Cempra's (CEMP) CEO Prabha Fernandes Presents at Baird Global Healthcare Conference (Transcript)

| About: Cempra, Inc. (CEMP)

Cempra, Inc. (NASDAQ:CEMP)

Baird Global Healthcare Conference

September 8, 2016 03:10 PM ET

Executives

Prabha Fernandes - President and Chief Executive Officer

David Moore - Chief Commercial Officer

Mark Hahn - Chief Financial Officer

Analysts

Brian Skorney - Robert W. Baird

Brian Skorney

Next company we does have presenting is Cempra Pharmaceuticals. There are several members of management here with us. Cempra is a antibiotics company. Their lead asset is now filed with the FDA, has a PDFUA date with the FDA before the end of this year, called solithromycin. I do cover the stock. I do have an outperform rating on the stock.

So maybe to start, Prabha Fernandes, who is the CEO of the company, to my left, maybe you can just give us a brief overview of what the company is focused on and the profile of solithromycin.

Prabha Fernandes

Well, thank you, Brian, and thank you for having us here. Cempra is focused on developing a new antibiotic. As I think all of you know, there is increase in rates of antibiotic resistance, there's a lot of cry on getting a new antibiotic. Few of us out there have actually done it before and we want to do it again. And we’ve been able to raise money and actually develop a drug where there is a very big need in the States and that’s what we are doing.

So the second product called fusidic acid or TAKSTA and that’s for chronic use in bone and joint infections. Our space is differentiated and there is a complete need for it. Not just a duplicate or something outgoing on there. So we’ve always been successful in doing that and that’s what we want to do with Cempra.

Question-and-Answer Session

Q - Brian Skorney

Great. So I guess to start, why don’t we discuss your lead assets, solithromycin, it comes from a very, very successful class of antibiotics historically. How solithromycin has been developed? What indications are you targeted for it? And how do you see it differentiated from others within the class and also others within the indication that are from the proprietary?

Prabha Fernandes

So how many of you have taken a Z-Pak or know of somebody else who has taken a Z-Pak and that’s how common it is. So Z-Pak is azithromycin, it belongs to the azithromycin class, it’s an old class of antibiotics. Now this class, why is it used so much? Why is that all of you raised your hands is because you went to doctor with a respiratory tract infection. When you go to the doctor with respiratory tract infection, they say, okay, I’m going to safe drug, which get to the lungs and kills the bugs, which may have caused you that pneumonia. They might also give it to you for your upper respiratory tract. That’s not our target. It’s for really a chest infection when you really need to treat those patients.

Those particular pathogens are what macrolides address. And there’s a series of gram-positive, some gram-negative, some which are neither gram-positive or gram-negative, so you cannot say the narrow spectrum, I’d say it’s the right spectrum, so it address pneumococci, Haemophilus, Legionella, Mycoplasma, so there are various classes of pathogens, but it does not kill those bacteria in your intestinal tract, which are absolutely essential for your well-being. And it doesn’t address those things which perhaps are in your skin and elsewhere in your body, which are important for your well-being.

It kills the pathogens, which is rioting. It also gets to the lung, after you swallowed it, it gets to the lung, it doesn’t go elsewhere in your body. It gets inside the tissue, so it gets inside the macrolides, which are with the bugs in there. I always say, when you take a macrolides, there is no place for the bacteria to hide, it gets there. That’s why it’s an important class. It’s also anti-inflammatory. Much of the pain and suffering we feel during any sort of infection is because of [indiscernible], which cause pain and inflammation.

Solithromycin and macrolides and solithromycin even more so is a strong anti-inflammatory. So you see that right away. That’s why the doctor gives you a Z-Pak because it feel better. Even if the bug is resistant, it still making you feel better, because it’s anti-inflammatory, but we have to kill the bug. And solithromycin is different because the only macrolides bound the bacterial ribosome in one area, we bind three areas, so this way it binds tighter. So if you get to knock-off one side, it’s still binding two other regions and also it’s very difficult for the bacteria to change three different regions to become resistance.

