NeuroDerm's (NDRM) CEO Oded Lieberman on Q4 2015 Results - Earnings Call Transcript

| About: NeuroDerm (NDRM)

NeuroDerm, Ltd. (NASDAQ:NDRM)

Q4 2015 Earnings Conference Call

March 31, 2016, 08:30 AM ET

Executives

Roy Golan - Chief Financial Officer

Oded Lieberman - Chief Executive Officer

Analysts

Ken Cacciatore - Cowen and Company

Chris Raymond - Raymond James

Scott Henry - ROTH Capital Partners

Operator

Good day and welcome to the NeuroDerm Fourth Quarter and Full-Year 2015 Financial Results Conference Call. Today’s call is being recorded.

For introductions and opening remarks, I would like to turn the call over to Roy Golan, CFO of NeuroDerm. Please go ahead, sir.

Roy Golan

Good morning and thanks for joining us today. With me is Oded Lieberman, CEO; and Sheila Oren, VP of Clinical and Regulatory Affairs.

Before we begin, I would like to read the following regarding forward-looking statements. Certain statements in today’s conference call and responses to various questions may constitute forward-looking statements. We wish to caution you that such statements reflect only the company’s current expectations and that the actual events or results may differ materially.

For more information about factors that could impact these forward-looking statements, please refer to the risk factors contained in the company’s most recent Form 20-F and subsequent filings with the Securities and Exchange Commission.

I will now turn the call over to Oded Lieberman.

Oded Lieberman

Thank you, Roy, and thank you everybody for joining us. On our call today, I’ll provide a corporate update including updates on our ongoing and upcoming clinical trials. Then I will turn the call back over to Roy to discuss our fourth quarter and full-year 2015 financial results. We will then take your questions.

2015 was an important year for NeuroDerm in which we were highly focused on advancing our product pipeline, including our lead product candidates ND0612H and ND0612L. Clinical data suggests that these product candidates may provide a more effective therapy alternative than what is clinically available to patients who suffer from Parkinson’s disease. We believe they have the potential to transform treatment options and offer a higher quality of life for Parkinson’s disease patients and their caregivers.

Following last November’s announcement of our streamlined clinical development program based on feedback from the FDA, which not only decreased the number of total patients to be enrolled in our clinical trial, but also reduced the total number of trials now included in our development program. We’ve made solid progress advancing our product pipeline.

In December, we announced the start of trial 006. This is the first ever efficacy trial of ND0612H, our high-dose product candidate intended for severe Parkinson’s disease patients who cannot be adequately controlled with oral therapy and might otherwise require surgical intervention. This open label pilot Phase II study of 36 patients treated for 28 days is designed to investigate the efficacy, safety, tolerability, and pharmacokinetics of two dosing regimens and compare them to the baseline oral standard of care.

We are encouraged by the progress of this trial so far, and we plan to announce top line results of this study in the second half of this year. In parallel, we are proceeding as planned with our 005 study, EU study, of a pharmacokinetic trial comparing ND0612H to Duodopa in healthy volunteers as part of our bioequivalent space regulatory approach in Europe towards obtaining approval in the EU. I can confirm that we anticipate completing this pilot trial and announcing this result in the second quarter of 2016.

Turning to our low-dose product, ND0612L, our product candidates for patients with moderate to severe Parkinson’s disease, we plan to initiate trial 007, the pivotal Phase III efficacy trial around mid-year 2016. Our 012 trial, which is the long-term safety follow-up study for both ND0612H and ND0612L intended to satisfy the requirements of both the U.S. and EU regulatory authorities, this trial should start soon in Q2 2016.

Now, I would like to provide an update on our U.S. activity. As a reminder, the FDA previously requested additional documentation pertaining to good manufacturing practices, the quality system regulation to Cane, the Italian supplier of the devices used in our ND0612H and ND0612L clinical trials. Although use of the devices for investigational purposes is not currently precluded, NeuroDerm decided to request additional documentation from Cane before proceeding with enrollment at U.S. investigators side.

I am pleased to confirm documentation has been provided and we anticipate commencing patient enrollment in the U.S. in the second quarter of 2016 consistent with the guidance we’ve provided on our third quarter call last November. We are also in discussions with several third parties in order to develop alternate sources of supply for our delivery devices.

We’ve added several highly qualified employees to the NeuroDerm team over the past few months. These individuals bring highly specialized experience in the areas of clinical, medical devices, and regulatory development. We continue to attract high caliber professionals, but believe that with the team we have in place to-date and headcount of 42 employees, we have a highly experienced CNS and Parkinson’s team in-house already.

