BioPharmX Corporation (NYSEMKT:BPMX) Q1 2016 Earnings Conference Call June 14, 2016 4:30 PM ET
Greg Kitchener - CFO
Anja Krammer - President
Ramakanth Swayampakula - H.C. Wainwright
Anthony Vendetti - Maxim Group
Good afternoon and welcome to the BioPharmX First Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this conference is being recorded.
I would now like to turn the conference over to Greg Kitchener, BioPharmX Corporations Chief Financial Officer. Please go ahead.
Thanks for participating in today’s call. Joining me today is Anja Krammer BioPharmX President and Co-Founder.
Earlier today BioPharmX released financial results for the first quarter ended April 30, 2016. If you have not receive this news release or if you would like to be added to the company’s distribution list, please send an email to firstname.lastname@example.org. Today’s conference call is being broadcast live through an audio webcast replay of the call will be available later today at www.biopharmx.com.
During today’s call BioPharmX will make forward-looking statements as to future operating results. Because such statements deal with future events actual results may differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found on our Annual Report on Form 10-K, Form 10-Q and other filings with the U.S. Securities and Exchange Commission, as well as in today’s press release.
The forward-looking statements provided during this call are valid only as of today’s date June 14, 2016 and BioPharmX assumes no obligation to publicly update these forward-looking statements. During the call BioPharmX will discuss non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in today’s press release made available on our website.
With that I’d like to turn the call over to BioPharmX’s President and Co-Founder, Anja Krammer, Anja?
Thanks, Greg. Good afternoon and thank you for joining us today. It is only been about two months since our last quarterly call because we took some extra time last time to close our first full year under the new fiscal schedule. So it’s great to talk to everyone again there soon, but because we spoke so recently, today’s call will focus on events and information in the last two months of the quarter that we have not previously discussed.
Our clinical trials are on track and we continue to explore what I believe to be a very promising opportunities, both in our research and development activities and in potential licensing agreements. I look forward to sharing as much detail with you as I can today. But again this will be somewhat be limited by the timing of our call. Of course the most notable change that’s occurred since we last talked is management change. Last month Jim Pekarsky resigned his position as Chairman, CEO and Treasurer. I think most of you probably know that I co-founded BioPharmaX with Jim and we worked closely together to fit our strategic direction and manage this company from its inception.
I’m grateful to Jim for the contributions he made to BioPharmaX and I want to personally thank him and wish him the very best. We were fortunate to have an experienced independent director available to assume the role of Chairman. Mike Hubbard brings deep knowledge and practical experience in effectively governing successful growth companies. We share a clear vision for the future of BioPharmaX and a commitment to execute our strategy.
In light of these changes, I think this is an opportune time to not only reassure you that we remain focused on our strategy, but to spend a little time talking about that strategy and the opportunities that we see ahead. It’s very easy to get wrapped up in the minute details of individual products and near-term objectives during our conversations with investors and to assume that everybody understands them in context.
So let me start at 30,000 foot view. We’ve talked about our focus on dermatology and women’s health that are at our core BioPharmaX is all about making medicine more effective by delivering it in smarter ways. We are a pharmaceutical company that takes a unique approach to innovation. We are not in the business of developing new drugs we’re in the business of creating breakthrough capabilities for proven drugs. We are totally focused on producing novel ways to precisely deliver medications with minimal dosage and maximum patient benefit.
Within a period of only about five years, we have built the robust internal R&D capabilities that allow us to rapidly investigate, develop, assess and refine new drug delivery systems. This allows us to conduct research more time and cost efficient in companies that form out research to outside labs. It creates investigative flexibility and supports accelerated development of a much richer pipeline of innovative products.
And this research is dedicated to the creation of revolutionary new categories of drug delivery systems. Our scientists have already created four delivery systems, three of which are already patent protected and four we’re in the process of protecting through patent filings. Delivery systems we have already created overcome biological barriers that historically force physicians to expose patients to the risks of undesirable side effects in order to treat their conditions.
Our strategy is to commit our research and development efforts to address clearly defined unmet medical needs. And we are doing that with remarkable success.
It is always been our strategy to focus on dermatology because it represents a huge potential market and a field which have seen doors of innovation. But again our core business is novel delivery and our initial goal is to prove our ability to tackle a challenging delivery system that addresses an unmet medical need.
