of our business of course, our focus remains on our development pipeline and what future opportunities that can generate especially but the possibilities to leverage our own commercial capability in the future.
Now, let's turn our attention to the financial results for Q1 2023.
We have begun the year with a solid quarter reporting net revenue of $2 $9 million as compared to $2 3 million during Q4 2022.
Ongoing reimbursements from the French early access program are the primary driver of revenue supplemented by a stars royalties.
Royalties earned during Q1 2023 were approximately 630000, representing a nearly 58% increase over the prior quarter.
While the royalties provide a steady and growing income stream milestones are expected to be the bigger driver of value from the historic license for the foreseeable future.
We reported a Q1 net loss of $11 $8 million or 34 cents per basic and diluted share, which was driven by our R&D investments and increased G&A all associated with the activities underway for the K P 10, 77, and Aramark small programs.
As of March 31, 2023, our cash cash equivalents and investments were $95 $3 million, which was a decrease of $7 6 million compared to December 31 2022.
The change was driven by our operating activities combined with our repurchase of 665739 shares of the company's common stock for approximately $3 $4 million at an average price of $5 nine per share.
There was approximately $39 million remaining under the company's share repurchase program as of March 31, 2023.
Looking towards the rest of 2023, our financial guidance remains unchanged from our last results call.
Our existing available capital on the balance sheet is expected to extend our cash runway into 2026, our operating forecast includes the reimbursements from the French EAP, while we need for the Aramark I'm an NDA resubmission.
The complete development program for <unk>, 77, and IH through NDA submission and potential to do so as well as our preparations for the possible U S launch of our remarkable if approved.
In addition, prescription transfer stores during Q1 2023 give us confidence that we will potentially reach at least one and possibly two of the net sales milestones under the <unk> license agreements during 2023.
Net revenue from the French EAP program is expected to remain steady at a rate of approximately $2 million per quarter throughout the year.
Our focus is on our execution of the product development plans for Aramark Tomorrow, and KC 10, 77, as well as in building our commercial capabilities. We believe we have the resources needed to accomplish these important goals.
And with that I'll return the call to Crystal.
Yes.
Thanks, Duane I'm excited about what lies ahead as we continue to transform zebra and work to enhance value creation for our shareholders. We continue our ongoing discussions with regulatory agencies and are preparing to resubmit. The air Baklava NDA as early as the third quarter of this year for the KC 10 Studies 77 program and wrestling with.
Orders, we anticipate preliminary interim data from the phase two trial in idiopathic hypersomnia as early as the third quarter.
These data have the potential to support both the advancement of K P. 10, 77 into a phase III study in I H, but may also support a phase III trial narcolepsy under the recently opened I M D.
Fuel our growth, we anticipate ongoing revenue from our air Medical Mall expanded access program in France to continue at approximately $2 million per quarter, and we have the potential to realize one and possibly a second net sales milestone under the stars license agreement. In addition to the growing royalty stream. This year, our capital remains strong with a cash.
Runway that extends into 2026.
With that I'll ask the operator to open the call for questions. As a reminder, is that Red boarded board chair and management team members participating on the call. Today include our board Chair camera February though.
Chief Financial Officer, Dwayne Clifton, and our Chief commercial officer, and EVP of business development, Josh Shafer.
Yeah.
At this time, if you wish to ask a question. Please press star one on your telephone keypad.
You may remove yourself from the queue by pressing star two.
Our first question comes from Louise Chen Cantor Fitzgerald.
Hi, congratulations on the progress this quarter and thanks for taking my questions here. So I wanted to ask you a few things firstly on the milestone potentially in 2023 can you give us a sense of the amount and timing that you might you know when you might get these different muscle how much they are and then secondly.
On T. P 10, 77 for narcolepsy can you talk about what I'm not need that you're addressing here in the market for narcolepsy and then lastly, just on your data as early as third quarter of 23 of this year for I E. What would you consider a successful outcome in that interim read out. Thank you.
Thanks Louise I appreciate that this is the Duane and I'll start with the milestone question and then.
