Tetraphase Pharmaceuticals' (TTPH) CEO Guy Macdonald on Q4 2015 Results - Earnings Call Transcript

Tetraphase Pharmaceuticals, Inc. (NASDAQ:TTPH)

Q4 2015 Earnings Conference Call

February 23, 2016, 16:30 ET

Executives

Teri Dahlman - Corporate Communications

Guy Macdonald - President & CEO

Chris Watt - CFO

Pat Horn - CMO

Analysts

Brandon Folkes - Guggenheim Securities

Alan Carr - Needham & Company

Heather Behanna - Wedbush Securities

Stephen Willey - Stifel Nicolaus

Operator

Welcome to the Tetraphase Fourth Quarter and Full Year 2015 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Teri Dahlman, Corporate Communications. Please begin.

Teri Dahlman

Thank you. Good afternoon and thank you for joining us today. With me on the call today are President and CEO Guy Macdonald, Chief Medical Officer, Dr. Patrick Horn and Vice President of Finance, Chris Watt. On the call today, Guy will make some introductory and summary remarks and Chris will provide an overview of our fourth quarter and yearend financial results. We will then open the call up for your questions, for which Pat will also be available.

Before we begin our formal comments, let me remind you that during today's conference call, we will be making forward-looking statements that represent the Company's intentions, expectations or beliefs concerning future events. These forward-looking statements are qualified by important factors set forth in today's press release and the Company's filings with the SEC which could cause actual results to differ materially from those in such forward-looking statements. Information discussed on today's call is accurate as of today and we do not intend to necessarily update the specific information in the future. I would now like to turn the call over to Guy Macdonald.

Guy Macdonald

Thank you, Teri. Thank you all for joining us today. For those of you who may be new to Tetraphase, our lead candidate Eravacycline is a broad spectrum antibiotic which is currently in Phase 3 development, for the treatment of multidrug resistance or MDR infections, including those caused by MDR gram-negative bacteria. As a reminder we completed two Phase 3 clinical trials as part of the IGNITE program. In the first trial IGNITE 1 in complicated intra-abdominal infection or cIAI, IV Eravacycline was well tolerated and achieved its primary efficacy endpoint of non-inferiority compared to ertapenem. In the second trial IGNITE 2 in complicated urinary tract infections or CUTI, Eravacycline was administered as a IV to oral transition therapy and was well tolerated but did not achieve its primary end point of non-inferior compared to Levofloxacin.

We performed additional data analysis for IGNITE 2 which showed the patients who had longer IV treatment on Eravacycline had better response rates, indicating that the overall study results were driven by decreased efficacy of the eravacycline oral formulation. In the subset of patients who received IV treatment, eravacycline treated patients achieved a higher response rate than Levofloxacin treated patients.

We had planned to utilize results from these two Phase 3 clinical trials to support the submission of a new drug application or NDA, for eravacycline in the treatment of cIAI and CUTI. Since the announcement of IGNITE 2 data, we have had and continue to have discussions with the FDA to clarify the regulatory path forward and the next steps for IV Eravacycline. We look forward to providing an update after we receive regulatory guidance from the Agency which we anticipate this quarter.

In parallel we're planning to initiate an additional Phase 3 clinical trial for once daily IV eravacycline in CUTI, the purpose of this additional trial is to confirm the positive efficacy of IV only eravacycline which was observed in the subanalysis from IGNITE 2. We intend to initiate this clinical trial, the work for which is already underway during the third quarter of 2016. We remain confident that eravacycline has the potential to be an important new antibiotic treatment option for gram negative bacterial infections, particular those caused by drug resistant pathogens. In just the U.S. and Europe IV antibiotic treatment in cIAI and CUTI comprises more than 60 million patient days of therapy, representing approximately 65% of total patient days of therapy in these indications.

We believe the profile of eravacycline supports the potential to play a significant role in the treatment of these serious infections. Regarding the oral dose formulation of eravacycline, we're planning to initiate new clinical studies to advance the oral development program during the second quarter of this year. Beyond the eravacycline program, we're also advancing our pipeline of novel antibiotic candidates.

