Zevra Therapeutics Q1 2023 Earnings Call Transcript

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May 15, 2023

There are 8 speakers on the call.

Operator

Afternoon, and welcome to the Zevo Therapeutics First Quarter 2023 Corporate and Financial Results Conference Call. Please be advised that today's call is being recorded. I would now like to turn the call over to Nicole Ochsner, Thera Therapeutics' Vice President, Investor Relations and Corporate Communications. Please go ahead, ma'am.

Speaker 1

Good afternoon. Thank you for joining us today to review updates related to Zebra's Q1 2023 clinical, operational progress and financial results. A few housekeeping items before we start. I invite you to view the webcast slides in the press release, both of which were issued this afternoon and can be found in the Investors section of our website. During today's call, we will be making statements, several forward looking statements.

Speaker 1

These forward looking statements include, but are not limited to the clinical, regulatory and commercial path for aramoclonal, Astaris, Revenue milestones and expected reimbursement from the French EAP program, the planned next steps in our pipeline program, The timing for enrollment, initiation, completion and reporting of data from our clinical trials, This is nor guarantees and involve risks and uncertainties and other important factors that could cause actual results to differ materially from those discussed here. Important factors that could cause actual results to differ From any forward looking statements can be found in the Risk Factors section of our quarterly report on Form 10 Q For the 3 months ended March 31, 2023, which is expected to be filed later today with the SEC. Moving on to the agenda for today's call, I am pleased to welcome Zevra's Board Chair and management team members participating in today's I'm joined today by our Board Chair, Tamara Faberito our Chief Development Officer and Co Founder, Crystal Mickle Our Chief Financial Officer, Lidwane Clifton and our Chief Commercial Officer and Executive Vice President of Business Development, Josh Schaeffer, I will now turn the call over to Tamara.

Speaker 2

Thank you, Nicole, And thank you all for joining us today. Before the team reviews our Q1 2023 progress, I'd like to share a few thoughts about where we are today and where we're headed. This has been a busy and eventful period for Zevra as Zevra continues To execute on its corporate strategy focused on developing and commercializing novel therapeutics designed to address The unmet needs of people with rare diseases. Importantly, advancing Zevra's pipeline remains the company's top priority. It's the cornerstone for value creation upon which our rare disease strategy has been built.

Speaker 2

Recently, we completed our 2023 Annual Meeting of Stockholders. And during that process, we received feedback from many of our stockholders Seeking change, which culminated in the election of several new directors to our Board. We welcome them to our team and we intend to continue supporting the company's rare disease strategy, unified in our mission to generate long term value for our shareholders. This has also led to leadership changes, and I'm pleased to announce today that while we conduct a search For a new CEO, Crystal Mickle, our Co Founder and Chief Development Officer, will be taking on the role of Interim President and CEO effective June 1. With her leadership and the support of the entire executive team, We take from this experience a renewed commitment to bringing desperately needed treatment to the patients we serve and we look forward to the achievement of our shared goals.

Speaker 2

To provide more details about the recent changes in April, Zevora's shareholders voted to elect John Bode, Douglas Calder and Cory Wotton to Zevora's Board of Directors. Accordingly, Richard Pascoe, Christopher Posner and Doctor. David Tierney stepped down from the company's Board. Additionally, Wendy Dixon was appointed to the Board to fill a vacancy. In addition to that, Matthew Pluster and Joseph Silery They have indicated that they will not stand for reelection at the company's 2024 annual meeting, and they intend to retire As soon as replacements are found for them.

Speaker 2

Last week, Rich Pascoe advised the Board of his decision to resign from his role as CEO, effective June 1. Rich's departure was a personal choice that he made In response to the outcome of our Annual Shareholders Meeting. As I've already mentioned, We're pleased that Crystal Mickle will serve as Interim President and CEO effective June 1, while the Board conducts a search As the newly appointed Chair of the Zevra Board, I'd like to thank Rich Pascoe, Chris Posner, David Turney and Travis Mickle for their leadership and numerous contributions through the years to help Several become the company it is today and their commitment to our shared vision of creating a commercially focused As we look to the future, Zevra is well positioned for success with a strong pipeline of Promising rare disease product candidates with multiple value creating milestones expected in 2023 and beyond. We have a leadership team with the depth and experience needed to execute on our strategic goals And the priority is to guide the company through this critical period and to ensure that shareholder and patient interests I'll now turn the call over to Crystal to provide an overview of our recent corporate And pipeline highlights.