Violet provided proof of concept of our ability to develop novel new delivery systems for existing drugs. In that case, we found a way of delivering molecular iodine to the body that no one has ever been able to do before. Molecular iodine the form of iodine that is safest for the body is not stable and that’s cannot be packaged easily into a pill. Our approach actually enables the body to manufacture its own molecular iodine. Violet delivers a compound that the consumers own body converts into molecular iodine supplying the mineral in a safest most effective way possible. With BPX-01 we have been able to deliver minocycline to the precise part of a skin layer where acne develops in a way that nobody has ever been able to do.
We’ve focused on a proven category leading medication and created a way for dermatologist to minimize dosage and reduce side effects while maximizing efficacy. This is important to dermatologists who often miss rely on large doses of oral minocycline to attack their patient’s acne. Typically oral minocycline causes side effects, which often means it cannot be used until the minocycline fully clears the acne condition. Our goal is that BPX-01 will provide a topical alternative that will enable dermatologist to use their most effective antibiotic in a novel, lower risk way to acne, which by the way is a well over $10 billion global market.
So our strategy targets define markets with significant potential focuses on unmet needs and provides solution by delivering proven medications in smarter ways. We are solving problems that physicians care about, but we are doing it with medications they already use and trust to treat their patients.
From an investor perspective we believe this creates a lower risk and potentially higher reward opportunity. For example, our focus on FDA approved medication inherently lowers regulatory hurdles because safety is already established and trials are more narrowly focused on the effectiveness of our delivery systems. Our significant R&D investment and commitment to extensive internal testing also helps minimize the risk for investors. Because we are able to establish the effectiveness of our systems with a high degree of certainty before seeking approval. Our strategy is to target specific unmet needs in large established markets or with the high probability of success and we believe our focus on medications that doctors already prefer reduce barriers to entries.
Finally, we are actively filing patents to protect our intellectual property and focused on creating value from our R&D investments. We have assembled an extraordinary research team and I look forward to telling you more about their work. Most of our conversation today is naturally centered on Violet and BPX-01 because these are the first viable results of our R&D efforts. We think these products have great potential and they certainly deserve attention. But from a strategic perspective they’re two pieces of a bigger opportunity. BioPharmX has already developed several novel delivery systems and each of these systems provide the potential platform for multiple products to uniquely address a variety of unmet medical needs.
This broader strategic perspective will become more visible over the course of this year and as we continue our current product and business development efforts. It’s an exciting time for BioPharmX and I’m anxious to continue this conversation in the coming months. For now let’s turn back to our current result and the progress we’ve made over the past few weeks.
First, I want to briefly mention our women’'s health product Violet. We’ve talked about our successful efforts to expand Violet’s retail presence and the response to our test marketing in various channels. There has been a positive response from those who try Violet including repeat business and testimonials that illustrate its market potential. But as we’ve also discussed we essentially created a new category with Violet and initial product revenues reflect that fact. We are convinced that Violet has tremendous potential, but we also think that the potential can best be achieved in partnership with the company that has a big footprint in women’s health. So we are currently exploring every option to maximize the potential of this product and its returns to our shareholders.
A number of women’'s health and consumer business companies also have recognized this potential and expressed interest in partnering with us on Violet. We are currently in advance discussions with those companies that we believe are most capable of accelerating sales of Violet through their established marketing and distribution channels. I can’t predict the outcome of these discussions, but we are actively pursuing an agreement that aligns with our strategic objectives.
Moving on to the dermatology market, we continue to see positive indications the Phase 2a and Phase 2b clinical trials for BPX-01 remain on track. Successful completion of these trials is a top priority. We’re also taking every prudent step we can to accelerate BPX-01 approval through concurrent activities in our Phase 2a and 2b trials. As a reminder, BPX-01 is our therapeutic dermatology delivery solution for acne. BPX-01 is the first and only stable hydrophilic topical gel with fully solubilized minocycline, the most prescribed drug for moderate to severe acne.
With BPX-01, we created a novel system to deliver the most efficacious ingredient for treatment of P. Acnes in a low dose topical form. Dermatologists are excited about this because it addresses two very real concerns without giving up a medication that no one interest. First, by precisely delivering a lower dose of minocycline to its specific target, BPX-01 supports a broad goal of minimizing use of antibiotics, but without sacrificing benefits.
Second, we expect to prove in clinical trial that BPX-01 enable minocycline to attack bacteria directly and quickly with few if any systemic side effects. This will be determine in a Phase 2a trial, which assesses the effectiveness of BPX-01 and reducing the number of acne causing bacteria in study patients and in evaluating its safety and tolerability. We achieved full enrollment in late April for Phase 2a and expect to have some initial top-line data within the next few weeks.
