AmpliPhi Biosciences Corp. (NYSEMKT:APHB)
Q1 2016 Earnings Conference Call
May 13, 2016 8:30 AM ET
Matt Dansey - Business Development Manager
Scott Salka - Chief Executive Officer
Steve Martin - Senior Vice President and Chief Financial Officer
Keith Markey - Griffin Securities, Inc.
David Bautz - Zacks Investment Research
Good morning, and welcome to the AmpliPhi Biosciences Financial Results Conference Call for the First Quarter of 2016. Today’s call is being recorded. For opening remarks and introductions, I’ll turn the call over to Matt Dansey, Business Development Manager. Please go ahead.
Thanks. During the call, we will make statements related to our business that may be considered forward-looking and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based upon AmpliPhi’s current expectations and involve a number of risks and uncertainties including the risks and uncertainties described in AmpliPhi’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 as filed with the Securities and Exchange Commission.
Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the time they were made. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update any forward-looking statements.
Now, I’ll turn the call over to Scott Salka, CEO of AmpliPhi Biosciences.
Thank you, Matt. I’m pleased to have Steve Martin, our CFO on the call as well. Today, we’ll review AmpliPhi’s progress and achievements in the first quarter of 2016 and discuss several important advances completed subsequent to the quarter - to the quarter end. I’ll then turn the call over to Steve for a review of our first quarter financial results. We’ll then take your questions.
I’m proud of our entire team including consultants, academic collaborators and U.S. Army for delivering so far on a very aggressive agenda we set for ourselves in 2016. On the research and clinical development front, we dosed the first patient in our first clinical trial with phage produced an AmpliPhi’s Slovenian production facility. This watershed Phase I clinical trial started in January in Australia and marks what we believe is an important inflection point not just for AmpliPhi, but for the entire field of phage therapy.
In the Australian study, we are examining AB-SA01 for the treatment of Staph aureus infections in patients with chronic rhinosinusitis or CRS, who have failed to respond to standard antibiotic therapies and sinuplasty. CRS affects almost 13% of the U.S. population and accounts for more than $350 billion annually in direct and indirect treatment costs. AB-SA01 has the potential to provide real hope to the estimated 2.5 million CRS patients in the U.S., who failed to respond to antibiotic or surgical treatment.
We completed during - or we completed dosing of our first cohort of three CRS patients, who each received AB-SA01 twice daily for seven days, treatment was well tolerated and no drug-related adverse events were reported. The first patient in the second cohort of the study, which will evaluate twice-daily administration of AB-SA01 for 14 days, has already been dosed and we remain on track to complete this trial by mid-2016.
We presented data at the European Congress of Clinical Microbiology and Infectious Diseases demonstrating that AB-PA01 or phage mix targeting Pseudomonas effectively infected and killed Pseudomonas isolates from a global population of patients, including those with cystic fibrosis.
In total, AB-PA01 was shown to be active in vitro against 87.2% of the 429 clinical isolates to be tested. The data also showed that AB-PA01 had activity in a mouse model of lung infection that was similar to meropenem, a broad spectrum antibiotic frequently used to treat Pseudomonas lung infections.
We strengthened the competitive position of our bacteriophage platform through the acquisition of key assets from Novolytics in January. These assets which include bacteriophage related intellectual property, bacteriophage library, formulation and regulatory know-how as well as GLP toxicology data support our strategy of assembling the premier bacteriophage therapy company.
We announced that we’ll be collaborating with researchers at the Westmead Institute’s Centre for Infectious Diseases and Microbiology, which in January received an $860,000 - excuse me, AUS $860,000 grant from the Australian Government to isolate and develop phages targeting E. Coli and Klebsiella, both of which contribute to the rising threat of antibiotic resistant pathogens.
On the management front, we appointed Steve Martin as our Chief Financial Officer. He brings over 30 years of finance and accounting management experience, including senior roles in publically-traded healthcare companies. Steve will be a tremendous partner for me and our management team as we work together, to grow our business, attract additional talented team members and effectively manage our capital resources.
