Pfenex's (PFNX) CEO Eef Schimmelpennink on Q3 2017 Results - Earnings Call Transcript

Nov. 09, 2017 10:06 PM ETPfenex Inc. (PFNX)
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Pfenex Inc. (NYSEMKT:PFNX) Q3 2017 Earnings Conference Call November 9, 2017 4:30 PM ET

Executives

Eef Schimmelpennink - Chief Executive Officer

Hubert Chen - Chief Scientific and Medical Officer

Analysts

Jason Butler - JMP Securities

Andy Hsieh - William Blair

Morgan William - Barclays

Operator

Greetings, ladies and gentlemen, and welcome to the Pfenex Third Quarter 2017 Results and Business Update Call. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

We would like to remind you that some of the statements made during the call today are forward-looking statements including statements with respect to our development and commercialization plans for PF708, PF582, Px563L, RPA563, PF529 and our clinical trials, the expected timing of clinical trial results, potential partnering opportunities for our product candidates, our ability to satisfy the filing requirements for PF708 through the 505 B2 regulatory pathway, our ability to obtain a procurement contract with respect to Px563L or RPA563, the potential to receive future payments under our Jazz collaboration agreement and our expectations with respect to the sufficiency, our cash and cash equivalents and cash generated from operations to meet our working capital and capital expenditure needs, and support of our PF708 and the A submission.

Actual results could differ materially from those contemplated by our forward-looking statements and reported results should not be considered as an indication of future performance. Please take a look at our filings with the SEC for a discussion of the factors that could cause our results to differ materially. Additional information will also be set forth in our quarterly report on form 10-Q for the quarter ended September 30, 2017 to be filed with the SEC. The forward-looking statements on this call are based on the information available to us as of today's date November 9, 2017 and we disclaim any obligation to update any forward-looking statements except as required by law.

Earlier today, Pfenex released financial results for the third quarter ending September 30, 2017. Pfenex earnings release and corporate presentation are currently available in the Investor Relations section of our website.

It is now my pleasure to introduce your host Pfenex CEO, Mr. Eef Schimmelpennink. Eef, you may now begin.

Eef Schimmelpennink

Thank you, Raco, and good afternoon everybody.

Welcome to Pfenex's third quarter 2017 conference call. I'm Eef Schimmelpennink, President and CEO of Pfenex and I'm joining by Dr. Hubert Chen, our Chief Scientific and Medical Officer. During today's call, I will discuss the progress in the quarter and will also be providing an overview of our strategy for future growth. Hubert will provide key technical updates and I will then describe our third quarter 2017 financial results after which I will open up the call for Q&A.

I'm being at the helm for three months, I have gained a lot of insights and I am extremely excited to believe in Pfenex. One of my first actions was to meet with every function in the company and participate in deep trust into the product pipeline and partnerships. I also embarked in our listening to by meeting with employees, key elements and business partners, government stakeholders and the investment community.

Looking back Pfenex's differentiated portfolio the growth opportunities enabled by the unique Pfenex expression technology and a strong and knowledge team with key aspects that attracted me when I did due-diligence into this opportunity. My first 100 days fully confirmed my initial analysis of the strong foundation the company has. I'm even more convinced today that the combination of these key elements is really one and that Pfenex has a great future ahead.

Furthermore, I'm off to a strong belief that the increased focus for the company on key assets and its pipeline and refocus on new core developments with strong partners combined with lien and target spending aimed at key value inflexion points, as well as laser focus on execution will drive success.

Over last months' my team and I have implemented changes to that extend and we're clearly starting to see the positive impact. As I mentioned in the previous call in August, we are further sharpened our focus and efforts on the top products in our portfolio including PF708 therapeutic equivalents to Forteo.

PF708 is a key focus for us and with 2016 global branded sales of our around $1.5 billion a significance commercial opportunity. Pfenex's employees are fully committed to delivering on our PF708 plans. The Pfenex team has continued to execute critical activities and manufacturing regulatory and clinical.

We continue to work through our submission of the NDA for PF708 in the third quarter of 2018, which could position us to launch commercially in the U.S. that approved by regulators around expiry on August of 2019.

I am a strong believer in the value of leverage in key competencies different bodies may have, and to that extent we continue to evaluate partnership opportunities in parallel to the potential of bringing the product to the market ourselves. We will always focus on the pathway that creates the most value for our stakeholders. And to that end, I'm pleased to confirm that we believe it is possible to bring PF708 to its anticipated NDA submission with our existing resources.

