AVANIR Pharmaceuticals (NASDAQ:AVNR)
F2Q09 (Qtr End 3/31/09) Earnings Call
May 07, 2009 11:00 AM ET
Brenna Mullen - Investor Relations
Keith A. Katkin - President and Chief Executive Officer
Christine G. Ocampo - Vice President, Finance
Randall E. Kaye, M.D. - Senior Vice President Clinical Research and Medical Affairs, Chief Medical Officer
Robin Davison - Edison Investment
Good morning. My name is Kaye and I'll be your conference operator today. At this time, I will like to welcome everyone to the Avanir Pharmaceuticals Fiscal 2009 Second Quarter Conference Call. All lines have been placed on mute to prevent any background noise.
After the speakers' remarks, there will be a question and answer session. (Operator Instructions). Thank you. Ms. Mullen, you may begin your conference.
Thank you. And good morning everyone. Joining me on today's conference call is Keith Katkin, President and Chief Executive Officer, Dr. Randall Kaye, Chief Medical Officer and Christine Ocampo, Vice President of Finance.
I will begin the call by addressing our forward-looking statements. Following this, I'll turn the call over to Keith Katkin.
As a reminder, the statements made on this call represent our judgment as of today, May 7th 2009. Our remarks and responses to questions during this conference call may constitute forward-looking statements, including plans, expectations and financial projection, all of which involve certain assumptions, risks and uncertainties that are beyond our control and could cause actual results to differ materially from the expected results of -- expressed in our forward-looking statements.
These forward-looking statements include among others, statements about our expectations for the continued development at Zenvia and the likelihood of success concerning FDA approval, as well as statements regarding anticipated expenditure levels, future cash balances and clinical development trend lines.
We encourage you to take the time to review our recent fillings with the Securities and Exchange Commission which present these matters in more detail as well as related risk factors. AVANIR disclaims any intent to update any forward-looking statements made during this call.
Now, I will turn over the call to Keith Katkin.
Keith A. Katkin
Good morning everyone. Thank you for joining us on the fiscal 2009 second quarter earnings call. I'll start today's call by providing a brief business overview before turning it over to Christina Ocampo, who will view our financial results followed by Dr. Randall Kaye, who will discuss our Zenvia clinical development program.
The second fiscal quarter has been a very productive period for AVANIR as we approach an important milestone in the clinical development of our investigational drug Zenvia for the treatment of pseudobulbar affect otherwise known as PBA.
Now that we've completed enrollment, we are beginning initial preparations for the regulatory review process as we move closer to the receipt of top line data by the end of September.
In March of this past quarter, we announced that we completed patient enrollment in the Phase III STAR trial in PBA. At the conclusion of enrollment, we expanded the number of patients by approximately 20% versus our originally target enrollment while hitting the earlier range of our previously stated enrollment timeline, enrolling the largest ever international PBA study in approximately 15 months.
In April, we announced that we completed additional non-clinical and clinical studies to further characterize the cardiovascular safety profile of the new lower dose Zenvia 3010 formulation. Together, those studies indicate that the new 3010 dose offers an increased margin of cardiac safety versus the original 3030 formulation.
Further, the non-clinical data suggest that the risk of Zenvia-induced arrhythmia including a rare, but potentially fatal type Clostridium (ph) is extremely low. Dr. Kaye will provide further insight into the enhanced cardiac safety database including the recently completed advanced cardiac safety study during his prepared remarks.
Our other major areas of clinical development for Zenvia is in neuropathic pain. Our approach in neuropathic pain continues to be to advance our programs with minimal spend in order to conserve our capital for the PBA program. Dr. Kaye will provide further update on the DPN program later in this call.
Finally, we made considerable progress from a corporate perspective in the second fiscal quarter. Despite being in a period of peak expenses associated with our Phase III clinical trial and PBA, we managed to exit the quarter with approximately 31 million in cash remaining on our balance sheet, enough to fund the operations into the second half of calendar 2010.
Given the results of our careful expense management, we now feel comfortable lowering our protracted cash burn by approximately 10% for the fiscal year from the initial estimate of 24 to $27 million, down to a range of 22 to $24 billion.
