Evoke Pharma, Inc. (NASDAQ:EVOK) Q4 2013 Earnings Conference Call March 25, 2014 4:30 PM ET
Executives
David Burke - Investor Relations, The Ruth Group
Dave Gonyer - Chief Executive Officer
Matt D'Onofrio - Chief Business Officer
Analysts
Irina Rivkind Koffler - Cantor Fitzgerald
Kay Nakae - Ascendiant
Operator
Greetings, and welcome to the Evoke Pharma Fourth Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, David Burke of The Ruth Group, who will read the Safe Harbor statement. Thank you, Mr. Burke. Please begin.
David Burke
Good afternoon, and welcome to Evoke Pharma’s fourth quarter and year end 2013 conference call and audio webcast. With me today are Dave Gonyer, Chief Executive Officer and Matt D'Onofrio, Chief Business Officer of Evoke Pharma.
Earlier today, Evoke issued a press release announcing financial results for the fourth quarter and the year ended December 31, 2013. We encourage everyone to read today’s press release as well as Evoke’s Annual Report on Form 10-K, which was filed with the SEC today. The company’s annual report and press release are also available on Evoke’s website at www.evokepharma.com. In addition, this conference call is being webcast at the company’s website and will be archived there for future reference.
Please note that certain parts of the information discussed on today’s call are covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, Evoke management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company’s business. These forward-looking statements are qualified by the cautionary statements contained in Evoke’s press release and SEC filings, including its Annual Report on Form 10-K. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 25, 2014. Evoke undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.
With that, I would now like to turn the call over to Dave Gonyer. Dave?
Dave Gonyer
Thanks, David and thank you all for joining us this afternoon for our quarterly call to provide you with the fourth quarter and full year 2013 financial results, along with an update on the business and the recent progress we have made.
2013 was an exciting year for Evoke and the most active for us in terms of introducing the Evoke story to a much broader investment community. Most notably, we entered the market as a publicly traded company through an IPO last September. We are pleased to have completed this process and are eager to have the opportunity to continue to generate interest in Evoke as well as our lead product candidate, EVK-001 or intranasal metoclopramide, which we believe provides an innovative treatment option for patients suffering from the symptoms of diabetic gastroparesis.
As I mentioned, EVK-001 is an intranasal delivery formulation of metoclopramide, the only drug currently approved in the U.S. for the relief of symptoms associated with gastroparesis. Gastroparesis is a debilitating condition that causes the stomach to take too long to empty its contents into the small intestine resulting in serious digestive problems and creating a range of issues, many of which are related to the unpredictable absorption of food and drugs. We believe that EVK-001 will change the standard-of-care in which the disease is treated as it provides an option to deliver the drug into the blood stream, bypassing the stomach without the need to administer intravenously. The concept of intranasal delivery of metoclopramide has been well-received through our discussions with patients, physicians, payers and gastroparesis advocacy groups and we are excited for the potential that exist in the marketplace.
EVK-001 has been recognized by the medical community as an important new drug in the treatment of gastroparesis. At Digestive Disease Week 2013, two important posters were presented by Dr. Henry Parkman of Temple University Hospital and Dr. Richard McCallum of the University of Texas, El Paso. Both posters described data from previous Evoke clinical trials and discussed potential benefits of intranasal delivery of metoclopramide.
And lastly, our acquired comparative Phase 2 trial data and analysis was published in December in the peer-reviewed journal, Neurogastroenterology & Motility. We believe this scientific review further validates the benefit of and the need for an alternative delivery of medication for patients with unpredictable absorption of oral medications. Late last year, we made two key strategic hires. Dr. Marilyn Carlson joined Evoke as our Chief Medical Officer, which we are thrilled about given her experience in clinical and regulatory development of drugs and drug delivery systems. We have been working with Dr. Carlson since 2007 on the development of EVK-001 and we are pleased to have her as an employee of Evoke. We have also added Dr. Wayne Alves to the team, who is well-versed in the development of drug candidates and provide key support as we prepare to commence our upcoming Phase 3 trial for EVK-001.
