Zogenix Inc. (ZGNX) CEO Stephen Farr on Q3 2018 Results - Earnings Call Transcript

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About: Zogenix, Inc. (ZGNX)
by: SA Transcripts

Call Start: 16:30 January 1, 0000 5:00 PM ET

Zogenix Inc. (NASDAQ:ZGNX)

Q3 2018 Earnings Conference Call

November 8, 2018 04:30 PM ET

Executives

Brian Ritchie - LifeSci Advisors

Stephen Farr - Chief Executive Officer

Michael Smith - Chief Financial Officer

Gail Farfel - Chief Development Officer

Ashish Sagrolikar - EVP and Chief Commercial Officer

Analysts

Paul Matteis - Stifel Nicolaus

Danielle Brill - Piper Jaffray

Jason Butler - JMP Securities

John Sullivan - Leerink Partners

Alexandre Bouilloux - Mizuho Securities

David Sherman - LifeSci Capital

Operator

Greetings and welcome to the Zogenix, Inc. Third Quarter 2018 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Brian Ritchie with LifeSci Advisors. Thank you. Mr. Ritchie, you may begin.

Brian Ritchie

Thank you, operator, and thank you all for joining us this afternoon. With me on today's call are Chief Executive Officer, Dr. Stephen Farr; and Chief Financial Officer, Mike Smith. In addition, Dr. Gail Farfel, Chief Development Officer; and Ashish Sagrolikar, Chief Commercial Officer will also be available during the Q&A session.

This afternoon, Zogenix issued a news release announcing financial results and providing a business update for the third quarter ended September 30, 2018. Please note that certain information discussed on the call today is covered under the Safe Harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Zogenix management will be making forward-looking statements.

Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Zogenix's news releases and SEC filings, including in the annual report on Form 10-K and subsequent filings. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, November 8, 2018. Zogenix undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

Now, I would like to turn the call over to Steve.

Stephen Farr

Thank you, Brian, and good afternoon to everyone who is joining us on today's call. I would like to begin our call today with an update on FINTEPLA or ZX008, our lead product candidate for the treatment of seizures associated with Dravet syndrome for which the development program is complete to support the upcoming NDA and MAA submissions.

Following the completion of our positive confirmatory study 1504 Phase 3 trial of our investigational drug, FINTEPLA, in patients with Dravet syndrome, we recently participated in a constructive pre-NDA meeting with the FDA. The purpose of the meeting was to seek agreement on topics around the presentation of integrated clinical data, aspects of the potential future product label, commercial manufacturing processes, and product specifications.

We are very happy to report that the face-to-face meeting with the FDA was highly collaborative and successfully met all of our objectives. In terms of the NDA submission timeline, we’ve already submitted the non-clinical module of the NDA under previously agreed rolling submission plan. We expect the chemistry, manufacturing and controls or CMC sections of the NDA will be submitted by early December.

Following discussions with the FDA at the pre-NDA meeting, we decided to conduct some additional data analysis that could optimize product labeling, and as a result the submission of the final clinical module for the NDA will now move into early first quarter 2019 from the previously anticipated end of this year.

As previously noted, our MAA submission for Europe for FINTEPLA is expected to occur shortly following the NDA submission. The company's core focus has and will continue to be the submission of high quality regulatory submissions. And as such, we intend to take the appropriate time to prepare these final materials in order to position the product best commercially and for the patient community.

Another key outcome of the pre-NDA meeting was the reaffirmation of our approach to cardiac safety evaluation incorporating FDA refined criteria for valve velocity. We continue to be pleased to state that to date there has been no development of cardiac valve velocity or pulmonary hypertension in any subject in any of our studies and including our long-term open-label extension study, Study 1503.

A formal interim analysis of the safety including cardiovascular safety, and long-term efficacy of FINTEPLA in Study 1503, has been conducted to support the NDA and MAA submissions. And we look forward to sharing these important data at the upcoming American Epilepsy Society or AES annual meeting, which will take place November 30th through December 4th in New Orleans. This analysis includes patients who have been on daily FINTEPLA treatment for up to 21 months.

