PLx Pharma Inc (NASDAQ:PLXP) Q1 2019 Earnings Conference Call May 10, 2019 8:30 AM ET
Lisa Wilson – Investor Relations
Natasha Giordano – President and Chief Executive Officer
Rita O’Connor – Chief Financial Officer
Conference Call Participants
Esther Hong – Janney
Donald Ellis – JMP Securities
Good day, ladies and gentlemen, and welcome to the PLx Pharma Q1 2019 Results Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference will be recorded.
I would now like to turn the call over to Lisa Wilson, Investor Relations for PLx Pharma. Ma’am, you may begin.
Thank you, Sydney. Welcome to PLx Pharma’s Q1 2019 earnings results call. This is Lisa Wilson of In-Site Communications, Investor Relations for PLx. With me on today’s call are Natasha Giordano, President and Chief Executive Officer; and Rita O’Connor, Chief Financial Officer of PLx. You could also access the webcast of this call through the Investors section of the PLx website at plxpharma.com.
Before we get started, I would like to remind everyone that any statements made on today’s conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company’s future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.
These forward-looking statements are based on information available to PLx Pharma’s management as of today and involve risks and uncertainties, including those noted in our press release issued this morning and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. PLx specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.
The archived webcast of this event will be available for 30 days on our website, plxpharma.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 10, 2019. Since then, PLx may have made announcements related to the topics discussed. So please reference the company’s most recent press releases and SEC filings.
And with that, I’ll turn the call over to PLx’s CEO, Natasha Giordano.
Thank you, Lisa, and thank you, everyone, for joining our call this morning. This is an exciting time for PLx as we continue to build toward our planned launch of Vazalore, which is about a year away.
We recently submitted our briefing package to the FDA to confirm the information needed for the sNDA submission the end of this year, and we remain on track with all our milestones, which include completing the registration batches in the third quarter, filing the CMC, sNDA submission of Vazalore toward the end of this year and launching Vazalore in mid-2020. In the near term, we look forward to advancing our dialogue with the FDA to prepare complete sNDA submission and expect to hear back from them later this quarter.
I will now turn the call over to our CFO, Rita O’Connor, to discuss first quarter results. Rita?
Thank you, Natasha. In the first quarter of 2019, we recognized revenue of $318,000 compared to revenue of $81,000 for the three months ended March 31, 2018. All the revenue recognized is attributable to work performed under an award of a National Institutes of Health grant.
Research and development expenses were $993,000 for the first quarter of 2019 compared to $1.1 million in the first quarter of 2018. The expenses in both periods include a continued development and manufacturing activities for Vazalore. This year, spending is expected to increase, especially in the second and third quarters, as we manufacture cGMP registration batches that will provide data to be included in the sNDA submission planned for the end of this year.
General and administrative expense totaled $2.2 million in the first quarter of 2019, roughly flat with the first quarter of 2018. G&A will increase during the second half of this year due to increased prelaunch marketing spending focused on the healthcare professional, retail trade and the consumer. Other income expense was $7.9 million of net other expense in the first quarter of 2019 compared to $8.2 million of net other income in the first quarter of 2018. This change is largely attributable to the noncash change and fair value of warrant liability primarily due to the fluctuation of the price of the company’s common stock.
You may have noticed that we have a couple new line items on our P&L and balance sheet related to the recent $15 million convertible preferred stock financing. As a reminder, we entered into a stock purchase agreement with Park West Asset Management to purchase 15,000 shares of newly issued Series A convertible preferred stock for growth proceeds of $15 million. The preferred stock is convertible into common shares at a conversion price of $2.60 per share. There were no warrants issued with this financing.
Holders of the preferred stock are entitled to an initial dividend of 8% per year, which will stop accruing upon the FDA approval of Vazalore. The preferred stock is presented as temporary equity on the balance sheet due to its contingent cash redemption feature, and the accruing dividend is presented as a long-term liability.
On the P&L, we have the line called preferred stock beneficial conversion feature and dividends with a noncash charge of $12.8 million or $1.47 per share. This line primarily includes a noncash charge related to the beneficial conversion feature of $12.7 million or $1.45 per share, which is the intrinsic value of the conversion option.
This line also includes the accrual of the 8% dividend of $128,000 or $0.02 per share. This line is presented below net income, is included in net income attributable to common shareholders, which is the numerator of the earnings per share calculation. The accrued dividend will continue to accrue until we’ve received FDA approval. However, the beneficial conversion feature is a onetime charge.
Net loss attributable to common shareholders for the first quarter of 2019 was $23.7 million or $2.71 per share compared to net income attributable to common shareholders of $5 million or $0.57 per share for the first quarter of 2018.
The first quarter of 2019 included $12.8 million or $1.47 per share for the beneficial conversion feature and preferred dividends related to the $15 million convertible preferred stock financing completed in February. 2019 also included a noncash charge of $7.7 million or $0.88 per share related to the change in the warrant liability. The first quarter of 2018 included income of $8.4 million or $0.94 per share related to the change in the fair value of the warrant liability.
