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Aquinox Pharmaceuticals, Inc. (NASDAQ:AQXP)

Q2 2014 Earnings Call

August 11, 2014 04:45 PM ET

Executives

Brendan Payne – Senior Manager, Investor Relations

David Main – President and Chief Executive Officer

Kamran Alam – Vice President Finance, Chief Financial Officer

Dr. Stephen Shrewsbury – Senior Vice President, Clinical Development, Chief Medical Officer

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Aquinox Pharmaceuticals Second Quarter 2014 Conference Call. This is our first conference call, we plan to hold these call semiannually. At this time, all participants are in a listen-only mode. Following the conclusion of the prepared remarks, will conduct a question-and-answer session and instructions will be given at that time. As a reminder today's conference call is being recorded. At this point, I'd like to turn the call over to Mr. Brendan Payne, Senior Manager, Investor Relations. Please go ahead

Brendan Payne

Good afternoon, everyone and thank you for joining us. On behalf of Aquinox, I would like to welcome everyone to our conference call to discuss financial and operational results for the second quarter of 2014. Joining me today are Mr. David Main, Chief Executive Officer, Mr. Kamran Alam, Chief Financial Officer and Dr. Stephen Shrewsbury, Chief Medical Officer.

During today's call, Mr. Main will begin with introductory remarks on our progress since our March, IPO. Dr. Shrewsbury will then give you an update on our clinical programs and then Mr. Alam will discuss our financial results. We will conclude the call with the Q&A session. Today's conference call will include forward-looking statements under Private Securities Litigation Reform Act of 1995 including statements regarding our research and development plans and financial outlook.

Actual results may differ from those indicated by these forward-looking statements due to numerous factors including those discussed in the risk factor sector of our SEC filings. Our expectations and assumptions could change. While we may like to update these forward-looking statements in the future. We specifically disclaim any obligation to do so, even if our views changed and with that, I'll turn the call over to David.

David Main

Thank you, Brendan and good afternoon everyone and thanks for joining for our first earnings call of the public company. Since we completed our IPO in March, we've made continued progress with the development of our lead product candidate AQX-1125. You may recall the AQX-1125 is a small molecule anti-inflammatory compound with a novel mechanism of actions namely activating SHIP1.

In immune cells, SHIP1 is natures regulated of an important pathway, also known as a PI3 kinase pathway and it plays a key role in the cell activation and migration especially at mucosal surfaces. Mucosal surfaces or the linings of the many organs that are exposed to the environment are an important barrier between the body and inflammatory stimuli in the environment.

There is a growing worldwide prevalence of inflammatory diseases of these surfaces, more specifically inflammatory diseases of the airways; GI tract and bladder are on the rise. Now the evidence at 1125 can target SHIP1 and reduce mucosal inflammation supports the exploration of AQX-1125 in the treatment in patients with exacerbation of Chronic Obstructive Pulmonary Disease, also known as COPD and Bladder Pain Syndrome Interstitial Cystitis or BPSIC for short.

Now FLAGSHIP is a multinational double-blind placebo-controlled Phase II trial design to assess AQX-1125's ability to reduce the effects of exacerbation of COP in approximately 350 patients to 400 unstable patients with moderate to severe COPD. The primary endpoint of this trial is the change in severity, duration and reoccurrence of exacerbation within patients treated with 1,125 versus placebo.

Now to assess efficacy, we are using the exacerbations of chronic pulmonary disease tool, which is a Patient-Reported Outcome tool also known as EXACT-PRO. A validated FDA recognized Patient-Reported Outcome tool developed by a consortium of large pharmaceutical companies and design to measure symptoms of COPD exacerbations through daily eDiary device kept by patients throughout the trial.

Now the FLAGSHIP trial is approximately 50% enrolled and we are expecting results in the first half of 2015. Just to provide now a quick update on our leadership trial. Leadership is a double blind placebo-controlled Phase II trial investigated AQX-1125's ability to reduce bladder pain and urinary symptoms in patients with BPSIC.

With the trial still actively enrolling in Canada, we have been proactively broadening patient access by opening clinical sites in the United States. This trial is also approximately 50% enrolled and we also expect to deliver top line data in the first half of 2015 with this trial.