Speaker 3

Crystal? Thank you, Tamara, and good afternoon, everyone. The rebrand of our company as Zevra during the Q1 was the culmination of a series of strategic moves over the past 2 years to refocus the company toward rare disease therapeutics. The acquisition of Aramarkamal in 2022 was a key element of the strategic growth of our company as this program complemented our in house development program, KP-ten seventy seven for the treatment of rare sleep disorder known as idiopathic hypersomnia. Our long term strategy has been designed to build on our expertise in drug development, which is now focused on rare disease, with the goal of commercializing our products in the U.

Speaker 3

S. Using a small best in class commercial team. As we prepare for resubmission of the aramaximalt NDA, we are also in the process of building the commercial capabilities that will allow Zevra to bring a much needed therapy to patients with Niemann Pick disease type C, also known as NPC. We believe our successful execution of this strategy has the potential to create meaningful long term value for shareholders. So why Zebra?

Speaker 3

Our new name is Greek for Zebra, which is the internationally recognized symbol of the rare disease community. We honor the many stripes of rare disease that are Beyond our name, we have established a rare and unique position for Zevra in the biotech marketplace As a development stage company with a growing revenue stream that reinforces our already strong financial position. Collectively, we believe that our strategy, our team, our strong financial foundation and our diverse portfolio of multiple clinical programs combined to enable us to deliver value to shareholders in 2023 and beyond. Importantly, We have a fully engaged and supportive Board of Directors that is positioned to help us advance our company's mission of addressing the unique unmet needs of people with rare diseases. Zebra's new direction capitalizes on our strength and our financial position, enabling us to retain the value of our hard earned approvals and control our commercial destiny while delivering much needed therapies to patients with limited or no treatment options.

Speaker 3

As part of our ongoing efforts to build and strengthen our team to execute our rare disease strategy, we announced that Sven Gunther was promoted In addition, Josh Schaeffer was added to our leadership team as our Chief Commercial Officer and Executive Vice President of Business Development. His expertise and leadership will be invaluable as we grow our commercial team. Finally, Travis Nickel continues to be fully engaged as a scientific consultant and he is laser focused on the Aramarkamal resubmission. Shifting to our financial results. We ended the Q1 in a strong position with cash, cash equivalents and investments of $95,300,000 as of March 31.

Speaker 3

Based on our current operating forecast, our available capital is expected to gender cash runway into 2026, placing Zevra in a fortunate position compared to many other biotech companies in today's volatile capital market. As Tamara stated, the entire organization remains fully committed to our rare disease strategy and we are focused on continuing to partner with key opinion leaders, patients, Families and advocacy groups to ensure that our therapeutic approaches are answering their biggest quality of life and disease management concerns, while ensuring that our products are relevant and capable of commercial success. The Q1 of 2023 in recent months We're significant for Zevra and its pipeline with new positive progress for both development programs. We'll first focus on aramocamol. Aramocimol is our orally administered product candidate for MPC.

Speaker 3

It has been extensively studied in multiple clinical trials from Phase 1 to Phase 3. Currently, aramoximol has been granted orphan drug designation for MPC in both the United States and the European Union and fast track designation, breakthrough therapy And rare pediatric disease designation from the FDA. If approved in the U. S, Aramachimol would also be eligible of its new drug application to the FDA as early as Q3 of this year. The long term goal for aramoximol is that once approved, Deborah plans to commercialize the product ourselves, retaining the full market value for shareholders.

Speaker 3

With a small and nimble commercial team, we believe we can fully Early access programs as well as our relationships within the MPC community, we believe we have a strong foundation to help support the adoption of aramaximol. Beyond our immediate focus on a successful U. S. Commercial launch, we also see commercial potential for Aramakimol outside the U. S, including the EU and other potential geographies.

Speaker 3

Now let's turn our attention to KP-ten seventy seven, our lead program for rare sleep disorders. I'll begin with an update on our idiopathic hypersomnia indication and finish with our narcolepsy indication. Due to limited treatment options for Pathak hypersomnia, also known as IH, and its small and underserved community of approximately 37,000 patients seeking treatment in the U. S, KP-ten seventy seven has been designated by the FDA as an orphan drug and is potentially eligible for expedited approval pathways. KP-ten seventy seven could potentially provide clinical and safety benefits that will help differentiate it from current and future IH products.

