Xeris Biopharma Holdings, Inc. Q2 FY2020 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to Strongbridge Biopharma’s Second Quarter 2020 Earnings Conference Call. At this time, all participants' lines are in a listen-only mode. I’d now like to hand the conference over to your speaker today, Lindsay Rocco of Elixir Health Public Relations. Thank you and please go ahead, ma’am.

Thank you and good morning, everyone. We are pleased that you could join us for Strongbridge Biopharma’s second quarter 2020 earnings conference call. Joining me from Strongbridge this morning are John Johnson, Chief Executive Officer; Dr. Fred Cohen, Chief Medical Officer; Rob Lutz, Chief Financial Officer; Scott Wilhoit, Chief Commercial Officer, and Rich Kollender, Chief Operating Officer. Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Reference to these risks and uncertainties are made in today’s press release and disclosed in detail in the company’s periodic and current event filings with the US Securities and Exchange Commission. I’ll now turn the call over to John Johnson.

Thank you, Lindsay. Good morning, everyone and thanks for joining us today. Before I begin, I hope that everyone on the Eastern Seaboard, especially those in the direct path of the tropical storm, are able to weather it safely. My thoughts and well wishes go out to those communities and the people who sustain them. That said, some of the Strongbridge team members, including myself, are calling from impacted areas, so we want to apologize in advance for any potential background noise or unintended disconnections with our telephone lines today. This call marks the first under my new role as Chief Executive Officer. After serving as Chairman of Strongbridge since 2015 and most recently as Executive Chairman, it was my pleasure to accept this position and to continue working hands-on with the Board, Executive Leadership team, and our talented employees to further deliver upon Strongbridge’s mission to make a positive and meaningful difference in the lives of patients with rare diseases. To begin, I would like to highlight a few of the key events from this quarter. Importantly, these achievements were made despite the continued COVID-19 pandemic and its impact on how we conduct day-to-day business. The second quarter marked our highest quarter of net revenue ever for KEVEYIS. We reported $7.8 million for the quarter, a 28% increase compared to $6.1 million during the second quarter of 2019. As a result, we saw 38% growth in KEVEYIS revenue in the first half of 2020 compared to the same period in 2019. Despite the initial uncertainty regarding how COVID-19 would impact both our field team's ability to interact with prescribers and patients as well as potential patient visits with doctors, we experienced a reduced but continuing flow of new patient referrals and new starts for KEVEYIS. This was coupled with a continued trend of high retention rates with existing patients. I want to recognize the dedicated efforts of our patient services team who work closely with patients to ensure access and minimize any interruptions or unnecessary discontinuations with therapy. Given the strong performance observed in the first half of this year, we expect to achieve or potentially exceed the higher end of our full year 2020 revenue guidance for KEVEYIS, which ranges from $22 million to $26 million. Additionally, and as we’ve previously stated, we have also been engaging in lifecycle development activities applicable to our KEVEYIS business. We expect to provide more detailed information on those later this year. Second, under the steadfast efforts of our medical team led by Fred Cohen, our Chief Medical Officer, we are nearing the completion of our pivotal Phase 3 studies for RECORLEV, an Endogenous Cushing’s Syndrome. Recently, we announced the achievement of the last participant completing the last study visit in the randomized withdrawal phase of the Phase 3 LOGICS study. We’re looking forward to reporting top-line data in September. Fred will go into more detail about LOGICS shortly. However, I do want to take a moment to underscore how proud I am of the team’s ability to keep the RECORLEV clinical program on track during such a challenging and unprecedented time for our industry, country, and global community. Enrolling and managing the progression of clinical trials in rare disease is often considered a tremendous feat of its own. Add the complexity of a pandemic to the mix, and what Fred and his team have accomplished is remarkable. Therefore, I want to extend my sincerest gratitude to our clinical team, the patients and their families who have stuck with us, and the healthcare providers who helped to make this happen. Finally, before I turn the call over to Fred, I want to address the strategic financial decisions we made recently to strengthen the overall financial position of the company. In May 2020, Strongbridge and its subsidiaries entered into a $30 million debt facility with Avenue Venture Opportunities Fund, L.P., a fund within Avenue Capital, which under the terms of the loan agreement allowed Strongbridge to borrow $10 million at closing. The agreement also provides Strongbridge with two potential additional tranches of up to $10 million each. Assuming the full draw-down of the $30 million, we’re able to extend our ability to fund operations through the first quarter of 2022. As we advance RECORLEV to commercialization, we recognize that there’s more value that we can bring to the rare disease community, with the capabilities we have built. As a result, we will be keeping an eye towards potential new assets that could enhance the lives of rare disease patients and build value for shareholders. With that, I will now turn the call over to Fred.

