Bellerophon Therapeutics's (CCRN) CEO Jonathan Peacock on Q4 2015 Results - Earnings Call Transcript

Bellerophon Therapeutics, Inc. (NASDAQ:BLPH)

Q4 2015 Earnings Conference Call

March 21, 2016 08:30 ET

Executives

Melody Carey - IR

Jonathan Peacock - Chairman & CEO

Fabian Tenenbaum - CFO & Chief Business Officer

Analysts

Christopher James - FBR Capital Marquee

Operator

Welcome to the Bellerophon Therapeutics Year End 2015 Financial and Business Update Conference Call. My name is Bridget, and I'll be your operator today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] Please note, that today's event is being recorded. I would now like to turn the conference over to Melody Carey, President of Rx Communications. Please go ahead.

Melody Carey

Thank you, operator. Earlier today, Bellerophon released financial and operational results for the year ended December 31, 2015. The release is available on the investor section of the company's website at www.bellerophon.com.

Before management begins its prepared remark, please note that some of the information in the news release and on the conference call contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words of expression reflecting optimism, satisfaction with current prospects, as well as words such as belief, expect, plan and anticipate, and similar variations identify forward-looking statements but their absence does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Bellerophon's most recent Form 10-Q and 10-K and subsequent filings with the SEC. These forward-looking statements speak only as of the date of this release and the company undertakes no obligation to publicly update any forward-looking statement or supply new information regarding the circumstances after the date of this release.

Participating on today's call from the company is Chairman and Chief Executive Officer, John Peacock; and Chief Financial Officer and Chief Business Officer, Fabian Tenenbaum. With that, I'd like to turn the call over to John.

Jonathan Peacock

Thank you, Melody. And welcome to everyone joining us today for our first annual financial result conference call since becoming a public company last February. With our clinical activities gaining momentum, we're pleased to provide a comprehensive update on our operations and clinical plans.

Looking back, 2015 was an important transitional year for the company. I'm pleased to recap a number of positive developments from the last course of 2015 and the first few months of 2016, and then I'll outline a clinical programs for 2016. In February of 2016 we released the final analysis of our phase 2 long-term extension study of the INOpulse, a Pulmonary Arterial Hypertension, or PAH which is part two of our phase 2 clinical trial. These findings reinforced the result from part one which demonstrated a sustained benefit and a clean safety profile for patients on the long term oxygen therapy to receive the higher iR-75 dose and stay on the therapy for at least 12 hours a day. We also received final confirmation from the FDA that our phase 3 studies final pulse to treat PAH can commence under a special protocol assessment or spa agreement.

As you know we recently developed the next generation INOpulse device, this design is lighter weighing approximately 2.5 Pounds and has an easy to use interface. It fits in a small hip, shoulder bag or purse and it allows the physician to set the dose and download usage data to monitor patient compliance. Approval to use this new device was a final step required to start our phase 3 trials and we are pleased to announce that after extensive validation and verification testing FDA Center for Drug Evaluation and Research and Center of Device and Radiological Health has approved our use of the new smaller INOpulse device in our upcoming phase 3 trial in PAH.

The supply chain for our new INOpulse device is also progressing well and importantly now ships several of our new INOpulse devices manufactured by Flextronics to our U.S. distribution center. We expect the new device to be in use by patients who are participating in the phase 2 continuation program at the end of the first quarter and shortly thereafter by patients enrolling in the phase 3 program. We also achieved agreement with the European Medicines Agency on the phase 3 trial protocol and in January we received EC certification for the new INOpulse device. The EC certification covers the design, development and manufacture of our entailed pulsatile nitric oxide delivery system including our triple lumen cannula and the application software.

This was the last step needed to move forward with the phase 3 program in Europe.

On the Intellectual Property front, in January the European Patent Office notified us of their intention to grant a European patent for INOpulse device. The patent covers the ability to provide a known amount of pharmaceutical gap to a patient regardless of the patient's inspiration rate or volume and distinguishes the INOpulse delivery system from others on the market. Upon grant by the European Patent Office can be officially validated in up to 38 European countries. As you may know we have issued and pending patents covering the methods of administration, the accurate dose delivery and the reduced NO2 formation from our cannula as well as the patent on the index filed which shows other cartridges cannot be used with INOpulse. These patents expire in 2027, 2033 and 2029 respectively.

In addition to patent protection, open drug designation gives us seven years of exclusivity in the U.S. for PAH. Our often drug filing is pending in the E.U. and we anticipate it being granted which will give us ten years exclusivity with that. From an operational and financial standpoint we have this restructuring behind us and we have made some important strategic additions to the team.