In addition to these data, we are once again going to have an extremely strong presence at the AES meeting. A total of nine abstracts have been accepted for presentation at the conference, including late-breaker poster presentations of new data from Studies 1504 and 1503. In addition, we will be sponsoring a CME Symposium at the conference on Sunday, December 2nd entitled Insight into the Mechanisms of Sudden Unexpected Death in Epilepsy or SUDEP exploring [indiscernible] prevention.

Earlier in the same day,. we will again host a scientific exhibit room to highlight all of the posters and publications generated from our Dravet program. Finally, at AES we will also be holding an investor update lunch on Monday, December 3. The event will feature presentations by two key opinion leaders on the recent results from the Phase 3 program for FINTEPLA. The Zogenix team will also provide a summary of the information from other company-sponsored poster-day, yes, as well as a general corporate update.

If you're interested in attending this event, please contact LifeSci Advisors. So NDA and MAA submission teams work diligently to prepare the required modules for regulatory review, our commercial group is actively preparing for the launch of FINTEPLA in both United States and Europe. In the third quarter, we made significant progress in hunting our commercial strategy, building the commercial team. So that upon approval we are well-positioned in to make FINTEPLA broadly available to patients with Dravet Syndrome.

Now turning to Study 1601. Our ongoing global Phase 3 clinical trial for FINTEPLA in LGS or Lennox-Gastaut Syndrome, which as we’ve said in the past is an indication with a patient population approximately 3x to 4x larger than the current populations of patients with Dravet syndrome.

This double-blind placebo controlled three-arm study is targeting a total of 225 randomized subjects between two and 35 years of age. Recruitment continues to progress well at approximately 30 active sites, primarily located in United States. And our focus is now on adding additional sites in Europe and Japan over the next several months. We intend to provide guidance on timing of completion of patient enrollment and the availability of top line data from Study 1601, at our Investor Event around AES in early December.

Finally, Michael, provides further details shortly, I'd like to conclude my remarks by highlighting, so genetics strong balance sheet that was filled with strength and by the successful public offering we completed in the third quarter. This financing generated net proceeds of approximately $293 million and we ended the third quarter with approximately $539 million in cash, marketable securities.

Our strong cash balance positioned us well to create significant long-term shareholder value with our advancing FINTEPLA program and Dravet syndrome , LDS, and other pipeline program opportunities.

With that, I will now turn the call over to Mike for his review of our financials. Mike?

Michael Smith

Thank you, Steve. As Steve refer to you, in the third quarter, we completed its successful public offering of common stock that culminated in the capital raise of $293 million in net proceeds at a price of $52 per share. This successful rate help strong position as to execute on our strategic plan to become a leading rare disease company with now approximately $540 million in capital at quarter end.

With that I will now review our financials for the third -- three months ended September 30, 2018 as compared to the corresponding period in the prior year. Research and development expenses for the third quarter ended September 30, 2018 totaled $27.6 million, up from $21.2 million in the third quarter ended September 30 2017. As the company expand a clinical trial activities from both U.S and Europe related to our Phase 3 development program of FINTEPLA in Dravet syndrome and LGS.

SG&A expenses for the third quarter ended on September 30, 2018 totaled $11 million compared with $6.1 million in the third quarter ended in the prior year. We reported a net loss for the third quarter ended September 30, 2018 of $42.3 million or $1.8 per share compared with a net loss of $42.8 million or $1.68 per share in the third quarter from the prior year.

The company recorded no revenue for the nine months ended September 30, 2018, and this compares with total revenue of $9.8 million in the nine-month period ended September 30, 2017 from prior, discontinued products. R&D expenses for the nine months ended in the third quarter 2018 totaled $77.3 million, up from $49.4 million in the mine months ended in the prior year. And again, requesting aforementioned increase in activity in our Phase 3 program for both Dravet syndrome and LGS.

SG&A expenses for the nine months ended September 30, 2018 totaled $27.7 million compared with $18.1 million in nine months ended September 30 for the prior year. We reported a net loss for the nine months ended September 30, 2018 of $101.5 million or $2.78 per share and this compares with a net loss of 87.1 million or $3.48 per share in the nine months ended from 2017.

