Acura Pharmaceuticals, Inc. (NASDAQ:ACUR) Q2 2016 Earnings Conference Call August 9, 2016 8:30 AM ET
Peter Clemens - CFO
Bob Jones - CEO
Michael Higgins - ROTH Capital Partners
Good morning, ladies and gentlemen and welcome to the Acura Pharmaceuticals Second Quarter 2016 Investor Call. This call is being recorded. I will now turn the conference over to Mr. Peter Clemens, CFO. Please go ahead, sir.
Thank you, Ashley and good morning everybody. Thanks for joining us. Bear with me as I read our forward-looking statements. I’d like to remind you that any discussion that takes place during this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements reflect managements’ current view of future events and operations, including but not limited to, statements pertaining to our expectations regarding the commercialization of our AVERSION oxycodone product by Egalet, the development of and clinical studies relating to and including estimated timing for and results relating to our LIMITX Technology, expectations regarding the abuse return effects of our LIMITX Technology and our ability to reformulate our lead LIMITX Technology product candidate to effect efficacious drug levels, expectations regarding NEXAFED, and NEXAFED Sinus Pressure and Pain and line extensions of the NEXAFED franchise, the meth-resistant capabilities of our IMPEDE Technology including expectations relating to the designation of NEXAFED as a meth resistant pseudoephedrine product under Indiana's new legislation encouraging the use of meth resistant products, expectations relating to our product development pipeline, the commercial potential of our products and plans to maximize this potential, future product sales, financial results and the Company’s strategy for long-term growth including our ability to obtain financing to fund continued operations.
Forward-looking statements involve certain significant risks and uncertainties and actual results may differ materially. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Certain factors that may cause actual results to differ materially from these statements are discussed in the Company’s press release issued yesterday evening and in the Risk Factors section and other sections of the Company's Form 10-K for the year ended December 31, 2015 and our Form 10-Q for the quarter ended June 30, 2016, each is filed with the Securities & Exchange Commission.
I'll now turn the call over to Bob Jones, our CEO, for a general corporate update.
Thanks Pete, and good morning, everyone. Thanks for joining us. During the second quarter, we announced our first clinical results for our LIMITX Technology, which prove that LIMITX is now our third definitive abuse deterrent product technology platform for the Company. What makes LIMITX different and we believe special, is that LIMITX addresses oral excessive tablet abuse or oral ETA. No abuse deterrent technology currently approved by the FDA addresses abuse by swallowing excessive number of intact tablet, which is why we believe FDA designated our LTX-04 development program for their fast track program.
Our oral ETA is generally recognized as the most prevalent route of abuse. And perhaps most importantly, the method of abuse adapted early by abusers. This may allow LIMITX to address a key and large abuse population and hopefully intervene before the person gets addicted. The overall conclusions we drew from the LTX-04 first clinical study that was study AP-LTX-400 were first the drug containing microparticles used in LTX-04 tablets released its drug too slowly and will require reformulations to provide greater plasma availability of drug at one and two tablet doses.
The amount of acid neutralizing capacity used in test formulation LTX-04P was appropriate and does not need further adjustment. Overall, subjects taking three or more tablets at a time experienced an average reduction in maximum blood concentration of approximately 20%. A sub-population of fast absorbers that is subjects that normally exhibited peak plasma concentrations of hydromorphone in 30 minutes or less, demonstrated the most benefit from the LTX-04P tablets when taking three or more tablets and a dose. 82% of those subjects in that sub-population had a reduction in Cmax that averaged 38% for those subjects. Two of the 17 subjects in the sub-population had Cmax reductions of 66%.
And interestingly, not only that this sub-population absorbed drug faster, they also tended to higher levels of drug in their blood stream, which we believe makes them a particularly vulnerable sub-population. We intend to discuss the results with the FDA and get advice for our future development plans under our fast track designation. We do not yet have a time frame from FDA for that discussion.
We remain on track to select the new microparticle formulation in mid-August for use in our next clinical study projected to be initiated in the fourth quarter of this year, subject to the feedback we received from the FDA. Our researchers have developed some exciting new formulations that bode well for the future of the LTX-04 program. We are excited about the prospects for LIMITX as a technology.
While we remain focused on moving LTX-04 forward and making it a viable product candidate, we continue to gain valuable insights into the LIMITX Technology, and believe we are just scratching the surface of what is possible with this technology. We also believe the technology can be applied to extended release applications. As we have previously indicated, it is our desire to seek partners for LTX-04 based upon the data from study AP-LTX-400. We have initiated discussions with potential new partners since we released our findings. But keep in mind these discussions are at a very early stage and there can be no assurance a partnership or licensing collaboration will result.
Moving on to OXAYDO, our FDA approved AVERSION Technology opioid product marketed by Egalet. We refer our investors to the Egalet earnings call of August 04th. Egalet reported OXAYDO gross sales for the second quarter grew 100% over the first quarter of this year on the strength of 400 newly prescribed new physicians in the second quarter. We are still in Egalet’s first year launch for OXAYDO, so the absolute numbers are small but we are encouraged by the continued strong growth trend.
On August 04th, Egalet had an FDA advisory committee for their lead development product and extended release abuse deterrent morphine candidate with a panel recommending approval for the Egalet product. Everyone at Acura congratulates our partner Egalet on that successful outcome. Egalet indicated in their call that they are considering an expansion of their sales force to support the new product, and importantly, that they would continue to actively promote OXAYDO. If their new product is approved and launched, we do expect some loss of resources on OXAYDO. However, with an expansion in their sales force and potential synergies to begin from their detailing to abuse deterrent opioid products to high prescribing physicians, we believe the momentum they have achieved behind OXAYDO to be undiminished and possibly even increase.