Today, we are pleased to announce that the ongoing PF708 study with primary endpoints for immunogenicity and secondary endpoints in pharmacokinetics bone mineral density and bone turnover markets is fully enrolled for the 181 total patients. We can report positive interim results of the PK portion which show comparable profiles between PF708 and for trial.

Based on feedback from the FDA, we believe the final primary endpoints results if possible it will in combination with the bioequivalence of PF708 to Forteo showing up early healthy subjects trials provide a clinical data set for our NDA submission. Hubert will review that data in more detail in a moment.

We expect that the immunogenicity data will read out in the first half of 2018 and once we have that data in hand we can look towards submission of the NDA in the third quarter of 2018. 2018 will be a very exciting year for Pfenex as we move towards our first NDA submission.

We've also completed our strategic review of PF582 and PF529, by a similar candidates to Lucentis and Neulasta respectively. Both programs have clearly laid out development pathway and with the right resources we believe both PF582 and PF529 could be significant opportunities.

We continue to engage potential strategic interests to monetize these assets. However given the resources needed for further development of these two by similar candidates, we have decided to close our development activities and focus our efforts and resources elsewhere in our product portfolio.

We are continuing to make good progress and I am very pleased with our novel anthrax vaccine program and the collaboration with Jazz. Both are great testimonies to the development quality and strength in the Pfenex production platform and scientific team to develop by [indiscernible], Px563L and RPA563 a novel anthrax vaccine candidates are fully funded by cost plus fixed fee advanced development contract with the biomedical advanced research and development authority of BARDA within the U.S. government, with the contract values at up to approximately $144 million.

With projected [indiscernible] are only two doses versus the currently licensed three dose product and anticipated improved side effect profile. We believe that our final vaccine product will provide an attractive alternative for the U.S. government. Our stability results show promising results to-date. We also recently had a successful meeting with the FDA which provided clear guidance for our proposed clinical and license plans. Hubert will further elaborate on this.

The net key milestone for our anthrax development program is triggering of the next set of development options in our contract, which will fund the ration of manufacturing not a clinical development and preparatory activities for the Phase 2 trial, which could start around the end of 2018.

Pfenex believes the successful completion of the Phase 2 study and other development activities under this contract could lead to a procurement contract for supply of Px563L, RPA563, to the strategic measure of stockpile. It's worth noting that the current so sourced contract is valued at close to $1 billion for a five year supply.

As you will recall in mid 2016 Pfenex and Jazz pharmaceuticals announced a collaboration agreement under which Pfenex granted Jazz will rights to develop and commercialize multiple early stage hematology product candidates based on our platform technology. We are pleased to announce we achieved the process development milestone linked to the progression of the ongoing development collaboration between Pfenex and Jazz in the third quarter.

The continued progress we are making on the various programs in our portfolio underlines the key strength of the Pfenex Expression Technology. Pfenex is at a pivotal point in our development and I look forward to leveraging my experience to lead the team and continue building Pfenex into an industry success.

We'll continue to focus on leveraging the Pfenex Expression Technology to create value for our stakeholders. I see great opportunity for further growth of Pfenex through focus on our key assets and by selectively adding more development partnerships.

Now I would like to turn the call over to Hubert to provide a technical update on PF708 and our anthrax program.

Hubert Chen

Thank you, Eef.

As we previously discussed the PF708 equivalent study conducted in 70 healthy subjects was completed in the second quarter of 2016 and met its primary objectives.

The ongoing study in osteoporosis patients was initiated in the fourth quarter of 2016. We enrolled a total of 181 patients, 90 randomized to PF708 and 91 to Forteo. With a primary end point of anti-drug, antibody formation after 24 weeks of drug treatment. The secondary endpoints are changes in bone mineral density and bone turnover markers after 24 weeks of drug treatment as well as pharmcokinetics or PK parameters after the first dose. Additional, study details are available on clinicaltrials.gov.

Today, we announced the interim PK data showing figure 1 of our press release. Patients or dose with either PF708 or Forteo on day one of the study and PK measurements are obtained up to four hours post dose. We are pleased to report that the two PK excursion curves are comparable and there are no statistically significant differences in PK parameters between PF708 and Forteo in osteoporosis patients.

It is important to point out that the study was not powered to demonstrate above equivalent for a secondary study endpoint. Additionally, there is inherent data variability in osteoporosis patients owing to their underlying medical conditions.

Overall, we believe that these interim findings complement our prior body progress results in healthy subjects.