We'll go to the other two.
So at this point, we have not been able to disclose publicly the milestone amounts.
Under the license agreement for our stores and so I still can't do that today, but I will tell you that.
We expect that when I talk about earnings this year I really mean.
The first one I'm just gonna be between its likely sort of in the Q2 or Q3 time frame is my expectation and then if we're able to earn the second one we would have earned it by the end of the year with a cash payment likely coming after.
After the end of the year. So in the beginning of 'twenty four Oh, that's the way they reported in their reported and paid a quarter in arrears.
So that's the first question and I guess, a crystal I would turn it to you with regard to the.
The 10 77 IH question.
Sure and I believe your first question was on.
On the it was it on the interim data or on narcolepsy.
Yeah. The first one was on narcolepsy and what unmet need that you're addressing there and then you have to sell cars on the Intel data Friday. Thank you.
So yeah, so regarding the unmet need.
You know narcolepsy is very similar to idiopathic hypersomnia and and the fact that they also have the same.
You know issues with brain fog, and and you know having that wakefulness excessive daytime sleepiness as as I age and so we do look to you know there are products that are on the market that are helping to consolidate sleep them, but they're really there are a few products that are on the market, but they do have.
Some limitations based off of the doses that they can give them and don't aren't necessarily as effective as we feel like ours could be with our unique profiles.
Profiles, so we do feel like that there is.
Some unmet need their narcolepsy as well.
And this is this is just shafer who's if I could also just add in one of the benefits of 10 77 is the.
The lack of a potential.
Abuse and and with its profile, we think 10 77 would be a much safer alternatives to some of the current stimulants.
At the same time, as having improved clinical efficacy as well.
And then I'm going to your other question about the the interim data and what we're looking for there so really the whole point for the Theres a couple of things for the Phase. Two study is we're looking to see you know F F.
We are powered it up based off of the analyses that we're looking at and then obviously safety is also that's our primary endpoint here. So continuing to look at that as far as for the interim those are the things that we would be looking for as well as where we are looking into two different dosing regimens and the potential for.
Those and what May.
Which one may be more effective with the least amount of side effects as far as you know, if there's any insomnia or or things like that that come with them. So those are the things that we would be looking for and those will all help us to begin designing the first stages of the phase III study as we as we go into the.
<unk> for that.
Okay. Thank you.
Our next question comes from Jonathan Aschoff Ross M Kingdom.
Oh, hi, Thanks, what kind of efficacy would you need to see with 10 77 in phase two to proceed to a pivotal trial and I H and maybe it's the same maybe it's not but what kind of efficacy would you have to see in phase two to proceed to both pivotal and IH and narcolepsy.
So as far as as efficacy with with this.
We haven't where we're looking at products that are that are similar and so while we don't have a.
Particular point that we are looking at a different point differential but on the epler sleepiness scale I believe.
That there are other products out there that maybe I think the differentiation was maybe a three point difference or something like that but but again those are those or other products.
Don't have a specific.
<unk> point that we are looking at yet again, that's why we are doing this phase two trial to see you know looking at that as well.
Okay.
By the way just to nitpick, what what was the consulting fees what was the revenue that wasn't on the stores or are remarkable.
The consulting fees during Q1 were very small it was around 25000. So it was a very modest final payment.
Okay.
So how do we look at our R&D, which kind of Pops.
He evidently in the first quarter, what's that going to look like this quarter third quarter fourth quarter.
So R&D is kind of tracking up as we have the active phase II trial and take K P. 10, 77, and I think that the trend. We're on here. During Q1 is going to be similar as we go through the year and complete the trial. But then also then begin preparing for the phase III going into 2000.
<unk> 24.
Okay. So at the very least you know slightly up comfort from Q1.
How is it about the same kind of pop in SG&A.
Is that your new run rate for your new low for the year.
Currently I expect it will be around flat in that area, but as we get into the resubmission process for once that's complete I should say and then we look forward into 2020 for.
