Alcobra's (ADHD) CEO Yaron Daniely on Q4 2015 Results - Earnings Call Transcript

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Alcobra Ltd. (ADHD) Q4 2015 Earnings Conference Call February 17, 2016 8:30 AM ET


Debbie Kaye - Investor Relations

Yaron Daniely - President, Chief Executive Officer and Director

Tomer Berkovitz - Chief Financial Officer


Charles Duncan - Piper Jaffray

Annabel Samimy - Stifel

Elemer Piros - ROTH Capital Partners


Good day, ladies and gentlemen, and welcome to the Alcobra Q4 and fiscal year earnings results conference call. [Operator Instructions] Now, I would like to hand the conference over to Debbie Kaye of Alcobra. Ma'am, you have the floor.

Debbie Kaye

Good morning, and thank you, Brian. Before the market open this morning, Alcobra announced financial results for the fourth quarter ended December 31, 2015. 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 expected milestones and 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 monitoring tools 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 further 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, 2014, filed with the Securities and Exchange Commission and in subsequent filings with the SEC, including Alcobra's final prospectus supplement, dated November 13, 2015.

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.

Yaron Daniely

Thanks, Debbie, and good morning, everyone. Today I'll provide an update on our development programs for our lead drug candidate, Metadoxine Extended Release or MDX. I'll then hand over the call to Tomer to review Alcobra's Q4 and annual financials.

Let me begin with an update on our adult ADHD program. The pivotal Phase III adult study, which we named MEASURE is enrolling patients with a target sample size of up to 750 randomized subject. In addition to powering this study to detect a modest effect size, the MEASURE study includes multiple design and operational elements that aim at providing rigorous controls over the magnitude of placebo response and treatment response variability.

In addition to an extended 10-week treatment duration, careful selection and training of clinical sites and FDA approved patient screening and enrichment method, we have upgraded our monitoring capabilities with an electronic data capture system or eSource, which allows real-time, remote, expert review of subject enrollment and assessment.

The state-of-the-art technology records and documents each and every patient interview, which is then promptly assessed by a central expert clinical team, ensuring standardization and compliance with study procedures and training. The system further allows real-time monitoring of patient and investigator's safety and efficacy reports.

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 enhance our potential for a successful outcome. Now, as we indicated in the written release earlier this morning, we now expect the availability of the MEASURE trial data by yearend.

Some of the elements which caused this spillover from our earlier mid-year projection into the second half of the year include the extension of some competing trials and our own pace introduction of the eSource system in our trial sites. Alcobra continues to prioritize the quality of patient selection and data management, while at the same time implementing effective methods to enhance recruitment in existing trial sites as well as carefully selected additional sites.

As Tomer will discuss in a moment, our cash position supports Alcobra's activities through the end of 2017, owing primarily to the successful institutional-led public equity financing completed in November of 2015, our solid financial position allowed us to continue to prioritize proper execution and scrutiny of the data over a rushing recruitment.

We also continued to make progress with the pediatric ADHD development program. As we have indicated before, 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. We are on track to launch the first of these two studies this year.

Finally, we continue our analyses and pivotal study design discussions in our Fragile X program with the FDA as well as key stakeholders, such as community experts and global experts in the field. As a reminder, the FDA has awarded MDX Fast Track designation, facilitating consultation and expedited review of the development plan for MDX in this indication alongside an orphan drug designation.

So this concludes my operational update. Before I turn the call over to Tomer, I'd like to congratulate him publicly on his appointment to the additional position of Chief Operating Officer with Alcobra. I'm very proud of Tomer's contribution to Alcobra's success and growth.

Tomer, please go ahead.

Tomer Berkovitz

Thank you, Yaron, for the kind words. Definitely hope to continue to contribute Alcobra's success in the future. Let me start by discussing our fourth quarter and fiscal year 2015 results, which were reported in our press release earlier this morning.

We reported total operating expenses of $5 million for the fourth quarter of 2015 compared with $6.8 million in the fourth quarter of 2014. Our fiscal year operating expenses were $19.7 million in 2015 compared with $33.1 million in 2014.

Total operating expenses include non-cash charges for stock-based compensation of $2.4 million this year and $4.1 million last year. Most of our operating expenses are driven by our research and development activities.

In the fourth quarter of 2015, R&D expenses were $3.3 million compared with $4.9 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.

On an annual basis, our R&D expenses were $13.5 million in fiscal year 2015 compared with $25.1 million last year. Our R&D expense in 2016 is expected to increase relative to 2015, as we complete the MEASURE study and conduct the first pediatric registration study.