Before handing the call off to Steve, I’d also like to highlight an important event that occurred subsequent to the close of the first quarter. In April, all of AmpliPhi’s previously outstanding Series B convertible Preferred stock was automatically converted to common stock, following our receipt of conversion elections from the holders of more than two-thirds of the Series B Preferred in accordance with AmpliPhi’s articles in incorporation.
The Preferred shares converted into approximately 1.5 million share of AmpliPhi common stock. Following the conversion AmpliPhi now has approximately 8.2 million common shares outstanding. We are pleased with the shareholder decision to automatically convert the Series B and the consequent streamlining of our capital structure.
I’ll now turn the call over to Steve, who will review our financial results for the first quarter.
Thanks, Scott. Cash and cash equivalents as of March 31, 2016 totaled $6.2 million. Revenues related to sublicensing agreements from our former gene therapy program were approximately $0.1 million for the quarter ended March 31, 2016 and for the same period in the prior year.
Research and development expenses for the quarter ended March 31, 2016 totaled $2 million compared to $1 million in the same period of 2015. The increase was primarily related to higher compensation costs by $0.2 million, $0.1 million of professional recruiting fees, and $0.4 million for the expense recorded related to the fair value of Novolytics asset acquisition.
General and administrative expenses for the quarter ended March 31, 2016 was $4.5 million compared with $2.3 million in same period in the prior year. The loss from operations in the first quarter 2016 included - sorry, general and administrative expenses for the quarter were $2.6 million compared to $1.4 million for the same period of 2015. This was primarily attributable to an increase by $0.8 million in non-cash stock-based compensation cost for two new executives and $0.3 million in incremental legal, accounting and professional recruiting fees.
The loss from operations for the quarter ended March 31, 2016 was $4.5 million compared with $2.3 million in same period in the prior year. The loss from operations in the first quarter 2016 included $0.9 million of non-cash stock compensation, depreciation and amortization expense.
Net loss recorded during the three months ended March 31, 2016 was $3.1 million, inclusive of $1.4 million of non-cash gain on a derivative liability in the balance sheet. Based on our current operating plan, we believe our current cash resources will be sufficient to fund our planned operations into the third quarter of 2016.
We are currently evaluating capital raising alternatives to raise capital needed for the advancement of our business. I’ll now turn the call back to Scott.
Thanks, Steve. This completes today’s update, we’re happy to take questions at this time. Operator, please begin the question-and-answer session.
Thank you. Today’s question-and-answer session will now be conducted. [Operator Instructions] We will take our first question from the line of Keith Markey. Keith, your line is open.
Good morning. Thank you for taking my question.
Good morning, Keith.
Couple of questions, could you give us an update on the status of your collaboration with Walter Reed?
Certainly, Keith, so as we’ve publically stated, the Phase I study that we’re planning to conduct with the U.S. Army at the Walter Reed hospital is on schedule. We expect to complete that study by mid-year and report out those results sometime in Q3. So we’re thrilled with to have that collaborations going. The army has been a great partner for us. And so, again, we are right on schedule and we expect to making an announcement fairly shortly about the initiation of that study.
Great. And then, aside from that data-point in the March - I mean, sorry, in the September quarter, can you give us other data milestones for, say, the next 12 months?
Sure, absolutely. So in addition to the Walter Reed study we were just talking about, and I might add that that study is going to be a safety study looking at safety of our Staph aureus phage mix is applied directly on the skin of healthy volunteers. Also as we publically announced, have started - we started in January a study in Australia in Adelaide at the Queen Elizabeth Hospital, a study with our Staph aureus mix applied to the sinuses of patients who are post-surgery and are infected with Pseudomonas. And so these patients have all had sinuplasty and nonetheless their infection has come back.
So that study is underway, as I mentioned in the call; and we expect to compete that study. We are right on target to complete that study, the middle part of the year and also report those results out sometime during Q3. So we expect again to announce the results of two Phase I clinical trials for the Staph aureus product in Q3 of 2016.
