Zynerba Pharmaceuticals' (ZYNE) CEO Armando Anido on Q2 2018 Results - Earnings Call Transcript

Zynerba Pharmaceuticals (ZYNE) Q2 2018 Earnings Conference Call August 2, 2018 8:30 AM ET

Executives

Will Roberts – Investor Relations and Corporate Communications
Armando Anido – Chairman and Chief Executive Officer
Jim Fickenscher – Chief Financial Officer and Vice President of Corporate Development

Analysts

Operator

Good morning and welcome to the Zynerba Pharmaceuticals’ Second Quarter 2018 Business Update Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a remainder, today's conference call is being recorded.

I would now like to turn the call over to Will Roberts, Vice President, Investor Relations and Corporate Communications.

Will Roberts

Thank you, Tiffany. Good morning everyone, and thank you for joining us on the call this morning. We issued a press release this morning announcing our second quarter 2018 financial results and providing a company update. This press release can be found on our website under the news section.

Before we begin I would like to remind you that today's webcast contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect Zynerba's current expectations regarding future events, including but not limited to statements regarding design, initiation, timing, continuation and/or progress of the company's clinical trials, and the company's ability to obtain and maintain regulatory approval for its product candidates and/or the label claims that is seeking from FDA.

Additional results may differ materially from those expressed in or implied by these statements as a result of various factors including those discussed from time-to-time in the company's filings with the Securities and Exchange Commission on Form 10-K and in our periodic filings on Form 10-Q and 8-K and other filings made with the SEC. Links to these documents are available on the Investor Relations section of our website and we encourage you to review these materials. Any forward-looking statements represent our view as of today August 2, 2018.

With me on the call this morning is Armando Anido, our Chairman and Chief Executive Officer; Terri Sebree, our President; and Jim Fickenscher, our Chief Financial Officer and Vice President of Corporate Development.

I’ll now turn the call over to Armando Anido. Armando?

Armando Anido

Thanks, Will, and good morning to everyone joining us on this call. It has been a busy and exciting few months for Zynerba. We initiated CONNECT-FX, a pivotal study in Fragile X. We presented compelling new data from the ongoing FAB-C study in Fragile X patients. We initiated BELIEVE-1, a Phase II study, in developmental and epileptic encephalopathies. We presented new long-term data from STAR 2 showing the benefits of ZYN002 in adults with refractory seizures.

We closed the $30 million follow on offering on July 24th as expected that we believe extends our cash runway into the first half of 2020, and through it gained new institutional shareholders. And today, we announced our quarterly results for second quarter 2018. It's an exciting time and as such we want to use this call to provide a status update on the company and to discuss our upcoming milestones.

We are focused on rare and near-rare neuropsychiatric disorders with a pipeline targeting conditions including Fragile X Syndrome, DEE such as Dravet and Lennox-Gastaut and adult refractory focal seizures. Our lead program is ZYN002 in Fragile X, a disease caused by a genetic mutation in the FMR1 gene that disregulates the endo-cannabinoid system in the central nervous system. This disregulation is central to clinical abnormality seen in the Fragile X patients. CBD may attenuate the loss of endogenous endo-cannabinoid signaling in Fragile X and improved behavioral symptoms.

As we announced in early July, we initiated CONNECT-FX, a pivotal study in Fragile X children. This multinational double-blind placebo controlled 14-week study is currently enrolling patients from 3 to 17 years old, who have a full mutation of the FMR-1 gene. We’re targeting 204 patients with 1 to 1 randomization of active drug to placebo in approximately 20 sites in the U.S., Australia and New Zealand.

The primary endpoint of this trial is the change in social avoidance behavior evaluated using the Aberrant Behavior Checklist, or ABC, for Fragile X. Key secondary endpoints that include the ABC irritability and social withdrawal/lethargic subscales and clinicians global impression improvement anchored to behavioral symptoms of Fragile X.

This study is powered at 90% to detect a treatment effect of 20% in the ABC social avoidance score between ZYN002 and placebo at a P-value of 0.05 or less. We also present a new data from the open label FAB-C trial at the July International Fragile X Conference demonstrating that after 12 weeks of treatment with ZYN002, patients achieved a statistically significant mean improvement of 58% versus baseline in social avoidance as measured by the ABC Social Avoidance subscale. This is the same subscale we are utilizing as our primary endpoint in CONNECT-FX.

And after 38 weeks of treatment with ZYN002, patients achieved a statistically significant mean improvement of 75% versus baseline in that same subscale. ZYN002 was well tolerated with an adverse event profile similar to that previously reported and no clinically meaningful trends in vital signs or clinical laboratory evaluations were observed.

Based on these compelling data, we are confident with the primary endpoint and trial design for CONNECT-FX. The CONNECT-FX top-line trial results are expected in the second half of 2019 and assuming positive results. We will quickly request a meeting with the FDA to discuss the past NDA submission. We believe that CONNECT-FX will be the only trial required by the FDA assuming positive results.