Thank you, John. The second quarter was significant for our Phase 3 clinical development program for RECORLEV, an Endogenous Cushing’s Syndrome. In May, we announced that our LOGICS Study had completed enrollment with a total of 44 study participants enrolled into the randomized-withdrawal phase of the study. Then in early July, the company announced that the last participant completed the last study visit in the randomized-withdrawal phase of LOGICS, with a total of 43 patients completing this phase. As a reminder, the LOGICS protocol allowed for a range in the target sample size and this range depended on the absorption rate of discontinuations in randomized withdrawal, which determines the number of primary endpoint completers. The protocol targeted approximately 42 primary endpoint completers, which would have provided approximately 99% power to protect the loss of therapeutic response rate of 17% in the levoketoconazole arm and 78% in the placebo arm compared with the null hypothesis. Based on simulations, if a loss of response in the RECORLEV arm shows an absolute difference of 35 percentage points or more using a dataset of just 42 completers of the primary endpoint, an inference of statistical significance is highly likely. Therefore, the 43 completers we have support the robustness of our primary endpoint analyses. The company anticipates that it will report the top-line results from the LOGICS study in September. Importantly, the top-line results will include the primary and key secondary efficacy endpoints, key safety findings, and disposition of patient numbers at various stages in the study. In June 2020, we conducted a pre-NDA meeting with the Division of General Endocrinology of the FDA to review plans related to our proposed New Drug Application submission for RECORLEV, with an anticipated submission date approximately six months following the reporting of top-line results from LOGICS. Based on feedback received from the Division during this meeting, we believe that the LOGICS and SONICS study results together will provide a sufficient clinical studies basis for a substantive review of an NDA and that it will be a review issue as to whether the data will be sufficient to support approval of the NDA. As with any regulatory process, there can be no assurance that the Division will determine that the totality of data included in the NDA submission, including the results from our SONICS and LOGICS studies, will be sufficient to warrant approval of the NDA for RECORLEV. We believe that if the NDA is accepted by the FDA for review, we can expect a review cycle of 10 months from the date of submission, which is the standard PDUFA cycle time for review of a new active ingredient under the 505(b)(2) NDA pathway. This is taking into account any unanticipated FDA review process modifications due to the ongoing COVID-19 pandemic. And with that, I’ll turn the call over to Rob Lutz, our Chief Financial Officer, who will review the financial highlights from the second quarter before we open the call up to questions.

Thank you, Fred. Our press release contained details of our financial results for the second quarter of 2020. Rather than read through all those details, my comments today will focus on some key financial results. We ended the quarter with approximately $60 million in cash, inclusive of the net cash received from the first tranche of our debt facility which John spoke about. We also saw a 26% reduction in second quarter operating expenses compared to 2019, which can be attributed to a combination of reduced headcount, favorability from reduced costs due to COVID, reductions in our clinical trial expenditures, and timing. Therefore, assuming the full drawdown of our $30 million debt facility, we remain on track to fund operations at least through Q1 of 2022, after the timing anticipated for RECORLEV FDA approval and launch, giving us flexibility to further finance the company optimally. And operator, with that we are ready for questions.

Thank you. And our first question comes from the line of Chris Howerton with Jefferies. Your line is now open.

Thanks for taking the questions and I echo your sentiment, John, just hope everybody out there is doing well and hope your team is okay. I guess to start, Fred, I just wanted to explore a little bit in terms of the language that you’re describing with respect to the approvability of NDA submission given that osilodrostat was recently approved with a randomized withdrawal design. Are you just kind of hedging your language a little bit or is there something that is concerning about the regulatory path with respect to Cushing Syndrome? And then secondarily, with respect to KEVEYIS revenue maybe for John or Rob, would you expect to revise guidance moving forward if you see another strong quarter, let’s say in the third quarter? Thanks again.

Hi Chris, this is Fred. With regards to your question, I don’t know if we’re hedging a bit, but I do think it’s important for people to recognize that the FDA does not comment per se on the approvability of data packages particularly in this case, where they didn’t have the results for LOGICS that they could even opine upon. But your point is well taken; there was recently an approval of a drug in the same or similar category for Cushing disease known as osilodrostat that was approved on the basis of a single pivotal registration trial. So that was a randomized withdrawal study with a similar type of design as compared with the LOGICS study. So I think it’s fair to say we remain optimistic that the results will speak for themselves.

So basically the point being that, you and no one else obviously who wants to put words in the FDA’s mouth is going to let them do their review as they see fit.

Yes, that’s exactly right. We think the data will speak for itself and will serve as a basis for a substantive review.

