Alexza Pharmaceuticals, Inc. (NASDAQ:ALXA)
Q3 2012 Earnings Call
November 6, 2012 5:00 p.m. ET
Mark Oki - Senior Vice President, Finance and Chief Financial Officer
Thomas King - President and Chief Executive Officer
Stephen Brozak - WBB Securities
Obed Cepeda - Green Coast Capital
Good afternoon, everyone, and welcome to the Alexza Pharmaceuticals 2012 Third Quarter Financial Results and General Business Update Conference Call. At this time all participants are in a listen-only mode. (Operator Instructions) We will be facilitating a question-and-answer session following the presentation. Today’s conference is also being recorded and if you have any objections, you may disconnect at this time.
I would now like to turn today’s conference over to Mr. Mark Oki of Alexza. Mr. Oki, you may begin.
Thank you. Good afternoon and welcome to our 2012 third quarter financial results and business update conference call.
Before we get started, I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including those related to the company’s ability to address the issues raised in the May 2012 CRL, the eventual prospects that ADASUVE will be approved for marketing in the U.S. or other locations, the timing of the EMA review of the ADASUVE MAA, our ability to commercialize products, the timing of the commercialization of our products, our projected revenue and expenses, and the ability of Alexza to support operations based on existing cash resources.
Actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risk factors are more fully discussed in our quarterly report on Form 10-Q that we filed with the SEC earlier today, most particularly under the caption, Risk Factors. Alexza disclaims any obligation to update or revise any forward-looking statement made on this call as a result of new information or future developments.
As a reminder, Alexza’s policy is to only provide guidance on product candidates and corporate goals for the next one to two fiscal quarters, and to provide update or reconfirm its guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document. Clinical and corporate milestone guidance is as of today, November 6, 2012, and financial guidance relating to the company’s current cash, cash equivalents, marketable securities and restricted cash is based upon balances as of September 30, 2012.
I’d now like to summarize the financial information for the third quarter of 2012 which was filed earlier today with the SEC on Form 10-Q.
We recorded $0.7 million and $3.3 million of revenues in the three and nine months ended September 30, 2012, and $1.3 million and $3.8 million of revenues in the same periods in 2011. In 2011 and the first quarter of 2012, we recognized revenues from our agreement for Staccato nicotine with Cypress Biosciences, Inc, while in 2012 we also recognized revenues earned under our ADASUVE agreement with Grupo Ferrer.
GAAP operating expenses were $7.1 million and $21.3 million in the three and nine-months ended September 30, 2012 compared to $11.2 million and $29.6 million in the same periods in 2011. R&D expenses were $4.8 million and $14.8 million in the three and nine-months ended September 30, 2012. This compared to R&D expenses of $8.1 million and $21 million in the same periods in 2011. In 2012, we’ve reduced costs through, among other things, reductions in our workforce, completing our outlined work on Staccato nicotine, and suspending on AZ-007, Staccato zaleplon.
G&A expenses were $2.3 million and $6.5 million in the three and nine-months ended September 30, 2012. This compares to G&A expenses of $3.1 million and $8.7 million in the same periods in 2011. In March of 2012, we recorded a non-recurring, non-cash, net contra expense of $1.4 million related to the termination of one our building leases and associated subleases.
Alexza ended the third quarter with cash, cash equivalents, marketable securities and restricted cash of $32 million. We believe with our current cash, cash equivalents, marketable securities and restricted cash and our current expected cash usage, we have sufficient capital resources to meet our anticipated cash needs into the second quarter of 2013. Changing circumstances may cause us to consume capital significantly faster or slower than currently anticipated or to alter our operations.
I will now turn the call to Tom King, Alexza’s President and CEO, for a business update and concluding remarks.
Thanks, Mark. Good afternoon and thanks to all of you for joining our teleconference today. Alexza has been very busy during the past three months since our last update and we have accomplished much with our ADASUVE NDA and MAA. I’m going to start with a general business update. Following this update, I’ll have short concluding remarks and then we’ll open up the conference call for questions and answers.
Since the beginning of the third quarter, we have accomplished the following. In July, Alexza entered into a committed equity financing facility under which we could sell up to $20 million of our registered common stock to Azimuth Opportunity, L.P., over an approximately 24-month period. This financing facility replaced a similar facility that was established in May 2010 and expired after its 24-month term. During the third quarter, Alexza sold 3.5 million shares of common stock under this agreement for aggregate net proceeds of $13.4 million. Alexza remains free to enter into and consummate other equity and debt financing transactions subject to certain restrictions.