As of March 31, 2019, cash and cash equivalents were $24.3 million. Our cash burn was $3.6 million for the quarter, including one debt payment of $313,000. Going forward, we are estimating an increase in the cash burn to around $5 million per quarter for the remainder of 2019, which includes about $1 million per quarter for debt repayment.
This increased burn reflects the manufacturing of registration batches that will provide data to be included in the sNDA submission at the end of this year as well as an increase in our prelaunch marketing spending. We anticipate we will have sufficient cash flow through approval of Vazalore expected in early 2020.
With that, I’ll turn the call back to Natasha to provide more details of our prelaunch and commercialization activities. Natasha?
Thank you, Rita. In this very important year, leading up to the launch of Vazalore, we remain focused on increasing our strategic presence within the scientific community, the retail trade and with consumers ensuring that Vazalore’s unique efficacy, reliability and safety profile is well communicated.
Vazalore is an innovative technology that utilizes our proprietary delivery system to ensure fast, more reliable platelet inhibition and safe absorption of aspirin. Our clinical studies have shown that Vazalore achieves up to five times higher absorption than coated aspirin, two times better platelet response than coated aspirin, and a 71% lower risk of ulcers than regular aspirin.
Lifetime aspirin therapy for every patient with known vascular disease, which are patients with atherosclerotic cardiovascular disease, or ASCVD, including coronary artery disease, cerebrovascular disease and peripheral artery disease is supported by the highest possible recommendation Class Ia by every clinical guideline.
Roughly 27 million Americans suffer from ASCVD, meaning they’ve had a previous vascular event such as a heart attack or stroke or a previous vascular procedure such as stent placement, bypass operation or carotid operation. In addition, there are about 16 million patients with diabetes who don’t currently have ASCVD, but who are at the same risk as a patient with vascular disease and, therefore, should be considered candidates for aspirin therapy.
Taken together, this is a large addressable market of over 40 million patients. This would equate to a total retail market of approximately $10 billion. To give you a perspective, even a small market share for Vazalore would generate significant revenue.
Vazalore’s differentiated clinical profile highlighted by faster, more reliable aspirin absorption than coated aspirin and a significantly lower risk of G.I. toxicity is well suited for the acute treatment of patients suffering from a heart attack or stroke. Accordingly, an important part of our strategy will focus on the healthcare professionals prescribing Vazalore for their patients in the hospital setting for an acute event and on the transition of their patients to chronic Vazalore maintenance therapy upon discharge.
Our mission is to engage with three important groups; healthcare professionals, consumers and leaders in the retail trade. We continue to actively participate in major conferences to raise awareness and build brand familiarity among these important constituents.
In March, we exhibited at the American College of Cardiology’s 68th Annual Scientific Session and Expo that was attended by nearly 12,000 cardiology health professionals. This is the largest gathering of its kind in the U.S. where the latest advances and solutions in cardiovascular science and care are shared. We are also just back from the American Academy of Neurology Conference, one of the largest gatherings of neurology professionals as PLx recently welcomed renowned neurologist Dr. Mark Alberts, who specializes in stroke care and intervention, to our scientific advisory Board.
As we broaden our discussions with thought leaders and specialties beyond cardiology, participating in this premier event was especially exciting. We’re very encouraged by the response to Vazalore from neurologists who treat patients who have had or at risk for having a transient ischemic attack, a TIA, or a stroke. Neurologists want and need a new innovative and better aspirin for these patients. Next week, we’ll be presenting two abstracts on Vazalore’s value proposition at ISPOR Conference, the leading global conference for health economics and outcomes research.
As part of these efforts to build advocacy for Vazalore, we recently attended the Annual National Association of Chain Drug Stores, the NACDS Conference, a prestigious gathering of influential retail leaders. We met with key retailers to discuss Vazalore and its potential to add life to an over-the-counter category that has seen no innovation in decades. We are now progressing into planning meetings to discuss how to best promote Vazalore at shelf and at pharmacy. We believe Vazalore has the potential to disrupt the aspirin market by offering physicians and consumers an innovative alternative to today’s therapies that is more effective and less likely to cause G.I. upset.
Our proprietary targeted drug delivery system offers a superior benefit risk profile and the novel mechanism of action enables strong patent life from multiple APIs. As we advance out toward our regulatory submission at the end of this year and to commercialization in the middle of next year, we’re very excited about our prospects to transform the current standard of care in the secondary prevention market.
With that, I’d like to open the call for questions. Operator, please go ahead with the instructions.
[Operator Instructions] And our first question comes from Esther Hong with Janney. Your line is now open.