In closing, these are truly exciting times at AVANIR. Interest at AVANIR from investors and other stakeholders continue to increase as we advance towards our pivotal Zenvia data which is continued to be expected no later than the end of September. This rising interest in AVANIR is manifested as increasing request for information and invitations to present at investment conferences such as the upcoming Deutsche Bank Healthcare Conference in May.
With that, I'll now turn the call over to Christine Ocampofor a discussion of the first quarter financial results. Christine?
Christine G. Ocampo
Thanks Keith, and good morning everyone. My comments today will cover our financial results for the second quarter of fiscal 2009 and the first six months of fiscal 2009 as well as our expected cash burn for the fiscal year.
In addition to the financial results summarized in the press release we issued earlier this morning, you can find additional information in our 2008 annual report on Form 10-K and our most recent Form 10-Q.
I will begin with a discussion of our outlook for the second quarter. Total net revenues were 812,000 for the second quarter for fiscal 2009 as compared to one million in the same period of the prior year. The decrease in revenue is primarily attributed to a decrease in grant revenue resulting from the completion of the government-funded anthrax antibody program which we partnered in 2008.
Second quarter fiscal 2009 revenues consistent of the recognition of deferred revenue of 417,000, and revenue generated from our license agreement with the Azur Pharma in the amount of 395,000.
Total operating expenses for the second quarter of fiscal 2009 were $5.8 million compared to $5.9 million in the same period of the prior year.
Our second quarter of 2009 operating expenses consisted of research and development expenses of $3.6 million compared to $3.5 million in the same quarter in the prior year and general and administrative expenses of $2.2 million compared to $2.4 million in the same quarter in the prior year.
Research and development expenses in the second quarter of 2009 consisted of costs contributed to the confirmatory Phase III STAR trial as well as other supportive studies for the full response to the approvable letter. The decrease in general and administrative expenses is primarily attributed to streamlined organization and focus on cost containment.
The net loss for the second quarter fiscal 2009 was 4.9 million or $0.06 per share compared to a net loss of 5.3 million or $0.12 per share for the same period a year ago.
Cash used in operations for the second quarter was 5.5 million.
And now moving on to our results for the first six months of 2009, total net revenues were 2.6 million for the first six months of fiscal 2009 as compared to 3.1 million in the same period of the prior year. The decrease in revenue is primarily attributed to a decrease in grant revenue resulting from the completion of the government-funded anthrax antibody program.
Revenues consisted of the recognition of deferred revenue of 1.2 million, royalty revenue granted from our license agreement with GlaxoSmithKline for sales of Abreva in the amount of 950,000 and royalty revenue generated from our license agreement with Azur Pharma in the amount of 395,000.
Total operating expenses for the first six months of fiscal 2009 were 12.8 million compared to 12.5 million in the same period of the prior year.
Operating expenses consisted of research and development expenses of 8.3 million compared to 7 million in the same period in the prior year, and general and administrative expenses of 4.9 million compared to 5.6 million in the same period in the prior year.
The increase in research and development expenses is attributed to cost of the confirmatory Phase III STAR trial as well as other supportive studies in the -- for the full response to the approvable letter.
The decrease in general and administrative expenses is primarily attributed to our streamlined organization and focus on cost containment.
The net loss from continuing operations for the first six months of fiscal 2009 was 10.1 million or $0.13 per share compared to a net loss of 9.8 million or $0.23 per share for the same period a year ago.
We ended the first six months with a total cash of 31 million and cash used in operations of 11.2 million.
Based on our performance thus far in fiscal 2009 and our ability to closely manage our expenses and contain costs, we anticipate that our cash burn in fiscal 2009 will be 10% lower than originally estimated, moving from 24 to 27 million, down to 22 to 24 million.
We expect that our current cash on hand will be adequate to fund continuing operations and the clinical development of Zenvia through the anticipated FDA approval decision date which we expect in the second half of calendar 2010.
Now, I'll turn the call over to Dr. Randall Kaye who will provide an update on the progress of our Zenvia clinical program.
Randall E. Kaye, M.D.
Thanks Christine and good morning.
During the past quarter, our clinical development team continued to make significant progress with our Zenvia clinical programs. Our efforts have been centered primarily on a single confirmatory Phase III Star trial of Zenvia for the treatment of patients with PBA, as well as completion of certain cardiovascular assessments.
The original start-up protocol called for enrolling approximately 270 patients with multiple sclerosis, or amyotrophic lateral sclerosis who exhibit signs and symptoms of pseudobulbar affect.
