Alcobra Ltd. (NASDAQ:ADHD)
Q1 2016 Earnings Conference Call
May 16, 2016 08:30 ET
Debbie Kaye - IR
Yaron Daniely - President & CEO
Tomer Berkovitz - COO & CFO
Annabel Samimy - Stifel
Charles Duncan - Piper Jaffray
Good day, ladies and gentlemen, and welcome to the Alcobra's First Quarter 2016 Earnings Results Conference Call. [Operator Instructions] I'd now like to introduce your host for today's conference, Ms. Debbie Kaye from Alcobra. Please go ahead.
Good morning, and thank you. Before the market open this morning, Alcobra announced financial results for the first quarter ended March 31, 2016. If you have not yet received this news release or if you would like to be added to the company's distribution list, please contact us at 646-597-6979.
Before we begin, let me remind you that this conference call will contain forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Because such statements deal with future events and are based on Alcobra's current expectations, they are subject to various risks and uncertainties. Actual results, performance or achievements of Alcobra could differ materially from those described and/or implied by the statements on this conference call.
For example, forward-looking statements include statements concerning among other things, the development of Alcobra's lead product candidate and its various indications, including the timing and design of clinical trials, timing of reporting results of such trials, Alcobra's ability to better design future clinical trials and reduce high placebo response, the benefits of utilizing certain methods and sites in Alcobra's clinical trials, the expected cost of clinical trials and levels of future expenses, reaching the milestones required for U.S. Food and Drug Administration approval, the potential of MDX to treat adult and pediatric attention deficit hyperactivity disorder and Fragile X, future uses of cash, and the sufficiency of the company's financial results as to meet certain milestones, and whether such milestones may be achieved at all.
In addition, historical results or conclusions from scientific research do not guarantee that future results would not suggest different conclusions or that historical results referred to on this call would not be interpreted differently in light of additional research or otherwise. Also, while the FDA has indicated to Alcobra that positive efficacy results from certain clinical studies may be sufficient to demonstrate efficacy for approval of MDX, the FDA is not bound by these communications and, accordingly, may change its position in the future due to reasons within or outside the control of Alcobra. The forward-looking statements contained or implied on this call are subject to other risks and uncertainties, including those described in the Risk Factors section of Alcobra Limited's Annual Report on Form 20-F for the fiscal year ended December 31, 2015, filed with the Securities and Exchange Commission.
Except as otherwise required by law, Alcobra disclaims any intention or obligation to update or revise any forward-looking statements, which speak only as of the date of this call, whether as of the result of new information, future events or circumstances or otherwise. Hosting today's call from Alcobra's senior management are Dr. Yaron Daniely, President and Chief Executive Officer; and Dr. Tomer Berkovitz, Chief Operating Officer and Chief Financial Officer.
It is now my pleasure to turn the call over to Yaron. Yaron, please go ahead.
Thanks, Debbie, and good morning, everyone. Today I will provide an update on our development programs for our lead drug candidate, Metadoxine Extended Release or MDX. I will then hand over the call to Tomer to review Alcobra's Q1 financials.
Our pivotal Phase III adult ADHD study, which we named MEASURE, is enrolling patients with a target sample size of up to 750 subject. This sample size powers the study to detect the effect size observed in the ITT analysis of our previous Phase III study. As I previously described, the MEASURE study additionally includes other design and operational elements that aim at providing rigorous controls over the magnitude of placebo response and treatment response variability. These include a longer treatment duration, careful selection and training of clinical site, FDA approved patient screening and enrichment method, as well as electronic data capture system which allows real-time remote expert monitoring of subject enrollment and assessment practices.
We continue to believe that the combination of enhanced powering assumptions, trial design modifications and live remote monitoring of electronic source in the MEASURE study enhances the potential for a successful outcome. As we indicated in the written release earlier this morning, we expect the availability of data from the MEASURE trial by year-end. Our recent implementation of effective methods to enhance recruitment in existing trail sites, as well as carefully selected additional sites resulted in improved enrollment rates. We remain entirely committed to ensure the quality of patient selection and data management in the MEASURE study.
As Tomer will discuss in a moment, we believe that our current cash position supports Alcobra's activities through at least the end of 2017, owing primarily to the successful institutional-led public equity financing of approximately $41 million completed late last year or a solid financial position allowed us to continue to prioritize trial execution at a suitable pace. We continue to make progress with the pediatric ADHD development program. Alcobra and the FDA agreed on the conduct of two pediatric registration studies, a single Phase II and a single Phase III, for demonstration of efficacy for approval of MDX in this subpopulation. And we intend to launch the first of these two studies this year. We're also continuing our dialogue with FDA on the design elements of a pivotal study in adolescence in adults with Fragile X syndrome. As a reminder, the FDA has awarded MDX Fast Track and orphan drug designations for this indication.