I am pleased to introduce Fabian Tenenbaum. To those of whom who have not yet met him, Fabian joined us last month as our Chief Financial and Chief Business Officer and I look forward to his leadership in the company. We also recently named Mary Ann Cloyd to our Board of Directors. Mary Ann is an independent director and is a member of the audit committee. Today, I feel very confident for our positioning in 2016 and beyond. Our highly experienced leadership team is well prepared to execute on our planned clinical projects and our substantially streamlined internal cost structure will allow us to progress these projects with existing and available resources.

Overall, we have a very ambitious clinical schedule for 2016. With a consolidated agreement between the FDA and EMA, our global phase 3 clinical program for PAH, we are preparing to enroll patients and expect to have the first patients enrolled early next quarter. PAH is a serious and aggressive condition which affects the function of the both pulmonary and cardio-vascular systems. It typically effects younger women and although several new therapies have become available in the past few years, on average these patients still die within five years from diagnosis typically from heart failure as a result of the sustained pressure on the right ventricle.

For this physicians typically initiate treatment with a single oral therapy but progress to combination therapies in severe patients or patients who have don't adequately respond. And given the continued high mortality rate there is a significant need for therapies to provide additional clinical benefits. We are developing INOpulse as a add on therapy which we believe could potentially benefit many diagnosed PAH patients. Data indicated the diagnosed population of approximately 35,000 PAH patients in the U.S and Europe of which 40% to 60% are on oxygen therapy. The first of our two phase 3 trials will include approximately a 180 patients and will be conducted across 18 countries.

This trial will have two treatment arms, INO75 and placebo, the second trial will have three treatment arms INO75, INO50 and placebo and each arm will include approximately 90 patients. So we will be enrolling approximately 450 patients in total. All patients will be on long term oxygen therapy and on one or more approved PAH therapy. A two week run in period will test for compliance on those who use the INOpulse device, few of them 16 hours a day will be replaced on the trial. The primary end point for approval will be changed in six minute walk distance up to 16 weeks compared to placebo. The secondary endpoint is time clinical worsening and the analysis for this end point will be pulled across both of trials. We plan to complete the first phase 3 study in the first half of 2018.

Turning to our second clinical program, pulmonary hypertension associated with chronic obstructive disease or PH-COPD, today there is no FDA approved PH specific therapy available for these patients. We have completed proof of mechanism work which shows that in an acute setting a pulse matrix oxide safely reduced to pulmonary hypertension in COPD patients and mechanistically increased blood volume in the vessels within the lungs. We are now advancing plans for further phase 2 testing and our goal is to demonstrate the potential benefit of INOpulse on exercise capacity for CH-COPD.

We expect these tests to begin in the second quarter of 2016 and we anticipate results by the end of 2016. We are also on track to initiate a phase 2 study in patients suffering from pulmonary hypertension associated with idiopathic pulmonary fibrosis or PH-IPF. And that's in the first half of 2016 also. The study will consist of an exploratory acute haemo-dynamic phase followed by a four week chronic use to exercise capacity. We should have the results from these tests by the end of 2016.

That concludes my update on our clinical program and with that I would like to turn the call over to Fabian to review our financial results.

Fabian Tenenbaum

Thank you, John. I am very pleased to join Bellerophon and I look forward to participate in these discussions with many of you as we work towards our common goals. For gravity, all of my remarks would be for the year ended December 31, 2015 compared to year ended December 31, 2014 unless otherwise indicated.

Overall, we were able to narrow our net loss to 2015 to $46.5 million from $59.7 million. Research & Development expenses in 2015 were $33.4 million down from $46 million in 2014 as a result of our decision to halt development of our BCM program until we can determine an alternative got forward and the completion of the phase 2-A clinical trial for PH-COPD in mid-2014. General and Administrative expenses totaled $14.9 million compared to $13.8 million in 2014. The increase for 2015 was primarily due to the onetime restructuring charges incurred mostly in the second half of 2015.

As of December 31, 2015 reported cash, cash equivalent, restricted cash and marketable securities of $24.5 million which included $14.6 million in prepayments of R&D expenses resulting from our amended drug supply agreement with Ikaria and our contract research organization worldwide clinical trial for the phase 3 clinical trial for PAH. This compares to $27.6 million in 2014. In December we entered into an agreement with Global Corporate Finance or GCF to allow access to additional funds as needed. In accordance to the agreement letter, we have the ability to draw up to $20 million by issuing registered and freely trading common stock shares to GCF subject to execution of the definitive share purchase and registration rights agreement.