So, currently, there’s no resistance to solithromycin, but it’s also very hard because they will have to make it three types, there is only one type. Currently, you might have taken a Z-Pak recently, so one out of two pneumococcus is resistant, so it most likely won’t work, whereas our drug will work against all those pneumococcus.

Brian Skorney

So, I think, it’s also about reviewing in the indication as your lead indication community-require bacterial pneumonia, is a very big unmet medical need, you’ve already stated the resistance that is required profound. From the perspective of epidemiology, hospitalizations, how big of a market is this?

Prabha Fernandes

David, do you want to take that?

Dave Moore

Yeah, I’d be happy to. Hi, everyone. I’m Dave Moore, Chief Commercial Officer. It’s a big market. So, the community-acquired bacterial pneumonia market in the United States is about 10 million prescriptions in every year. You will hear different numbers in terms of reported cases of pneumonia, but the IMS data is about 10 million prescriptions every year.

In the hospital, the treatment of pneumonia rivals any in-patient infection and use of antibiotics was about 30 million treatment phase a year for community-acquired bacterial pneumonia in the hospital and some of that is combination therapy. If you expand that out a little bit because these drugs are commonly used for other respiratory tract infections, there’s 120 million prescriptions a year for respiratory tract infections in the United States. And as you mentioned, macrolides have always been a main state. There’s about 55 million prescriptions a year for azithromycin for respiratory tract infection.

Brian Skorney

So, solithromycin, you had announced two Phase 3 studies in community-acquired bacterial pneumonia solithromycin IV, solithromycin oral, how does it stack up from these clinical trials against the comparator Moxifloxacin and how do you kind of segregate when you think about commercializing solely versus --?

Prabha Fernandes

So let me start there and I’m going to handover to David maybe in-between. So Moxifloxacin surrounding a clinical trial, you could not use azithromycin and why not? It makes perfect drug there. Why couldn’t you use a macrolide as a comparator? It’s because it would be unethical. Because one of the two bugs are currently resistant, this is a lethal disease. You cannot use – the FDA would not approve such a study. So you have to use a drug.

We could have used Levaquin or Levofloxacin, which is the most used fluoroquinolone for CABP, but we couldn’t use it, we use it in our Phase 2 because U.S.-only – had two doses one overseas and one here, two different doses, a global trial. So we have to use the one drug – the only feasible drug, which is – part of it was Moxifloxacin in our Phase 3 trial, which is Moxifloxacin.

It is the most potent drug for CABP available today. All right? And in fact, before we got our oral results [indiscernible] why did you use such a more potent drug you are going to sell, you are going up with a macrolide against fluoroquinolone. Well, we succeeded. We did very well in the oral trial, extremely well. In the IV trial, we were as good as Moxifloxacin.

So we were as good as the most potent fluoroquinolone, now why would people use it if we are just as good as Moxifloxacin, which is generic. Firstly, Moxifloxacin has many adverse events with fluoroquinolone. Firstly, [indiscernible] it’s not used that commonly because hallucinations and other [indiscernible] affects your heart. It also has now the black box.

So FDA had an ad com on fluoroquinolone. They had it last November, but it’s not got a black box, so physicians who try to prescribe, they want to see the black box. It’s what the FDA called as the constellation of adverse events. So do you want that. So right now physician doesn’t have a choice. You go in there, you see there is something that it might not work or your could use Levaquin, which work, but has the adverse events.

However, if solithromycin becomes available then you have an option. That’s what you need to provide is, provide a doctor with a good option. That’s what they will have. So right now the label says Levofloxacin if you have resistance to pneumococcus to azithromycin. So in the future we hope that the guidance documents, we have now two published papers, which are acquired to get on the guidance documents. The guidance documents says Levofloxacin, well, that is available. So, Dave, you want to add to that?