Currently, we are in the process of finalizing steps necessary to initiate our Phase 3 trial. We are actively recruiting sites for the trial and intend to have up to 60 sites in total providing a good base of approximately 200 patients that we plan to enroll. Many of the sites were used in our previous trial, which will provide significant benefits with respect to efficiency and familiarity with Evoke EVK-001 and needs of the gastroparesis patients. We have signed contracts with a number of sites and have met with many of them at a recent investigator meeting. We are tracking in line with our internal timeline for launching the Phase 3 trial of EVK-001 in the second quarter. We hope to have additional details to share with you on patient enrollment in the coming weeks and look forward to providing these important developments with our shareholders and analysts.
Overall, 2013 was a transformational year for Evoke highlighted by our entry in the public market and the substantial progress we have made in the ongoing clinical development of EVK-001. The efforts our team put forth last year have set the stage for continued meaningful advancements in 2014 and we believe positioned the company for long-term success.
With that, I would like to turn the call over to Matt for a review of the financial results for the fourth quarter and full year. Matt?
Matt D'Onofrio
Thanks, Dave. Once again, thank you all for joining us today for our second earnings call as a public company. In the fourth quarter we reported a net loss of $1.6 million or $0.27 per share based on weighted average shares outstanding of approximately 6 million. This is compared to a net loss of $672,000 or $0.60 per share based on approximately 1.1 million weighted average shares outstanding for the fourth quarter of 2012.
R&D expenses in the fourth quarter were $636,000, up from $318,000 in the fourth quarter of 2012. The year-over-year increase in R&D expenses was primarily related to the initiation of clinical trial activity including the reallocation of management’s time subsequent to completing the IPO and the addition of clinical and regulatory personnel.
General and administrative expenses in the fourth quarter of 2013 were $944,000 compared to $344,000 in the fourth quarter of 2012. The increase is related to the cost of being a public company, costs incurred related to our new corporate offices, executive team retention payments and additional personnel costs.
For the year ended December 31, 2013, net loss was $2.8 million or $1.20 per share based on approximately 2.4 million weighted average shares outstanding. This compares to a net loss of $2 million or $1.79 per share based on approximately 1.1 million weighted average shares outstanding during the full year of 2012.
Research and development expenses during the year ended December 31, 2013 were $957,000 compared to $1.2 million during the year ended December 31, 2012. The year-over-year decline in R&D expenses was primarily related to a decrease in executive compensation allocated to research and development as we worked to raise capital in 2013 as well as to the reversal of the 2012 bonus accrual due to the Board of Directors decision not to pay 2012 bonuses in order to conserve cash.
General and administrative expenses for the full year of 2013 totaled $1.6 million compared with $837,000 in the same period a year ago. The increase is primarily related to a larger portion of labor costs being allocated to general and administrative activities in 2013 in preparation for IPO and the retention payment of $355,000 to the executive team offset by the previously mentioned reversal of 2012 bonus accrual. Total operating expenses for the year ended December 31, 2013 were approximately $2.6 million compared to the total operating expenses for the year ended December 31, 2012, of $2 million.
Turning to our balance sheet, we ended the full year of 2013 with cash and cash equivalents of $24.2 million. Subsequent to the end of Q3 we received an additional $3.8 million related to the exercise of the underwriters’ over-allotment option in the IPO. We believe these funds will be sufficient to fund our activities to the completion of the upcoming Phase 3 trial for EVK-001.
That concludes our prepared remarks. We would like to open the call to questions. Operator?
Question-and-Answer Session
Operator
Thank you. We will now be conducting a question-and-answer session. (Operator Instructions) Thank you. Our first question comes from the line of Irina Koffler with Cantor Fitzgerald. Please proceed with your question.