We believe the company has sufficient cash combined with the additional planned funding from GCF to support operations through the completion of the first of our two phase 3 trials for INOpulse and PAH as well as planned testing during 2016 for pulmonary hypertension associated with COPD and pulmonary fibrosis.

With that I will ask the operator to open the call for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from Jason Gerberry from Leerink Partners. Your line is open.

Unidentified Analyst

Hi, good morning, this is Derick [ph] on for Jason. Thanks for taking my question. So first on the phase 3 study in PAH, can you just remind us the typical recruitment time for these trials? Is there any reason to believe that your study might be enrolled differently than past trials? And then secondly, the PAH IPF study, can you give us any more details as far as study size and potential powering of the study, primary endpoints, anything there? Thanks.

Jonathan Peacock

So let me take the first question on enrollment. I think if we look at the range of enrollment rates for previous PAH trials, we are assuming an enrollment rate as probably little bit below the medium on historic trials so there should be some upside potential, that had to go faster than indicated. I think, we believe, that the timeline we have given at the right balance between realistic and aggressive but the enrollment rate is probably slightly below the median on previous trials. I think one thing that is worth noting is that there isn't, this will be the only major phase 3 trial out there during the period that we will enrolling so I think we are certainly not going to be in a crowded space and this is also clearly as it needs more therapy and the physicians will then treating these patients know, and are very open to looking for therapy so we don't expect any major challenges in recruiting for this trial.

Particularly for the long term oxygen therapy patients, we don't think this will be particularly appropriate for someone who is not a significant addition to their therapeutic burden they carry right now by just adding this role to the small device given to them particularly given the very clean safety profile that it has. So, we are assuming I think a realistic enrollment rate and in a way we are optimistic that we can go faster but I think it's realistic. So just repeat the second question for me could you?

Unidentified Analyst

On the PAH IPF study the phase 2, can you give us a little bit more detail as far as study size, any powering end point, things like that?

Jonathan Peacock

It's quite a small trial, I think we have talked about his briefly before, I think it's just few patients, but we want to see is, you may recall we did work with Fluid DA on the COPD patients where we showed through the CT revolution imaging study that before and after, we did the CT imaging study before and after treating these patients with pulp nitric oxide and showed that we were mechanistically increasing volume in the vessels and the lungs. We wanted to show first of all mechanistically that we are having that impact for these IPF patients in the healthy part of their lung which we believe will be a significant benefit relief to them. And then secondly, we are going to continue that study for a month to look at any improvements and six minute walk distance relative to base line felicitations. So we are single digit patients, so, this is not going to be one that we can statistically power.

Unidentified Analyst

Okay. And then just one last one maybe for Fabian. With the restructuring behind you guys, can you talk about your cash position over the next 12-18 months? Is the fourth Q a good time to start modelling the future trends for the next two years?

Fabian Tenenbaum

Yes, I think post restructuring in some restructuring costs that was in Q4, I think was correct. As we look forward the year, I think some saving into the Q4 number as a result of the expenses related to the restructuring. But after considering that, that is probably a good rate to go forward into 2016.

Jonathan Peacock

Just to build on that, I think there will be some difference in the accounting and cash going forward given that we largely prepaid WCC for the clinical trials cost for the INO one study and we prepaid Ikaria a nine for the cartridges and filling of the cartridges. A lot of that cash has been spent and will amortized over the life of the studies. They will see that difference between cash and accounting going forward as a result of that, so it's a fairly significant payments which Fabian said in aggregate settled $14.6 million that it came out of cash in Q4. And I think I had previously indicated cash burn of around $15 million in 2016 and 2017. I think for 2016 it’s probably going to be closer to $20 million and for 2017 $15 million still looks about right. In terms of your modelling, that’s where our current assumption is.

Unidentified Analyst

Okay great, thanks guys.

Operator

Thank you. Our next question is from Mitu Baral [ph] with Cowen & Company. Your line is open.

Unidentified Analyst

Hi, it’s Ellie [ph], thanks for taking the question. So I guess, you are nailing down the spot, where there any last changes on the spot design?

Jonathan Peacock

No, there were no changes, it all came out greatly and I know we are all frustrated that it took longer than we wanted it to take, but that was more to complete the testing on the second generation device and then show that every which way that it met the FDA’s needs but no changes to the trial design and it just took longer than we hoped it would.

Unidentified Analyst

Okay. And then no changes to the machine at all?

Jonathan Peacock

No changes to the machine, I haven’t called it a machine before but yes.

Unidentified Analyst

And when can we expect the first sites to open?