Dave Moore

Yeah, I think one of the other things that we’re very confident when we hear from our physicians and surveys and advisory boards, they really look to macrolides to be first line treatment for these types of diseases. They’ve always been what we would call the first column in guidelines. And they are comfortable and familiar with that class. You said it earlier, Brain, these products have historically launched phenomenally well. All real community respiratory antibiotics that launched well, with the macrolide, even more so.

And that’s the type of product that they are looking to use first line. They’ve only gone to the fluoroquinolone because of resistance. And so there’s these two market for us at play right now that on one side, you have resistance for azithromycin and that’s 50% on average in the United States. Some places like Texas, 60%. That scares frontline treated, urgent care, emergency medicine, primary care, it’s a scary number. So then they move over to the fluoroquinolone. We were already very confident in our potential for penetration just based on it being a macrolide instead of a fluoroquinolone, which are thought to be a safer class of drug.

Whereas Dr. Fernandes mentioned, the recent black box warnings, it’s significant in many. We’ve been testing it. We’ve been asking what does this do to your future prescribing. Right now, they don’t have alternative. But when you introduce solithromycin, a macrolide, that provides an alternative. That is as effective as the most potent drug for pneumonia. That was an unexpected timing for us [ph].

Brian Skorney

Great. So when we think about the FDA and review process now, next step will there is going to be a panel coming to discuss safety and efficacy of solithromycin and then there is two PDUFA dates for the IV and the oral formulation. So I guess backing going from the second first, what are the thoughts around why there is two PDUFA dates, I think, that sounds it’s been a lot.

Prabha Fernandes

It’s actually very simple. These are very large documents being filed. Although there was – or that you would have a truck leaving out of labs with some thousand papers, now you just go e-file in, then you have the IV documents to through in. It’s just so long to go through the gate way that it could proceed in the next day, so we finished on two separate dates. So it’s a date of submission that you have. So it’s really one – two NDAs with two different drug products being approved, but it’s the same drug substance. So it simply does get under same belt.

Brian Skorney

Got you. Okay.

Prabha Fernandes

But it just takes so long just get it through the gate way.

Brian Skorney

In terms of the ad com, what are you guys preparing for in terms of the presentation, what do you think the sticking points will be, there is always something that new advisory committee comes up with…?

Prabha Fernandes

Yeah, well, the first thing and most important is I think the FDA wants to showcase that, you must remember when they wrote the CABP guidance, when they wrote the oral CABP guidance to do an outpatients study with PORT III for pneumonia to get certain cultures done on outpatients and get people to come back on the early response endpoint. Come back on the fifth day, come back on the seventh day, call back on the 23rd day. People meet up, you should see that they will also meet up the FDA, hence you can’t do this.

Why did you put up this CABP there then? Temporary random study, temporary random successful study, run it according to milestones and gave them this. We’re then forced to try it for the CABP guidance. So they don’t use the show that isn’t running. Successful CABP study according guidance, we are proud of it now. Okay? So that’s number one.

So they will discuss that and how we got our bugs, the various bugs. These tests that’s clearly invented for us and the study had 27% microbial isolation. This is an inpatient study, shame on you for it. With did 50% on an outpatient study. So, of course, there obviously our medical people, they vary with that. So I do think they will showcase that. I’m sure also that the paenl will come up with – you talked about the two type effects. So they will ask us about the [indiscernible], so that I think FDA already knows that they overcame that a while ago, we showed why keep that [indiscernible] that was very, very potent, which related to the [indiscernible].

We’ve not seen any high flow at all in our study, so that was fantastic. We have also been allowed to treat children [indiscernible] and so on. So obviously the FDA has gone over that. And remember Z-Pak never had intravenous and never had pediatrics. We’ve got all the dosing formulations. We have a very safe product. We are proud of it. And recently have enough data to share it with the analysts, but I’m sure it will be discussed. We even have other discussions where we – why did you acquire [indiscernible] there’s an another study that comes up when we talk to people. Also why do you not have a loading dose in the IV and we have explanations to all of those.