We're currently conducting a Phase 1 clinical trial for TP-271 which is being developed to combat respiratory disease caused by bacterial bio-threats and antibiotic resistant public health pathogens. We're also planning to initiate a Phase 1 clinical trial evaluating TP-6076, our second generation antibiotic candidate with potent activity against drug resistant pathogens during the second quarter of 2016. I would now like to turn the call over to Chris Watt, to provide an overview of our fourth quarter and year end 2015 financials.

Chris Watt

Thanks, Guy. As of December 31st, 2015, we had cash and cash equivalents of $205.9 million and 36.6 million shares outstanding. We expect that our cash and cash equivalents, as well as expected revenue from our U.S. government awards, will be sufficient to fund operations into at least early 2018. For the fourth quarter of 2015, we reported a net loss of $18.1 million or $0.50 per share, compared to net loss of $20.6 million or $0.69 per share, for the same period in 2014. Revenues were $2.5 million compared to $3.1 million for the same period in 2014. Revenues for each period consisted of contract and grant revenue under the company's U.S. government awards.

Research and development expenses for the fourth quarter of 2015 were $15 million, compared to $19.7 million for the same period in 2014. A decrease in R&D expenses was primarily due to lower clinical trial and drug manufacturing costs for eravacycline, as the IGNITE 2 clinical trial concluded. General and administrative expenses for the fourth quarter of 2015 were $5.6 million, compared to $3.7 million for the same period in 2014. The increase in G&A expenses was primarily due to costs to support pre-commercialization activities for eravacycline.

For the year ended December 31st, 2015, we reported a net loss of $83.2 million or $2.36 per share, compared to a net loss of $66.7 million or $2.49 per share for the same period in 2014. Revenues were $11.7 million for the year ended December 31st, 2015, compared to $9.1 million for the same period in 2014.

As mentioned earlier, revenues for each period consisted of contract and grant revenue under the Company's U.S. government awards. R&D expenses were $73.8 million for the year ended December 31st, 2015, compared to $61.9 million for the same period in 2014. The increase in R&D expenses was primarily due to drug manufacturing and nonclinical costs, in support of our NDA-related and pre-commercialization activities for eravacycline and activities in support of our preclinical candidate TP-6076, as well as increase in stock-based compensation.

G&A expenses were $20.9 million for the year ended December 31st, 2015, compared to $12.9 million for the same period in 2014. The increase in G&A expenses was primarily due to costs to support pre-commercialization activities for eravacycline. With that, I would now like to turn the call back over to Guy.

Guy Macdonald

Thank you, Chris. In closing, I would just like to review the milestones we're expecting during 2016. To provide an update for the eravacycline program during the first quarter, initiating a Phase 3 clinical trial evaluating IV eravacycline in complicated UTI infections during the third quarter, initiating new clinical studies evaluating the oral dose formulation of eravacycline during the second quarter, advancing the ongoing TP-271 Phase 1 clinical program throughout the year, initiating a Phase 1 clinical trial for TP-6076 during the second quarter and lastly, we plan to present scientific data from antibiotic candidates at scientific meetings throughout the year.

We remain focused on advancing the development of eravacycline and we look forward to keeping you updated on this and our other pipeline programs throughout the year. With that, let's open it up to questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]. The first question is from Louise Chen of Guggenheim. Your line is open.

Brandon Folkes

It's Brandon Folkes on for Louise. Could you give us more detail on what you found out during the UTRO analysis and how this will fit the design of the new oral studies? And perhaps if you could help us with the market of intra-abdominal without the oral and then last one could you file without the UTI study? Thank you.

Pat Horn

So this is Pat. And I can address the first and the last. So the first one was on what we learned about the oral product in the completed Phase 3 study. And so in some corporate presentations we have presented that analysis. So again, just to kind of step back, the IV study in complicated intra-abdominal infection was IV only and that was a positive study. The Phase 3 study in complicated urinary tract infections had an IV to oral transition.

And overall as Guy said, we failed to demonstrate non-inferiority to Levofloxacin. Once we got that data back, we did a multi-variant analysis to look at potential factors and what we found is that increasing length of IV therapy, increased the response rate of eravacycline compared to Levofloxacin.