The other important milestone is the completion of the production of the clinical trial material to support our Pseudomonas study that we have slated to start in 2017. That clinical trial material is being produced today, currently in our Slovenian facility, and it takes about eight months or so to complete the production and to start releasing those batches. So that will happen during the balance of 2016 and in the early 2017.
The other thing that we expect to do is we’ll take some of the engineering lots from the Pseudomonas production run and complete our inhalation toxicology and do the final qualifications on the nebulizer. We’ll report that out and then we’ll do the regulatory filings to support the Phase I clinical study for the Pseudomonas mix. We’ll do that sometime in the first-half of 2017.
And again, we’re slated to start that Pseudomonas study, which will be in CF patients with Pseudomonas infections on their lung, and we’ll do that sometime - we expect to do that sometime in the middle of 2017.
Then, I think the other, the last key milestone is that - following the two Phase I studies for the Staph aureus cocktail that we expect to report out in Q3, we will start the first of our double-blinded placebo controlled studies using that Staph aureus mix. And we expect those to start sometime very early in 2017.
Great. Sounds like you’re always busy.
Yes, absolutely, Keith, so it’s - like I said, it’s been a busy year so far this year and we expect to continue that progress.
Yes. That’s great. At this point, do you have any presentations, plans for scientific or clinical meetings?
Yes. We do have a - there is a meeting coming up in July, in Europe, in Liverpool, the microbiology conference. And we are making a couple of presentations there, poster and a presentation. So that’s the very next one that’s coming up, that’s July in Liverpool.
Great. Thank you very much.
Our next question comes from the line of David Bautz. David, your line is open.
Hey, good morning, guys.
Good morning, Dave.
So you mentioned that there are about 2.5 million people with chronic rhinosinusitis that don’t respond to antibiotics or surgery. I’m curious what percentage of those patients have Staph aureus and would be eligible for treatment with SA01?
Dave, that’s a great question. And we see numbers reported in the academic literature that are - this is kind of a range that we’ve seen in the academic literature. So it seems that 25% to just over 50% range.
And I would also add that when we are screening patients for the Australian study, we do see patients - some patients come in and are co-infected with Staph aureus and Pseudomonas. And those patients are excluded from the study. And I - those have been a minority of the patients. The majority of the patients that we’ve screened are infected solely with Staph aureus.
Okay. And my other question was, now that the agreement with Intrexon has been cancelled, so are you going to be entering into other collaborations to kind of continue the work that Intrexon have been doing?
I think, David - yes, definitely it’s a great question. And absolutely, I think you’ll see us over the next handful of months, next few quarters announce collaborations with academic institutes and/or biotechnology companies that will give us access to some cutting-edge synthetic biology technologies and know-how that we’ll use to modify not only phages to make them better at treating infections in humans, but also the manufacturing hosts - to make those manufacturing hosts more effective at producing the clinical raw material that we’ll need.
Okay, great. I appreciate taking my questions.
Thanks a lot, David.
[Operator Instructions] If there are no further questions at this time, I’ll turn the call back over to Scott Salka for closing remarks.
Thank you. The AmpliPhi team is working diligently and making continued progress toward our goal of building tremendous value by deploying our industry-leading bacteriophage platform to deliver next-generation drugs on the world against the growing threat posed by antibiotic-resistance. I look forward to providing you with additional updates in the months ahead.
Thanks to all of you for your time today. And now, I guess, I will hand the call back over to the operator.
Okay. And we actually do have an additional question in the queue. It is from the…
I’m sorry. It’s from the line of Alan Adler [ph]. Alan, your line is open.
Yes, thanks. Scott, how are you?
I’m doing well, Alan. Thanks for calling in. I appreciate it.
Good. Could you discuss your manufacturing facility in Europe, and what its capacity is, what the state of its development is, and what is the timeline to produce what you need for these trials?
Thanks, Alan. Thanks for the question. So the facility that we built it’s in Ljubljana, Slovenia, the capital of Slovenia, which is about - I drove there, from there to Milan. It’s about five-hour drive to Milan. So it’s basically due east from Milan. It’s a state-of-the-art facility. It’s about 6,000 square feet.
