Alcobra's CEO Discusses Q4 2013 Results - Earnings Call Transcript

| About: Alcobra Ltd. (ADHD)

Alcobra Ltd. (NASDAQ:ADHD)

Q4 2013 Results Earnings Conference Call

February 13, 2014, 08:30 AM ET


Michael Rice - Investor Relations, LifeSci Advisors

Yaron Daniely - Chief Executive Officer

Udi Gilboa - Chief Finnacial Officer


Annabel Samimy - Stifel, Nicolaus & Co.


Good day, ladies and gentlemen and welcome to the Alcobra Fourth Quarter 2013 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later we'll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this call may be recorded.

I’ll now introduce your host for today's conference Michael Rice of LifeSci Advisors. You may begin.

Michael Rice

Thank you. Before the market opened this morning, Alcobra announced financial results for the fourth quarter and yearend 2013. If you've not yet received the news release or would like to be added to the company's distribution list, please call LifeSci Advisors in New York at 646-597-6992 and speak with Paul Arndt.

Before turning the call over to management, I’d like to make the following remarks concerning forward-looking statements. This conference call contains forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Because such statements deal with future events and are based on Alcobra’s current expectations, they are subject to various risks and uncertainties and actual results, performance or achievements of Alcobra could differ materially from those described and/or implied by the statements on this conference call.

For example, forward-looking statements include statements that imply that MDX may be helpful to treat cognitive dysfunctions, such as ADHD, including Primarily Inattentive-ADHD and Fragile X syndrome, or that we will receive favorable results in clinical trials of MDX. Statements regarding the timing of initiation and successful completion of enrolment of our Phase III trials, Phase II paediatric clinical trials and, and Phase II Fragile X programs, if such trials or other trials are commenced at all or the timings and conclusion, reporting of data from the trials and statements regarding Mr. Baker's responsibilities and successful execution thereof.

Statements regarding initiation of other clinical trials and timing thereof, as well as statement regarding the sufficiency of the company's financial resources to be at certain milestones and whether such milestones may be achieved at all, in addition, historical results of conclusions from scientific research do not guarantee that the results – future results would not suggest different conclusions or that historic results referred to on this call would be interpreted differently in the light of additional research.

The forward-looking statements contained or implied on this call are subject to other risks and uncertainties, including those described under the headline Risk Factors in Alcobra Ltd registration statement on Form F-1A filed with the SEC on October 22, 2013 and in subsequent filings with the SEC.

Except as otherwise required by law, Alcobra disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date hereof, whether as a result of new information, future events or circumstances or otherwise.

At this time, it is now my pleasure to turn the call over to Dr. Yaron Daniely, President and Chief Executive Officer of Alcobra. Yaron, please go ahead.

Yaron Daniely

Thanks, Michael. Welcome everyone. Good morning, thank you for participating in today’s conference call. With me today is Mr. Udi Gilboa, our Chief Financial Officer.

Today, we’ll update you on the progress we’ve made in our development programs for our lead drug candidate, extended-release Metadoxine, which I'll be referring to on this call as MDX. I'll also summarize our expected milestones for the year ahead and Udi will take you through the financials for the fourth quarter of 2013. After our prepared remarks, I’ll be happy to answer any questions you may have.

Before going into some detail on our development activities, I want to highlight two recent management changes at Alcobra. In January, we announced a very significant new hire, with the appointment of Mr. David Baker as our Chief Commercial Officer. David is a highly respected and seasoned pharmaceutical executive and in our view, certainly one of the leading people worldwide in the development and marketing on CNS drugs, particularly in the ADHD space. David will be responsible for all pre-commercial activity for MDX and will lead our effort to establish brand awareness for the product in the medical community. He will also look at new opportunities and potential uses for both MDX and other molecules in Alcobra's pipeline and will support our general, investor and public relations activities at the company.

David joins Alcobra after spending about 10 years at Shire where he was instrumental of building their pipeline at ADHD and CNS brands. He led the launch of Vyvanse in 2007, oversaw the launch of the adult indication for Vyvanse and led the early work that later resulted in the launches of Vyvanse in international markets such as Canada, Brazil, Australia and Europe. Also under David's leadership, Adderall XR became the number one selling ADHD brand in the U.S. and Daytrana was launched as the first ADHD patch.