And then Chris, as it relates to KEVEYIS, first off, I’m glad you asked the question about whether we’re shooting too low as opposed to can we really reach the number. But I would say this, we’ve been very cautious and a bit conservative with the COVID uncertainty. It’s not that we anticipate any issues per se in the fourth quarter; we have plenty of supply. For us, it’s really the unknown of what COVID could cause if we see substantial issues in the third and fourth quarter. As you might expect, we monitor KEVEYIS sales and activity daily, weekly, and monthly. Yesterday, we did the July review for KEVEYIS and it was very strong. We certainly will keep an eye and try to give a more defined number as COVID unveils itself and we can see a little bit more about what’s happening with these states and some of the actions that are being taken and our field team’s ability to get in there. We have seen the field team become more successful operating in a virtual environment. We’ve developed a little bit of a secret sauce that has been working for us as of late, and I’m very pleased with their performance and certainly very proud of the performance of the patient services team in retaining patients and what we’ve heard back from them certainly is that KEVEYIS and its efficacy in helping them to potentially avoid going into the emergency room has been a big factor in their adherence. So we look forward to serving those patients going forward.

Great, and if I may maybe just one more question with respect to KEVEYIS. I know that we’ve had discussions in the past with respect to lifecycle management strategy. I’m just curious if and when you might be able to provide some updates on some of the things going on in the background there?

Sure, I’ll ask Rich Kollender, our Chief Operating Officer, to comment on that. Rich?

Hi Chris, thanks for your question. We continue to actively work with the patent office, as we’ve mentioned prior. We filed more than a dozen patent applications in the US and three PCT patent applications. As you recall, the first of these applications were filed in the fourth quarter of 2018, and we’re working very closely with outside counsel as we prosecute these patent applications. All of the inventions described in these patent applications relate to methods of using the active ingredient in KEVEYIS in a manner consistent with the labeling that we received for the product back in November of 2019. In terms of a timeline, as I’ve mentioned, we’re working actively with the office. We expect to get back to the market from timely this year with some more information.

Okay, all right, well thanks for taking the questions, and again I hope you all are well.

Thank you. And our next question comes from the line of Hartaj Singh with Oppenheimer and Company. Your line is now open.

Great, thank you for the questions, and again I’m glad to hear everyone is safe and also working hard, so thank you. Just a couple of questions. One is, Fred, I had noticed you had far fewer discontinuations in LOGICS than you had in SONICS. Is that just an artifact of the study design with LOGICS versus SONICS? Or are there learnings that you’ve been able to apply in terms of managing patients under RECORLEV as you get them through these fairly regular Phase 2 trials? And I just got a quick follow-up.

Thanks, Hartaj. It’s Fred. Yes, I think a little of both. Primarily they designed the randomized withdrawal phase, as you know, which has an open label titration and maintenance period that precedes it. And once patients enter the randomized withdrawal phase, they’ve already demonstrated that they’ve responded well to the drug and have been able to stably maintain a normalized mean UFC for at least four weeks. From that perspective they’re more stable from a disease control standpoint, presumably feeling pretty good on the drugs. Factors that may lead to discontinuation at that point, such as lack of efficacy, aren’t really issues anymore. Adverse events likewise, if they occur, they tend to occur more frequently earlier. So for those reasons, the study design definitely made a huge contribution to that. The other factor, as you mentioned, is our learnings. We have learned a lot about the drugs since we started SONICS back in 2014, and I think we provide clearer and maybe more effective guidance to the clinicians treating patients in terms of just how to manage their expectations and how to manage titration effectively, and we definitely got better at that. So I would say it’s those things.

Great, thanks, Fred. And then the other question is also just for you. I remember that when LOGICS year and a half or two years ago, Strongbridge announced that the company would undertake LOGICS to be able to go to the FDA with a stronger rationale for potentially improving RECORLEV. One big reason was just to have a bigger safety database. Can you just talk a little bit about that and remind us again how much larger LOGICS make that safety database? And then secondly, in SONICS you also evaluated five key cardiovascular and secondary endpoints. Will you be updating those also with LOGICS or those will be primarily SONICS kind of analysis? Thank you for the questions.

Yes, sure. With regards to the safety database, we haven’t yet disclosed the numbers that we dosed in LOGICS to achieve the 44 door randomized. But suffice to say that, the safety database will be quite a bit larger than just SONICS. I think importantly, we’re going to have several dozen patients who will have more than a year of therapy and a smaller number of patients who will have multiple years of therapy on the drug at the time of the NDA submission, facilitated by our third Phase 3 study known as OPTICS, which is an open label extension study. So in fact, we’ve already had at least one or two patients that I’m aware of who have been on the drug for about four years at this point. That’s important because you want to see for any chronic disease drug with a lifelong disease that patients can stay on it for multiple years. So the safety database, just to put that in perspective, is going to be very much competitive with what other branded drugs in the category have provided for their reviews. In terms of, I’m sorry, what was the second part of your question?