We are working with a very solid company that is helping our entire team, some of us have not done this before, but the entire company needs to be board, so a lot of people are getting trained on how to answer questions. I don’t have as much time, but they have review right? It’s one -- [indiscernible] all the questions. So we are getting things so well.

Brian Skorney

Great. Prabha, you’ve been very involved in kind of the process lab a couple of years in terms of these justified, incentivized the development of antibiotics. It’s sure going to falling off the radar of drug development in the prior decade. I guess, A, thoughts on how Cempra is impacted by some of the initial legislative efforts that have already been put into place, I know with Congress and kind of backing the session, Cempra assets back on the desk, with low probability they get passed through [indiscernible], but how you think kind of back shift impacts a company such as Cempra?

Prabha Fernandes

I think building awareness is very important. People have said it’s good have any sort of publicity and if they provided a lot of publicity people are becoming aware of antibiotic resistance. You can talk to any family now, they have sometime remember who’s had a problem with an infection. You are seeing that in the news. So the government gave you the gain at it with priority review.

So we submitted our NDA in April because we wanted our NDA review in 2016 and we got it right. We’ve got a PDUFA date in 2016 that otherwise it would have fallen in 2017, so the priority date was very important. It gives you five-year of patent extension, it helps our other products because it has a five-year [indiscernible] adds another five years, which is fantastic, 10-years of beautiful exclusivity.

With solithromycin because we have a very long patent on it, anyway it doesn’t matter, but it’s good to have it, it’s statutory protection, nobody can challenge it when it cycle through. This is that good. And then just the interaction with the FDA. The FDA is now empowered. Empowering was a very important word and the fact that it kind of hiding or worried, now the Congress said you are going to get a new antibiotic approved and that’s important for them, so they are working with us. They call us, we call them. We talk to them.

Brian Skorney

Great. In terms of additional efforts that the government in the commercialization front, I know there is some additional incentives at both end put in place on the table, how are you utilizing that in terms of solithromycin?

Prabha Fernandes

For the IV drug, it’s could be useful.

David Moore

Yeah, I mean, what’s being proposed in terms of the legislation impacting the reimbursement rate and it’s certainly something that we are in favor of and we think it’s necessary and it sends the message for those that are maybe have stepped away from antibiotic development or currently in it that there is going to be a market, there is going to be an opportunity for fair reimbursement especially in the hospital, it’s been difficult for antibiotics. There has been generics that still work. The infections that are very impotent hard to treat infections are few, there aren’t commonly that many, and so the antibiotics tend to be higher priced.

So we are certainly in favor of that. We would love to see legislation potentially for antibiotics or anti-infections in general that is centered even in the community, Medicare Part D as an example on the outpatient side, not just the inpatient and I think those discussions are taking place as well.

Prabha Fernandes

As well to help our second product.

David Moore

Correct.

Prabha Fernandes

So, yeah, we have to [indiscernible].

Brian Skorney

When you think about the kind of reality of launching solithromycin and how do best position it, not just in terms of how the drug works, it works so well, but how you actually sort tackling the decision-makers and the payers, there is a hospital component, there is an outpatient component, there is a GP component, where do you put your efforts in to focus on to try to get the best utilization of the outcome?

David Moore

Great question, Brian. The easy answer is all of the above. Solithromycin has a value proposition in the hospital, it has a value proposition in the outpatient setting. And so I’m going to talk about both. In the outpatient setting, managed care or managed care that’s managing the benefit from Medicare Part B are very interested in treating pneumonia. So there is an incentive for them to allow new acute therapies that could effectively treat a patient at home instead of having to go to the hospital. There is a limit, right? You can’t price is too high.