Irina Rivkind Koffler - Cantor Fitzgerald
Hey, guys. Thanks for taking the questions. I have one kind of long one on the preparations for the trial, just wondering about the percent of your study sites that have been cleared just are enrolling subjects, you mentioned there was about 60 sites just wondering how many of those are ready to go and are you providing them with ad budgets and have they sort of created list of potential patients to screen for the study? I guess that’s question number one. And then the second question is about run-rates of expenses, I know R&D should probably go up, but should we think about 2014 SG&A quarterly spend around the same levels as this quarter? Thanks.
Dave Gonyer
Hi, Irina, this is Dave. I will answer the first question and then turn it over to Matt. So, we have a substantial number of the sites that we have contracted with and all are working hard as you know the pieces to get up and running in terms of IRB approval of the site initiations, that’s all being worked on right now. They are working on a list of patients as well. So, it’s a great question. We have asked many of the sites to do that ahead of time even before contracting, so that we know we have the right sites. In terms of ads, we do this based upon side by side basis depending on the need. We prefer not to do that initially, because this is a disease, where it’s best finding these patients within the clinic themselves. And I will turn the second question over to Matt regarding run-rates unless you have additional questions with that.
Irina Rivkind Koffler - Cantor Fitzgerald
No, that’s alright.
Matt D'Onofrio
Great. So in terms of run-rates, yes, the R&D spend, will go up as you stated, but we are going to be pretty stable with a slight uptick in G&A just given we have our team in place, we have our offices in place, it’s just a matter of addressing those public company costs and other thing that sort of start to creep up.
Irina Rivkind Koffler - Cantor Fitzgerald
Okay. And you mentioned you had an investigator meeting already, is this you are just holding one investigator meeting and that was it or you might have a couple of other little mini regional ones or something?
Dave Gonyer
Yes. We had one initial one and then we will have webinars as well as needed.
Irina Rivkind Koffler - Cantor Fitzgerald
Okay, thank you.
Operator
Thank you. Our next question comes from the line of Kay Nakae with Ascendiant. Please proceed with your question.
Kay Nakae - Ascendiant
Yes, thank you. Also just looking for a little more detail on SG&A spend, obviously you had the amount for retention that you mentioned that unlikely to reoccur in 2014, but also as far as the new hires and their allocation of their time and experience, can you give us a sense of how that gets allocated between G&A and R&D?
Matt D'Onofrio
Okay, great. So in terms of the personnel and division of expense, G&A, R&D, the majority of the team is now full-time research. There are a few of us that do split our time to a certain extent as for instance, I myself participate in a number of activities that might be more associated with the R&D portion contracting with sites, other things like that. So some of us do split our time and then there is a good number of persons here, the majority since there are the seven of us in total that are working completely on the R&D side. And then in terms of your earlier question, I am not sure if I understood it correctly, you are looking for more understanding on the total spend or run rate?
Kay Nakae - Ascendiant
You mentioned the 355K retention payment, we are not expecting to see a repeat of something like that in 2014. Is that correct?
Matt D'Onofrio
No.
Kay Nakae - Ascendiant
Okay. And then just with respect to the timing of commencing the Phase 3 is there some critical number of sites, minimal number of sites that you will need before you are comfortable in green-lighting the start of enrollment there?
Dave Gonyer
We want to get up to close to the 60 sites as possible to get things really ramping up in terms of finding patients and then the enrollment. So we will push to get as many of those 60 as we can.
Kay Nakae - Ascendiant
Okay, that’s all I have. Thanks.
Dave Gonyer
Thanks, Kay.
Operator
Thank you. (Operator Instructions) Thank you. I’d now like to turn the call back over to management for closing comments.
Dave Gonyer
Great, thank you everyone for participating today and we look forward to a successful 2014.
Operator
Thank you. This concludes today’s teleconference. You may disconnect your lines at this time and thank you for your participation.
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