Zevra Therapeutics, Inc. Q3 FY2022 Earnings Call

Good afternoon, and welcome to the KemPharm Third Quarter 2022 Corporate and Financial Results Conference Call. Currently, all callers have been placed in a listen-only mode and following management’s prepared remarks, the call will be opened up for questions. Please be advised that today’s call is being recorded. I will now turn the call over to Nichol Ochsner, KemPharm’s Vice President, Investor Relations and Corporate Communications. Thank you. Ma’am, you may begin.

Good afternoon and thank you for joining our call to discuss KemPharm’s third quarter 2022 financial and corporate results. Before we begin, I would like to remind our listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties and are subject to changes at any time, including but not limited to, statements about KemPharm’s expectations regarding future operating results. Forward-looking statements are made pursuant to the Safe Harbor provisions of the federal securities laws and represent management’s current expectations. Actual results may differ materially. KemPharm disclaims any obligation to update or revise forward-looking statements except as required by law. For complete information regarding forward-looking statements, risks and uncertainties can be found in KemPharm’s filings with the SEC, which are available on KemPharm’s website under the Investor Relations section. Speaking on today’s call will be Travis Mickle, KemPharm’s President and CEO; and LaDuane Clifton, CFO. Following remarks, Travis and LaDuane will participate in a question-and-answer session. With that it is my pleasure to introduce, Travis.

Thank you, Nichol. And thank you everyone for joining us again today. For those who are not familiar with KemPharm, I would like to give just a brief introductory statement. KemPharm is focused on the development and discovery of novel treatments for rare CNS and neurodegenerative disorders as well as lysosomal storage diseases. While historically, we have had a number of other assets that have been licensed, our new focus is on the development of potential products that we could internally commercialize. That is all built on the foundation of strong science as well as a solid financial structure. Next slide, please. Just to briefly go over the recent highlights, as well as the results from Q3. Of course, there are a number of different things going on with arimoclomol. We have not continuously updated, but just as a highlight, we recently completed the four-year open-label safety trial for arimoclomol, demonstrating a long-term effect as well as safety of arimoclomol over that time period. We have been having ongoing collaborative dialogue with the FDA, which includes meetings, submissions, and back-and-forth questions and answers. So a very collaborative discussion there. We have been working to bring in all the new data as well as some other data that we weren't expecting to add to the NDA. Based on all of that, we are now targeting resubmission as early as Q3 of next year. AZSTARYS continues to generate sales and milestones, and there is potential for royalty revenue with AZSTARYS as we know that Corium is continuing their efforts there. The KP1077 development program is progressing well. We have just announced positive results from the Phase I cardiovascular trial, which indicates we are on the right track with this program. We expect to initiate the Phase 2 trial before the year-end. Additionally, as LaDuane will highlight in more detail, we have a strong balance sheet. We have had revenue from the French EAP as we expected, and we have ample capital to do everything we expect, and perhaps a lot more. Specifically looking at the various product development highlights, arimoclomol is intended for treating Niemann-Pick type C, an ultra-rare lysosomal storage disorder. Most side effects are related to neurological symptoms, including cognition, hearing loss, speech, swallowing, etc. We were able to acquire the product after the CRO faced some financial difficulty. We see this as a high-value opportunity for us, not just because it already generates revenue through the French EAP, but also to considerably advance the company into the commercial stage for these rare disorders. So the intended resubmission in Q3 will help advance those goals. Next slide, please. Regarding the path to resubmission that I mentioned, we are continuing to have this dialogue with the FDA, including submission of some of these studies completed prior to acquiring the asset. The CRO has been involved in this process, and I believe this shows a very collaborative interaction with the agency who wants to see advancement here. We are also working to bolster the arguments made in the original NDA as well as specifically addressing each of the CRL issues. Something we were not aware of was that the four-year safety trial was wrapping up, and the database would be locked for the final report. Given all of this, it wouldn’t make sense for us to submit the NDA without that data. We believe it is very strong data that supports our potential safety and efficacy for the product. Looking forward, a question that everyone should keep in mind is regarding any potential delay from our previous guidance. The FDA has not raised any new issues or concerns; it has been focused on reviewing what they didn’t know from the previous filings and what has been generated since then. There has been no request for any new efficacy trial from the FDA, which is a critical point. We still believe that there is a viable path, but there could be the possibility in any regulatory submission that we might need to conduct additional work or go through an appeal process. Briefly about KP 1077, this product is intended for the treatment of idiopathic hypersomnia as well as narcolepsy. It contains 100% serdexmethylphenidate, which is classified as a C4 controlled substance. This is also an orphan disease; idiopathic hypersomnia is less common than narcolepsy. Our intended benefit here is to provide higher exposure, addressing major symptoms of IH, including sleep inertia and brain fog. We filed an IND earlier this year and expect to initiate our Phase II trial before the end of the year. Everything seems to be progressing well, and we look forward to recruitment. We expect to have interim data from this Phase II trial by roughly mid-next year, with top-line data by the end of next year. Once that study is underway and possibly after interim data, we will initiate a second study focused on narcolepsy. I think that gives a comprehensive update on both of our development programs, and I will now turn it over to LaDuane Clifton for more details on the financial position.