Sure, Fred. The five cardiovascular secondary endpoints you evaluated in SONICS.

Yes, so we looked at cardiovascular biomarkers, thanks for reminding me. We will provide in the top line release the key secondary efficacy endpoints for LOGICS. Not all of the same endpoints that we measured in SONICS are being looked at as key secondary efficacy endpoints in LOGICS because we only have that eight-week time period to show changes between the active and the control arm. However, we will share data on the markers that we measure: things like glycemia, fasting glucose, body weight, lipid changes. We’ll share those results with you on the LOGICS study. And of course we have the open label titration maintenance part of the study that won’t be part of the top line in that regard, but will be part of the submission that we made to the FDA with the final results.

Okay, thank you, Fred. Thanks for all the questions.

Thank you. Your last question comes from the line of Jonathan Wolleben with JMP Securities. Your line is now open.

Thanks for taking the questions and congrats on the progress. Just a couple on RECORLEV. I guess Fred, can you discuss how important patient-reported outcomes are in terms of improving quality of life for these Cushing patients and if that data will get in the top line as well?

Yes, thanks. In terms of quality of life, it’s something that we looked at in SONICS. We saw improvements granted that it’s an open label study. LOGICS, of course, is a double-blind controlled study that provides a different way of looking at the same data but over a shorter time period. So I believe that we will be presenting that; I can confirm that with you after the call. I believe that is part of the top-line package. It’s certainly something that we measured in LOGICS serially throughout both the open label as well as the randomized withdrawal portion of the study. So we do think the quality of life assessment is a very important one; quality of life is impaired to a substantial degree in patients with Cushing Syndrome. In SONICS, we showed that we were largely able to reverse the impairment of quality of life in the patients who completed the maintenance phase of the study.

Great, and then can you discuss a little bit of the commercialization strategy in terms of targeting impaired physicians or centers of excellence and any synergies with your current salesforce?

Yes, thanks for the question, Jonathan. I’ll ask Scott Wilhoit, our Chief Commercial Officer, to address the question. Scott?

Yes, good morning. We reported out in fourth quarter 2019 some research that we conducted as part of that presentation, which is part of our July investor deck. We outlined preliminary our targeted approach. When you look at this marketplace, the good news is that it’s a fairly concentrated call point for us. And so what we’ll be doing is looking at medical claims data and RF claims data as proxies to narrow in on the endocrinologists that we would approach in the launch phase. From a general perspective, we believe there are likely about 8,000 endocrinologists; among those, about 1,500 to 2,000 are neuroendocrine specialists or community physicians that have these types of patients, and approximately 125 to 150 centers. We’ve kind of used that as a guide to think about our resourcing. We’re preliminarily considering that probably 25 to 45 customer-facing physicians at launch would be sufficient. Just for clarity, that would include sales team members, our patient access managers who interact with both physicians and patients, as well as our MSO that would be focused on this. Not only in the commercial group but in Fred’s medical affairs group as well. So that will give you just how we’re thinking about targeting. We’ll refine that, of course, as we get past the LOGICS data in early next year. We’ve got commercial infrastructure in place to support KEVEYIS, including market analytics, a 17-member sales team, and patient access managers, and we intend to fully leverage that. This gives us a lot of optionality when we think about how we would utilize that infrastructure, including our sales team. We haven’t made that decision yet, but we do have a lot of flexibility going forward.

I would echo what Scott said. I think importantly, what Scott and the team have built here from an infrastructure standpoint is very leverageable. We’ll add people, and exactly how many we’ll give you more of an update on that going forward. But suffice it to say that KEVEYIS has been a great starting point for us to build the infrastructure. We’ve got a lot of learnings, and the team has evidenced by this quarter’s results is functioning exceptionally well. We look forward, assuming positive data and an FDA approval, to launch RECORLEV to this market.

Great, thanks again and congrats on the progress.

Thank you. And this concludes today’s question-and-answer session. I would now like to turn the call back to John Johnson for closing remarks.

Thank you. In closing, I’m truly energized by both the near-term and long-term prospects for the company. Recent efforts undertaken by the management team, coupled with very strong revenue performance quarter-over-quarter for KEVEYIS, have resulted in a healthy financial position for the company, which not only extends our financial runway and flexibility but will enable us to grow and create value for our stakeholders over time. Importantly, we achieved much of this recent success and have maintained it amidst an unprecedented time in modern history. I’m so proud of the way this team has navigated such unchartered territories and continue to deliver upon our collective goals. Thank you again for joining today’s call and for your continued support as we prepare for a number of upcoming milestones that will be transformational for this company. Have a great day.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating; you may now disconnect.