This concludes my operational update. Now I'm going to turn over the call to Tomer to discuss the financials. Tomer, please go ahead.
Thank you, Yaron. Earlier this morning, we reported our first quarter 2016 results. We reported total operating expenses of $5.2 million for the first quarter of 2016 in line with the first quarter of 2015 and our average quarterly expense rate last year.
Total operating expenses include non-cash charges for stock-based compensation of $0.7 million this quarter and $0.8 million in the same quarter last year. Most of our operating expenses are driven by our research and development activities. In the first quarter of 2016, R&D expenses were $3.4 million compared with $3.6 million in the same quarter last year. R&D expenses this quarter consisted primarily of cost associated with the ongoing Phase III adult ADHD MEASURE study. As we stated previously, our R&D expenses for the rest of fiscal year 2016 are expected to increase relative to 2015, as we continue the MEASURE study and launch the first pediatric ADHD registration study.
G&A expenses for the first quarter of 2016 were $1.5 million compared to $1.3 million in the same quarter last year. Pre-commercialization expenses were $0.4 million this quarter compared to $0.3 million in the same quarter last year. Finally, we ended the quarter with $65.2 million in cash, bank deposits, and marketable securities compared to $69.7 million at the end of the previous quarter and $45 million at the end of the first quarter 2015. We believe that our cash balance support Alcobra's currently planned activities through at least the end of 2017. We believe that the company's balance sheet supports our ability to effectively execute our plans, especially in the current market environment.
I'll now turn the call over to the operator for the Q&A session.
[Operator Instructions] Our first question comes from the line of Annabel Samimy with Stifel. Your line is open. Please go ahead.
Hi guys, thanks for taking my question. Had a few, just first on the R&D sales increase, can you share with us, I guess what percent enrolls here for the Phase III exactly, the expense which R&D is going to increase. Do you have any kind of guidance for the year that we can sort of model out? And then on the pediatric studies, I was under the impression that they were going to enroll immediately, is there anything that's hanging out with the FDA that just designed all means as enrolling sites, any color there would be great. And then finally, is there anything the you can tell us about -- I guess, some of the competing programs there, I think there is few that are enrolling -- it's been encroached on your enrollment of adult population or the pediatric population? Thanks.
Thanks, Annabel. So let me try and walk through some of these questions. We have not guided and it's not been disclosing percent enrollment in the measure study for various reasons which we've discussed in the past. All I can say is that we continue to expect data by year end. You know the duration of treatment so you can kind of back calculate and make some assumptions but we have seen slight delay towards the end of last year, the beginning of this year 2016 to which we've applied some measures to enhance and compete more effectively in the adult ADHD clinical trial, we've seen these bare fruit in the last month. So we are on target. Maybe Tomer, I will leave up the R&D expense guidance for just another moment.
With regards to the ped study timing, there are numerous regulatory elements that come to play when you start pediatric studies including different dosage forms and dosage strength and different checklists that need to be fulfilled in order to start studies in these age groups. And we're trying to just work out these items through discussion with the agency in the U.S. and with comparable agency here in Israel. And as soon as we can get those studies going and get permission to get them going, we are very eager to be able to assess efficacy in the pediatric population.
With regards to competing programs, I've alluded to this before, there are several, still ongoing large adult ADHD studies clinical trials that -- you will find them, I don't want to mark them for my competition but I think essentially these -- what we have done as part of the effective measures to enhance enrollment in our sites, it's has focused some additional resources on sites that are non-overlapping between these competing sites or sites that have already enrolled their cap in those additional sites and are now more available to enroll patients in our trial.
These trials may or may not be concluded this or next month as they were expected to conclude at the end of last year, now they are expected to conclude now. But we feel confident that even if the competition remains as it is today with regards to adult ADHD enrollment, the data should be available by year-end. So let me just turn it over to Tomer to complete the answer on the R&D expense.
Yes, so couple of words on the cost structure and the overall cost of the ongoing trial. As we indicated in the past, our expectation is that the overall cost of this Phase III trial is going to be in the $16 million to $18 million range. And that is still the expectation. When you think about the cost structure, there is a fixed component and there is a variable component, and the variable component is the function of the recruitment rate in the trial. So as you approach the later stage of the trial, you typically tend to incur higher expenses there in the variable component. So my expectation is that somewhere in Q2 but more so in Q3 and Q4, we're going to see a bit of an increase there in the R&D expense, as for the magnitude of this increase, it's probably around a couple of million dollars each quarter.
Okay, thank you.
Thank you. Our next question comes from the line of Charles Duncan with Piper Jaffray. Your line is open. Please go ahead.
Hi guys, thanks for taking the question. I had kind of the same question as Annabel but I'm really wondering about the pediatric program. If you could share with us some of the nuances of your discussion with the agency because it seems like it's taken a while to get up and running. And are there -- what can give us confidence that this is going to roll out soon and enroll well in the near-term?