So the subanalysis that Guy referred to is, if within that study you look at subjects who only received IV study drugs, then we see that the point estimate in the response rate actually favors Levofloxacin and the lower bound confidence interval there does not go below minus 10. So what that means is, that there was an underperformance of the oral product in that study and that is due to a lower than expected exposure to eravacycline following oral administration. So in the upcoming UTI study we're going to look at IV only. As Guy said, we're continuing development of the oral product.

We're taking that back into some more studies to look at kind of what the cause was for that, but the UTI study going forward will be IV only. The third one was whether it's possible to file for IAI only and that is part of the ongoing discussions with the FDA and as Guy said, those are still ongoing discussions and once we have a final response from the FDA, we'll be able to update you on that.

Guy Macdonald

And lastly, just briefly, I would be happy to take this in more detail offline, in the intra-abdominal market in the U.S. and the core Europe markets is around 34 million patient days of therapy. Around 70% to 80% of that is IV therapy only. We classify around 20% of those as what we call high risk patients needing more than a simple generic antibiotic. Clearly in IAI alone there is a significant opportunity for differentiated product like eravacycline and the numbers are pretty similar in complicated UTI.

Operator

The next question is from Alan Carr of Needham and Company. Your line is open.

Alan Carr

I wondered if you could talk a bit more about what you plan to do with the oral formulation? Are you trying different formulations and maybe expect different tolerability outcomes? Can you elaborate on that?

Pat Horn

The first thing we're going to do is we're going to take the experimental conditions in the Phase 3 study and replicate an IV to oral transition in a Phase 1 unit, where we have much tighter control over mealtimes and feeding and as well as dosing and we can actually get better PK. That will really help us determine what the exposure was after the oral and after the IV, once we have that data, then we'll progress to see what there is that we can do to boost that exposure to eravacycline after an oral administration and we can't really specify what those steps will be until we get the results from that first study. And as Guy mentioned, we plan on starting that study second quarter of this year.

Alan Carr

So I guess you can tell us something about the scale of the Phase 1 here? How many volunteers are involved and when you might have some data from that?

Pat Horn

So I think this will be much more like a PK study, rather than a large clinical trial. And so the smaller numbers, I think once we have the results from that, we'll be able to plan the second study. And I think once we get a clear path forward for the oral formulation and can really articulate a time line and giving it back to the clinic, then we'll come forward with what our plans are for that.

Alan Carr

It wouldn't be aggressive to assume that you have a good understanding from that PK study by the end of this year, right? Is that safe to assume?

Pat Horn

So I think again once we have the first PK study which actually will be a relatively short study, then we'll know our steps forward. But that will just be to inform really our second study. And once we have the results of the second study, we'll be able to formulate a more long term plan.

Alan Carr

I guess to clarify, the first study I understand, that's to understand the exposure, try to replicate what happened in the Phase 3 and it sounds like that's something that would clearly happen you could fit within this year. Is that safe to say?

Pat Horn

Yes.

Alan Carr

Okay. And then the second one, I guess can you elaborate a bit, what would be the second study then?

Pat Horn

The second study will really depend upon what it is that we find out in the first study.

Alan Carr

That's the one where you might play around with I guess, you wouldn't change any formulations in the second study, would you?

Pat Horn

Without the data from the first, it's impossible to really rule anything out. It may be that we adjust the length of time between meals and dosing. It may be something like a formulation change.

Operator

The next question is from Heather Behanna of Wedbush Securities. Your line is open.

Heather Behanna

This one is for Pat. Thinking about the IV UTI study that you're going to start in the third quarter, I wonder if you could talk a little bit about the fact that you are going to use once daily? I know in if you look at the IAI data where you decided on twice daily for greater exposure, I was wondering if you thought about maybe doing two different dosing arms or exploring twice daily instead of a once daily for the UTI study?

Pat Horn

The answer is no. I think that when we look at our, we did our Phase 2 intra-abdominal study with once daily 1.5 milligram per kilogram and twice daily 1.0 milligram per kilogram. In that study the exposures following the 1.5 milligram per kilogram once a day, clearly should be adequate to give us exposures we need to treat urinary tract infections and those plasma exposures from the once day dosing would really drive a urine concentration of eravacycline sufficient to treat urinary tract infections.