We plan to enroll a total of approximately 70 women with BPSIC and our primary objective is to measure the difference in the change from baseline in the mean, daily bladder pain score based on 11 point numeric rating scale at six weeks compared to baseline as recorded by patients using a daily eDiary.

Dr. Shrewsbury will review in more detail our progress and recent strategies to maximize enrollment of these trials shortly. Now before I turn the call over to Stephen. I want to comment on the two new disease indications we have selected for AQX-1125.

We will be advancing into exploratory efficacy trials in both chronic rhinosinusitis with nasal polyps and atopic dermatitis. Both of these indications represent sizable market opportunities due to a substantial unmet medical need where AQX-1125 pharmaceutical properties appear well suited.

Steve will outlined in more detail both of these trials. So now, I would like to turn it over to Steve our Chief Medical Officer, who'll give you a more detailed update on our clinical programs before Mr. Alam reviews our financial results. Steve?

Steve Shrewsbury

Thank you, David. Good afternoon, everyone. I'll start with an update on our Phase II FLAGSHIP trial in patients with COPD exacerbations. We continue to actively enroll patients in this trial and now have sites opened in Northern and Central Europe, Australia, New Zealand and the United States.

As mentioned, we anticipate top line results in the first half of 2015 and we have deployed several new strategies to fit in that aim. We remain focused on the progress of this trial and are eager to find a normal treatment option for this underserved patient population. There are very few treatment options available to a 1 million of COPD patients worldwide that suffer exacerbations requiring frequent hospitalization and who suffer from the severe symptoms of the disease that dramatically reduce their daily quality of life.

COPD exacerbations are directly linked to the deterioration and COPD patients' lung function and increased mortality. The World Health Organization now predicts that COPD will be third leading cause of death worldwide by 2030. It is already the number cause in the urgent hospitalizations in the US, Canada and Western European countries.

COPD exacerbation rates spike during the winter months and can be triggered by upper tract infections and colder weather. Over the course of the trail to date, we have observed a lower incidents of seasonally related COPD exacerbations. Likely due to an uncharacteristically mild winter at the end of 2013 in Northern and Central Europe where enrollment began.

To make up for this lag, we have expanded the FLAGSHIP trials geography to include countries in the Southern Hemisphere and recently began opening clinical sites in Australia and New Zealand allowing us to capitalize on their winter season.

We are also pleased to announce that the FDA has accepted our IND for FLAGSHIP and we are actively adding US sites in preparation for the upcoming winter in the northern hemisphere. The sites in the US, will complement the already active 30 plus sites in Northern and Central Europe that have been continuing to enroll patients.

The US sites will be ready for the full upcoming 2014, 2015 winter season. These will be in addition to the European sites, where we really currently have the full complement of sites for March 2014 onwards. We believe these steps will have a significant impact on increasing enrollment by essentially capturing heightened COPD exacerbations during the full and early winter months globally.

Let us now turn our attention to the Phase II leadership trial in BPSIC. The trial continues to enroll patients in community and academic sites across Canada and we are pleased to be able to report that the first US patient in the leadership trial has been randomized.

To-date we have observed that, leaderships stringent enrollment criteria have resulted in fewer women being eligible for the trial on forecast.

Specifically, two enrollment criteria that are fundamental to the trial include requiring women to have had recent cystoscopy evidence of inflammation and they cannot be taking opiate painkillers. Both of these restrictions are essential for measuring the benefit of an anti-inflammatory agent on pain scores while avoiding compounding factors from opiate painkillers.

The recent acceptance of our IND for leadership by the FDA and the addition of approximately 10 sites in the US. We will provide a much larger patient pool to draw from and we believe, this will increase our enrollment rate. We expect to have top line results for this trial also in the first half of 2015.

Currently, more than 14 million patients predominantly women are estimated to suffer from painful condition and have received multiple courses of antibiotics, various painkillers and even narcotics and ultimately the majority undergo multiple cystoscopy's and locate installation of therapist.

There is only one approval oral treatment for this condition and it appears to have limited efficacy. Urologist report that this condition causes significant impact on quality of life and challenging to manage. Overall, the leadership trial represents an important opportunity to evaluate AQX-1125 as a once daily anti-inflammatory therapy for a patient population in desperate need of affective treatment.