We ended the quarter with cash and cash equivalents and marketable securities totaling $539.1 million as compared to $293.5 million at the beginning of the year. As I said earlier, this includes a $293 million in net proceeds generated from a public offering that we successfully just recently completed in early in the third quarter.

With positive results from two pivotal Phase 3 studies in FINTEPLA and Dravet syndrome. We are now focused on preparing and submitting appropriate regulatory filings and readying our commercial plans. We also continued to enroll patients in our second Phase 3 program in LGS and are well-capitalized to execute on our FINTEPLA clinical and commercial plans globally.

Beyond FINTEPLA, as noted previously, we are active in business development and evaluating additional product development opportunity that could further leverage our strong core competencies and expertise in identifying, developing and commercial -- commercializing rare disease therapeutics.

We are primarily focused on clinical stage product candidates and in particular, those with similar characteristics to that of FINTEPLA. in terms of therapeutic solution with the potential to have greatly impact for family and communities living with these rare diseases.

This in my second year, it's been a great, it's been a spectacular year Zogenix . And it's exciting as its been we are equally excited about the future prospects for our company and look forward to multiple key value inflection points in the coming months.

I will now turn the call over to the operator to begin the Q&A session. Operator, would you please provide the instruction book. Thanks.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Paul Matteis from Stifel. Please proceed with your question.

Paul Matteis

Great. Thanks so much and congrats on all the progress. Just a few questions. One on the recent FDA meeting, Steve I was wondering if you could clarify on about the nature of some of these additional analysis and what the upside might be the labeling claims. Does that have to do with SUDAP or does it have to do with some other element of the efficacy offering.

Stephen Farr

Paul, thanks for the question. I appreciate it. Come dive into specifics, obviously because this will be subject to the FDA review, but as you might imagine we conducted our Phase 3 program with a number of secondary endpoints. Some of them were -- we thought really interesting and potentially [indiscernible] inclusion into a product label. So our focus is really on developing rationale and justification in the NDA to support those type of endpoints being in our label.

Paul Matteis

Okay. Okay, got it. Thanks. And then how specific is the FDA been with the size of the safety data base and duration of exposure that it wants to see for this drug. Have they remained vague and referred to this as just sort of a review issue and show us the data or if they’ve given you actual specific numbers of patients and kind of okayed exactly what you’re going to have?

Stephen Farr

I’m going to ask Gail to address that one for you.

Gail Farfel

Hello, Paul. The FDA has in the -- aware of the size of our safety data base and they’re comfortable with safety data base with that many patients, particularly in the number of younger individuals in the safety database. So they’re looking forward to the review, but on the face of it, it is sufficient for the filing.

Paul Matteis

Okay, great. Thanks, Gail. And then just one last one, at AES should we expect an update on the Belgian Open Label LGS study?

Stephen Farr

I don’t -- I’m not sure it's my honest answer to that.

Gail Farfel

I believe we had a poster at a midyear meeting. [Indiscernible] a number of posters on the Phase 3 program. And that is a far larger data set than the Belgian cohort, but we will check into that.

Paul Matteis

Okay.

Stephen Farr

Yes, Paul, obviously our self focus is on the bigger patient population that we’ve generated as part of our Phase 3 program. There will be a number of other abstracts that will be presented and I think they become public -- there will be public knowledge about mid month about month. So hopefully you'll see it that time.

Paul Matteis

Okay. Okay, great. All good. Thanks so much. I appreciate it.

Operator

Your next question comes from the line of Danielle Brill with Piper Jaffray. Please proceed with your question.

Danielle Brill

Hi, guys. Thanks for the questions. I guess, I was wondering at your pre-NDA meeting. Where there -- was there any discussions around potential advisory committee meeting?

Gail Farfel

There were no discussions. That would be a matter of review.

Danielle Brill

And what is your expectation from meeting?

Gail Farfel

Referencing [ph] whether or not we’ve expectations, advisory committees are best prepared for early. So we will commence preparations and await hearing from FDA whether or not there will be a meeting.