I will now turn the call over to Roy for a review of our financial results. Roy?

Roy Golan

Thanks, Oded. As of December 31, 2015, NeuroDerm had cash, cash equivalents, and short-term bank deposits totaling $99.8 million. We believe that this is sufficient to advance our product pipeline and reach our clinical and regulatory milestones to meet 2018.

As you may have noticed, we have filed an F-3 this morning. We believe this constitutes good corporate housekeeping and allows the company flexibility in the future. As for research and development expenses, net, they were $4.1 million in the three months ended December 31, 2015 compared to $3.4 million in the same period in 2014. The increase was primarily due to an increase in subcontractors, mainly from clinical studies and production costs related to our product candidates, partially offset by a decrease in share-based compensation expenses.

In the three months ended December 31, 2015, general and administrative expenses were $2 million compared to $2.8 million in the same period in 2014. The decrease was primarily due to a decrease in share-based compensation expenses.

The company reported a net loss of $6.7 million in the three months ended December 31, 2015 compared to $20.3 million in the same period in 2014. The decrease in net loss was primarily due a decrease of $13.5 million in financial expenses, net, mainly from non-cash financial expenses for the three months ended December 31, 2014 related to the fair value of the company’s convertible loans, embedded derivatives, and financial instruments, which were converted into ordinary shares prior to the company’s initial public offering in the fourth quarter of 2014.

For the year ended December 31, 2015, research and development expenses, net, were $12.8 million compared to $8.1 million in the same period in 2014. The increase was primarily due to an increase in materials and subcontractors, mainly related to clinical studies and production costs related to our product candidates.

General and administrative expenses were $5.2 million for the year ended December 31, 2015 compared to $5.3 million in the same period in 2014. The decrease resulted mainly due to a decrease in professional services, related to the completion of our IPO in 2014.

The company had financial income, net of $2.4 million, for the year ended December 31, 2015 compared to financial expenses, net of $16.5 million for the year ended December 31, 2014. These financial expenses, net, from mainly non-cash expenses, primarily related to changes in fair value of our convertible loans, embedded derivatives, and financial instruments that were converted into ordinary shares prior to the company’s initial public offering in the fourth quarter of 2014.

The company reported a net loss of $15.6 million for the year ended December 31, 2015 compared to $29.9 million for the same period in 2014. The reduction in net loss was driven primarily by the decrease in non-cash financial expenses described above, partially offset by an increase in research and development expenses, net.

Turning to cash guidance for the full-year 2016, we expect our cash burn to be approximately $35 million.

I will now turn the call back to Oded.

Oded Lieberman

Thank you, Roy. Before we take your questions. I’d like to summarize our upcoming milestones in 2016. For trial 012, the long-term safety follow-up trial in Israel, the EU, and the U.S. for both ND0612L and ND0612H, we plan to initiate this trial in the second quarter of 2016.

For trial 005, the pharmacokinetic pilot dose finding study comparing ND0612H with Duodopa in the EU, this is ongoing and we expect top line results in the second quarter of 2016. This study will be followed by a definitive bioequivalent study.

For study 006, our study investigating the efficacy, safety, tolerability, and pharmacokinetics of two dosing regimens of ND0612H compared to the oral standard of care on 36 patients treated for 28 days, we plan to announce top line results of this study in the second-half of this year.

For study 007, our Phase III pivotal efficacy trial of ND0612L, we plan to initiate this trial around mid-year 2016. We expect also to begin enrolling U.S. patients in the second quarter of 2016.

Lastly, we will be meeting with the FDA for an end of Phase II meeting later in the year, probably in Q3, and we’ll be doing similarly with the EU authorities.

Before we begin the Q&A session, I’d like to say that we’re all very excited by the work we’re doing. We have received some very encouraging feedback from our first efficacy trial with ND0612H, which motivates and drives us onward. It is our goal to help these patients with higher quality of life.

Operator, please begin the question-and-answer session.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We will take our first question from the line of Ken Cacciatore from Cowen and Company.

Ken Cacciatore

Good morning, guys. Congratulations on all the progress. I guess, as we go into some of the data released by Oded, I was wondering if you could help frame for us, what exactly success looks like, maybe starting with the comparator study against Duodopa? Could you just help us understand what are the things we should be looking for? I know, it could be obvious, but trying to understand is that when we look at comparability, to what degree do we need to compare and when we look at magnitude from the ability for you to get comfortable levodopa into the system? Can you give us a sense of what threshold would be clinically meaningful versus similar, just frame for us what we should be looking at in terms of success when that data reports out? Thank you.