G&A expenses for the fourth quarter of 2015 were $1.3 million compared with $1.4 million in the same quarter last year. Our fiscal year G&A expenses were $5 million in 2015 compared with $5.8 million in 2014.

Pre-commercialization expenses were $0.3 million this quarter compared with $0.5 million in the same quarter last year. On an annual basis, pre-commercialization expenses were $1.2 million this year compared with $2.1 million last year.

Finally, we closed the year with $69.7 million in cash and bank deposits compared with $35.5 million at the end of the previous quarter and $21.7 million at the end of 2014. The increase in our cash balance this year is due to two successful public offerings that were completed in January and November of 2015 for a total gross amount of $71 million.

The successful financing were meaningful to our company in several respect. First, as Yaron mentioned earlier on this call, we now have the financial flexibility to continue to focus on quality execution of our clinical trial, especially in today's challenging capital market environment.

Second, our equity offerings were led by strong healthcare dedicated institutional investors, which transform the shareholder base of the company and provide a meaningful support and validation to the company's approach. Third, these transactions expanded and enhanced our corporate relationship with several major investment banks and supported the float and trading liquidity of our stock.

Our current cash balance supports our corporate planned activities through the end of 2017. We firmly believe that the company's solid financial position ensures our ability to effectively execute our plans and maximize value to our shareholders.

I'll now turn the call over to the operator for the Q&A session.

Question-and-Answer Session


[Operator Instructions] Our first question comes from the line of Charles Duncan with Piper Jaffray.

Charles Duncan

It seems a bit bizarre to talk about the financing, but that was seemed well place, given that you now have a strong balance sheet. Wanted to talk to you about the MEASURE data? I believe that you mentioned that its yearend '16 versus 3Q. What are you seeing in the enrollment rate trends that informs the push? And why do you think this is happening, is it the result of competition or challenges with regard to the trial protocol?

Yaron Daniely

So with regards to enrollment, as you said, we are seeing a bit of a spillover from the original target date of June, July, as you said into what looks more likely like a Q4 event. This is due primarily to a couple of things that I mentioned earlier briefly. One, the extension of a couple of very large pharmaceutical run competing trials in adult ADHD, that our expectation was that they would be over by the end of last year, at least that was our read on clinical trials that got from those trials. Unfortunately they continue to enroll, and so we have seen some revision of recruitments from that.

Then second is really our own very careful implementation and training of the eSource system, which we continue to believe provides a tremendous benefit in standardizing and increasing the quality, while minimizing some of the noise and variability in the trial. These two together are causes to revise our projections a bit ahead to, as you just said, around Q4.

Charles Duncan

Occasion and investigator interest remains high in the program?

Yaron Daniely

Yes, in adult ADHD studies, in general, there has never been an enrollment problem, but we are all trying to focus on the quality clinical sites rather than just ramp up the number of sites and have folks that are potentially less experienced or folks with smaller clinical databases. There is a significant competition for the good physicians.

They continue to enroll very well, screening and enroll patients very well, and to us it's important to stick with these investigators rather than to kind of cast a much wider, less discriminant net. The interest in the trial and the trial daily work continues to be high, with the dropout rates, as we have seen in all our trials to date continue to be extremely low.

Charles Duncan

Let me ask you one last question. In terms of sequence of events on the ADHD trial and Fragile X, will you wait until the adult ADHD data to advance the pediatric ADHD trial beyond the short-term efficacy study.

Yaron Daniely

So you are asking me about -- at least as far as I understood you asked about two different trials, the Fragile X program and the pediatric, the first pediatric registration study. With regards to the Fragile X program, we are still in the design and discussion phase with FDA. Once we have a finalized protocol, we will see whether at that point it makes sense to start this program actively ahead of the MEASURE study or not. Naturally, if the time delta there is small, then it may not make sense to kind of launch into that program, given the readout from the adult ADHD study.

This is not the case for their first registration pediatric ADHD study. Our view is that given the importance of the pediatric opportunity, given the qualities of our drug candidates, as well as what could be potentially higher chances of success in pediatric ADHD, given their inherently low placebo rate, it would actually be wise to have this trial up and running, basically as soon as possible for Alcobra and potentially read out shortly after the adult ADHD reads out.


Our next question comes from the line of Annabel Samimy with Stifel.

Annabel Samimy

I wanted to clarify for the pediatric study. Are you going to have all the -- some of the modifications that you had in the adult study and does that potentially cause slowing of enrollment for that study, as well as primarily the extension of the other Phase III, competitor Phase III trials is causing the delay in the adult. And then can you just clarify also what exactly you need for the NDA findings? Is it going to be the adult Phase III and the pediatric Phase II or is it going to be the Phase III and the pediatric Phase II and Phase III, thanks.

