Zevra Therapeutics Q4 2023 Earnings Call Transcript

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March 28, 2024

There are 12 speakers on the call.

Operator

Good afternoon, everyone. Thank you for joining the Zevra Therapeutics Q4 2023 Corporate Update and Financial Results Call.

Operator

Today's call is being recorded and will be made available on the company's website following the conclusion of the call. With that, I will now turn the call over to Nicole Ochsner, Vice President of Investor Relations and Corporate Communications for Zephyr Therapeutics.

Speaker 1

Good afternoon and thank you for joining us today to review Zebra Therapeutics progress in the Q4 full year of 2023, outlining our clinical advances, operational achievements and financial results. Before we get started, let me take a moment to provide some important information. I encourage you to access the news release, which was just published and available in the Investor Relations section of Zevra's website. As we proceed with this call, it's important to highlight that today's discussion will include forward looking statements. Forward looking statements are not promises or guarantees and are inherently subject to risks, uncertainties and other significant factors that may lead to actual results differing materially from the projections made.

Speaker 1

Please refer to the Risk Factors section in our most recent quarterly report on Form 10 Q and our other filings with the SEC and Annual Report on Form 10 ks. I'm pleased to welcome Zebra's management team members participating in today's call. I'm joined by Neil McFarlane, President and Chief Executive Officer, Lizwayne Clifton, our Chief Financial Officer, Joshua Schafer, our Chief Commercial Officer and EVP of Business Development Crystal Miffle, our Chief Development Officer and Adrian Cortell, our Chief Medical Officer. Now, I'll turn the call over to Neil.

Speaker 2

Thank you, Nicole, and thank you all for making the time to join us today. During the Q4 and into 2024, we made solid progress towards transforming Zevran into a commercial stage company. On our last call, we announced that we were focused on 3 key priorities. 1st, to close the Acer acquisition and deliver value to patients by commercializing Opryla. 2nd, to resubmit the aramothimol NDA.

Speaker 2

3rd, to complete the Phase 2 trial in idiopathic hypersomnia and prepare to advance KP-ten seventy seven into Phase 3. I'm happy to report that we executed on all of these objectives and I would like to take the opportunity to recognize the extraordinary effort from our entire team to deliver for people living with rare diseases. Before discussing our results, it's important to note that our financial statements for fiscal year 2022 including all interim periods and the interim periods of 2023 will be restated due to a change in our warrant accounting. LaDoyne will provide more details later on the call, but we believe the restatement will have no impact on the company's cash or ability to execute on our strategic priorities. Turning to the Q4 corporate highlights.

Speaker 2

Let me start with the completion of the Acer acquisitions, which propelled us into becoming a commercial stage company, diversifying our revenue potential and providing scale. The acquisition was a natural fit with Xero's mission, bolstering the talent on our team and bringing complementary rare disease assets, including commercially available Opruva. Opruva is indicated for the treatment of certain urea cycle disorders or UCDs, which are a group of rare genetic disorders that can cause harmful levels of ammonia to build up in the blood, potentially resulting in neurocognitive impairments, brain damage and in some cases coma or death. We estimate that there are approximately 2,000 people in the U. S.

Speaker 2

With UCDs, of which roughly half are diagnosed and treated. The UCD market in the U. S. Is estimated at approximately $350,000,000 annually. Despite the available therapies, unmet needs for people living with UCD persists.

Speaker 2

We believe that Opruva is well suited to address these needs as it provides personalized dosage for each patient's requirements. It's portable and easy for patients to take. And most importantly, it is palatable as it was formulated to overcome the challenging taste and smell that is associated with other formulations of sodium phenylbutyrate. Our commercial launch strategy is comprised of 2 major components: 1, establishing a customer facing team and 2, building awareness. Since the completion of the Acer acquisition in mid November, we have made significant progress towards executing on these priorities, ensuring that people who suffer from UCDs have access to and are aware of the benefits of Opryla.

Speaker 2

As of the end of January, we have a customer facing team with decades of rare disease experience to support the launch of Opumo. This team was built to be targeted and able to reach the needs of our customers and partners, most of whom are located in approximately 40 centers of excellence across the country. In addition to the sales specialists, we have marketers, patient services and market access professionals as well as medical science liaisons and patient advocates for engaging with key customers. While initially built to support the launch of Opruva, this same group of professionals will launch aramathimol if approved. We have initiated several strategies that are being utilized to build awareness for Opruva, which is currently quite low.