And so we’ve been very active and engaged having advisory board one-on-one meetings with payers to understand what is that price point that this product is not going to be in a prior authorization, it’s not going to be bought. Our goal and probably have instilled this in all of us, this is a product that should be available for doctors and patients and that’s what we want to have happen because the positioning is first line therapy. That’s where a macrolide should be in the treatment algorithm. So we have to support that by going and working with payers to get that level of access.

On the hospital side, I’m sure many of you have seen recent antibiotic launches and again they’ve been commonly for gram-negative infection in the hospital, on those infection, we got an opportunity going through a very large segment. One of the number one reason someone gets hospitalized is because of pneumonia and we are going to work with them to ensure that this product is available to not just the infectious disease physician where they put it on a shelf, but in emergency medicine with the hospitals, they are the frontline treaters of CABP in the hospital. And so in the hospitals again our goal is to make sure that it’s going to be available. And that has to do with the way you work the hospital in terms of your pricing and expectations…

Prabha Fernandes

We had an advisory committee meeting with infectious disease doctors for the first time because I would say they are easy with macrolide. But I was amazed, they were so excited because of the intravenous and the oral. They said right now we start with the fluoroquinolone or we start with [indiscernible] we have to send them home not for quinolone because the hospital administration said these are things to send them home, I don’t have anything to send them home on because [indiscernible] is only intravenous. So the fact that you can go with one drug, the same drug you go home with, the stewardship is becoming big. When you talk about the antibiotics, everyone is infectious without the antibiotics. So we have the right drug for the right patient at the right time.

Brian Skorney

Not to diminish the drug utility in respiratory infection, but it’s really an amazing drug for UPI and gonorrhea. With the current status of that trial, when we might see some data there and when we see a supplementary NDA?

Prabha Fernandes

As you know, we had the 100% success in the Phase 2 trial, which was interesting because we have been challenged that we [indiscernible] gonorrhea. And we worked in all modified for the 100%. So we ran our Phase 3 study, we ran it in Australia, and why Australia – we got as far as we can go, that’s true, but we went to Australia because we have a lot of drug resistance there. Men from there go to Cambodia and Indonesian and come back home with drug resistant gonorrhea and we want to tested against the resistance thing, in that point we are assessing a sensitive thing.

So we went there to get that, but unfortunately 98% of the patients we got are DMS [ph]. So we didn’t want on label to be gonorrhea [indiscernible] approval, it’s an important population but we wanted it for drug use. So the NHI stepped in and they want the drug approved for women and men, they saw the data we have already and they said we would like to enroll in two sites in the U.S. under Arcadia. And they have started enrolling at one of their sites. [indiscernible] and we are in no hurry.

And why are we not hurry? It’s because that second indication, we want the FDA ad com and the approval to focus on CABP, single-mined focus as they start focus, let’s get that done, because that where your patents on extension should be for your first indication. Second indication, we don’t want that to become first because then you’d get your patent for extention for gonorrhea, it’s a larger number of patients, it’s 800,000 patients in the United States alone. There is one boat and there is only so much money you can make right.

So because of which we’d rather have half of our first indication and then we’d come along with gonorrhea for second indication. And then, of course, we have pediatrics. And one thing people forget is that upon approval for oral CABP and IV CABP, it’s also available for children, because it’s available in the formulary, all other drugs [indiscernible] was never approved for pediatrics, it’s not used in pediatrics. So they know the reason why we should be any different, we have to be doing the first time ever to get a suspension at all tested IVs in the pediatric [indiscernible] but the suspension is the only formulation which gets approved in two years. It’s going to be available in for children.

Brian Skorney

Moving on to TAKSTA, but I do want to send a couple of minutes on that that [indiscernible] by investors especially with the GNAC and the five-year extension on top of NCE status, and [indiscernible] exclusivity, it does make of an interesting product, maybe review, what is specific asset that the data from Europe in terms of the safety and efficacy experience and what you think it can bring to U.S. if approved?