In August, Alexza received the EU Certificate of GMP Compliance of a Manufacturer for our Mountain View, California manufacturing facility for ADASUVE. This EU GMP certificate was a result of the EMA inspection which was hosted in May 2012 and our follow-up work with the EMA authorities to address the questions that they had. This initial certificate is good for three years and is valid through May 15, 2015.
During the fourth quarter, Alexza and its EU partner Grupo Ferrer plan to meet with the EMA as part of our ongoing work for the ADASUVE MAA. According to the published EMA timetables and an estimation of our internal projections of our work, we currently project that we will receive the Day 210 CHMP Opinion for the ADASUVE MAA in December of 2012.
In September, we received the Day 180 List of Outstanding Issues from the CHMP regarding the ADASUVE MAA. We have successfully addressed a majority of the questions outlined in the Day 120 list of questions we received in March. However, we still have some remaining issues to address with the EMA, including two major objections which preclude a recommendation for marketing authorization at the present time. It is our plan to address these items directly in our face-to-face meetings with the EMA in this November.
In October 2012, Staccato system was recognized by Frost & Sullivan with its 2012 Global Enabling Technology Award, based on Frost & Sullivan's recent analysis of the bipolar disorder therapeutics market. We are quite proud to have received this international award which is an excellent recognition of Alexza’s Staccato system and the innovation contained within this technology.
In summary, we continue to make strong progress in our efforts to move ADASUVE towards the approval goal lines. We are working with our partner Grupo Ferrer to address the EMA’s Day 180 List of Outstanding Issues and have successfully obtained our EU Certificate of GMP Compliance of a Manufacturer for our Mountain View manufacturing facility. The Alexza and Grupo Ferrer teams will be meeting directly with the EMA as we continue to advance the ADASUVE MAA towards approval.
In the United States, we believe we remain on track for our ADASUVE NDA PDUFA date of December 21. As we have previously stated, we believe that there was an agreement between us and the FDA on the content of the ADASUVE package insert language. We further believe that we are in agreement with the FDA on the scope and on the content of the ADASUVE REMS program.
Finally, we believe that we have adequately addressed the manufacturing issues outlined in our recent complete response letter, and we expect that the FDA’s re-inspection of our facility to confirm the closure of these issues. During the third quarter we have strengthened our balance sheet through the use of the Azimuth equity line raising $13.4 million in net proceeds. We ended this quarter with $32 million on our balance sheet.
In addition to have a stronger balance sheet, this financing has allowed us to restart some of the long lead time items in our global supply chain for the commercial manufacturing of ADASUVE and to initiate some pre-commercialization efforts on the marketing and market research fronts. As Mark previously outlined in our cash guidance section, we now have adequate cash to get us strongly past the PDUFA date in December and into the second quarter of 2013. Additionally, to be clear, we are not planning to sell stock between now and our PDUFA date.
In conclusion, during all of the work we have done with the regulatory agencies during the past year, it is easy for us to forget about what ADASUVE could mean to patients and the clinicians who treat their agitation. Agitation is a very important unmet medical need which is not well understood by many as it is difficult to research and collect data on. In the United States, ADASUVE is being developed for use in a hospital setting to treat agitation in adult patients with schizophrenia and bipolar I disorder. The clinical data from our Phase 3 studies which are now published in the peer reviewed literature, were strong and compelling in the treatment of this agitation.
All of us at Alexza strongly believe that ADASUVE represents a potential significant improvement in patient care into a group of patients who have few advocates and few approved therapeutic options. It is an important goal for all of us, everyone of the Alexza employees, and one that keeps our focus high. We look forward to updating you on our progress during the coming months.
Thank you again for your support and we would now like to open today’s conference call for any questions.
(Operator Instructions) And our first question comes from the line of Stephen Brozak with WBB Securities. Please proceed.
Stephen Brozak - WBB Securities
Good afternoon and obviously we are obviously waiting with anticipation here. And, Tom, I have got a question that goes straight to the point. You have got a product that you recognize as being very very, I am sorry, put it advanced and clearly superior. Could you give us a 30 second to a minute description of why the product is that much better than the current standard of care? And I will hop back into the queue after that because I think everyone wants to understand why obviously so many people are waiting and are determined to see it approved.