Speaker 2

For example, we have established Quick Start, which is a 30 day free trial to allow patients and physicians to gain experience with ALFRUVA. We're working with patient advocacy groups, the patient community and UCD centers of excellence to drive brand recognition. We're also working with payers to ensure broad market access for patients. We've seen a meaningful growth in reimbursement coverage, which was approximately 55% at the time of acquisition to now more than 70% of covered lives. While it's too early in the launch to provide data on today's call, we're monitoring key launch performance indicators, including new patient enrollments, number of covered lives and net revenue.

Speaker 2

As previously mentioned, the commercial footprint we established provides a high strategic fit for aramothamol as the majority of prescribers with both products work within the same centers of excellence. If aramothamol is approved, we believe this close proximity and overlap in patient care will allow us to realize synergies and scale with the infrastructure that we've built. As a reminder, aramofol is our drug candidate in development for the treatment of Neiman Pick disease type C or NPC. NPC is a rare genetic progressive and potentially fatal neurologic disease. Earlier this month, the FDA assigned a new PDUFA date of September 21, 2024 and reaffirmed its intent to present the resubmission or discussion at an advisory committee meeting.

Speaker 2

If approved, we intend to utilize our clinical data as well as real world evidence and the data from our expanded access program to support market access, reimbursement and treatment decisions to establish aramothamol as the foundation of treatment for people with NPC. We will continue to work closely with key opinion leaders to educate on aramathimol's clinical profile and raise awareness of the heterogeneous presentation of NPC, which may include neurological and psychiatric symptoms, all of which make MPC difficult to identify and diagnose. Because of this, the time to diagnosis remains a significant unmet need in the MPC community. Therefore, we're working with patient advocates to drive early diagnosis and supporting efforts for MPC to be included in newborn screening. Together with an approved indication, these initiatives will help drive the evolution of treatment guidelines and accelerate the time to diagnosis and treatment initiation.

Speaker 2

We will continue to work with all stakeholders to develop patient services that will provide access and a positive experience. We applaud the MPC patient advocacy community who united and submitted a compelling response through an informal petition to the FDA in support of Aramothimol's approval. They received nearly 1,000 signatures from 47 states voicing their support. As the FDA review continues, Zevra will maintain our expanded access program for aramothimol and continue working tirelessly to bring this potential therapy to patients as soon as possible. Now I'd like to turn your attention to KP-ten seventy seven, our clinical candidate being developed as a treatment for idiopathic hypersomnia or IH.

Speaker 2

IH is a rare chronic sleep disorder characterized by excessive daytime sleepiness, an uncontrollable need to sleep and difficulty waking up from sleep in most instances despite average or longer amounts of nocturnal sleep. As you may recall, KP-ten seventy seven cerdexmethylphenidate or SDX was designed to steadily release D methylphenidate, its active ingredient. This unique pharmacokinetic profile allows for flexible dosing to overcome these primary IH symptoms. The design also ensures that patients receive the highest drug concentration when they need it most. SDx is designated as a Schedule 4 controlled substance by the U.

Speaker 2

S. Drug Enforcement Administration. Earlier this week, we announced positive top line data from our placebo controlled, double blind, proof of concept Phase 2 study evaluating the safety and tolerability of KP-ten seventy seven in patients with IH. Consistent with the interim data that we previously reported in Q4, KP-ten seventy seven was well tolerated at all dose levels evaluated in the study, including the highest dose of 3 20 milligrams daily and at dosing regimens of either once or twice daily. The most common adverse events were insomnia, headache, anxiety, nausea and decreased appetite.

Speaker 2

Due to KP-ten seventy seven unique pharmacokinetic profile, adverse events were mostly mild in severity despite higher overall exposure levels. These data support the study's primary endpoint of safety and tolerability. Top line results from the Phase 2 study also showed that KP-ten seventy seven produced clinically meaningful improvement in excessive daytime sleepiness or EDS as assessed by change from baseline in the Epworth Sleepiness Scale during the 5 week open label titration period, which was maintained throughout the 2 week double blind withdrawal period for both dose regimens. Additionally, patients administered KP-ten seventy seven showed benefit in change from baseline at the end of the open label titration and at the end of the double blind withdrawal period for the IH severity scale, the sleep inertia visual analog scale and brain fog severity scale. The study successfully fulfilled the objectives by providing key information for the design of a potentially pivotal efficacy trial and the results of the secondary efficacy endpoints are supportive of initiating a Phase 3 trial of KP-ten seventy seven.