Prabha Fernandes

So fusidic acid is a great drug, which is covenants of Leo Labs and they had it approved for skin and certainly used for bone and joint infections, in the old days they did that with a massive trial. So it has never been approved in the U.S., so we brought it into the U.S. we actually have to get a U.S. amendment pact with President Bush signing the law in 2008, people have told us it was impossible, we got it done. And we were able to then get [indiscernible] upon approval.

We did lot of safety data, because it’s an old drug FDA 1s that we do a lot of it over, so we did that and we ran Phase 1, we ran a Phase 2 study, it’s skin at that time. The guidance was failing, you may remember three of them having problems. So we finished with the Phase 2 and we waited and we started a bone and joint – a prostatic joint infection study. There is no guidance for us. So we met with the FDA, we said, we would like to chronic oral suppressive therapy of bone and joint infection. There are a number of patients who fail on treatment for bone and joint infection with [indiscernible]. They have taken an IV injection, it’s a long place of time. There is no oral treatment for lungs, no oral treatment.

I’m in the Europe, I can get this stuff and it’s good, it’s safe, you can take it for years. We had state people legs, arms, et cetera, et cetera, and they had a good quality of life. And that’s very important. So we are running a refractory bone and joint, but they are also doing the skin study because we want to get some drug approved and two patients which is our biggest calling is that different drugs to patients. [indiscernible] Because we will publish the bone and joint study, there is no guidance for bone and joint. So we are going to finish of ABSSSI study this year and we will then put that data out, so we will start a second study, we hope to start a second study, we have not yet made a decision as to when to start the study. And once we’ve get it done, we can get the drug approved and the patients [indiscernible] second drug sort of with that.

Brian Skorney

I don’t want to leave Mark out of the conversation, you will get many more questions next year. But maybe interested to me worthwhile reviewing the financing of the company right now, current burn rate, how far do you think your capital [indiscernible]?

Mark Hahn

Sure, thanks. So we think we have a really strong balance sheet. I’m very happy of our cash position. We have on a pro forma basis at June 30, $289 million of cash on hand, that’s enough cash to last through 2017 including funding the launch of solithromycin, but we have a very robust launch plan [indiscernible].

Brian Skorney

And in terms of partnership potential how you guys were currently thinking about, you have U.S., EU rights right now, willingness, desire to partner off Europe, so both and what we might imagine and if you do, do European partnership what that might look like?

Mark Hahn

So there are interested parties in Europe. Europe is a very strong market for a new community antibiotic like solithromycin. We feel though we’ve got a pretty significant value inflection coming up in a short period of time, so we are not in a hurry. To make that happen, Europe takes a little bit longer than United States in terms of the approval timeline. And we are trying to make sure we time that and align it choosing the right partner one that shares our vision of what this product could be, not just for today, but from a lifecycle perspective as well. But we are really focused on what happens at the end of this year and then having that move into those discussion as we move out.

Brian Skorney

When you think about Europe in terms of co-commercialization or --?

Prabha Fernandes

We haven’t yet decided which way we go. There are some thoughts about that. Some thoughts as to maybe we can buy a company in Europe and have them do. So there are many options open to us, that’s why we are meeting with the entire door open. And our MAA is rolling right along nicely now and hence we are already having discussions with MAA, so it’s kind of interesting that MAA [ph]. There is increasing resistance and the need for pediatric gonorrhea is still great, we would have to get it approved for CABP quickly to get it for the these other indications.

Brian Skorney

Got you. Last minute here. I will see if anyone has any questions in the audience. If not, I will just throw out if there is anything, I didn’t ask that you think…

Prabha Fernandes

I want to introduce John Bluth, we have hired our own investor relations person. He is right there with us in the audience. And so please feel free to reach John Bluth at the company. He is always there for all of you.

Brian Skorney

Great. Well, thanks so much for the coming.

Prabha Fernandes

Thank you for your time. Thank you all very much.

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