Trevi Therapeutics, Inc. Q4 FY2022 Earnings Call

Good afternoon and welcome to the Trevi Therapeutics Q4 and Year-End 2022 Earnings Conference Call. Please note this event is being recorded. Various remarks that management makes during this conference call about the company's future expectations, plans and prospects constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of the company's most recent annual report on Form 10-K which the company filed with the SEC this afternoon. In addition, any forward-looking statements represent the company's views only as of today and should not be relied upon as representing the company's views as of any subsequent date. While the company may elect to update these forward-looking statements at some point in the future, the company specifically disclaims any obligation to do so even if its views change. I would now like to turn the conference call over to Jennifer Good, Trevi's President and CEO. Please go ahead.

Good afternoon and thank you for joining our fourth quarter and year-end earnings call and business update. Joining me today on this call are Lisa Delfini, Trevi's Chief Financial Officer, and Dr. David Clark, Trevi's Chief Medical Officer. Lisa and I have some prepared remarks, then the 3 of us will be available for questions. 2022 was a transformational year for Trevi with regard to validating the broad utility of the mechanism of our drug, Haduvio. With our trials in IPF cough and prurigo nodularis both reading out positive, it left us in a strong position to decide how best to grow the company for our stakeholders. Based on the strength of the cough data and IPF, as well as the lack of competition in that space, we feel we can carve out a strong and unique position in therapy for IPF. We also believe that because of the differentiated central and peripheral mechanism of our drug, we have the potential to provide therapy across a range of chronic cough indications regardless of what the underlying disease is. So with those decisions made and strong capital raising in 2022, we are now buckled in and focused on executing against our plans for the next stage of development. Let me now provide an update on each of our programs, starting with our lead program in chronic cough and IPF. IPF is a serious end-of-life disease and chronic cough is a major cause of morbidity, significantly impacting the patient's quality of life. It is estimated that up to 85% of IPF patients are suffering from chronic coughing. As we prepare for our next trials in this indication, there are many learnings we can take from the development work occurring in refractory chronic cough. However, there are also unique aspects of the IPF patient population related not only to a potential effect on the underlying disease but safety in this frail patient population that we also need to keep in mind. We are planning to conduct 2 studies in parallel during this next phase of development in our IPF chronic cough program. The first is a Phase IIb dose-ranging trial that will study 3 doses. The doses we are planning to study are 27, 54, and 108 milligrams BID. Based on the data from the Phase II CANAL study, we have dropped the highest dose as it appears the efficacy occurred very early in that trial and at the lower doses. Because of the severity of illness in these patients, it will be important to understand the minimally effective dose. We are planning for approximately 50 subjects per arm for a total end in the study of 200 and dosing for approximately 6 weeks. We are planning on conducting this study in multiple countries to be able to complete enrollment in a timely manner. We will give better guidance on enrollment timelines once we initiate the study. In parallel, we are planning for a Phase Ib respiratory physiology study. As you may know, all opioids have a class label black box warning regarding respiratory depression. This is not something we have seen in our safety data across our various studies to date. But because of the lung impairment in IPF patients, we feel this is an important question to study early. We plan to run an inpatient study in IPF patients with levels of varying disease severity and increasing doses of Haduvio to determine if we see a clinically significant impact on respiratory depression. These 2 studies will help define the optimal dose or doses and the patient population in our pivotal program. We have submitted the respiratory physiology protocol to the FDA and are awaiting their feedback. We are also preparing for submissions in the U.K. and Europe to support these trials. There is a new regulatory process in the EU called CTIS which became mandatory as of January 31, 2023. Under the new process, the health authority and the ethics committees perform their reviews in parallel. As a result, there's more information required upfront to make the submission. In theory, this new process will streamline the review process, although there is little data to show how the implementation is going and companies expect there will be growing pains. So we will keep you informed of our expected timelines but I wanted to make you aware there is a new process in play which makes timelines difficult to estimate. In parallel, our clinical operations team is preparing for these studies so that we can initiate once we have regulatory agreement on the protocol and an open IND. We expect to initiate both of these IPF studies in the second half of 2023 and we will provide guidance on the overall final design as well as the estimated timing for the trial once we begin the studies. In addition to the preparations in IPF cough, we are also developing a protocol for a Phase II refractory chronic cough study. That study will look a lot like the CANAL trial and will seek to establish proof-of-concept in refractory chronic cough. There have been a lot of trials in this condition, with only one mechanism that has been successful, the P2X3s. P2X3s work peripherally in the lung. However, we believe there is still a significant opportunity for a mechanism that works both centrally in the brain and peripherally in the lungs and has the potential to provide strong and consistent efficacy in a broader set of RCC patients. Our cough data generated to date has continued to garner a lot of attention globally and has been presented at various respiratory meetings by KOLs in pulmonology. During the fourth quarter, Dr. Philip Molyneaux presented data at the British Thoracic Society meeting. We have also finalized a manuscript on the trial results and we'll be submitting it for publication shortly. On March 29, there will be another presentation at the Annual German Pulmonology meeting. On Monday, May 22 in Washington, D.C., additional results from CANAL will be presented at the American Thoracic Society meeting. And on June 9 through 10 in Reston, Virginia, at the American Cough Conference, there will be a presentation on our central and peripheral mechanism of action and why it is unique and could be important broadly in cough. I think it is important to note that almost all of our conference submissions have been chosen for oral presentations. I think this speaks to the medical community's interest in our program and the importance of the unmet medical need we are trying to address. The other program where we have ongoing work is for the treatment of prurigo nodularis, or PN which is a serious and debilitating disease characterized by papules and nodules on the skin as well as incessant and severe itching. In June of last year, we also reported positive data in the Phase IIb/III PRISM trial in PN. The trial achieved statistical significance on the primary and all key secondary endpoints. During the first quarter of 2023, we completed the 1-year open-label extension study that was associated with PRISM. We should receive the data from that study in the second quarter and we'll prepare for an end of Phase II meeting with the FDA which we expect to have this year. Finally, we also commenced a human abuse liability study in the fourth quarter of last year. The objective of this study is to compare the abuse potential of oral nalbuphine to butorphanol. The injectable version of nalbuphine is currently unscheduled in the U.S. by the Drug Enforcement Agency, or DEA. Butorphanol is a Schedule IV drug. This study is a randomized, double-blind, active and placebo-controlled 5-way crossover design. The study is conducted in 2 parts, with the first part characterizing various butorphanol doses. One butorphanol dose will be selected to be studied in the second part of the protocol to determine the abuse potential of oral nalbuphine relative to the selected dose of butorphanol. The company is currently completing Part 1 of the study and expects top-line data from the complete trial by the end of 2023. It is a busy time at Trevi working to initiate or conduct 4 separate studies and completing the open-label extension in PN. This is a critical part of the process to get right, and David and his team are making good progress against each of these. We will announce the start of each study with more details as we initiate each one. As I look back on 2022, I am extremely proud of the execution by our team and the positive trial results in both of our lead indications. The trial data and subsequent financings have positioned us well to continue the development of Haduvio in not only IPF chronic cough but also other serious chronic cough conditions such as RCC and cough in interstitial lung diseases. For PN, we are in discussions with potential partners to advance that program into the next stage of clinical development. The end of Phase II meeting with the FDA will help determine next steps for this program. I will now turn it over to Lisa to review our financial results, then we will open it up for questions.