So there really from that point of view, there doesn't seem to be a need to go to the twice daily dosing. I think the twice daily dosing in intra-abdominal infection really increased exposures, were really kind of there to get the deep-seated infections, the abscesses that you see with intra-abdominal infections. With complicated urinary tract infection where you could have [indiscernible] or just a urinary tract infection itself, in a patient with abnormal anatomy, those exposures we get with the once daily dosing should be sufficient. So that's what we're going forward.

Heather Behanna

And then just quick financial question for next year, as far as collaboration revenues, with two set of one going into the clinic now, should we expect an uptick or will that be offset by eravacycline? How should we think about revenues in 2016 from contracts?

Guy Macdonald

Well, I mean, clearly the 2071 is the final stage of the NIAID contract. So obviously that is going to be when we complete the idea. And then the oral which is obviously the second part, we're doing an IV SAD which we started then we have an IV MAD and then hopefully followed by Phase 1 oral program and then that would complete the NIAID program. We still have the ongoing and last year and a half of the BARDA program on eravacycline.

Operator

The next question is from Stephen Willey of Stifel. Your line is open.

Stephen Willey

I guess as you think about the next Phase 3 CUTI study that will be the only, should we be thinking about that in terms of almost being a replicate of IGNITE2 minus the oral switch? Is there anything that you would want to do differently, in terms of trial design or patient selection?

Pat Horn

So I think part of the ongoing FDA discussions include really talking about what this study design of the UTI study will be, so I think that we're in the process of finalizing that. I think there is really limited changes you can make in order to really comply with the FDA guidance document. We would have to use the same patient selection, we would have to use the same end point. Again the big difference would be with the IV only.

Stephen Willey

In terms of sizing that trial, should we presume that some of the patient exposure data that was generated in the IGNITE 2 could count towards some of the safety exposure requirements that FDA requires?

Pat Horn

Right. It would all go into the safety database, in terms of the efficacy analysis it will need to be sized to be a standalone study to support statistical evaluation of the efficacy, just from the repeat study.

Stephen Willey

Okay. And then I guess as we think about the oral, the continued oral development I think in the lead in Phase of IGNITE 2, you had shown I believe data that suggested that there was not a drop-off in drug exposure per urine, following the transition from IV. So I'm wondering if you think that there may be something going on from a plasma perspective that needs to be further evaluated?

Pat Horn

That's really one of the reasons we're pulling it back. But when we did our analysis, when we did our analysis of IGNITE 2, there were a couple things we wanted to look at. One was as you said we had the lead in part although it wasn't powered for statistical significance showed a larger response rate in the eravacycline groups in than the Levofloxacin group, where just the opposite was seen in the pivotal part. Our analysis we really tried to explain what we saw in the pivotal part, as well as try to understand the difference between the pivotal part and the lead in.

The one unifying thing that really ties that together is the length of IV therapy because the switch to IV, from IV to oral wasn't mandated at a certain time. There was everyone got three days of IV minimum and then they could be switched if they met protocol criteria and that could happen in day four, day five or continuing on to day seven. And when we did that analysis what we saw is that on average, patients in the lead in part of the study had longer IV therapy than patients in the pivotal part. So the length of IV therapy helps to explain the results of the pivotal part, as well as the difference between the lead in and the pivotal.

Stephen Willey

Okay. And then maybe lastly, I know that you had previously mentioned I think late last year that there was no intention to file an MAA in 2016. I'm just wondering if the thoughts on a potential path forward in Europe, if that has changed at all and whether or not the regulatory feedback you received from FDA will somehow perhaps change that strategy, as you think about going forward in the second half of this year? Thanks.

Guy Macdonald

That's a good question. I think to be honest the FDA interaction has taken up an awful lot of our time and resources. We do plan over the next few months to have interactions with the European agency and understand what path forward we have there in terms of what we can file. So when looking at it separately to the U.S. regulator interaction, although at the end when we have the answers to both clearly from a business point of view, we'll see whether it makes sense to launch in one versus the other or both at a similar time. We'll be able to give an update later in the year, as to what we're planning to do there.

Operator

And at this time I would like to turn the call back over to Teri Dahlman for closing remarks.

Teri Dahlman

Thank you again for joining us today. We're available if you have additional questions.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.

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