Oded Lieberman

Okay. Well, thank you, Ken, for this question. The regulatory approach in the EU is as mentioned a bioequivalence-type approach. This means that this falls under the rationale of bioequivalence. What also this means is that under such a rationale, we are not required to demonstrate efficacy in an efficacy trial, but rather demonstrate PK similarity to the comparator product in this case, Duodopa, in a fashion similar to what is done with generic drugs.

Generic drugs are not required to demonstrate a new efficacy. But rather the fact that they are similar enough to the comparative drug, and this is exactly the same case here. So there were three basic parameters that are always taken into account. It is the Cmax, it is the area-under-the-curve, and it is the general shape of the curve. And as you may recall, the EU authorities have agreed to evaluate our product not only according to the bioequivalence rules, but in fact according to, I would say, a more lax set of considerations, which is PK similarity, which means that the same principles apply but the strict rules of bioequivalence as they are applied to generic drugs do not necessarily hold in our case.

So what would – one could expect as far as the results would be broadcasting out. I think that for us and for everybody, the important conclusion is how similar we are to the comparator drug with these three parameters. I doubt if we will be giving out the exact numbers for – I would say for obvious competitive reasons, but we will do our very best to be as transparent as possible in reflecting how similar these three parameters are in our drug candidates vis-à-vis Duodopa according to the – I would say, the discussions we had with the U.S. authorities. Does this answer your question, Ken?

Ken Cacciatore

It does. Thank you very much.

Operator

Thank you. And our next question comes from the line of Chris Raymond from Raymond James.

Chris Raymond

Hey, thanks, and congrats on the device getting the documentation on the Cane issue. I just – I have a question though on this and just wanted maybe a clarification. I was just looking through your 20-F, and it seems that the language doesn’t mention that the documentation has been submitted, so – but, yes, I think I heard you guys say that you did check that box. Can you maybe, was that just in the last day or so, and can you also clarify some if you had any sort of feedback from the FDA that they were satisfied with that particular submission?

Oded Lieberman

Right. So the first question, was it done very recently? The answer is, yes. It was done very recently.

Regarding your second question, feedback from the FDA, we – again, I’m a bit limited in what I can disclose regarding exchanges between the FDA and Cane and not at liberty to disclose that. What I can tell you is that Cane are in constant touch with the FDA. And to our knowledge, they have – they are answering all the requirements of the FDA to their best ability. And as far as beyond that I cannot really respond, but that’s as much as I can say.

Chris Raymond

Okay. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Scott Henry from ROTH Capital.

Scott Henry

Thank you. Good morning. A couple question. First, could you talk about R&D spending levels for 2016? How should we think about that relative to 2015? I assume, G&A, we should expect just kind of the steady trending increase, but R&D is probably the bigger variable?

Oded Lieberman

Right. Roy, can you please take this question?

Roy Golan

Yes. Scott, thank you for this question. As we did not disclose anything within the budget as we approved and as we disclosed right now, it is going to be approximately $35 million. Your assumption is absolutely correct. There are not going to be any major changes to our G&A, so it’s mainly going to go to R&D, specifically the two areas -- clinical trials and our production.

Scott Henry

Okay. So $35 million for 2016 will be kind of your all-in expenses number?

Roy Golan

That is correct.

Scott Henry

Okay, thank you. That’s helpful. And then on the clinical side, it looks like everything is pretty much right in line with expectation. The question is, do you still think that you could file these products by the end of 2017. How should we think about the filing timeline?

Oded Lieberman

Well, this is Oded. Yes, we believe we will be able to file by the end of 2015. We have – as I mentioned, we are encouraged by the progress that we have in our current trial, that was a bit of a test case, and we are certainly encouraged by the enrollments rate. It is – again gives us the reasons for encouragement and yes, we confirm that we expect to file by the end of 2017.

Scott Henry

Okay, great. Thank you for taking the question.

Operator

Thank you. And that concludes our question-and-answer session for today. I will turn the call back over to Oded Lieberman for his closing remarks.

Oded Lieberman

Thank you. Today’s question-and-answer – I’m sorry. Thank you for – first of all for joining us today on our call. We look forward to updating you on our progress throughout the year, as we continue to make progress on our products pipeline and development.

Operator

Thank you, ladies and gentlemen. That concludes our call today. You may now disconnect.

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