Speaker 2

We plan to request an end of Phase 2 meeting with the FDA to seek guidance on the Phase 3 clinical trial design. We are pleased with the top line data and believe that KP-ten seventy seven could provide a significant benefit to the estimated 37,000 people in the U. S. Who are currently diagnosed with IH. With only one FDA approved treatment for IH, there remains an unmet need for therapies with different mechanisms of action to address symptoms, including sleep inertia, excessive daytime sleepiness and cognitive dysfunction.

Speaker 2

We look forward to presenting the results from our Phase 2 study at the upcoming sleep 2024 conference this summer. And in summary, we're pleased with our progress in the Q4. As we enter 2024, we have 3 areas of focus. 1st, to successfully launch ALprova and ensure access for patients. 2nd, to prepare for the potential launch of our Amakimol.

Speaker 2

And third, to advance KP-ten seventy seven in sleep disorders. We believe that we are all we believe that we are well positioned to continue to execute and deliver on these key strategic objectives. Now I'll hand the call over to LeBlaine, who will provide an update on our financial results and outlook.

Speaker 3

Thank you and good afternoon.

Speaker 4

2023 was a time of incredible progress as we seek to make therapies available to people living with rare diseases. Our financial results for the quarter and full year reflect our continued investments in advancing our development programs and building out our commercial capabilities. As Neil pointed out at the beginning of the call, we are restating our previously issued financial statements for the fiscal year ended 2022, including all interim periods and the interim period in 2023 due to a change in the accounting for warrants with certain cash settlement features. Warrants from 2021 have been classified as equity and are now accounted for as a liability, resulting in non cash fair value adjustments that will be recognized at the end of each reporting period. This change and the related non cash adjustments are expected to have no direct impact on the company's cash, cash equivalents and investments, our forecasted runway or our business operations.

Speaker 4

Now focusing on our financial results for Q4 2023, we reported net revenue of $13,200,000 This was a solid quarter in which we earned the net sales milestone of $10,000,000 under the Asaris license agreement as annual net sales for that product surpassed $50,000,000 for the year. Revenue also included royalties under the license, which rose to $1,300,000 for the period comparing to $900,000 in Q3 2023. Net reimbursements from the French expanded access program for Aeromosimol was $1,800,000 and there was recognition of some initial sales of approval. R and D expenses for the quarter were $11,400,000 which was primarily driven by the Phase 2 study in KV-ten seventy seven that has since been completed, along

Speaker 2

with the

Speaker 4

work to prepare the Aramarkma NDA for resubmission. General and administrative expenses were $14,700,000 The period over period increase was primarily related to personnel costs and professional fees associated with our investments and our commercial infrastructure as well as our business development activities which included the closing of the Acer acquisition. Net loss for Q4 2023 was $19,600,000 or $0.51 per basic and diluted share. Our full year 2023 results included net revenue of $27,500,000 which was primarily driven by the $15,000,000 in total net sales milestones earned under the Astaris license agreement, royalties of $3,800,000 and net reimbursements from the French early access program for Aeromachema totaling $8,600,000 for the year. With total R and D expenses of $39,800,000 and G and A expenses of $34,300,000 we reported a net loss of $46,000,000 or $1.30 per basic and diluted share for 2023, which includes the non cash impact of the change in fair value adjustment for the warrant liability of $1,400,000 or $0.04 per basic and diluted share.

Speaker 4

As of year end, total cash, cash equivalents and securities were $67,700,000 which was a decrease of $15,700,000 compared to September 30, 2023. Total shares of common stock outstanding were 41,500,000 and fully diluted shares outstanding was 58,200,000 which includes approximately 5,600,000 shares issuable upon exercise of warrants. Looking ahead, our available resources are expected to support our forecasted operating cash runway into 2026 and we intend to evaluate optimization of our debt structure. Our forecast includes commercial revenue from sales of Okruga and ongoing reimbursements from the French EAP or Aramarkimel, but it does not include commercial revenue from sales of Aramarkimel or the sale of the priority review voucher, which would follow potential FDA approval. We remain optimistic about the opportunities we have in store during 2024 and our focus is on creating long term value for shareholders by consistently executing against our plan in support of our mission to becoming a leading rare disease Operator, please open the line for questions.

