Dipexium Pharmaceutical LLC (NASDAQ:DPRX)
Q4 2015 Earnings Conference Call
March 23, 2016 08:30 AM ET
David Garrett - VP, Finance and Corporate Development
David Luci - President and CEO
Robert Shawah - Chief Accounting Officer and Treasurer
Ben Haynor - Feltl & Company
Daniel Sanchez - Raymond James
Greetings and welcome to the Dipexium Pharmaceuticals’ Fourth Quarter and Year-End 2015 Financial Results 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].
It is now my pleasure to introduce your host, David Garrett, Vice President, Financing and Corporate Development. Thank you sir, you may begin.
Thank you. Good morning and welcome to the Dipexium Pharmaceuticals’ Year-end 2015 financial results conference call. This morning we issued a press release providing financial results and company highlights for the full year ended December 31, 2015. This press release is available on our website at www.dipexiumpharmaceuticals.com.
Joining me on the call today is David Luci, President and Chief Executive Officer of Dipexium, who will provide a corporate update and outlook for 2016. Following his comments, Robert Shawah, our Chief Accounting Officer will provide an overview of the financial highlights from the 2015 before turning the call back over to David Luci for closing remarks.
As a reminder, during today’s call we will be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions, estimates and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Investors should consider these risks and other information described in our filings made with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed yesterday March 22, 2016 and our quarterly reports on Form 10-Q. You are cautioned not to place undue reliance on these forward-looking statements, and Dipexium disclaims any obligation to update such statements at any time in the future.
In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 23, 2016. Dipexium undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date and time of this conference call.
I will now turn the conference call over to David Luci.
Thank you, David. Good morning everyone, and thank you for joining us on this morning’s conference call to discuss Dipexium’s financial results for the year ended December 31, 2015. During today’s call, we will discuss our full year 2015 financial results and share some key corporate highlights.
2015 was a significant year for Dipexium; we continued to advance Locilex to OneStep-1 and OneStep-2 pivotal phase III clinical trials for the treatment of patients with mild infections of diabetic foot ulcers or Mild DFI. The studies have been enrolling well and we currently expect to complete these trials in the second quarter of 2016 and report topline data in the third quarter of 2016. If successful, Locilex has the potential to be the first product specifically approved in the US for the treatment of patients with Mild DFI.
In addition, we received formal regulatory advice during 2015 on the European Medicine’s Agency regarding Locilex’s regulatory pathway and the European Union, and we anticipate filing for approval in Europe in the first half of 2017 if the OneStep-1 and OneStep-2 trials are successful. With the closing of our secondary public offering in June ’15 pursuant to which we raised 21.3 million of gross proceeds, we are well positioned to capitalize on the commercial potential of Locilex in the US and in Europe.
In addition, as we draw closer to the completion of the OneStep pivotal phase III clinical trials, we are keenly focused on increasing awareness of Dipexium and Locilex among key constituents, while also raising awareness about the unmet need of patients with Mild DFI. To this end, we look forward to sponsoring two upcoming premier medical conferences focused on the diabetic foot, the Diabetic Limb Salvage Conference in Washington DC in late March and the 16th Melbourne Diabetic Foot Conference in the United Kingdom in mid-May.
I’ll now like to provide a more detailed update of our business by focusing on the following corporate highlights. First, clinical and US regulatory update; second, a manufacturing update; third, non-clinical development update; fourth, the European clinical and regulatory update; and fifth, the intellectual property update. I will then turn the call over to Rob Shawah, our Chief Accounting Officer to discuss Dipexium’s financial highlights for the year ended 12/31/15.
Firs the clinical and regulatory update; I’d like to discuss that our progress and status of enrollment and the OneStep-1 and OneStep-2 pivotal phase III trials. As of today, our pivotal phase III clinical trials has passed the 86% enrollment mark, both individually and in the aggregate; identical enrollment in both. These trials target enrollment of 180 patients per trial for a total of 360 valuable patients.
The OneStep clinical trials are designed to establish the clinical superiority and safety of topical Locilex plus standard local wound care, as compared to placebo cream plus standard local wound care in the treatment of Mild DFI. We can now say that we anticipate completing enrollment in the OneStep studies in the second quarter of 2016 and announcing the topline data in the third quarter of 2016.
Also I would like to underscore a couple of aspects of the OneStep pivotal phase III trials. First, although we are delighted with the current pace of enrollment, our emphasis throughout the trial has been to monitor and continually train investigators and sales staff to ensure proper patient selection regarding inclusion and exclusion criteria for randomization in to the studies.