In April of last year, we announced that enrollment was ahead of schedule, and that we intended to increase enrollment to approximately 300 patients. As many of you are probably aware in early March, we announced that we achieved targeted enrollment. And at the conclusion of enrollment, we had a total of 326 patients. Specifically that was 197 with underlying ALS and 129 patients for underlying MS.
These incremental patients will allow us to further enhance the safety database for the complete response to the approvable letter and will also increase the overall statistical power of the STAR trial.
In addition, we continue to see low overall rates of discontinuation and a high percentage of eligible patients rolling over into the optional open label extension study. This compares favorably to our previous experience, and we reaffirmed that we expect top line data available no later than the end of September of 2009.
AVANIR also embarked on additional non-clinical and clinical work to further clarify the potential for cardiovascular risk. While these studies were not requested by FDA, we felt that proactively developing a larger database would be an important component for eventual labeling discussions.
The cardiovascular work included an investigation of non-clinical data using a rabbit ventricular wedge model, the well accepted pre-clinical model with a high sensitivity and specificity for identifying medications with a potential for causing torsades de pointes, the rare ventricular arrhythmia.
In the wedge study, the quinidine concentrations, the quinidine concentration comparable to the new Zenvia 3010 milligram dose had an overall torsades de pointes risk score of zero which was lower than the original Zenvia 3030 milligram dose.
We believe the wedge study, in addition to two other non-clinical studies, provide support of the improved margin of cardiovascular safety.
In addition, in support of planned labeling discussions, we conducted an Advanced Cardiac Safety Study or ACSS to assess the degree to which the new lower dose Zenvia 3010 formulation with potentially prolonged cardiac QT intervals.
Substantial QT interval prolongation can disrupt the heart's electrical cycle and results in cardiac arrhythmia. The ACSS was a randomized double-blind placebo and positive-controlled multiple-dose 3-treatment crossover study, evaluating the ECG effects of Zenvia 3010 milligrams administered in 50 healthy volunteers.
Moxifloxacin, a widely used drug known to prolong the QT interval, but not induce torsades de pointes, was selected as a positive comparator to establish assay sensitivity.
An individual correction method known as QTcI was utilized to achieve the best possible elimination of the effect of heart rate on QT duration. The ACSS was designed and conducted in compliance with the Food and Drug Administration guidance, E14, The Clinical Evaluation of QT Interval Prolongation and Proarrhythmic Potential for Non Antiarrhythmic Drugs.
In the ACSS, the overall effect of Zenvia 3010 on QT internal was less than the effective moxifloxacin positive control. In the study, Zenvia 3010 and moxifloxacin produced maximal mean QTcI changes of 10.3 milliseconds, 12.2 milliseconds and an upper bound 95% one-sided confidence intervals of 14.3 and 16.2 respectively.
Additionally, there were no QT outliers of clinical concern. Specifically no subject in the study had an absolute QTcI greater than 480 milliseconds and no subject had a change in QTcI greater than 60 milliseconds.
The Zenvia 3010 had no significant effect on PR or QRSinterval duration or cardiac morphology.
In accordance with FDA guidance regarding drug candidates that demonstrate an upper bound 95% one-sided confidence interval above 10 milliseconds, AVANIR will continue to conduct detailed ECG monitoring throughout the STAR trial and provide this important clinical cardiac safety information in support of the full response to the FDA approvable letter.
The ACSS data combined with data from a previous thorough QT study suggests a flat QT dose response relationship between 10 and 30 milligrams of quinidine with a dose related increase in QT seeing above 30 milligrams.
Therefore relative to the original 3030 formulation, the new 3010 dose should provide an improved margin of cardiovascular safety for situations such as dosing errors and inadvertent call administration with drugs known to elevate plasma quinidine levels, such as drug-drug interactions which the FDA raised as the potential concerns in the Zenvia approvable letter back in 2006.
In summary, the reduction of the quinidine component of Zenvia by 67% improved the overall safety margin from the original dose previously studied.
The additional non-clinical and clinical data have further clarified our understanding of its cardiovascular safety profile. While Zenvia appears to cut some degree of QT interval prolongation at the intended prescribed dose, we believe the data indicate that it is not proarrhythmic.