Throughout his career, David was in Senior Brand Management positions on five different billion dollar brands and across three different categories. In addition to Shire, he worked at Merck for 14 years, where he held positions in marketing, sales, market research and business development and we are really proud and excited to have David on Board. I want to take this opportunity to welcome him to Alcobra.

We are also announcing today that the current Board member, Mr. Howie Rosen was elected as Chairman of our Board effective today, replacing Dr. Aharon Schwartz. Howie has been the Director of Alcobra since our IPO last year. His previous roles include Vice President of Commercial Strategy at Gilead Sciences. Before at Gilead, Howie spend about 10 years at ALZA where he served as Vice President of Produce Development and also had responsibility for mergers and acquisitions, R&D planning and technology ventures. He was also President of ALZA following it's acquisition by J&J.

Interestingly ALZA may be familiar to some of you as the company who developed and is responsible for Concerta, one of the most recognized ADHD brands in the world. Howie completed his undergrad in Chemical Engineering at Stanford University and has a Masters of Science and Chemical Engineering from MIT and an MBA from Stanford Graduate School of Business. Howie is based in California, which is relevant because as we continue to build out visibility here in the U.S., it's more practical for us to have a U.S.-based Chairman and I want to take this opportunity to thank our outgoing Board Chairman Dr. Schwartz for his dedication and valuable service to Alcobra. Dr. Schwartz will remain an active Board member in Alcobra and will continue landing his support and unique perspective in the development of strategic positioning of innovative CNS drugs.

So turning now to our development programs, our main focus continues to be on the development and commercialization of our lead drug candidate MDX to treat cognitive dysfunctions, such as Attention Deficit Hyperactivity Disorder or ADHD. MDX is a fast-acting, highly effective non-addictive treatment for ADHD with a very favorable tolerability profile.

We hit a major milestone in December when we announced positive results in our second Phase IIb trial conducted in adults with Predominantly Inattentive ADHD. The results were especially important because they confirm what we see as some of the key differentiating attributes of MDX in the ADHD space.

As we think about the positioning of MDX, our results thus far have clearly shown that we have a genuinely differentiated product with a unique mechanism of action. Among the principle aims of our clinical program, we want to show that the drug is safer than the stimulants, which are currently the main stay for ADHD treatment and also that has faster onset and is better tolerated than the currently approved non-stimulants.

MDX, to just remind you, is a proprietary once-daily bilayer formulation of Metadoxine that offers immediate as well as extended release delivery in a single oral dose. The preclinical work we've conduced shows that MDX appears to rapidly correct abnormal signalling pathways that are understood to be linked with cognitive impairment. We've demonstrated that Metadoxine selectively binds and deactivates the 5-HT2B receptor, a member of the serotonin receptor's family without showing any affinity to other serotonin receptors or any of the characterized targets of existing stimulant and non-stimulant medications such as dopamine and norepinephrine receptors and transporters.

Now it's important to note that although Metadoxine acts on a serotonin receptor, it is not at all related to the class of molecules called SSRIs. Metadoxine was shown to antagonize namely to deactivate a specific serotonin receptor whereas SSRIs are non-specific activators of a broad range of serotonin receptors. And we've confirmed in multiple studies that Metadoxine does not increase the concentration of dopamine or it's metabolites in the brain, unlike currently available ADHD therapies, further suggesting that this drug should avoid DEA scheduling.

Instead of broadly increasing dopamine and norepinephrine levels, we've observed that Metadoxine is able to restore balance of dysregulated glutamine GABA system, a pathway that's critical in executive function such as learning, memory and attention and one that is severely disturbing many cognitive dysfunctions such as Autism and ADHD.

The results we announced in December were from our second Phase IIb randomized double-blind placebo-controlled crossover single centered study enrolling 36 adult subjects with predominantly inattentive ADHD. Predominantly inattentive ADHD is one of the two most common ADHD subtypes and account for as much as 40% of adult ADHD.

The primary endpoint in this study was a change in TOVA ADHD Score from baseline. Now TOVA stands for Test of Variables of Attention and is an established computerized continuous performance task that provides information about an individual's sustained attention, speed and consistency of responding and behavioural self regulation.

The benefit of using this test is that it's an objective, immediate measure of changes in function and can be utilized to measure performance as early as after the first dosing. This primary endpoint was achieved showing a statistically significant change from baseline in TOVA in patients receiving the 1400 mg dose of MDX compared with placebo.