Operator

We'll take our first question from Oren Livyatnikov with H. C. Wainwright. Please go ahead. Your line is open.

Speaker 5

Thanks. It's helpful. I'm really curious about this old Pruva launch. It sounds like you've got your infrastructure in place and maybe aren't just now trying to build awareness. So I know you're not giving guidance and certainly not on a product specific basis, but should we expect material revenue growth for that product this year?

Speaker 5

Or is this more about just like a sampling and awareness building year and just getting all the patient support processes worked out, especially ahead of aramaklamol? And on Aramaklomole, could you just talk about what if anything you can say about your expectations around an adcom as far as what areas of focus you are most preparing for, where you think the agency might be most interested, whether it be the connection between real world data and your clinical data or validation and statistical issues? Anything you could provide on that front would be really helpful. Thanks.

Speaker 3

Hey, Arun, it's Josh. Thanks for the question. With regards to the Opruva performance, as you noted, we are in full launch. And as Neel just mentioned, effective the end of January, we had an entire commercial and medical team out engaging with our customers. We knew at the beginning of all of this that awareness for ALTRUVA and Zebra was quite low, but ALTRUVA in particular, you'll recall, it was approved through a 505(2) pathway, which meant that it had very little clinical experience.

Speaker 3

And so our priorities have really been around driving awareness and ensuring that patients have access to ALPRUVA. And to do that, our team is working with physicians to identify the appropriate patients. We have a quick start program in place to make sure that patients can experience the benefits of Opryuba and our reimbursement is increasing from 55% to over 70%. So it is too early for us to give any guidance on performance and revenue. We will be watching new patient enrollments, covered lives and net sales as we go and we'll be providing updates on a quarterly basis.

Speaker 2

Or I was going to ask Adrian to comment a little bit on the agency and the potential focus of the outcome. Yes.

Speaker 6

So the FDA has currently not confirmed the AdCom. So there is an intention to hold an AdCom and no date has been set. We obviously clearly are preparing for the AdCom. As part of the initial submission and the CLL, we kind of know what the questions were that the agency we're looking for. We're focusing on addressing those.

Speaker 6

Most important though is we're really focusing on telling a story that the clinical data clearly shows, which is a significant benefit for patients. Some additional information that we got during the 2 Type B meetings prior to our resubmission also be included. We're really mostly looking forward to having a healthy debate about what we consider clear efficacy in these patients and a clear benefit risk profile.

Operator

We'll take our next question from Jonathan Ashcroft with ROTH MKM. Please go ahead. Your line is open.

Speaker 7

Thank you very much. I haven't had a chance to read the press release. It came out a little late and there's a whole bunch of calls. But can you help us better understand the magnitude of benefit in IH and thus your optimism for an end of Phase II meeting that will go well and inform Phase III design?

Speaker 6

Absolutely. First, we need to just really focus on what that Phase II trial is trying to achieve. This is a trial that was designed to demonstrate safety and tolerability and inform us for what the data would say into how to design the development program in IH. Part of the secondary endpoints was looking at the daytime sleepiness and the antibiotic hypersomnia scoring scale. We saw clinically meaningful improvements not only in the vaccination phase, but also in the low blind phase.

Speaker 6

As I said, this trial is not designed to show statistical significance. We are planning to present this data at sleep24 meeting and because of that, we're on data embargo. So we will discuss the data there with the sleep experts that will attend that meeting.

Speaker 2

Okay. So when you did

Speaker 7

this trial, you optimized these people to any one of the 4 different doses. So it's a complete random smattering like it's not 16 patients per dose. It's whatever was their optimum dose. That's where they landed. There's no balance among those 4 groups.

Speaker 7

That is correct. Okay. So after seeing the Phase 2 press release, are you still contemplating a narcolepsy trial? Because the word narcolepsy is not in that press release on Tuesday. I was just curious if why that was?