Hi, good morning. Thanks for taking my question. So first, it seems like the steps towards sNDA submission later this year and approval are on track. So can you just help us understand what factors were involved in the previous delay? And how they’ve been addressed? And then I’ve got a follow-up question.
Sure. Of course. So back in March of last year, we self-identified some inconsistencies in the formulation, specifically in the excipient. And after some thought and analysis and some work, we decided to switch suppliers for those in key ingredients. From that point, we needed to do all the appropriate testing and run the appropriate experiments to ensure that the formulation behaves just like the formulation that we have had approved in the 325 milligram with the FDA. And so since then, we have done that. We’ve run development scale batches. We will be running registration batches in Q3, and we are on track to submit our C&C supplement in the end of the quarter of 2019.
Okay Great. And then my follow-up is if you can discuss any feedback you received at the National Association of Chain Drug Stores Conference, NACDS, specifically regarding the value proposition of Vazalore and potential commercial positioning of Vazalore?
Sure. So we’ve been meeting with the key retailers for the last year. At NACDS, we were able to again meet with several of them and continue our conversations around the value propositions specifically, but also how to promote this product at shelf and at pharmacy. I will tell you overwhelmingly the response has been extremely positive. The aspirin category has been flat for years and years. There’s been no innovation. So they are really looking at this as something that can move them – this therapeutic class and are working with us. We continue to have meetings scheduled in the next several weeks to further those conversations as well.
Okay. And what would move the shift from pharmacy to shelf or vice versa?
So this is – it’s an interesting question, Esther, because this product will be recommended by cardiologists, neurologists and endocrinologists in the treatment of high-risk secondary prevention patients, but yet it’s an over-the-counter product. So we are in discussions with the retailers on placement of the product. So whether it be at pharmacy or at the shelf so that it’s easily acceptable to the consumer as they go into the store to purchase.
Okay. Thank you.
And our following question comes from Donald Ellis with JMP Securities. Your line is now open.
Thank you. Good morning. I have a few questions. I’ll ask them one at a time. The first question is regarding the ACC and the American Academy of Neurology. Can you share with us what kind of reception you guys received? And maybe some subjective comments from the docs?
Sure. Thank you for asking that question because we’re pretty excited about the response we’re getting from the specialist community whether it be from the cardiologist but also now from the neurologist. Their response has been overwhelmingly positive. They too are waiting for a new and better aspirin. The category really needs some innovation and here’s a product that delivers both on antiplatelet efficacy but also on G.I. safety. And why that’s important is as you could imagine that having efficacy is priority. However, G.I. safety is really important to consumers to make sure that they can stay on the product. It can’t help them if they don’t take it, if you will.
Now the neurologist is interesting as well because as you know they treat aggressively, TIAs and stroke, and really are in need of an aspirin that works better, that has better efficacy. So the response that we had just this week from the neurologists is, well, we really want, we really need a new aspirin to help treat these high-risk patients. So both the cardiologists and that neurologists and now they are on our scientific advisory Board as well, they are very willing to help us educate their peers and make sure that the specialists community is aware of this new innovation.
I mean, are they shocked to see the data comparing Vazalore to Ecotrin with respect to thromboxane inhibition and ASA levels?
Yes. They are shocked in one sense but they also suspect that the enteric-coated aspirin doesn’t work as they thought it would, right? Because there are patients that are taking the coated aspirin and they are being compliant. However, they’re still having strokes, they’re still having heart attacks. So physicians suspect that there’s something wrong. And then as we present our data that was published in JAC, the Journal of American College of Cardiology, it’s stunning for them. And they understand it right away and they’re eager to get the product on to market but also to help educate their peers.
Okay. Next question is regarding the comment about the second and third quarter registration manufacturing batches. Where in the P&L are you going to book that?
That would be on the R&D expenses. So that will increase in the second and third quarter specifically, and then that data from those batches will go into the sNDA submission at the end of the year.
Great. Last question is about, you mentioned a $10 billion total market opportunity. What daily price were you using when you came up with that forecast?
That was around $0.80 a day retail.
And that’s what your – you continue to plan to charge for it?
Yes. That’s what the customer will pay at shelf.
John, we did a lot of research with consumers as well, over 2,000 consumers as well as 1,000 specialists, and we asked that specific question. And because of the value proposition behind Vazalore and the effect that it could have on patient life, both the physicians and the patients were generally accepting of anything under $1. And so we decided strategically to price it at the $0.80.
Great. Thank you. That’s all my question.
Thank you. And I am showing no further questions that this time. I would now like to turn the call back to Natasha Giordano for closing remarks.
Thank you. We believe that Vazalore offers healthcare professionals treating at-risk ASCVD and diabetic patients a promising alternative that overcomes the limitations of today’s therapies. We’re excited to bring this technologically advanced and innovative aspirin to the market, addressing a large, chronic, unmet medical need while building value for our shareholders. Thank you for your time this morning, and have a great day.
Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may now disconnect. Everyone, have a good day.