The primary endpoint of our Phase 2b clinical trial will be to assess changes in inflammatory lesion accounts. This trial also look at overall tolerance to repeated exposures to the topical drug as well as overall improvement as determined by the patient and clinician. While we believe that a 1% concentration is the right dose, Phase 2b will confirm the dose we take into phase 3. The difference between active and placebo will also help to determine the sample size for phase 3. We expect Phase 2b to be completed in early 2017 with Phase 3 clinical studies commencing around mid-2017.
Of course to my earlier point, our breakthrough BPX-01 delivery system can also be leveraged to address other unmet medical needs. Applying the same technology and approach will allow us to deliver other larger solubilized molecules using our hydrophilic topical gel. So this is more than just a one product application and we are actively planning for future products.
Now I’ll turn to BioPharmaX Corporation CFO, Greg Kitchener for a deeper review of our financial highlights. Greg?
Thanks, Anja. For the first quarter ended April 30, 2016 revenue for Violet was $33,000, which is fairly consistent with last quarter. As Anja pointed out, we are investing significant energy and discussions with potential partners who can accelerate our efforts to maximize Violet’s commercial and shareholder value. Total GAAP operating expenses were $4.5 million during the quarter compared to $3.2 million during the prior year period as a result of increased expenditures for the company’s acne drug clinical trials.
GAAP net loss for the first quarter was $4.5 million or $0.17 per share compared to a net loss of $3.9 million or $0.33 per share during the prior year period. Excluding stock-based compensation expense and amortization of purchase intangible assets, non-GAAP net loss for the first quarter was $4.2 million or $0.16 per share compared to a net loss of $3.1 million or $0.27 per share last year.
Our weighted average shares outstanding was 26.2 million shares for the first quarter, reflecting the effect of shares issued in the most recent capital raise and the full quarter effect of the shares issued to Franklin Templeton in late Q4. Cash and cash equivalents as of April 30, 2016 were $4 million.
Understanding our cash position and needs we’re actively in discussions with several strategic partners and remain confident in our ability to raise capital through a variety of means. These partners have put a great deal of value on the products and assets we’ve developed as well as in the future of the company.
At this point, I will turn the call back to Anja for closing comments.
Thanks, Greg. I will just briefly reiterate that BioPharmaX’s Board of Directors and management team remain absolutely focused on our core strategy and our milestones and product development remain on track. We are eagerly anticipating the completion of our BPX-01 Phase 2a clinical trials and starting on Phase 2b and look forward to updating you soon on our product pipeline potential licensing agreements. We remain committed to building a leading specialty dermatology company and I believe we are on the right path to do so.
With that we will now open it up to questions. Operator?
Thank you. [Operator Instructions] Our first question will come from Swayampakula Ramakanth of H.C. Wainwright.
Thank you. Good afternoon, Anja. Couple of questions initially on Violet. So in terms of trying to get this into partners so that you can improve on the commercialization that you have initiated here, what sort of companies are you looking at and what would be an ideal partner so that you can maximize what BioPharmX has initiated?
Yeah, sure. Thank you, RK. So the type of companies that we are interested in and in dialogue with are large women’s health companies, women’s health companies that currently services the OB/GYN community and sell to that audience. We are also talking to consumer goods products companies, companies that would sell over the counter women’s health type and supplement dietary supplement type products direct to the consumer marketplace. So both of those are the types -- selling women’s health type products that we are in discussions with.
So as you are talking to these distributors at the same time what efforts are you putting in so that just in case these discussions don’t come to fruition for another six months, how do you keep the ramp up that is currently on in terms of adoption of Violet?
So currently RK we do still have our own channel, as Greg mentioned our revenues quarter-over-quarter still consistent. So we are still managing that and that is still an active business for us.
And is it still some sampling going on with Violet or you are not sampling that anymore?
Absolutely, so our active programs are still in place. We are still servicing our current customers, selling to the channel, still marketing and sampling to the healthcare provider channels, as well as their patients and consumers directly. So that is an ongoing activity that the commercial team is still conducting.
Okay. And then in terms of the BPX-01 studies, what’s the hurdle that you need to cross both in 2a and the 2b because you're kind of giving us the timeline for Phase3 as well. So that – to be comfortable that we can assume the Phase 3 with start in the middle of 2017? And separately do you need to do two large studies to register the product or just one study is good?