There could be some uptick in G&A as we think about beginning to prepare more deliberately for the commercial launch of our remarkable so we're going to be very thoughtful and stage that so just to repeat the G&A is going to be in a similar place where it is right now for a few more quarters and then we'll kind of assess how it how it might change.
<unk> after the Resubmission.
Okay.
One thing I kind of would like to know if you don't mind stepping back and answering this is <unk>.
Typically when managements.
<unk>. This much you know theres a change in what's going to happen and how it's going to be done there really doesn't seem to be much in the way of any change.
With how youre going forward with zebra.
<unk> change so what's different.
Why you know why the management change is.
It really kind of going forward the same way you've been it doesn't seem to.
Here with me.
Yeah.
Yeah, I can't I don't know Tamara, maybe if youre yeah on the call.
Please go ahead.
I'd like to take that thank you Jonathan for asking that.
And as you might be aware, we just went through.
Contested proxy fight and mm three new directors were elected to our board.
And our CEO rich Pascoe, what's not reelected he was one of the three directors that we have put up for reelection and <unk>.
Because he was not reelected to the board he chose to resign as C E O as well and I think you know what you mentioned is very very important preserve rock nothing.
Nothing is changing in terms of our strategy and it's Crystal said in her comments, we have been working on this for two years and we now have a strategy of developing <unk>.
Rare disease drugs for the market, that's where we were going before the annual meeting and that's where we're gonna go afterwards, so I'm.
We're very sorry to lose which we understand.
What he did and we will be looking for a new CEO , but we see no change in the company's strategy whatsoever.
Thank you for that lastly.
Data that Luis was was referring to interim data. So the phase two data coming in as early as the third quarter. That's just an interim look to see primarily how powered your trial is.
So yes.
That's exactly right. So the interim data is just that it's in the middle of the trial to see if there's any adjustments that we need to make them primarily in the powering of the.
Buddy.
To see if if we need to increase the numbers to get them you know the effects that ought.
Hard to be able to see the effects that are coming out of our our hum.
Our molecule and then but again, we can also look at.
Things like the dosing regimen, and <unk> and other things because we do have that open titration.
A portion of it.
Okay. So what again what is your intended initial enrollment and what could that jumped to if you are if you see that you are underpowered.
Sure. So our initial enrollment we're looking to enroll 48 and I don't remember what the exact number was we do have a percentage above that and I can go back and look at that I don't remember exactly but we do have that.
Yeah.
Planned if it does need to go up.
Okay. Thank you very much.
Hmm.
Just a reminder to ask a question. Please press star one now.
And then star one to ask a question.
This concludes the Q&A portion of today's call, we'd now like to turn the call back over to Christopher <unk> for any additional or closing remarks.
Thank you very much as we conclude today's call I would like to leave you with a few additional thoughts.
One of the founders of the company I have devoted a significant part of my career, helping to build this company from scratch and to a team that has been able to take not one but multiple products from discovery through development, culminating in regulatory approval, where these products now are now available to patients providing for previously unmet needs and.
Our journey continues as we move forward with more opportunities to build upon our legacy of success in drug development. The addition of commercial capabilities as a natural part of zebras evolution and I'm proud to step into the role of interim President and CEO as of June 1st with the goal of fully supporting our team as we execute on our objective to drive toward many more success.
As in the future.
One of the hallmarks hallmarks of how our company began with through sincere dialogue with our shareholders and with all of our stakeholders, we remain committed to providing clear communication as one of our guiding principles and completing our work with integrity and excellence.
Needs of the patient communities, which we serve are at the forefront of what we do every day and I know our team of scientists and business professionals is fully committed as I am to bring the promise of novel rare disease their therapies to those who need the most we have the tools and the resources needed to fully capitalize on the opportunities, which lie ahead and the resolve to get.
It done I'm proud to be on this journey with the team we have built and with you our shareholders. Thank you very much.
This concludes today's ever Therapeutics first quarter 2020 through earnings call and webcast. You may disconnect. Your line and have a great wonderful day.
Okay.
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Hum.
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