Speaker 3

The KP-ten seventy seven Phase 2 study is actively enrolling subjects at more than 30 sites in the U. S. Interim Phase 2 efficacy and safety data information from an open label titration phase, which we believe will help us in designing the Phase 3 study. At the end of last quarter, Zevor submitted an investigational new drug application or IND to the FDA for narcolepsy. Thereafter, the FDA informs ever we may proceed under our newly opened IND indicating we can initiate our clinical program for KP-ten seventy seven in narcolepsy.

Speaker 3

Extending the potential of the KP-ten seventy seven program further across the spectrum of sleep disorders. Phase 1 will be conducted to support our clinical data package in both narcolepsy and IH. In addition, the KP-ten seventy seven Phase 2 study NIH could support the determination of whether to initiate a Phase 3 trial in narcolepsy in the future. Now, LeDuane will provide more details about our Q1 2023 financial results.

Speaker 4

Thanks, Crystal, and good afternoon. During Q1 2023, we saw the prescription trends for Starz continue as expected with an estimated 8,669 prescriptions reported as of the week of May 5, 2023. The trend remains encouraging and gives us confidence to reiterate our guidance that we believe we will achieve the first and possibly a second net sales milestone under the Astarus license agreement during this year. As you may know, Astarus was approved in March 2021 for the treatment of ADHD in patients aged 6 and older. It is being commercialized in the U.

Speaker 4

S. By our partner, Coriant Incorporated, who has Together a great team to make this product available. With substantial insurance coverage throughout the U. S. And a sizable field sales force, we believe the net sales milestones and a growing base of royalty revenue will continue to be a foundational part of our business.

Speaker 4

Of course, our focus remains on our development pipeline and what Now let's turn our attention to the financial results for Q1 2023. We have begun the year with a solid quarter, Reporting net revenue of $2,900,000 as compared to $2,300,000 during Q4 2022. Ongoing reimbursements from the French Early Access Program are the primary driver of revenue supplemented by Astarus royalties. Royalties earned during Q1 2023 were approximately $630,000 representing a nearly 58% increase over the prior quarter. While the royalties provide a steady and growing income stream, milestones are expected to be the bigger driver of value from the Astarus license for the foreseeable future.

Speaker 4

We reported a Q1 net loss of $11,800,000 or $0.34 per basic and diluted share, which was driven by our R and D investments and increased G and A, all associated with activities underway for the KP-ten seventy seven and Aramacamil programs. As of March 31, 2023, our cash, cash equivalents and investments were $95,300,000 which was a decrease of $7,600,000 compared to December 31, 2022. The change was driven by our operating activities combined with our repurchase of 665,739 shares of the company's common stock for approximately $3,400,000 at an average price of $5.09 per share. There There is approximately $39,000,000 remaining under the company's share repurchase program as of March 31, 2023. Looking towards the rest of 2023, our financial guidance remains unchanged from our last results call.

Speaker 4

Our existing available capital on the balance sheet is expected to extend our cash runway into 2026. Our operating forecast includes the reimbursements from the French EAP, what we need for the Aramacomo NDA's resubmission, The complete development program for KP-ten seventy seven and IH through NDA submission and potential PDUFA as well as our preparations for the possible U. S. Launch of aramaximol, if approved. In addition, prescription trends for STARZ during Q1 2023 give us Confidence that we will potentially reach at least 1 and possibly 2 of the net sales milestones under the Astara's license agreement during 2023.

Speaker 4

Net revenue from the French EAP program is expected to remain steady at a rate of approximately $2,000,000 per quarter throughout the year. Our focus is on our execution of the product development plans for Aramakimel and KC-ten seventy seven as well as in building our commercial capabilities. We believe we have the resources needed to accomplish these important goals. And with that, I'll return the call to

Speaker 3

Thanks, Woodwayne. I'm excited about what lies ahead as we continue to transform And work to enhance value creation for our shareholders. We continue our ongoing discussions with regulatory agencies and are preparing to resubmit the Aramarkamal NDA as As early as the Q3 of this year. For the KP-ten seventy seven program in rare sleep disorders, we anticipate preliminary interim data from the Phase of KP-ten seventy seven into a Phase 3 study in IH that may also support a Phase 3 trial narcolepsy under the recently opened IND. To fuel our growth, we anticipate ongoing revenue from our Aramarkamal expanded access program in France to continue at approximately $2,000,000 per quarter, and we have the potential to realize 1 and possibly a second net sales milestone under the Astarus license agreement.