Finally, we turn to our IMPEDE Technology that is used in our methamphetamine resistant pseudophederine products. We continue to advance our NEXAFED 12 hour and IMPEDE 2.0 formulations based upon our pre-IND discussions with the FDA. Also work on incorporating IMPEDE 2.0 into NEXAFED is progressing well. Our gross sales of the NEXAFED franchise for the first half of 2016 are in line with the sales we achieved for the same period in 2015.
Our efforts with NEXAFED are currently two fold. First, we are focusing on leveraging the new law in Indiana that recognizes meth conversion resistant products and encourages their use. We are implementing programs to help educate Indiana pharmacists about the benefits of NEXAFED and how NEXAFED can assist with their compliance with the law. Second, we recently were alerted to a movement in an area of Maine in which law enforcement was encouraging pharmacies to remove all pseudophederine based products from their pharmacies due to a spike in meth lab activity.
Media reports indicate Rite-Aid is complied by offering only NEXAFED in their pharmacies in that region, an action they have already taken in West Virginia and selected other geographies. Many independent pharmacies in Maine also have followed suit. Acura applauds Rite-Aid and other pharmacies that have been responsible in addressing the meth problems in their communities. Sadly media reports that some chain pharmacies in Maine have elected not to heed the request of local officials and they continue to put their profit interest ahead of the needs of the communities they serve.
I’ll now turn the call back over to Pete who will review our financial results.
Thanks Bob. We reported net loss of $3.3 million for the second quarter of 2016 or $0.28 per diluted share compared to a net loss of $2.7 million or $0.27 per diluted share for the same period in 2015. With revenues for the quarter of $257,000 compared to $341,000 in the second quarter of 2015. Royalties on Egalet sales of OXAYDO continue to increase from 5,000 in the fourth quarter of 2015, their first quarter, to 17,000 in Q1 and now to 30,000 in this current quarter, which we believe demonstrates that Egalet’s efforts to educate physicians on abuse deterrent benefits of OXAYDO are taking hold.
We anticipate such royalties will continue to grow quarter-by-quarter. For the six months we reported net loss of $6.7 million compared to a net loss of $1.4 million for the same period in 2015. It’s important to remember though that the 2015 results reflect a $5 million payment from Egalet arising from our licensing of OXAYDO to them.
Research and development expenses for the three and six month periods of 2016 showed increase of approximately $1 million over the comparable periods in 2015, which reflects our expanded development and clinical testing associated with our LIMITX Technology product candidate. Selling, marketing, general and administrative expenses for the three and six months periods for 2016 declined slightly over the comparable periods in 2015 as we sought to hold the line on discretionary spending.
At August 05, 2016, our unrestricted cash after deduction of our term loan compensating balance requirement of $2.5 million. Cash equivalents and marketable securities was approximately $3.4 million. And our outstanding term loan balance with Oxford Finance was $6.6 million.
As Bob said, we are expected to receive feedback from the FDA regarding the clinical results of our hydromorphone products formulae with our LIMITX Technology. And we firmly believe this will provide a catalyst to securing additional capital in 2016 to fund operations and further development activities. At the same time, we are engaged, as Bob said, in preliminary discussions with multiple potential partners for our various technologies.
Operator, now we’ll open up the call for questions.
Thank you. The question-and-answer session will be conducted electronically [Operator Instructions]. Our first question will come from Michael Higgins with ROTH Capital Partners.
First question, can you give us an update on the timing for the meeting with the FDA? It sounds like you don’t have that set yet at this point, or -- just trying to understand if you could reach out to set up that meeting with again?
We’ve had some back and forth with the FDA at this point, Michael, that’s started back towards the end of July, mid to end of July. And then we’re still waiting for FDA to get back to us with their timing and plans for response.
And I think your comments on the buffering agents. Just want to confirm, would it be possible a change in the microparticle formulation to have any impacts on the activity of the buffering agents?
No, I think the buffering agents are a integral part obviously of the technology, but there are separate piece of the puzzle if you will. So the buffering agent for us sort of manner of how and to what extent that they neutralize the stomach acid. The critical piece of the buffering agent is to not neutralize the stomach acid to a great extent with one or two tablets. But then as we move up to three and more tablets to have a great deal of neutralization. And with the LTX-04P level of buffering agents we saw really exactly the profile that we’re looking for.
We do have ideas on how to improve all of this, but certainly for the LTX-04P formulation right now that that buffering ingredient is at the right amount. The microparticle then becomes a separate organism, if you will, within the formulation. So what we’re looking for now is to develop the microparticle that had ph2, ph3, that’s the acidic phs releases very rapidly, much more rapidly than the MT-17 microparticle that was in the clinical study, but also provides the same level, if not greater, of retardation of the release in the basic or neutral environment.
And then my last question is on the discussions of the partners. As the number of partners changed with cohort two results, are you having conversations with the same number of partners over the last say six plus months?
No, it's actually expanded since we’ve got the clinical results and that’s what we had expected. I think we certainly needed to prove out the technology and show that what we have is viable. It's a little more challenging for us because we don’t have a specific product at this point and we won’t until we get the microparticle worked out, which we believe will happen in the next clinical study. We’re very encouraged by what we’re seeing with the microparticle development. But not that we have the data, it's opened a few more doors for us.
It looks like that no one else has questions. So, appreciate everybody taking the time today and look forward to updating you in the near future. Thanks.
That does conclude today’s conference. Thank you all for your participation.
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