Yes. So I guess let me answer that in two parts here. So for Phase 2a we are coming up on that study completion here in the next several weeks and in that I think I maybe mentioned this in our last call, but we are looking to show P. Acne reduction as well as safety and tolerance results there. So at that point in time you will be hearing from us we will issue an announcement to that effect when that trial portion is completed.
Our intent is then to subsequently move right into our Phase 2b and at this time we will have multiple arms in that study the protocol haven’t been fully filed on record yet, but that is in process now. Obviously we want to get 2a completed and announced. And we have outlined what that will look like. So that will run for 12 weeks. It is multi-centered double blind and will be randomized and vehicle controlled. And we anticipate that based on the 12 week duration and then the reporting and such that follows that that will be an early 2017 study completion.
Okay. And do you think you need two studies for registration?
Not for the 2b, I think you may be thinking about Phase 3.
No for the Phase 3, do you need two Phase 3 studies to register the product or one study -- one large study there?
There are maybe two for that, but we will be talking to you guys more once we get closer to that protocol because our 2b will inside that.
Okay, thank you.
And our next question will come from Anthony Vendetti of Maxim Group.
Thanks. Just as a follow-up on the Phase 2b. So is that study expected to be I know you said 12 weeks and double blinded randomized. Are you expecting about 400 patients or so or how many patients are you expecting to do in its multi-site has that been outlined?
We anticipate somewhere in the 200 to 250 range Anthony.
Okay. And is that protocol has already been submitted to the FDA or…?
It’s in process right now.
Okay. Okay, and then I know Phase 2a is only about 30 patients, is that right?
So the endpoints that the FDA are looking for are safety and tolerance. However, you believe you’ll be able to also see the P. acne reduction. How are you going to -- or how do you expect to report that is that something on a 30 patient sample is too small to say anything definitive about or if you see significant reduction across these 30 patients in addition to the safety and tolerability that the FDA is looking for? You could say something at least if not -- at least not statistically significant you could say something you think that’s subjective or qualitative from a P. acne reduction standpoint?
Correct, you summarized that correctly, correct. I mean we could definitely inside that there is a strong trend. We know that it’s really a true feasibility study of that nature. So it is more about safety and the tolerability. So you’re correct.
Okay. And then just to understand where you are in terms of -- and this is more for probably Greg. So I know you’re looking at partners and stuff. In terms of cash burn where are you now? I know you’re around $1.2 million a month. Is that still the case have you brought the cash burn down a little bit or is that tough to do when you’re in these Phase 2a and 2b trials?
Good question, Anthony. I think I would first point to our recently provided financials for the quarter, you’ll see our sales and marketing expenses dropped in Q1. Obviously part of that is being mindful of our cash and our cash burn offsetting that was an increase in our R&D spending funding or beginning of our 2a clinical trial. So we are absolutely mindful of our cash, our cash burnt and our expenses in the quarter and will continue to really, really tightly look at that as we move through this quarter.
All that being said I think that that $1.2 million a month burn is probably a good estimate to use at this point in time. Obviously the timing of the cash for the clinical trials is going to maybe accelerate a little bit as we move through the quarter and in the second half of the year.
Okay. And just after the last raise, the number of shares you’re using right now because you’re reporting a loss doesn’t reflect the fully diluted shares. Do you have the fully diluted weighted average account for the quarter? And what you’re at right now today in terms of fully diluted shares?
Let me get back to you on the fully diluted number. I can and I guess speak to in Q2 which is going to factor in the timing of the full quarter’s impact of the capital raise. We expect our share count to increase about 29 million for the quarter. But let me follow up with you on the fully diluted number that you’re looking for.
Okay, yes that’s great. And just Anja on the partnerships you did give a lot of color on that in terms of partnerships with Violet. Is -- do you have some sort of timeframe in terms of when you hope to have an agreement buy or these negotiations still very early stage and could result in not having an agreement or do you feel pretty confident that one of these companies that you’re having negotiations with will result in an agreement sometime in the next couple of months this year or something like that?
Yes. I would say Anthony to characterize it generally speaking we’re in early stage discussions. But I would definitely say it would be within this year.
Okay. I’ll hop back in the queue, thanks.
Okay, thank you.
And this concludes our question-and-answer session. I would like to turn the conference back over to Anja Krammer for any closing remarks.
Thanks for joining us today and we look forward to providing another update in September on our next earnings call. Thank you.
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!