Speaker 3

In addition to the growing royalty streams this year, our capital remains strong with a cash runway that extends into 2026. With that, I will ask Operator to open the call for questions. As a reminder, Zevra's Board Chair and management team members participating on this call today include Our Board Chair, Tamar Favorito our Chief Financial Officer, LeDuane Clifton and our Chief Commercial Officer and EVP of Business Development, Josh Schaeffer.

Operator

You may remove yourself from the queue by pressing star 2. Our first question comes from Louise Chen, Cantor Fitzgerald?

Speaker 5

Hi. Congratulations on the progress this quarter and thanks for taking my questions here. So I wanted to ask you a few things. Firstly, on the milestones potentially in 2023, can you give us a sense of the amount and timing that you might When you might get these different masks and how much they are? And then secondly, on KP-ten seventy seven for narcolepsy, Can you talk about what a net need that you're addressing here in the market for narcolepsy?

Speaker 5

And then lastly, just on your data Early as Q3 'twenty three this year for IH, what would you consider a successful outcome in that interim readout? Thank you.

Speaker 4

Thanks, Louise. I appreciate that. This is Blaine. And I'll start with the milestone question and then we'll go to the other 2. So at this point, we have not been able to disclose publicly the milestone amounts under the license agreement for Starz.

Speaker 4

And so I still can't do that today, but I will tell you that, I think We expect that when I talk about earnings this year, I really mean, I expect we'll earn the first one. It's going to be between It's likely sort of in the Q2 or Q3 timeframe is my expectation. And then if we're able to earn the second one, we would have earned it by the end of the year With the cash payment likely coming after the end of the year, so in the beginning of 2024. That's the way they reported And they reported and paid a quarter in arrears. So that's the first question.

Speaker 4

And I guess, Crystal, I would turn it to you with regard to the 1077 IH question.

Speaker 3

Sure. And I believe your first question was on the was it on the On data or on narcolepsy?

Speaker 5

Yes. The first one was

Speaker 3

on narcolepsy and what unmet need that you're addressing there. And then yes, the second one was on the income date of Friday. Thank you. So regarding the unmet need, narcolepsy is very similar To idiopathic hypersomnia and the fact that they also have the same issues with brain fog and Having that wakefulness, affects the daytime sleepiness as IH. And so we do look to there are products that are on Market that are helping to consolidate sleep, but there really there are, a few products that are on the market, but they do have Limitations based off of the doses that they can give, and don't aren't necessarily as effective as we feel like ours could be with our unique profile.

Speaker 3

So we do feel like that there is some unmet need there in muscle upsy as well.

Speaker 6

And this is Josh Schaeffer, if I could also just add, one of the benefits of 1077 is the lack of Potential abuse and with its profile, we think 1077 would Much safer alternative to some of the current stimulants at the same time as having improved clinical efficacy as well.

Speaker 3

And then going to your other question about the interim data and what we're looking for there. So really, the whole point for the there's a couple of things for the Phase 2 study is we're looking to see If we are powered it up based off of the analyses that we're looking at and then obviously Safety is also that's our primary endpoint here, so continuing to look at that. As far as for the interim, those are the things that we would be looking for as well as where we are Into 2 different dosing regimens and the potential for those and what may which 1 may be more effective with the least amount of side effects as far as if there's any insomnia or things like that, that come with stimulant use. So those are the things that we will be looking for and those would all help us to begin designing Those first stages of the Phase 3 study as we go into the planning for that. Okay.

Speaker 3

Thank you.

Operator

Our next question comes from Jonathan Haskow, ROTH MKM.

Speaker 7

Hi, thanks. What kind of efficacy would you need to see with 1077 in Phase 2 to proceed to a pivotal trial in IH? And maybe it's the same, maybe it's not, but what kind of efficacy would you have to see in Phase 2 to proceed to both, in pivotal and IH and in narcolepsy?

Speaker 3

So as far As efficacy with this, we haven't we are looking at products That are similar. And so, while we don't have a particular point, that we are looking at, a different point But on the Eplore sleepiness scale, I believe that there is other products out there that maybe I think the Differentiation was maybe a 3 point difference or something like that. But again, those are other products. We don't have a Specific point that we are looking at yet, again, that's why we are doing the Phase 2 trial Looking at that as well.

Speaker 7

Okay. By the way, just to nitpick, what was the Consulting fee, what was the revenue that wasn't on the Staris or Aramakimal?