Danielle Brill

Okay. Thanks. And then, can you just remind me about other potential indications that you may consider for FINTEPLA?

Stephen Farr

Yes, we are currently evaluating another indication that we would like to pursue a development program around, and that’s a condition called [indiscernible] which is another childhood onset catastrophic epilepsy syndrome. So we are currently doing our work with respect to potentially kicking off a clinical program in Houston next year. We also are sponsoring and we will continue to sponsor [indiscernible] initiated studies that we have several requests and investigators are interested in looking at the drug's efficacy and safety in other rare epileptic disorders and we will continue to keep you informed as those -- as and when they become -- as and when they start.

Danielle Brill

Sounds good. Thank you so much for the questions.

Stephen Farr

Thank you, Danielle.

Operator

Our next question comes from the line of Jason Butler with JMP Securities. Please proceed with your question.

Jason Butler

Hi. Thanks for taking the question. First one, Steve, just you mentioned that the FDA was still agreed with your approach to assessing CV safety specifically with respect to valvulopathy. Can you just remind us that how you think about -- how are you thinking about presenting this data when you look to presentations like the upcoming AES Conference. And then my second question, you mentioned you’re ramping up commercial preparedness activities. Can you just give us some insight into the work you’re doing. Thanks,

Stephen Farr

Yes, I will take the first part of your question and then maybe I will ask Ashish to address the commercialization question. I think with respect to presenting cardiovascular data, obviously, we have done something which we don’t think it's been done before, not as to assess echocardiography sequentially on a longitudinal basis in a fairly large patient population. So our intent as we present this data will be to show what we’ve seen on echocardiography with respect to regurgitation patient and how that fits into the FDA defined category of valvulopathy. As we have said all along we have not seen any evidence of valvulopathy or indeed primarily hypertension in our trial. So that will be the conclusion from the poster of the AES. But you will see all of the data that’s led to that conclusion be presented. And Ashish, could you address the commercialization plot.

Ashish Sagrolikar

Yup. Thanks for the question. We’ve made significant progress with the commercial strategy and the team as well. So that if approved we are ready to make FINTEPLA label to the [indiscernible] community. The strategy is based on three key principles. First is raising awareness by educating physicians, patients, their families on our therapy. Building an ecosystem to ensure access and seamless delivery off the therapy and finally enabling patients to stay on the therapy to deliver so that we can deliver long-term benefits of FINTEPLA. A comprehensive patient services program will be critical resource for the [indiscernible] families in this process and we are already building that program which will include solutions for onboarding, coverage assessment, seamless therapy initiation as well as ongoing support.

Stephen Farr

Thank you, Ashish.

Jason Butler

Okay, great. Very helpful. Thanks. Thanks for taking the questions.

Stephen Farr

Thank you, Jason.

Operator

Our next question comes from the line of John Sullivan with Leerink Partners. Please proceed with your question.

John Sullivan

Hey, guys. Good afternoon. Thanks for taking the question. Just wanted to shift gears a little bit and ask about LGS and your progress in study sites opening with respect to that program. You say you are currently at about -- over 30 sites open. What’s the goal and what’s the timing in? When can we expect more guidance regarding this?

Stephen Farr

Yes. As I mentioned, John, we will present really a picture of where we are at and most importantly when we expect to conclude study enrollment as well as the ability of top line data at our investor update lunch at the American Epilepsy Society meeting. We’ve always guided that we provide this information by the end of the year. And it was important for us to really start to get sites up and running in Europe during this quarter. We’ve made very good progress in United States. Most of those approximately 30 sites open are all -- are in the United States and we’ve seen healthy enrollments and encouraging enrollments in North America. We now need to translate that into open sites in Europe and also in Japan to enroll patients from those areas, because this is a multinational trial that will be used to support regulatory submissions in United States and Europe as well as Japan. So more specific data at our AES event on December 3.

John Sullivan

Thank you.

Operator

Our next question comes from the line of Difei Yang with Mizuho. Please proceed with your question.