I'm pleased to announce that the study is on track and a final immunogenicity read out is anticipated in the first half of 2018. We believe that the results from this study if positive along with the positive bioequivalence findings in healthy subjects just satisfied the clinical filing requirements for PF708 for the 505P2 regulatory pathway.

We now turn to Px563L in RPA563, which are our novel recombinant anthrax vaccine candidates. The program is funded by BARDA under an vast development contract value at up to approximately $143.5 million. We initiated a randomized placebo controlled Phase 1h file in healthy subjects in the second half of 2015 to investigate safety and immunogenicity.

We announced the positive interim analysis results in the second half of 2016 and we completed the final long-term assessment for all subjects in the first half of 2017.

Demonstrating appropriate drug stability profile as well as the manufacturing of clinical trial material are necessary before we can obtain BARDA funding for the Phase 2 study. We have made good progress on both fronts.

Recently we executed a contract modification with BARDA that authorize funding to reserve a GMP manufacturing slot with our contract manufacture. With respect to stability we have generated favorable real-time stability data at 5 degree Celsius, the expected storage temperature and accelerated stability data at 25 degree Celsius for our 2016 manufactured lot out to nine months. We believe that these stability profiles if continued at current trends will support a shelf life that is consistent with BARDAs expectations.

Finally, as Eef mentioned in his opening remarks, we recently had a successful meeting with the FDA in which we achieved our key objectives and obtained clear guidance on our proposed Phase 2 clinical study design as well as the overall development strategy to support license share for the post exposure of prophylaxis indication. Currently, we expect to initiate the Phase 2 study towards the end of 2018.

Finally, regarding the Jazz collaboration, I'm pleased to announce that during the third quarter, we achieved a process development milestone for one of our collaboration projects. This achievement highlights one of the key strengths of our Pfenex Expression Technology that Eef alluded to earlier in the call, which is the ability to enable rapid, high-quality production and analysis approaching therapeutics. We look forward to continue success in the collaboration with Jazz.

With that, I will like to turn this call back to Eef.

Eef Schimmelpennink

Thank you, Hubert.

We report a third quarter 2017 revenue of $5 million in the three-month period ended September 30, 2017, compared to $48.8 million for the same period in 2016. This decrease was due to the termination of our development and license agreement with Pfizer during the third quarter of 2016 which resulted in accelerated recognition of $45.8 million of revenue. This decrease was partially offset by $2 million increase in revenue comprised of revenue recognized in connection with meeting a process development milestone under our collaboration agreement with Jazz, in addition to increased government contract revenue for our Px563L product candidate as greater activity occurs from two options exercised in January 2017 under our existing contract with the U.S. government allowing for continued development.

Cost of revenue increased to $1.8 million in the third quarter of 2017, compared to $1.3 million for the same period in 2016. This increase in cost of revenue was mainly due to an increase in costs for Px563L product candidate under our government contracts related to the newly exercised options for continued development.

R&D expenses decreased to $8.1 million in the third quarter of 2017 compared to $8.7 million for the same period in 2016. This decrease in research and development expenses was primarily due to the staged development of our pipeline programs. Expenses decreased for materials and subcontractors for PF529 and PF530, which would partially offset due to clinical trial expenses for PF708.

SG&A expenses decreased to $4 million in the three-month period ended September 30, 2017 compared to $4.4 million for the same period in 2016. Cash and cash equivalents as of September 30, 2017, were $48.4 million; we expect that our cash position will be sufficient to fund operations for at least in the next 12 months.

We are grateful for the efforts put forth by the team of Pfenex as we work diligently everyday to build solid value for our shareholders. We look forward to updating you on our progress.

Operator can you please open the call to Q&A?

Question-and-Answer Session

Operator

Absolutely. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Jason Butler of JMP Securities. Please go ahead.

Jason Butler

Hi. Thanks for taking the question. First one on PF708 on the PK data. I just wanted to confirm that you are saying that the data -- the PK results fall within the standard FDA thresholds on CMAX, now you see for establishing bioequivalence. Is that correct?

Hubert Chen

Hi, Jason. This is Hubert. So, happy to answer that call. I think what we have shown here is that we have comparable PK profiles between 708 and Forteo. In terms of this study as we mentioned in the opening statement was not power it to demonstrate bioequivalence in the traditional sense of what the FDA is looking for. However, keep in mind that we have already demonstrated that in healthy subjects and disclosed those results last year in 2016. So, in terms of how these two data sets, we believe are complementary to each other, we already demonstrated the bioequivalence in healthy subjects, this is just additional customer free data in the intended patient population as to just demonstrate that there are comparable PK profiles.