Next is our program in DEE, a group of rare and ultra-rare epilepsy syndromes that involves significant developmental impairment or regression of developmental progress, including Doose, Dravet, early myoclonic encephalopathy, Lennox-Gastaut and West syndromes among a number of others. They are often progressive and highly resistant to current treatment options, an unmet medical need we hope to address with ZYN002.

In April, we initiated BELIEVE 1, a six-month open-label Phase II clinical trial, evaluating the efficacy and safety of ZYN002 in approximately 50 children and adolescents with various DEEs. We are actively enrolling patients in Australia and New Zealand. The primary efficacy assessment is the change in seizure frequency versus baseline. We were thrilled with the rate of enrollment in this trial. We expect to present top-line data in 2019. And when the trial is fully enrolled, we will provide more specificity on when in 2019 we will release these data.

Later this half, we expect to initiate our double-blind placebo controlled Phase II b trial of ZYN002 in adult refractory focal seizures, which is the most common form of epilepsy. Over one-third of the 1.5 million focal seizure patients suffer uncontrolled seizures despite being on multiple antiepileptic drugs.

Our trials expected to enroll approximately 300 adult focal epilepsy patients from sites in the U.S., Australia and New Zealand. The primary endpoint will be reduction from baseline in focal seizures. The compelling results of our Star 2 extension study including continued reductions in seizures through 12 months of treatment with ZYN002 have contributed to the design of this study.

The new trial design will include an increase in baseline seizure frequency, stratification by gender and an increase in the duration of the study, more to come as we initiate this trial later this half. Just as our pipeline has evolved so has our capitalization. Thanks to our recent financing, which closed as expected on July 24th and added $30 million net to our cash position. The 30-day underwriters option to purchase additional shares is still open and expires on August 19th.

We estimate that our current cash position including the proceeds of the offering provides funding to get us pass top-line data readouts from CONNECT-FX and BELIEVE-1 and if the CONNECT-FX data are positive in the regulatory interactions supportive, fund the filing of our NDA for ZYN002 in Fragile X. Clearly, this is a very exciting time at Zynerba.

I will now turn this call over to Jim Fickenscher for a quick review of the financial results. Jim?

Jim Fickenscher

Thanks, Armando, and good morning everyone. For the three months ended June 30, 2018, we incurred a net loss of $12 million, or $0.89 per share, compared to a net loss for the same period of 2017 of $8.3 million, or $0.64 per share. Included in the net loss amounts are $1.8 million and $1.4 million of non-cash stock based compensation expense respectively.

Research and development expenses increased by $2.8 million to $8.5 million for the second quarter of 2018. The increase was primarily related to higher manufacturing and clinical trial costs related to our product candidates and higher personnel costs including stock-based compensation expense.

General and administrative expenses increased by $0.8 million to $3.4 million in the second quarter of 2018. The increase was primarily related to increases in expenses associated with personnel costs including stock-based compensation expense and an increase in pre-commercialization expense for our product candidates.

As of June 30th, our cash and cash equivalents are $43.1 million, down $9 million from the March 31st balance. Please note that the $30 million in proceeds from the July 2018 secondary offering are not included in the $43.0 million as this will be recorded in third quarter financial statements.

Thank you for your attention this morning. I’ll now turn the call back over to Armando for some concluding remarks.

Armando Anido

Thanks, Jim. Zynerba's purpose as always been to deliver novel medications to patients who need them the most, those who are refractory to current therapeutic options and those suffering from diseases that today have no approved therapeutic alternatives. Thanks to our achievements and momentum. We continue to move ever closer to potentially realizing that purpose and are well capitalized to continue to execute on our business plans. Throughout this year and next, our pipeline will continue to evolve. We have six key clinical goals that we expect to achieve over the next 18 months.

First, complete CONNECT-FX and report top-line results in the second half of 2019. Second, complete BELIEVE-1 in DEE and report top-line results in 2019. Third, initiate the adult refractory focal seizure trial later this half. Fourth, present longer-term data from the FAB-C study in Fragile X by year end. Fifth, present longer-term data from Star 2 in adults with refractory focal seizures later this year. And finally with clinical and regulatory success in Fragile X file our first NDA, and very importantly we believe we have the capital to achieve all of these goals. As we approach and achieve these milestones, I believe we are well positioned to generate excellent returns to all of our shareholders.

With that, I’ll open this call out to Question-and-Answer Session. Operator, can you please give the instructions on how to initiate the question.

Question-and-Answer Session

Operator

Armando Anido

It appears things are a little quiet this morning. So I want to take this time to thank everybody for participating on the call and happy to follow up with any individual investors, who would like to talk personally. Thank you all. Have a great day.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. You may now disconnect. Everyone have a great day.