According to the FDA, regardless of the degree to which a drug prolongs the QT interval, decisions about its development and its approval will ultimately depend upon the morbidity and mortality associated with the disease and the demonstrated clinical benefits of the drug.
We believe that if approved, Zenvia will bring an important new treatment option for patient suffering from PBA episodes and the benefits will outweigh the risk if proper labeling and risk management are used.
Now briefly moving onto the neuropathic pain program, in September 2008, we submitted the Zenvia Phase III study protocol and related program questions to FDA under the FDA process in DPN pain which is a form of neuropathic pain.
In November of last year, we received our initial response regarding the proposed study protocol. We continue to be engaged in discussions with FDA regarding the design of the next Phase III study as well as the overall neuropathic pain program requirements.
In additional to DPN pain, we have strong proof-of-concept data in MS related neuropathic pain and eagerly await additional data on reduction of pain seen among patients with MS in our STAR trial.
In summary, we continue to make considerable progress with our Zenvia clinical programs, and we remain committed to making Zenvia available to patients as quickly and as safely as possible.
Thanks for your attention. I'd like to turn the call back to Keith.
Keith A. Katkin
Thank you, Randall. In closing, I'd like to say we continue to be very excited about the future of AVANIR. We believe that AVANIR really stands out from the pack of small biotech companies which is why you may have noticed that the entire management team bought shares on the open market during the last quarter.
We have a very promising near-term market investigational drug in Zenvia, sufficient capital to accomplish our business objectives over the next year and the number of key milestones in the near term. We believe we are a uniquely positioned to create value and we are doing everything possible to deliver the best possible outcome to our shareholders.
With that, operator, I'd now like to open up the call for questions.
Thank you, operator. While we're waiting for any questions, I'd like to let everyone know that we'll be presenting at the Deutsche Bank 34th annual healthcare conference on May 19. The live presentation will be webcast and available for replay on our website for 30 days if you are unable to listen to the live presentation.
Operator, do we have any questions at this time?
Yes, several questions from the line of Robin Davison with Edison Investment.
Robin Davison - Edison Investment
Hi, hello guys. I was looking at the second quarter, actually Zenvia was as the return of the Special Protocol Assessment, which if any of the secondary endpoints, do you have to see -- significant to meet the requirement quality absolutely to the primary end point? And then the other question is really, Keith whether there's probably something you guided from the cash utilization in '09. I wonder whether I am thinking it particularly changed or pushed out to cause that sort of -- in terms of dollar saving?
Thanks Robin. I'll answer the question about the cash burn and then I'll turn it over to over to Dr. Randall Kaye to answer the questions about the Special Protocol Assessment.
In regards to the cash burn, we have not delayed or pushed out any programs. We have really focused on examining every cost that is non-essential to the Zenvia PBA clinical program. And quite frankly we've taken advantage of somewhat of the downturn in the economy. And we've asked all of our vendors to do their fair share in helping us manage our cash. And we're able to secure discounts from almost the majority of all our vendors. So a good prudent management plus reaching out in these economic times and asking for discounts that would allow us to reduce our overall expenses. And that -- now I'll now turn over to Randall for -- to answer the question about that Special Protocol Assessment.
Randall Kaye, M.D.
Sure. Robin I think your question was about what was specified with the agency in the Special Protocol Assessment for the statistical analysis plan, what's required is...
Robin Davison - Edison Investment
Randall Kaye, M.D.
Yeah. So what's required is demonstration of the primary analysis of the primary endpoints, so that's purely changing episode count of the 3010 formulations versus placebo. And we certainly pre-specified all our additional analysis both the primary and secondary as well as some exploratory endpoints, but the requirement for the SPA is succeeding the primary endpoint.
Robin Davison - Edison Investment
All right. That endpoints, the two way, the MS and ALS combined?
Randall Kaye, M.D.
That's correct. It's both MS and ALS patients combined. We certainly will do some analysis, but there was not a requirement and this was discussed with the agency around having success in just one of the sub populations. It would be very, very difficult to power up a study that way.
Robin Davison - Edison Investment
Thank you Robin. Are there any additional questions operator?
And there are no further questions at this time.
Great. Well I'd like to thank everyone for joining our second quarter conference call, and we look forward to keeping updated on our progress during the upcoming months
Thank you for your participation, this concludes today's conference, you may now disconnect. (Operator Instructions)
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