Thank you, Jennifer and good afternoon, everyone. The full financial results for the 3- and 12-months ended December 31, 2022 can be found in our press release issued ahead of this call and our 10-K which was filed with the SEC today after the market closed. I'll start with fourth quarter 2022 results. For the fourth quarter of 2022, we reported a net loss of $5.5 million compared to a net loss of $8.5 million for the same quarter in 2021. This is a net loss per share for the quarter of $0.06 as compared to a net loss per share of $0.28 for the same quarter of 2021. R&D expenses were $4.3 million during the fourth quarter of 2022 compared to $6.2 million in the same quarter of 2021. The decrease was primarily due to decreased clinical trial costs, reflecting the completion of both the blinded portion of the PRISM and CANAL trials prior to the fourth quarter of 2022, partially offset by an increase in costs related to the human abuse liability study which we initiated in the fourth quarter of 2022. G&A expenses were $2.3 million during the fourth quarter of 2022 compared to $2.1 million in the same period of 2021. The increase was primarily due to higher legal fees associated with intellectual property filings and other professional fees. Other income net was $1.1 million in the fourth quarter of 2022 compared to other expense net of $300,000 in the same period of 2021. The change was primarily due to an increase in interest income in 2022 as a result of investing the funds from our capital raises completed during 2022, coupled with higher interest rates than were available in the fourth quarter of 2021. Now turning to the full year results. For the year ended December 31, 2022, we reported a net loss of $29.2 million compared to a net loss of $33.9 million for 2021. Our net loss was lower in 2022 as a result of decreased R&D expenses which were $19.8 million during the full year 2022 compared to $23 million in 2021. This was offset by increased G&A expenses which were $10.1 million for the full year 2022 compared to $9.5 million in 2021. Other income net was $0.7 million in 2022 compared to other expense net of $1.5 million in the same period of 2021. The drivers of these changes were largely the same as the drivers I just discussed related to the fourth quarter changes. A few comments on cash and cash runway. During the fourth quarter of 2022, we received $3.1 million in gross proceeds from the underwriters' option for the greenshoe related to our September offering. These funds, together with the funds we raised earlier in the year, enabled us to end the year with cash, cash equivalents, and marketable securities of $120.5 million. This gives us cash runway into 2026 which includes completing the trials that Jennifer laid out today and paying off our term loan in accordance with its terms. Finally, I want to take a moment to address recent events related to SVB. As many of you know, last Friday, the FDIC closed SVB and appointed the FDIC as receiver. We bank with SVB. However, the substantial majority of our cash, cash equivalents, and investments were held in custody accounts in our name at another large financial institution, so we had very limited exposure. On Monday, the FDIC announced that all SVB deposits are protected. So this has now become largely an operational matter which we are managing through. This concludes our prepared remarks. I will now turn the call back over to the operator for Q&A.