Thanks, Travis. As Travis mentioned earlier, we had another positive quarter, and specifically, our balance sheet remains very strong. Revenue reported for this quarter is $2.9 million, which is associated with a remarkable EAP program, as we expected. Our net loss for the quarter is about $0.19 per basic and diluted share, driven primarily by R&D expense and G&A expense, but again offset by net revenues. As of September 30, our cash balance was $107.4 million, a decrease of about $7 million compared to the prior quarter. This decrease was comprised mainly of ongoing third-party R&D costs and other expenses, notably investment in working capital related to the French EAP program. As we move forward, we expect cash flow to begin operating in a normal course. Our cash balance, based on our current operating forecast, allows our resources to extend our runway into 2026. Further, as Travis mentioned, if AZSTARYS generates royalty revenue or additional milestones, that will potentially extend that runway even further. Thank you, and Travis, back to you.

Thanks, LaDuane. Looking forward as we review the upcoming milestones, I would like to reiterate our intention to re-file the NDA in Q3 of next year, anticipate quarterly revenue from the French EAP program, and monitor the scripts for KP1077. We expect to start the trial by the end of the year. Interim results should be available by mid-year, with final results expected by the end of the year, as well as the initiation of a narcolepsy trial sometime in 2023. LaDuane highlighted that we have a solid balance sheet with many expansion opportunities, not just with our pipeline but also with what we have in arimoclomol and KP1077. We have a long runway that can be further bolstered by additional revenue. With that, I’ll turn it over to any questions.

Our first question will come from Sumant Kulkarni with Canaccord. Your line is open.

Definitely. Thanks for taking my questions. I have a bunch here, so I will start with one. It looks like at this time you don’t have any new requests from the FDA, but has the agency already finished reviewing the new data that you’ve generated? If not, when do you think the FDA could finish that? And how confident are you that the FDA’s new analysis will not lead to the need for a new clinical trial?

I mean, it is an ongoing sort of review. So we have submitted, and I won’t give particular details, but whatever we have submitted to the agency, they have fully reviewed. There will be a detailed review post-submission, which is standard course, but they have already asked questions and weighed in on some of the information. That is not the totality of the information where we could actually file the NDA if it were. We have more to provide them as well as more to put into the NDA that they won’t be able to review until then. So I hope that answers your question.

Yes. And then it seems like the safety study is the new piece of information that has led to this potential delay in the filing. Were there any specific findings in the safety study that you might consider new or counterintuitive relative to the safety data already publicly known on arimoclomol? And is there any risk related to continuing the EAP program for the product based on the new safety data?

That particular study did measure the NPCCSS, and the efficacy score was continuously measured as well. It actually showed a long and lasting effect of arimoclomol in those patients who were in the study, which would have been not just four years but five years in total. There were no safety signals different from those in the double-blinded phase of the trial. The data is strong; it has already been presented by Mark Patterson at two NPC conferences, including the recent conference back in July. We can put those results on our website soon. Those results seem helpful. Additionally, the outcomes from the two failed trials that Orphazyme attempted with ALS and IBM indicate, again, there have been no significant safety signals from arimoclomol, which is quite rare for this type of disease with this number of patients exposed for such a long period.

And then one more before I hop back into the queue. Could you give us any details on what specific parts of the proposed NDA package may be most in need of strengthening that led to this push out in the timeline? Also, would you say that the new timeline is conservative relative to the information needed to be generated?

Yes, I would say it is conservative. The difference between March and July is Q1 to Q3, which does not necessarily indicate a six- or nine-month delay. Looking at what needed strengthening, there is nothing significant; we really have all the data. It is about putting it together. The safety trial results were not something we anticipated incorporating into the submission, but we strongly believe it is critical to our arguments for benefits as well as aligning the sequential submission patterns. The agency wants to see something and requested more from us. So while we would like to do things in parallel, we cannot, which has pushed the timeline out slightly. Again, I think that is very positive since we have not received any negative feedback from the agency.

Very helpful. Thank you.

Thank you. Our next question will come from Jonathan Aschoff with Roth Capital Partners. Your line is open.

Thank you, guys. Good evening. Would you break down the revenue to an extent if you can? Because it’s not 100% arimoclomol France. Can you help us out with that?

Yes. There was a portion of that that was royalties from net sales of AZSTARYS. When we file our 10-Q, you'll see that we recognized about $200,000 of royalty revenue from AZSTARYS.

Okay. So it’s simply about $2.7 million from arimoclomol, $200,000 from AZSTARYS, and no other line item, right?

Yes.

Thank you very much, guys.

Thank you. This does conclude the Q&A portion of today’s call. And I would now like to turn it back to Travis Mickle for any additional or closing remarks. Thank you.

Thank you again for your participation and joining us today. I appreciate the good questions and initial analysis, and hopefully I’ve provided additional clarity on what we are doing and what we hope to achieve not just for the remainder of this year, but for next year as well. So thanks everyone, and hope you have a nice evening.

Thank you, ladies and gentlemen. This does conclude today’s KemPharm third quarter 2022 earnings call and webcast. You may disconnect your line at this time and have a wonderful day.