Thanks, Charles. What may or may not give you confidence, the fact that we are likely more eager than anyone else to get these trials started. We believe that a drug that is a non-scheduled entity with fat onset of action and the kind of tolerability profile that we have seen and continued to see would likely be a major clinical benefit in the pediatric ADHD population and would actually be relatively easy to enroll at least for patients who are unhappy with current therapy or unwilling to try current therapies. With regard to the nuances, I will not deviate from our practice, not to kind of disclose discussions that we had with FDA but very broadly, I think I mentioned we're talking about generation of various dosage forms, that rely on PK studies and achieving certain exposure levels that maybe designed or we may try to achieve, we're talking about trying to reach an agreement through not a trail by trial or a population by population but trying to reach an agreement through a PSP which is relatively new creature, a comprehensive study plan that includes all your safety and efficacy, clinical and non-clinical studies required for pediatric approval, including by the way details of the under six-year old studies, the pre-K studies that the agency is now requiring sponsors of ADHD trials to conduct. So it is taking little longer than we expected unfortunately but I think hope that you understand that we would like to get this going as quickly as possible, we certainly have the resources to get this going as soon as we are allowed to proceed and we will try and get it going promptly.
Yes, that makes sense because it sounds like it's more complicated than in the past but if you were betting in, would you anticipate being able to see at least the trial listed on clinical trials by the end of the third quarter or by the end of the fourth quarter?
So I am inherently as the CEO of a startup betting [ph] so that's not fair, but I would say that we -- I would be very, very disappointed if we don't see Clin Trial record by the end of the third quarter.
And then -- thank you. Third quarter -- and then perhaps Tomer, you have enough information from the discussions that your colleagues have had with FDA to include sizing and cost of that pediatric program in your 2017 cash flows or I guess not guidance but assumptions?
Yes, absolutely. So when we say that we have sufficient cash until at least the end of 2017, I'm taking into account here both the ongoing Phase III adult trial as well as the pediatric trial.
Okay, that's helpful. And then final question regarding the adult program, the MEASURE study just remind me -- I'm not sure I remember, do you have an open label extension for that study in which patients can enroll and if so, can you give us some sense of patient enrollment in that study?
We are enrolling or will be enrolling patients to not an open label but a placebo-controlled safety study which will collect both comparative data as well as independent safety data. And that study for various -- technical reasons that study will be essentially I think enrolling either before the end of this quarter or the beginning of next quarter.
Okay, thanks for the added color.
Thank you. [Operator Instructions] Our next question comes from the line of Byrne Amin [ph] with Jefferies. Your line is open. Please go ahead.
Thanks for taking my questions. Maybe a question on MEASURE Yaron, what's the dropout rate during the placebo unit Phase?
Thanks. So when you say dropout rate, you mean drop out in the classical term that people leave the study or the exclusion of placebo responders during the variable placebo period?
I mean the screen failures…
We do not -- let me -- I'm not trying to be -- we do not terminate subjects that show a placebo response during that period, right. In order to maintain the blind, we keep them in the study. So we do not exclude them or terminate their enrollments. Or you're asking what is the -- essentially what is the placebo responder population or are you asking about a true dropout rates?
I'm asking what are the percentage of patients that would be excluded from the trial based on the exclusion criteria that you're employing during that placebo leading phase.
Okay. So they are not excluded from the trial, they are excluded from analysis. So we have estimated upto 20%. So the 750 number of subjects basically takes into account about 20% of subjects that would be not part of the analysis because of the placebo variable period. So the trial is actually designed to randomize 600 patients, that number of patients is the number required to demonstrate the size that we have seen previously. Again, the design assumption was for about a 20% placebo response or exclusion rate and we are in that neighborhood in the study.
Okay. And then, at APA, I noticed you've had some posters, is there any data that we need to read off of those, is that what you're presenting?
So we -- we are not, we have presence at APA and I think that there may have been some mention of previous MDX work on both Fragile X and ADHD but there is no new data present APA. The major conference for Alcobra and ADHD specifically has been and likely continues to be the ACAP Conference, the American Academy of Child and Adolescence Psychiatry Conference, that's where a lot of the ADHD investigations and activity takes place. This conference will take place this year at the end of October in New York. And we expect to be presenting data there.
Okay, great. Thank you.
Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Alcobra's CEO, Yaron Daniely, for any closing remarks.
Thank you. So I wanted to thank all of you for participating in this mornings call. I look forward to communicating our progress as we move forward with our development programs. Our solid financial position and focus development efforts allow us to continue making meaningful progress on our clinical programs which we hope will establish MDX as an effective for cognitive compound demonstrating significant clinical benefits together with a favorable safety and tolerability profile. Thank you all, again, and have a great day.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.
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