Alexandre Bouilloux

Hey, good afternoon, guys. This is Alex on for Difei. Thank you for taking the question. I was wondering if you could give us an update on your IP strategy in the context of your recent discussions with the FDA and the additional analysis you will be conducting that could potentially impact the label? Thank you.

Stephen Farr

Yes, really nothing at the FDA meeting that would reach over to IP. Obviously, they’re sort of separate areas of work. We already have four issued U.S patents that we believe are orange book listable, based upon the combination of FINTEPLA with other drugs for the treatment of seizures associated with Dravet syndrome and guiding upon dose administration, drug interactions etcetera. So we already have four issued patents in that area. We are continuing to prosecute other IP in that same family. And in addition, we have two other patent families, one pertaining to a -- a future REMS program or risk management program that utilizes, for example, echocardiography to ensure the safe use of our drug as well as some other elements of a future risk management or REMS programs. And we also have an IP that’s pending around the manufacture of a pure form of fenfluramine using a unique synthetic process. Then, of course, we are using that drug substance in our drug product. So our IP situation is continuing to evolve. We are hopeful that we will get more patents, but as of today we have four orange booklets patent in the United States which would expire in 2033.

Alexandre Bouilloux

Great. Thank you.

Operator

[Operator Instructions] Our next question comes from the line of Michael Higgins with Ladenburg Thalmann. Please proceed with your question.

Alexandre Bouilloux

Hi, everyone. This is Louise in for Michael. Congratulations on your progress on the NDA and smooth quarter. I have a few questions. I start, I guess with the additional analyses that you mentioned from your NDA meeting with the FDA. Were cardiovascular safety issues part of these additional analyses?

Stephen Farr

They were not.

Alexandre Bouilloux

Okay. And still on the safety, you have regular data safety monitoring board meetings, when was the latest meeting and what is the cutoff for the open-label extension data going in for the NDA package? This has -- has it been extended after your pre-NDA meeting?

Stephen Farr

That’s a question I think Gail would be best to address. Gail?

Gail Farfel

Sure. Our latest or last [indiscernible] meeting was in July. And the advice with the meeting is as with all meetings were to proceed with the program unchanged. The data that is being submitted in the NDA, the main cutoff was a long-term open-label data was from the spring. However, for serious adverse events and adverse events of special interest and adverse events that led to withdrawal, we will be submitting data that brings forward from the spring and brings it into late summer. And then as I’m sure you know there is a data safety update that is submitted 120 days after the NDA is submitted or accepted, and that brings the data forward. So the FDA is going to get a full and complete view of the safety data.

Alexandre Bouilloux

Okay. Thank you. It's very helpful. And last question on the REMS program that you briefly mentioned regarding the IP situation. But with the REMS program that you’re proposing discussed in the pre-NDA meeting and if there are anything more you can share with us on what that might look like?

Stephen Farr

Really there were no specific comments about the REMS at the meeting. So we are -- obviously, we will be submitting our approach to risk management as part of the NDA and that will be reviewed by the FDA at that time.

Alexandre Bouilloux

Okay. Thank you.

Operator

Our next question comes from the line of David Sherman with LifeSci Capital. Please proceed with your question.

David Sherman

Hi, guys. Just one question for me. I was just wondering if there's been any update on the drug interaction study with CBD? Are things still on track for inclusion in the NDA?

Stephen Farr

Gail?

Gail Farfel

Hi, David. It's Gail. Yes, things are still on track and that data is expected to be included in the NDA.

David Sherman

Okay, great. Thanks a lot.

Stephen Farr

Thank you.

Operator

There are no further questions in the queue. I would like to hand the call back to Dr. Stephen Farr for closing remarks.

Stephen Farr

Thank you, operator, and thank you to -- for all of you for joining us on our call today. We are obviously were extremely pleased with our progress that we’ve achieved with our late stage FINTEPLA development program in our two indications, both Dravet syndrome as well as in LGS. And now we're starting to shift our attention as you’ve heard on the call towards the potential future commercialization in both United States and Europe. So we’re looking forward to ending this year with a successful AES meeting. We hope many of you can be there to see all posters and to be part of our investor update lunch. So thank you all again for joining us on our call today and enjoy the rest of the day.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.