Yaron Daniely

With regards to your first question, we call the first pediatric registration study around here the mini MEASURE study, it's essentially of similar design, and in particular you have referred to the design elements, which I have mentioned with regards to the data capture system and some of the patient enrichment criteria, these will be employed in the pediatric registration study as well.

These elements, as far as we can tell, I have no impact on the enrollment revision, I guess, the enrollment projection. What we are really seeing is enduring level of competition that we thought would not be around this year and we're holding back really from casting a much wider less discriminant net.

But I don't believe that the issue of the pediatric study design essentially ties into enrollment slowdowns. Pediatric studies are smaller, and so that study is not going be a 750-patient study, it's likely to be less than half the size, and therefore should not have the same enrollment period.

With regards to NDA submission, our plan right now have not changed from what I've guided before, and that is given the timelines for the MEASURE study as well as the open-label safety database of 100 patients for one year, and the relative, I guess, simplicity or size of the two registration studies in children, we still expect to have the NDA package submitted as a whole for both adults and children very similar to what atomoxetine did back in the early 2000. And so all three studies essentially, the two registration studies and the MEASURE study would be submitted together with the safety database at the same time.

Annabel Samimy

And what is the timing of that filing?

Yaron Daniely

Well, I would probably be prudent and say if we were forecasting end of 2017, then I would forecast now early'18, but I don't want to project two years into the future. That what's the gamut shows.


Our next question comes from the line of Elemer Piros with ROTH Capital Partners.

Elemer Piros

Most of my questions have been answered, but maybe just a little bit more color on the enrollment patterns of the adult ADHD study, Yaron. If you compare screen failure rate at the beginning versus now, how would it compare and the defined certain sites that had to be excluded based on their quality of data collection with the real-time monitoring?

Yaron Daniely

So if you compare -- if you look at the screen failure rates from the beginning of the trial until today, the rate has actually been slowly, but the trend is there decreasing. And that we have seen in most of our trials where right at the beginning you have probably a mix of logistical issues, less familiarity of the sites with the protocol and you essentially get slightly higher screen failure rates than what you get once the sites have better practice and are actually prescreening using their own site procedures of their clinical databases. So we have actually seen screen failure slowly decrease over time.

With regards to site terminations or radar terminations due to quality analytics that the eSource system provides to us in real-time, we fortunately, fortunately I said -- but we fortunately did not have to terminate either our sites nor radars. We have seen what we believe is good data and great commitment on behalf of our clinical trial sties to really adhere to the protocol and conduct assessments thoughtfully and thoroughly.

Here and there, there are some remediation or some discussions that go on between the expert CRO and the clinical sites to just make sure we understand or they understand what the radar saw in their interview, but I have to say that we have seen very good cooperation and support from the clinical trails and we've not had any issue to date.

Elemer Piros

Now, it seems that there is an opportunity here to actually speed things up as opposed to reflecting on the delay in the adult trial, because I previously was under the impression that you wouldn't thought the pediatric study bid out the data readout from the adult trial. You could actually makeup for lost time by starting the pediatric study. So would you please tell us about potential rate limiting steps that are gating items for you not to start the study during the next brief period of time?

Yaron Daniely

The first pediatric registration study, the Phase II?

Elemer Piros


Yaron Daniely

No. There are no gating items other than your standard clinical operation procedures. We need to have a protocol, have contracts, have IRBs, clinical trial supplies, investigator meetings, things like that. We are doing what we can to accelerate these planning and start the trial as soon as we can.

I agree with you, I think that if you want to have a sliver lining there, the adult ADHD study is not a rate limiting step for the pediatric development work. And we will be starting that, again, as soon as we can. The adult study is likely to readout ahead of the pediatric study, but not a year ahead, but a short time before the pediatric study. But again, the pediatric study, I haven't even started enrolling yet. So once we start enrolling that we'll know.


Thank you. There are no additional questions. I would now turn the call back over to Dr. Yaron Daniely, CEO of Alcobra for closing comments.

End of Q&A

Yaron Daniely

Thanks. So I wanted to thank all of you for participating this morning. We are all enthusiastically working on our programs, and I look forward to communicating our progress as we move forward. Our solid financial position really allow us to maintain rigorous monitoring and quality supervision over our lead program, an adult ADHD, which we hopeful establish MDX as an effective for cognitive compound with significant clinical benefits and a favorable safety and tolerability profile. Thanks, again, for joining us this morning and have a great day.


Ladies and gentlemen, this does conclude today's program. And you may all disconnect. Everybody, have a wonderful day.

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