Lastly as David mentioned earlier, we are excited to announce two new disease indications for AQX-1125, chronic rhinosinusitis with nasal polyps and atopic dermatitis. We have conducted an extensive assessment of the many disease areas, where AQX-1125 could demonstrate therapeutic benefit through SHIP1 activation and have selected these based on that prevalence, current therapeutic options and unmet medical need combined with AQX-1125 demonstrated anti-inflammatory activity at mucosal surfaces.

Chronic rhinosinusitis or CRS with nasal polyps is a chronic inflammatory condition of the mucosal linings of the sinuses and nose. Inflammation in the mucosal line sinuses can lead to facial pain and pressure, loss of the sense of smell, dripping of mucus down the back of the throat and feelings of nasal obstruction and congestion.

When the nasal passage lining is badly affected polyps develop, which are fleshy swellings that cause blockages and further worsening of symptoms. This condition is not to be confused with allergic rhinitis, which is more often mild and short lived. CRS is persistent and frequently severe, although local steroid application, sprays and drops control the disease for some patients, upwards of 500,000 patient annually in the US alone end up having surgery to remove the polyps, which may recur to open the sinuses.

All steroids are often used before or after surgery but long-term of oral steroids is strong discouraged and can have serious side effects. The disease often last many years, despite available therapy and repeated surgeries and can have a significant impact on quality of life. We believe there is a significant unmet need for an affective anti-inflammatory therapy that could be more effective than topical therapy and suitable for longer term use compared to oral steroids.

The skin although not covered in mucus, is nevertheless the barrier which is very active immunologically and thus share similar cell types to mucosal surfaces. We have strong pre-clinical data supporting activity of AQX-1125 in skin diseases. Atopic dermatitis or AD also know eczema is inflammation of the skin, the dermis. Which results in dryness and sickening often with severe itching resulting in scratching?

Sometimes the inflammation is so severe as to cause weeping or oozing from the rough thick areas often worst in the bend of joint such as the neck, knees, ankles, elbows and wrists. With sever flare ups of the disease, oral steroids may sometimes be used for short courses. Other systemic treatments specifically some biologics are in development, but these are expensive and require injections.

Some immunosuppressive drugs and even cytotoxic agents have been used to treat severe form of AD. We believe, patients with either disease would welcome a once daily orally administrated drug with a favorable tolerability profile. We plan to initiate a Phase II clinical trial in at least one of these indications before the end of the year.

At this point, I will turn the call over to Kam to discuss our financials.

Kamran Alam

Thanks, Steve. As we recorded in our press release, cash, cash equivalence short-term and long-term investments as at June 30, 2014 were $52.4 million compared to $13.8 million on December 31, 2013. This increase was primarily driven by the proceeds from Aquinox's IPO. Research and development expenses were $4.6 million for the second quarter of 2014 compared to $1.2 million for the same period in 2013.

This increase was primarily due to the ongoing advancement of AQX-1125 through the FLAGSHIP and LEADERSHIP trials. General and administrative expenses were $1.1 million in the second quarter of 2014 compared to $400,000 for the same period in 2013. This increase was primarily due to cost associated with operating as a public company.

In the second quarter of 2014, Aquinox had a net loss of $5.4 million compared to net loss of $800,000 for the second quarter, 2013. The increase in net loss was primarily due to the ongoing advancement of AQX-1125 to the FLAGSHIP and LEADERSHIP trials and cost associated with operating as a public company. With that, I'll turn the call back over to you, David.

David Main

Thanks, Kam. Well we are pleased about the progress we are making in our clinical trials, but more importantly feel confident that the steps taken by our team to maximize enrollment in our ongoing trials, while also identifying two new exciting clinical indications will add the value our shareholders expect, we look forward to delivering on our upcoming milestones and will be reporting accordingly as we go forward.

So operator, we can now open the call up for questions.

Question-and-Answer Session

Operator

Thank you (Operator Instructions). I'm not showing any questions in queue.

David Main

That's great. Well hopefully, we address the questions as part of our provided remarks. We encourage anyone if they have a follow-up questions afterwards to feel free to contact the company directly and we look forward to our next call scheduled for our year end results. Thank you, operator.

Operator

Ladies and gentlemen. Thank you for participating on today's conference. This concludes today's program. You can all disconnect. Everyone have a great day.

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Source: Aquinox Pharmaceuticals' (AQXP) CEO David Main on Q2 2014 Results - Earnings Call Transcript

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