Second, we’ve implemented certain enrollment enhancement programs including the appointment of six full-time Clinical Research Liaison or CRL to enhance the communication and messaging at the clinical trial sites and between trial sites and high docile wound care specialists in the local area around each trial site. Generally speaking, we believe these programs have contributed meaningfully to our increased enrollment in the past several months.
The next [important] point here is regarding our US regulatory update in the Pediatric Waiver Approval we received from the FDA. In February 2016, FDA formally agreed with our pediatric study plan, specifically a pediatric waiver, meaning that it is highly unlikely that we will need to dose a pediatric study here in the US.
Now moving on to chemistry manufacturing and controls, the company’s manufacturer of active pharmaceutical ingredient has now completed the first of three validation launch of API that we will need for a planned submission of a new drug application amendment to FDA and marketing authorization application to the European Medicine’s Agency. We’re planning to initiate the manufacture of the two remaining validation lots for regulatory guidelines in the first half of this year.
We’ve also scaled up the size of our API lots and have successfully completed the scale up of the first formulated batch of Locilex cream at the 140 kg batch size. We’re using this inventory in the OneStep pivotal phase III trials. This 140 kg batch size is also the site to be used initial commercial scale inventory for product market introduction. We continue to anticipate as we mentioned in the past that we’ll have adequate stability data on three cGMP registration batches of product supply at the time we submit our new drug application amendment to support a shelf life of 24 months.
In addition, we’ve now successfully manufactured and put on stability a two gram tube of Locilex to be used as physician samples to support market introduction. The third area of our business non-clinical development update; in 2015 we finalized protocols for five new microbiology studies to be conducted on our behalf by outside vendors. These microbiology studies are intended to strengthen our planned regulatory submission with the FDA and the European Medicines Agency.
In these studies, we test the activity of pexiganan against a broad range of contemporary microorganisms to provide supported information for inclusion in the clinical and invitro list for proposed US drug labeling and the for the planned marketing authorization application to be filed in Europe. We anticipate these five studies will be completed in the first half of this year. We also anticipate abstract and poster presentations of the results of our microbiology study to be made on our behalf at various scientific conferences throughout 2016.
That is our European clinical and regulatory update. We obtained formal scientific and regulatory advice from the European Medicines Agency’s Committee for Medicinal Products for Human Use or CHMP in the second quarter of 2015 regarding our requirements for obtaining marketing authorization for those [reps] in the EU. On the basis of this formal advice, we believe the company will be in position to submit our marketing authorization application to the EMA in the first half of 2017, without being required to conduct additional clinical trials in Europe in support of our submission.
Additionally, in the third quarter of 2015, we filed an application for pediatric study waiver with the European Medicines Agency as required under the EU guidelines. The pediatric waiver is requested and granted when the indication applied for in adults in not present in children, as is the care we believe with diabetic foot ulcer and infection. Accordingly we as sponsor would now plan a clinical trial in a pediatric population either pre or post approval in Europe if the regulatory authorities in fact agree with a substance of this submission.
And in fact in December of 2015, the pediatric development committee of the European Medicines Agency approved our pediatric waiver and the European Medicines Agency adopted a concurring decision in January ’16 accepting the decision of the Pediatric Development Committee. Meaning that we are now required in Europe to conduct pediatric studies the same as the result and outcome in the US.
The last area of our business briefly is intellectual property. In the first quarter of 2016 the company announced the issuance of patents in Australia and New Zealand. We anticipate the issuance of additional international patents throughout this year and next year. These patent issuances may include new international patents arising from ongoing prosecutions in Europe, Canada, Japan, China, Korea, Latin America and South America, and we’ll keep you updated by way of the earnings calls and press releases as those unfold.
I’ll now turn the call over to Robert Shawah, our Chief Accounting Officer to guide you through the highlights of our 2015 financial results.
Thank you David. As mentioned earlier, our 2015 full year financial results were included in our press release issued earlier this morning. The company ended the year on December 31, 2015 with cash and short term investments totaling $32.2 million compared to $27 million for the year ended December 31, 2014. The increase was primarily attributable to net proceeds of $19.7 million from the company’s common stock offering in June 2015.
Net cash used in operating activities was $14.6 million for the year ended December 31, 2015 versus $11.3 million for the year ended December 31, 2014. The company’s cash balance is currently anticipated to fund operations through 2017. Research and development expenses were $11.3 million for the year ended December 31, 2015, compared to $8.9 million for the year ended December 31, 2014. The increase is primarily due to the increased enrollment in the phase III clinical trials and the related trial expenses.
General and administrative expenses were $7.5 million for the year ended December 31, 2015, compared to $4.7 million for the year ended December 31, 2014. The increase was primarily due to an increase of $1.9 million for non-cash stock based compensation related expenses, an increase of $0.3 million for increased compensation expenses due to full 12 months of salary activity, an increase of $0.3 million in marketing expenses and finally an increase to $0.3 million in legal, insurance and office related expenses.