Importantly again, this all was achieved with a single dose of MDX, validating the immediate onset of our drug candidate and setting it clearly apart from the class of other non-stimulant ADHD medications, which do not show such immediate benefit and actually take as long as six to ten weeks to achieve an effect.

As we've seen in past clinical trials MDX appeared well tolerated with no significant differences in adverse event profiles between treatment and placebo groups. The statistical significance and magnitude of the effect in the study support and reproduce the findings we observed in our previous placebo-controlled Phase IIb trial in 120 adults with ADHD treated for six weeks.

So we now have two placebo-controlled Phase II studies that demonstrate the significant efficacy and tolerability attributes of MDX in adults with ADHD. We presented these results at our Investor Meeting in New York on December 20 of last year and you can find the detailed presentation from this in the News and Events Section of our website.

Also in the fourth quarter, we released new findings in the diminished abuse potential of MDX. We announced results from a regulatory preclinical abuse liability study that evaluated the potential of reinforcing effects of Metadoxine using a well established self-administration procedure in methylphenidate-trained rats.

The self-administration models are widely used in mandatory techniques to compare the positive reinforcing effects of novel CNS active drugs to those of known substances of abuse such as stimulants. Data from this study demonstrate that Metadoxine has substantially less potential to be recreationally abuse drug than methylphenidate, a common stimulant ADHD medication.

The next important step in our MDX development program will be the Phase III trials in adults with ADHD. We are preparing for the dosing of patients in the first of two trials after announcing last week the filing of the IND in the U.S. This filing in the U.S. marks a major milestone in allowing the evaluation of MDX in Phase III studies for ADHD and additional studies in MDX for other indications.

The first Phase III trials designed to enrol 300 patients and the trial designed is similar to the successful Phase IIb trial the company published in the past. The trial will be a randomized double-blind placebo-controlled parallel-group multi-center study with patients receiving either 1400 mgs of MDX daily or placebo for six weeks following a two week screening period. The primary endpoint will be the difference between the arms on the Investigator Rated Conners' Adult ADHD Rating Scales or CAARS, a widely accepted regulatory clinical measure of the presence and severity of ADHD symptoms.

This is the same endpoint we utilize in our published Phase IIb study and one which Strattera was approved on in 2002. Secondary endpoints will include the same TOVA endpoint, which was utilized in our previous study as well as additional exploratory endpoints of cognitive benefit and executive function and despite a minor delay related primarily to administrative issues, we remain confident in our ability to recruit patients rapidly into this study and conclude it shortly after the midpoint of 2014.

Moving on to our financial situation, in October we announced the completion of a highly successful public financing, which raised net proceeds of approximately $35 million, adding to the capital we raised in the IPO last year, we now have the resources to fund the expansion of our clinical research programs beyond the adult ADHD program. The funds raised will allow us to move forward with the planned paediatric clinical trials for MDX and ADHD both this year and in 2015 as well as the Fragile X programs in adults and children thorough expected approvals.

We believe these programs have the potential to build significant additional shareholder value for our investors and demonstrate the broad applicability of MDX in the cognitive impairment field. In addition to strengthening our balance sheet, this recent equity financing has also allowed us to further diversify our shareholder base and to add some new high quality institutional investors.

Before turning the call over Udi to discuss financial results, I would just like to summarize the key milestones for 2014 and what you should expect from Alcobra this year. As I said, our Phase III clinical trial MDX in 300 adult ADHD patients should enrol throughout the first and second quarters and we expect to report topline results in the third quarter of this year. We are also on track to begin enrolling patients in our Phase II paediatric ADHD and Phase II adolescent and adult Fragile X trials; both of these studies also reporting before the end of the year 2014. So there is a lot of news flow in the second half of 2014 with major clinical readouts expected in at least three placebo-controlled studies and potentially additional proof of concept trials in new indications for MDX.

Turning over to a brief description of our financials, Udi, please go ahead.

Udi Gilboa

Thank you, Yaron and thank you to our shareholders for joining us today. Operating expenses for the fourth quarter of 2013 were $5.26 million of which $0.5 million was non-cash charges for stock-based compensation. Excluding stock-based compensation, operation expenses for the fourth quarter of 2013 were $5.1 million.

As we've mentioned in the past, the Company expected quarterly operating expenses to increase in Q4 and an increase is expected over the next few quarters due to an acceleration of our clinical development as well as pre-commercial and strategic activities.