Speaker 4

The consulting fees during Q1 were very small. It was around $25,000 So it was a very modest final payment.

Speaker 7

Okay. So how do we look at R and D, which kind of popped significantly in the Q1? What's that going to look like

Speaker 4

So R and D is kind of tracking up as we have the active Phase 2 trial in KP-ten seventy seven and I think that the trend we're on here during Q1 is going to be similar as we go through the year and complete the trial, But then also then began preparing for the Phase 3 going into 2024.

Speaker 7

Okay. So at the very least, slightly up How is it about the same kind of pop in SG and A? Is that your new run rate Or your new low for the year?

Speaker 4

Currently, I expect that we'll be around flat in that area. But as we get into the resubmission process or once that's complete, I should say, and then we look forward into 2024, There could be some uptick in G and A as we think about beginning to prepare more deliberately for the commercial launch of Aramarkimel. So we're going to be very thoughtful and stage that. So just to repeat, the G and A is going to be in a similar place where it is right now for a few more quarters. And then we'll kind of assess how it might change after the resubmission.

Speaker 7

Okay. And one thing I kind of would like to know if you don't mind stepping back And answering this is typically when managements change this much, there's a change in what's going to happen and how it's going to be done. There really doesn't seem to be much in the way of any change with how you're going forward with Zebra other than a name change. So what's different? Why the management change if You're really kind of going forward the same way you've been.

Speaker 7

It just doesn't seem to square with me.

Speaker 4

Yes. I don't know, Tamara, maybe if you're

Speaker 2

still on the call, you guys can press that. I would like to take that. Thank you, Jonathan, for asking that. And as you may be aware, we just went through a Contested proxy fight and 3 new directors were elected to our board and our CEO, Rich Pascoe was not reelected. He was one of the 3 directors that we had put up for reelection.

Speaker 2

And Because he was not reelected to the Board, he chose to resign as CEO as well. And I think what you mentioned is very, very important for Zevra. Nothing is changing In terms of our strategy and as Crystal said in her comments, we have been working on this for 2 years And we now have a strategy of developing rare disease drugs for the market. That's where we were going before the annual meeting and that's where we're going to go afterwards. So We're very sorry to lose Rich.

Speaker 2

We understand what he did and we will be looking For a new CEO, but we see no change in the company's strategy whatsoever.

Speaker 7

Thank you for that. Lastly, the data that Luis was referring to, interim data. So the Phase 2 data coming in as early as The Q3, that's just an interim look to see primarily how powered your trial is?

Speaker 3

So yes, that's exactly right. So the interim data is as just said, it's in the middle of the I hope to see if there is any adjustments that we need to make, primarily in the powering of the study, to see If we need to increase the numbers to get the effects that or to be able to see the effects that are coming out of our And then but again, we can also look at things like the dosing regimen and other things because we do have that open titration A portion of it.

Speaker 7

Okay. So what again was your intended initial enrollment? And what Could that jump to if you see that you are underpowered?

Speaker 3

Sure. So our initial enrollment, we're looking to enroll 48 and I don't remember what Exact number was we do have a percentage above that and I can go back and look at that. I don't remember exactly, but we do have that

Operator

This concludes the Q and A portion of today's call. I would now like to turn the call back over to Crystal Mickle

Speaker 3

Thank you very much. As we conclude today's call, I would like to leave you with a few additional thoughts. As one of the founders of the company, I have devoted a significant part of my career helping to build this company from scratch and to a team that has been able to take not one, but multiple products from discovery through development culminating in regulatory approval where these products now are now available to patients providing for previously unmet needs. And today, our journey continues as we move forward with more opportunities to build upon our legacy of success in drug development. The addition of commercial capabilities is a natural part of Zevret's evolution and I'm proud to step into the role of Interim President and CEO as of June 1, with the goal of fully supporting our team as we execute on our objective to drive toward many more successes in the future.

Speaker 3

1 Providing clear communication as one of our guiding principles and completing our work with integrity and excellence. The needs of the patient communities which we serve are at novel rare disease therapies to those who need them most. We have the tools and the resources needed to fully capitalize on the opportunities which lie ahead and the resolve to get it done. I'm proud to be on this journey with the team we have built and with you, our shareholders. Thank you very much.

Operator

This concludes today's EverTherapeutics First Quarter 2023 Earnings Call and Webcast. You may disconnect your line and have a great wonderful day.

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Zevra Therapeutics Q1 2023
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