Okay. Thanks Stephen. If you look clinically, the results we have from our clinical trials and you compare them to the other products that are currently available in the marketplace to treat agitation, there are three things that ADASUVE delivers that are not currently available in a single product. That’s speed, it’s consistency of effect, and it’s non-invasive administration.
We have shown in both clinical studies that we have onset of effect in ten minutes that’s never been shown with any antipsychotic in treating agitation. Even the injections are not that fast. When we have done responder analysis, both the CGI-I as well as the PEC40 responder analysis, we see not only rapid onset of clinical meaningful effect, but also very high density. The PEC40 for example, showed onset of clinically relevant reduction of agitation in more than 50% patients in less than 30 minutes. Again that has never been seen with any agitation product that is currently being used.
And lastly, you get all of that speed and predictable onset in a non-invasive way. I mean obviously we know through our primary [markup] research that oral formulations, the tablets, the solutions, the rapid dissolve tablets, are used to treat agitation also even though they are not approved for the product. But the onset of those products is one hour or two hours. And so while it’s easy to give them then the onset is unpredictable and it takes a long, long time.
So for the first time ever, using ADASUVE we believe that the physician doesn’t have to compromise. They can get speed, they can get predictability, at the same time they could do it in a very simple straight-forward non-invasive way. So thanks for your question, Steve. Next question, please.
Our next question comes from the line of Obed Cepeda with Green Coast Capital. Please proceed.
Obed Cepeda - Green Coast Capital
Could you just clarify, because I guess there is probably some other people who are on line who are wondering as well that the two outstanding issues with, as pertains with the Day 180 questions versus some of the issues we had back with the Day 120 questions. And I know that the Day 120 issues were disclosed. There was something about the, some of the extrapolations of Phase 3 and things of the like. Are some of the issues we are having with the Day 180 carryovers from the Day 120? Were the 120 issues resolved? I think you mentioned something about that. I am just a little confused on this matter.
No, it’s a great question. Thanks, Obed. So the question is the Day 180 issues. And actually in our Q, we actually go through the verbatim from both of those remaining issues. And so they are there in the Q if you want to read them. It falls with the two camps. What the European authorities have asked is they talked about our request for a broad label. In a broad label they mean mild to moderate, severe agitation. And because our clinical trials were studied in mild to moderate agitation, they felt that we needed to tune down the label. And so the way we will be addressing is by changing the label specifically to mild to moderate.
I mean at the end of the day we are talking about exactly the same patient population. The patient population that is two severe that can't use the device because they are too agitated is a population that you wouldn’t take. But what we have found with the Europeans is they are more practical, perhaps a little pragmatic about what the indication statement is and tying it to the patient population that’s studied. So as a result of that, our approach to that is shaping at least the size and scope of the patient population calling out mild to moderate.
The other issue was this interesting dynamic between pulmonary risk and risk of QT. Just as a reminder, we saw no QT signal in our single dose QT study that we did as part of the overall ADASUVE application. The European authorities have said that you get a significant increase in overall effectiveness if you will, with a second does. So then you go from about 70% of patients getting effectiveness in one dose to over 90% in two. And they ask us to consider the question of about having a second dose. But also in that sort of case the second dose we don’t have, if you will, a QT study that shows repeat dosing. We don’t anticipate any QT in that but we do not have data to that.
So the discussion that we will have face to face with the EMA will be specific to if we move to two doses, which I think they would like us to do in 24 hours, what's the way we in a post-approval way allow us to gather QT data from a repeat dosing algorithm.
Obed Cepeda - Green Coast Capital
Okay. That’s actually very helpful. And it seems these are issues down that we should be able to resolve I think in a straightforward manner. So that’s helpful, that’s clarified. Because as you can imagine it was getting very detailed, so thanks a lot.
I am sorry for the detail but I....
Obed Cepeda - Green Coast Capital
No, no, the detail is important but that helps clarify it. Thank you very much.
Great. Well this is Tom King, seeing no further questions thank you again for your time today. It’s an exciting time for the company, we are within six or seven weeks of our PDUFA date and we also expect to hear from the CHMP during the same period of time. So we look forward to updating you between now and the end of the year as we progress towards the hopeful approval of the product both in the United States and internationally. And thank you again for your time and support.
Ladies and gentlemen, we thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Have a good day.
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