Jonathan Peacock

So I think what Debbie is focusing on is getting the new device to replace two questions who are continuing n the extension study and they are going to get the device this quarter i.e. remainder of this month and then we will stop the INO-1 patients shortly after that and several sites are already initiated and waiting for it but I think Debbie is determined as our Chief Medical Officer that we need to get first devices to the patients who have been carrying around the heavy device for two or three years now and we need to get them prioritized first but the INO patients will come very shortly after but I think really realistically what that means is they would be getting it in Q3. Beginning of Q2, sorry, beginning of Q2.

Unidentified Analyst

And are the data sets for the U.S. and the EMEA identical or do you think we will end up carrying about different end points or steps?

Jonathan Peacock

No, we have very specifically been through the scientific advice working part of the process with the EMEA, we have very specifically aligned and agreed on the protocol with the EMEA with the scientific advise working party process. And they have fully aligned with the endpoints in the protocol that we have embedded in this file. So that is something that Peter Fernandes and team have spent a lot of time with the regulatory authorities in Europe so we feel very comfortable that we have a protocol that is fully aligned between Europe and U.S.

Unidentified Analyst

Okay, thank you.

Jonathan Peacock

Thanks, thank you.

Operator

[Operator Instructions] Our next question is from Christopher James with FBR Capital Marquee. Your line is open.

Christopher James

Hi, good morning guys. Thanks for taking the questions. Just two quick questions. Regarding the patient numbers you mentioned 35,000 patients with PAH 40% to 60% on oxygen therapy, I guess what proportion of those patients are on long-term oxygen therapy, greater than 12 hours per day are compliant with that?

Jonathan Peacock

I think Chris, it's hard to get the specific days from that but I think our experience is, is the large majority of those 40% to 60% stay on their oxygen therapy for at least 12 hours a day. And I think one indicator of that is during the phase 2 trial, the oxygen therapy patients, without a strict protocol stayed on the device -- 70% of then stayed on the device for 12 hours or more a day and that was with this very heavy device that they have to carry around. So I would say at a minimum, I would expect some 70% and probably more than that. And the 40% to 60% by the way is, the reveal registry indicates that 40% of the patients on that registry are on oxygen therapy, 60% is a combination of -- we did our own market research among multiple KOLs and VUS in Europe which indicated that 58% of their patients were on oxygen, plus from the phase 2 recruiting that we did, around 60% of the patients that were on the trail were on oxygen. So I think we feel pretty good about that range of oxygen therapy patients in the vast majority already on that 12 hours a day regime. And I think as you -- that running period was also given a pretty good sense of how compliant these patients are.

Christopher James

Great John, that's really helpful. And then on the -- I'm not sure if you mentioned this or if I missed this, the timing of the second -- start of the second phase 3 study in PAH, and is the SPA inclusive of both studies?

Jonathan Peacock

Yes, the SPA is inclusive of both studies with the primary endpoints being Six Minute Walk Distance, so that's fully clear. In terms of when we will start the second of the two phase 3 trials, ideally we would like to start it at the back end of this year which would enable us to complete it during 2019 about a year after the IN01 study. That depends on funding, I think as we've indicated we are funded for the IN01 study and for the phase 2 testing that we're planning this year, COPD and IPF we're not yet funded for the second of the two phase 3 studies and I think depending on markets conditions, we will see if we can get that second phase 3 study funded or at least funded to the point where we can start it late for this year and run it through to when we get the phase -- the results from IN01 which would be another funding event for us. So I think if we -- if we're able to get the funding in place to carry IN02 through to first half of 2018, when we'll have the results from IN01, then on top of what we've laid out today, that will probably be another $20 million to $25 million to get to that point.

Christopher James

Great, thank you. That's helpful.

Operator

Gentlemen, there are no further questions. Please proceed with your closing remarks.

Jonathan Peacock

Okay, thank you. So I'd just like to reiterate that we're very well positioned to advance our clinical programs. We have in place a strong and experience leadership team that many of you have met. But they are working hard to execute the phase 3 and the phase 2 clinical programs that we have ahead of us in PAH, COPD and IPF. We've right sized our cost structure, and we believe we have sufficient resources in place and available to complete the first of the two phase 3 clinical trials in PAH, and the planned phase 2 work in COPD and IPF. Our team is keenly focused on continuing to build the company and our cardiopulmonary pipeline. And I look forward to updating you on our continued progress on future calls. So thank you all and thanks for joining us today, and have a good day.

Operator

Ladies and gentlemen, this concludes today's call. You may disconnect your lines.

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