The company reported a net loss of $18.7 million or $1.99 per diluted share for the year ended December 31, 2015, compared to a net loss of $13.6 million or $1.73 per diluted share for the year ended December 31, 2014. Dipexium received gross proceeds of $21.3 million from its June 2015 common stock offering, with net proceeds of $19.7 million. The company had 10,301,114 shares outstanding as of December 31, 2015.
Thank you Rob and thank you all for joining us for today’s earnings call. We are very pleased to report Dipexium’s 2015 achievements and look forward to building on this momentum throughout 2016. I would now like to open up the call for questions. Operator?
[Operator Instructions] our first question comes from the line of Ben Haynor with Feltl & Company. Please proceed with your question.
Ben Haynor - Feltl & Company
On the five microbiology studies, do you look at those as being more to support the NDA submission or more to expand the labeling or both?
More to support the NDA submission, so we’ve already performed GAAP analysis on the NDA, the new drug application and the marketing authorization application. So what we’re trying to do is make our submissions as robust as we can and kind of obviate the questions that we could anticipate that the regulators may ask in the process.
Ben Haynor - Feltl & Company
I know in the past you’ve mentioned some pretty clinical work, animal work going on in IV formulation, is anything new to report there?
No, that project didn’t yield a formulation that we could move forward from a toxicity perspective. Although there is more things that we could do, we’ve kind of parked that on a back burner for now, so that we can continue as a primary strategy as more of a focus since we’ve picked Europe since last year without having to do more clinical trials. It’s required us to do the GAAP analysis on the European submission for approval and pick-up the new microbiology studies and other things that relate to the primary strategy.
Ben Haynor - Feltl & Company
As you’re getting close to the end of enrollment, have you seen the rate of enrollment pickup at all or hockey stick if you will?
Yes, in fact we have, February, it being the shortest month of the year, February ’16 was 24 patients enrolled. So the biggest month of enrollment since we started the study, and we had to anticipate, I would guess that March may be even better than February. So, I think it’s the point where we are at that hockey stick effect. I would think we’ll probably do 25 to 30 patients a month, but inherently difficult to guess.
Ben Haynor - Feltl & Company
How do you see the R&D spend track and the once the trial played or once the enrollment’s complete and they wind down, obviously expenses for the submission putting it altogether, but I would imagine that R&D would drop off towards the end of the year as you get closer or as you get the NDA filed.
It absolutely will. We say on an annualized basis we are setting 1.3 million per month, and the thing being that maybe more than 1.3 million in the early month. But towards the end of the year it might be 400,000 or 500,000 a month. So, we think that by years’ end the yearly spend will be something in the neighborhood of 15 million bucks for the year.
Our next question comes from the line of Elliot Wilbur with Raymond James. Please proceed with your question.
Daniel Sanchez - Raymond James
It’s Daniel Sanchez on for Elliot; I have two quick questions for you. Question number one, has the recent successful scale up to the 140 kg altered the prior expectations of the expected cost per tube, and where does that stand currently? Secondly question, will there be any less specific events or symposiums at the upcoming conferences in Washington and the UK, thank you.
Sure, Daniel thanks for dialing in and to answer your first question is yes, the cost of goods per tube with the increase in size to a 140 kg batches has decreased. You may recall about a year ago, we were anticipating $12 to $15 per tube. The tube cost now is down to about $10.50 with the 140 kg batch size. We also think that having two years of shelf life will be beneficial to our cost of goods compared to what Magainin has been experiencing with the old formulation which I believe had one-year of shelf life.
So from a cost of goods point of view, given that our anticipated retail price is $600 reimbursable price, it’s less than 2% cost of goods. In terms of the specific event, we don’t have any specific events or plans in Melbourne. We do have a couple of poster presentations upcoming at one of the Melbourne conferences David remind is that in June?
Yeah, the ICAAC.
I’m sorry, the ICAAC conference. I think we have a couple of abstracts that we’ve submitted for poster presentation. So we’ll have possible events there, and there’s a conference in Florence, Italy, a wound care conference in September, and at that time, if we have our clinical data our topline data, we may be able to organize a webinar or an analyst day to have our key opinion leaders doctors Lipsky and Joseph present that data to the financial community. We’re still working on that.
[Operator Instructions] It appears we have no further questions at this time. I would now like to turn the floor back over to management for closing comments.
Thank you very much again for your attendance today, and 2016 is a real exciting time for Dipexium, and we look forward to providing another update in the second week of May with our first quarter results. Thank you.
Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
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