Net loss for the fourth quarter of 2013 was $5.7 million, or $0.45 per basic and diluted share, compared to $295,000 or $0.04 per basic and diluted share for the same period of 2012. As of December 31, cash, cash equivalent and short-term deposits totalled $50.1 million compared with $19.5 million as of September 30, 2013. The increase is a result of the $38 million in gross proceeds from the public offer we completed in October this year.

And with nothing further, we’ll open up the call for questions.

Yaron Daniely

Go ahead, sorry.

Question-and-Answer Session


Thank you. (Operator Instructions) Looks like we have a question from Annabel Samimy of Stifel. Your line is open.

Annabel Samimy - Stifel, Nicolaus & Co.

Hi guys. Thanks for taking my questions. I actually have several. The IND situation, I was under the impression that you had already filed the IND and that you are just waiting for approval of that IND to start [open], the IND was just filed, so if you could just explain whether this resubmission of the IND or is this the actual IND and how long might we -- might it take for its approval before you can start?

Yaron Daniely

Thanks Annabel. No, this is the original and only submission of the IND in the U.S. INDs are submitted as kind of the last step before dosing patients in the U.S. and the review period for FDA is capped at 30 days. Once 30 days elapse and assuming there is no word or any kind of feedback from FDA, you are allowed to dose patients. So at most we anticipate or expect to dose patients no later than 30 days after submission of the IND in the U.S.

Outside of the U.S., there are slightly different regulatory path which were actually initiated earlier. So potentially outside of the U.S., treatment of patients may occur before that.

Annabel Samimy - Stifel, Nicolaus & Co.

Okay. And then just on the dosing, you already established the 700 milligram dose was obviously not an effective dose. Is there any other reason should look at other doses where the FDA won any other doses given that other drugs in the space have multiple options from a dosing perspective?

Yaron Daniely

So it's a great question. It's kind of composed of two parts. We do not have reason to believe that at this point that additional doses will be required to be evaluated, but it's certainly a possibility that I can't rule out, but we don't believe that that would be required based on now two studies showing that 700 mg was not effective in the adult ADHD population.

With regards to other drugs and particularly talking about the approved stimulants and Strattera, those have some dosing stairs or levels, primarily because of a body weight adjustment, especially when kids grow older and become bigger. In the adult population, there is a lot less variability in terms of wait and so those doses are usually fixed.

As we move our program for paediatric there is likely going to be may be one or two ideal doses, but we'll have to investigate that and decide on it's future.

Annabel Samimy - Stifel, Nicolaus & Co.

Okay. Great. And then I want to ask about the latest milestone you reached that Metadoxine did have an effect on AKT and ERK signalling pathways. I think at one point you had mentioned there is potential for diagnosing patients based on the levels of these signalling pathways, so how realistic is it that you can incorporate a diagnostic in either ADHD or in Fragile X or what not to be able to target the therapy a lot better?

Yaron Daniely

I think that there is a possibility and we will be collecting data in our Phase II programs to see whether number one, how prevalent the elevated levels of [phosphate] for example are found peripherally in these indications and number two, how highly correlated they are to improvement in clinical symptoms following treatment with Metadoxine. If those hypothesis are validated in our original Phase II studies, they could be used for identifying patients in consequent studies or even post marketing and patients who are more likely to respond.

But I think an interesting hypothesis based on both published literature and our observation in the preclinical studies and it remains to be validated in the clinical setting.

Annabel Samimy - Stifel, Nicolaus & Co.

Okay. And then one last question, I guess in the past I guess commercialization has been a question and now obviously we have David Baker on Board, so how realistic is this, is it that you could potentially commercialize this yourself and retain the value of this program.

Yaron Daniely

I think it's always been realistic on an operational level. I think that the ADHD field and many of you have had the chance to interact with David and hear his kind of deep insights and cumulative experience on this, but the ADHD field can be handled with a specialized sales force that target the vast majority up to two thirds of three quarters of prescribers in a very efficient way.

So operationally it's certainly feasible whether you are asking if it's likely or probable that this will be the case, that I think is a completely different question, but it's certainly feasible.

Annabel Samimy - Stifel, Nicolaus & Co.

Okay. Great. Thank you.


Thank you. (Operator Instructions) I am not showing any other questions in queue. I would like to turn the call back over to management.

Yaron Daniely

Well thanks everyone for making the call this morning. I hope everyone stays warm at least on the East Coast today. I look forward to seeing you all on the road.


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

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