We got two reactors of 20 liters each, so it’s about a 40 liter capacity, which when you’re talking about biologics manufacturing, so let’s say, you were looking at manufacturing antibodies, that’s sounds like a really small capacity. But for the production of bacteriophage these tiny little viruses that - we are not actually producing a whole lot of protein by weight, so the 40 liters is quite a bit of capacity. So those reactors are both online now.
And as I mentioned it takes about six, eight months to make a batch of phage. It’s that how long it took for the Staph aureus mix for example, and that contains three bacteriophages.
We only have the capacity to manufacture of one bacteriophage at a time. And so, we have three in the cocktail. That’s four - I mean, that’s three separate runs. And then, for our Pseudomonas mix, we have four phages in the cocktail. So it’s four distinct discrete runs to produce those four. And then we blend them at the end.
So our capacity is still somewhat constrained, Alan. So we had complete manufacturing of the Staph aureus cocktail before we could clean up the facility and get it ready to start manufacturing the Pseudomonas cocktail. And as I mentioned, that’s underway right now.
And we will not be able to manufacture, for example, or start manufacturing our C. difficile phage until we’re done with the manufacturing of the Pseudomonas phage, which will be as I mentioned in early 2017. So one of the things that we will ultimately need to do is put another line is place. So we’ll either do that by expanding the Slovenian facility. And one of the great opportunities in Slovenia is that they’re one of the small countries of only, I think, fewer than 3 million people that live in the country. But they are a center for generic drug manufacturing in Europe.
And so they are quite a few people with the expertise - manufacturing expertise there. So we wouldn’t have any problem in tracking employees there. So we could double our manufacturing, for example, by expanding our Slovenian facility and there’s plenty of room there to do that or we can put a manufacturing facility someplace else, in Australia for example, or in the U.S.
So will this facility, the sequential manufacturing, hold up which of your trials and stretch out the timeline quite a bit?
Well, for example, if we had unlimited funds, we could probably - we could have saved a couple of months and started our Pseudomonas cocktail manufacturing to support our CF study. We could have accelerated that by a couple of months. But again, we had to finish the Staph aureus cocktail before we could start the Pseudomonas cocktail. So already if we have had, again, unlimited funds, we could have expanded our manufacturing facility last year. We could have saved a couple of months on the manufacturing of the Pseudomonas cocktail.
We are not quite ready, even if we have the capability to start manufacturing the C. difficile cocktail. But we’re expecting that we’ll be in that position before we’re done manufacturing the Pseudomonas cocktail. So again, that production of the C. difficile cocktail will have to wait. And so, it could cost us a quarter or so, again. And so, ultimately as I mentioned, we’ll probably make that decision to expand the manufacturing capability.
And what is the expense if you had the money and the timing to expand your facility so that you had enough capacity to do all of your trials, not to speak of what you would need in order to do therapeutic production?
Yes, absolutely. So the - it’s not that expensive as we did it in Slovenia. So as an example, the facility that we have was just empty space. It was an existing building but it was not built out in anyway what a laboratory facility shall. And that buildup cost about $2.5 million. So it’s quite inexpensive to build that facility up. And it was built up by contractors from Switzerland, so it’s like I said, a world-class facility.
So it would cost us about that amount of money that $2.5 million in capital equipments and construction cost to double the size of that facility in Slovenia. We foresee that will be...
All right, it’s not a big number.
No. Absolutely, Alan, it is not a big number. We’re fortunate in that regard that it doesn’t require huge bioreactors to produce bacteriophage.
Good. Thank you very much. Good luck.
Thanks a lot, Alan. Appreciate it. Operator, are there any…?
And there are - I’m sorry, there are no further questions.
Okay. Thank you so much. So I think I read my closing remarks. And so, again, we look forward to providing you all with additional updates in the months ahead, so thanks to all of you for your participation today. And, operator?
And this does conclude today’s teleconference. You may now disconnect.
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