Our first question comes from Leland Gershell with Oppenheimer.

I want to ask Jennifer about two dosing-related questions. As you approach the abuse liability study, will you aim to align the nalbuphine doses tested with the dose-ranging study you're starting, or will you consider higher doses to monitor for any adverse effects? Additionally, regarding the trial in RCC, if you're able to share, how will the doses in the RCC study compare to those you've examined so far and the doses currently being tested in the IPF IIb?

Thank you, Leland, for the question. David, I'll take the first one on the house since I lived through that. And then why don't you take the RCC dose since you're working on that protocol as we speak. So Leland, the process and the how, we actually already ran through that to identify the dose for nalbuphine. We did that a year or 2 ago, where you essentially try to find a maximum tolerated dose. And so we sort of pushed up and really, there's a limit in the guidance that says once you get to 3x your effective dose in the market, you can stop which is what we were able to get to. We have not found an MTD on nalbuphine. So the exact dose is, I think, 480. David might correct me a little bit. But that dose will be compared to the work being done on butorphanol which is also basically 3x what's in the marketplace. So the doses will get nailed down and it will be sort of 3x what you see in our clinical trials. Okay? And then, David, do you want to talk about RCC and how you're thinking about dosing?

Yes, you're correct that the highest dose used in the HAL study is 486. We will indeed be consolidating the doses. For the RCC study, which has a design very similar to the CANAL study, it will involve a two-way crossover design with around 60 participants. The highest dose we plan to investigate there is 108 milligrams, based on the favorable results observed at the lower and intermediate doses in the CANAL study focusing on the IPF chronic cough population. Additionally, in the Phase IIb chronic cough IPF study, which is a dose-ranging study, we will be testing 27, 54, and 108 milligrams against placebos. Therefore, we are planning to incorporate these doses into the two programs.

Our next question comes from Thomas Smith with SVB Securities.

This is Nat Charoensook on for Thomas Smith. First question is like what are the gating factors to initiate a Phase IIb dose-ranging study in chronic cough with IPF which is now expected in the second half of '23? And I have a follow-up.

I didn't catch the first part of that, like what are the gating factors to getting the Phase IIb going? Is that what you asked?

Yes.

David, can you discuss the Phase IIb study and explain how we will proceed from here to its launch since you are overseeing that day-to-day?

Yes, as Jennifer mentioned in her introduction, we will provide specific guidance on the conduct phase of that study once our planning is complete. For a study of this scale, with around 200 subjects, the typical recruitment phase is about 12 months. That's a general estimate. The primary reason for the delay in the study start is related to global supply chain issues with packaging materials, which are arriving later than we anticipated. This delay is the main factor affecting the study start. Additionally, the new mandatory EU clinical trial submission process, which has recently been implemented, is expected to slow down the initiation of studies in EU countries by up to 3 months or more. These are the two main factors impacting the timeline.

Got it, that's very helpful. And maybe another one, like so you guide the full data from the open-label extension operation in second quarter '23. So what do you plan to report? And what are your expectations on the data?

Yes, we get this question a lot. And we haven't sorted that out yet. I think we want to see the data, sort of what does it show, what's there. We will definitely report it at a medical meeting. It's got a lot of interest by the dermatology community, for sure. How we handle it sort of from an IR perspective, if you will, we still need to sort out the best way to do that. So I'm going to defer that once we see the data and sort out the messaging from it. We'll figure out the best way to do that.