Jason Butler

Okay, great. And now, this is your -- essentially your most advanced clinical asset, can you just talk about what -- how you see the commercial opportunity and your commercial strategy for PF708 looks? Thanks.

Eef Schimmelpennink

Thank you, Jason. This is Eef. We believe that 708 is a very significant commercial opportunity. Obviously, we are aware of the competitive landscape and I think the current developments clearly illustrate that the market is waiting for and sensitive to a different opportunity out there. So, we feel that this is a very significant opportunity for us and we are very focused and making sure that we progress the asset according to the guidelines that we just mentioned.

Jason Butler

Okay, great. And then, just last question for me, can you just talk a little bit more about what led you and your strategic review of 582 and 529 to pose at this point, is it something about development cost or opportunities that -- just any more color you can give us instead of the rationale behind the decision?

Eef Schimmelpennink

Absolutely. So, as I mentioned we completed a full strategic review of both 582, 529. This review considered timeline for development and cost and how we maximize shareholder value. And a lot of the opportunities really remain attractive, we have decided that we would pause the activities for those two programs and focus on our development efforts elsewhere within the portfolio until strategic partnerships for these candidates are forged, so we continue to engage with potential strategic partners. But, until that time, we are focusing our efforts elsewhere.

Jason Butler

Okay, great. Thanks for taking the questions.

Operator

And our next question today comes from Andy Hsieh of William Blair. Please go ahead.

Andy Hsieh

Hi. Thanks for taking my question. I just have -- I like to hear maybe your view on the FDAs most recent guidance specifically, I think they talked about using the 505b2 pathway for complex generics maybe your interpretation about that and just how relevant that is to your regulatory plan?

Hubert Chen

Thanks for the question. Just want to clarify, you are referring to a recent draft guidance about the complex generics or are you talking to this synthetic teriparatide draft guidance?

Andy Hsieh

Right. Yes. Exactly, it's the draft guidance just that you are talking about, I guess, I think it's talking about complex generics but also specifically mentioning teriparatide?

Hubert Chen

Right. So, just to provide a little more of background, this was a recent drafted guidance from the FDA releasing early October in which it actually allowed certain peptides. That is referencing recombinant, RLD but it is allowing synthetics, two, as a follow-ons and can potentially access the 505 pathway, which is different from the 505b2 pathway that we currently are pursuing with 708.

While clearly, we have done a lot of review of this draft guidance and our position right now is that this synthetic versions of teriparatide injection can now satisfy the lately requirements for ANDAs under the 505 pathway especially because with respect to the referenced listed drugs recombinant source of the active substance.

So, if you take a look at how a typical label is under the ANDA just the fact that the follow-ons would be synthetic if just we cannot match the recombinant description on the label, so that's number one.

And more importantly from a scientific and clinical safety perspective, we believe that a synthetic teriparatide candidate is unlikely to have the same types of product related or process related impurities as would be expected for a [recombinantly the] [ph] right product. So, therefore, Pfenex really proposes rest around all the therapeutic type development candidates need to demonstrate comfortable safety, immunogenicity and clinical effectiveness relative to their RLD in a long-term patient study such as with our ongoing osteoporosis study.

Andy Hsieh

Great. Thank you for that helpful insight.

Operator

And our next question today comes from Morgan William of Barclays. Please go ahead.

Morgan William

Hi. Good afternoon. Thanks for taking my question. I just wanted to follow-up on the question earlier on the strategic rationale that kind of put PF582 and 529 to the side. I'm just kind of wondering, if you could elaborate on whether we are likely to see some additional development stage partnerships like the one with Jazz or kind of what we should be keeping an eye out for as you look to kind of monetize those assets and refocus your efforts elsewhere?

Eef Schimmelpennink

Thanks Morgan. Great question. And as we mentioned we will continue to opportunistically we are open to partnerships on those assets. I think the key thing is that we will not move them forward without any of those assets. As you would expect, I'm not going to be able to elaborate on any of those discussions that may or may not happen. But, that's our position on 529 and 582.

Morgan William

Okay. Thank you.

Operator

And this concludes our question-and-answer session. I will turn the conference back over to management for any final remarks.

Eef Schimmelpennink

Thank you all for contacting. Thank you everybody for dialing in and we look forward to interact with you throughout the quarter.

Operator

And thank you, sir, we thank you all for attending today's presentation. The conference as now concluded and you may disconnect your lines. Have a wonderful day.

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