Got it. And last one, if I may. So what is your expectation on the R&D and SG&A expenses in '23 compared to 2022?

I anticipate that R&D expenses will rise in 2023 as we carry out the studies that Jennifer mentioned, in contrast to 2022.

And G&A, please, might as well.

I think G&A will also increase slightly.

Our next question comes from Sean Kim with Jones Trading.

So I guess one question on the Phase Ib respiratory physiology study. Can you give a little more color on what dosing levels you're intending to try out for the trial? And also, how that might inform the potential Phase III programs and other trials in the pipeline?

Yes, David, go ahead.

Yes, we will likely use the 162 dose that was the highest dose titrated in the CANAL study. We will probably titrate in a similar way to what was done in the CANAL study. What was the other part of your question?

And how to inform, David, that Phase III program and what doses we use.

These two studies are crucial for coming together. For Phase III, we need to understand the extent of the population of IPF patients and their comorbidities, including things like disordered sleep breathing and sleep apnea. The respiratory physiology study will address this because it will involve subjects with greater severity and these comorbidities that weren't part of Phase II, enabling us to make an informed decision for Phase III.

Okay. And just one quick follow-up question on the Phase IIb dose ranging study. So now that the trial is set to initiate in second half '23, what would be the expectations for the top line readout in terms of timing?

Yes, Sean, I will hold off on providing specific guidance until we actually start the process. David mentioned earlier that we are planning for approximately a 12-month recruiting period. The dosing will consist of 6 weeks, so it’s not an extended trial. I want to wait until we officially initiate it before offering a more precise timeline. However, this should give you a basis to estimate the timing on your own. Thank you for your report this week. I appreciate it.

Our next question comes from Sir Mamtani with B. Riley Securities.

I appreciate the level of detail. Can you comment on the acceptance of the CANAL abstract at PDS? Additionally, I believe there are the PAciFy trials expected from Dr. Molyneaux regarding morphine after the IPF test. What are your expectations for any relevant safety and efficacy data points that could be significant for Haduvio? I also have a follow-up question.

Yes, sounds good, Mayank. So our poster, I know exactly what it's about. I know they've been tugging and pulling on all different looks at the data. So David, I don't know. Do you know exactly what's being covered there? Might be the anti-fibrotic data but I'm not sure. Go ahead.

Yes. There will be additional analyses, including some additional endpoints that haven't been disclosed before. That's right presented there.

Yes. And I think, Mayank, you were asking about the Philip Molyneaux trial in the U.K. around morphine. Is that what you were asking me about and how I think that's relevant to our program?

That's correct. And I think there will be some data at APS around that also.

Yes. No, that's great. I think from our perspective, we're excited about that study because I think it just builds more critical evidence around the mechanism here in this whole opioid pathway. Morphine has its own set of issues, certainly around respiratory depression and also just the whole scheduling, Schedule II. But from our perspective, we think it just continues to build critical scientific evidence around the pathway; so I think it should work. They use low doses of morphine now. And as I've heard from several KOLs, it's really the only thing that works in cough. It's part of what drew us to the space. But we felt that, first of all, we work on 2 receptors and we felt that because of more of the safety profile and abuse addiction profile around our drug, that we could be a much better chronic option. So I'm excited to see it. I would expect that it should work. And I don't feel threatened by it because of all the things I just mentioned to you. And they're going to have a hard time patenting that. So likely people may use it off label but there's other challenges with prescribing morphine in today's environment.

Got it. And then about the 2 studies, Phase IIb IPF and RCC, could you just comment on the different placebo responses you're factoring in? And obviously, based on your learning from CANAL but also some of the dry run going on P2X3 development programs?

Yes. When we look at these studies in more detail, particularly in IPF, there’s an accepted response rate of about 25%. Our findings showed a slightly lower rate of around 23%. Overall, this figure aligns well with previous trials. For RCC, we are collaborating with experts in the field who possess extensive data. David, I'm not sure if you're aware of the powering assumptions we have regarding the placebo group since you have been involved with that protocol.

Absolutely. I completely agree with your comments regarding the IPF. For IPF, recent studies have shown a consistent placebo response below 30%. The key aspect of RCC is its 2-way crossover design, similar to CANAL. In RCC studies of that nature, including recent ones, the placebo response has been around 20%. This response is quite different from what has been observed in longer-duration parallel group studies in RCC.

I'm not showing any further questions. This concludes our question-and-answer session. I would like to turn the call back over to Jennifer Good for closing remarks.

We would like to thank everybody for participating in today's call and hope to talk with some of you at the Needham Investor Conference being held April 17 through April 20 virtually. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.