Speaker 2

Thanks, Jonathan. It's Neil. We're taking this data that we've got now on our Phase 2 to inform of Phase 3 in IH, but we're also understanding our Phase 1 data, some of our Phase 1 data and other data to understand how to unlock the value of the broader sleep disorder opportunity. So we're evaluating that, but we have no further comment today on if we're going to move forward into narcolepsy.

Speaker 7

Okay. And just a yes or no, I'll prove a MSUD is going to wait until you see how you track with the first indication, correct? Or do you have development plans for MSUD such that you can even give us a timeline?

Speaker 3

So you are correct. We're waiting to do a full evaluation of our portfolio and strategic plan before we make any decisions on maple syrup, urine, seed.

Speaker 7

Okay. Lastly, when it comes to your AdCom, do companies typically have any sort of back and forth with the patient advocates and strategize in any way? And if so, do you intend to do anything like that? Or is it just everyone shows up?

Speaker 8

This is Crystal. Yes, we it is very common for the companies to engage with the patient advocacy group and that we are doing that. One of the ways was to the patient petitions that came through, Certainly that was something that we were very happy to see and so we will continue to engage and make sure that the voices of the patients are being heard at the AdCom in their own way.

Speaker 7

I mean, I think that will be an important part of an adcom. So that's good to hear.

Speaker 9

Thank you

Speaker 7

very much.

Speaker 2

Thank you, Jonathan.

Operator

We'll take our next question from Sumant Kulkarni with Canaccord. Please go ahead. Your line is open.

Speaker 10

Good afternoon. Thanks for taking my questions. I have 2. First one is, have you

Speaker 7

had any interactions with the

Speaker 10

FDA on the pending aramoximol filing since you announced the 3 month push out of the action date and how are those discussions gone?

Speaker 2

Thank you, Sumant. Maybe I'll take that one. We get as part of the NDA resubmission information requests from the agency, which we've been able to satisfy and return in a timely way. 3 months on our September 20 which then caused the delay of 3 months and our September 21 PDUFA. So we are having those discussions, information requests are coming in and we're able to satisfy those information requests in a timely fashion.

Speaker 10

Got it. And then on the recent Phase 2 data for 1077 in IH, we're yet to see any quantitative details because of the sleep eating related embargo. But qualitatively, would you say there was anything counterintuitive either in a positive or negative way in the data relative to your original expectation?

Speaker 6

I think the most important lesson from this study was on the primary endpoint. So we dosed patients at the 3 20 milligrams, which is a pretty high dose, higher than we've done before in patients. And we saw no increase in the safety profile and safety risk. More importantly, the cardiovascular safety profile is exactly as we had expected and there's no changes in the cardiovascular safety profile. So that we in principle have a compound that can be safely administered to patients with diabetic hyperosomnol.

Speaker 2

Thank you.

Operator

We'll take our next question from Louise Chen with Cantor. Please go ahead. Your line is open.

Speaker 11

Hi, good afternoon to the line of Ravi R. W. From Cantor. Congrats on the data and thank you for taking our questions. My first question is on KP-ten seventy seven post positive Phase 2 results, one is closest competitors in IH, What differentiates KP-ten seventy seven?

Speaker 11

Our second question is on ARAMAKAMO. The rare pediatric disease PRD program is starting to end this year, if Eramakimasu gets approved and the program does become terminated, how might that impact the value of Air Mark most PRV? Thank you so much.

Speaker 2

You were a little challenging to hear. I understood the question to be if we were going to get a PRV with the approval of aramofol. Is that correct? And then the other 1077 program in regards to the differentiation from competitors?

Speaker 11

Yes, that's correct. Thank you.

Speaker 2

Okay. So yes, we have a PRV that will be issued upon approval with our Amaco Mall's NDA approval. So that does.

Speaker 4

I would add, Neil, that and, Karvi, I think what you said is what is the likelihood or what do we think the value change would be if the program governing that would be ending this year. And I think the analysis we've seen or the information we've heard from a variety of sources says that the potential that that program ends, the value could go up. So I think we're going to assess that and look at that, but that's our current thinking on that point. Adrian?

Speaker 6

Okay. Adrian here with regards to the competition in the idiopathic hypersomnia space. So KP-ten seventy seven has a differentiated profile, significant different pharmacokinetic profile than other products in the market and also a specific mode of action being stimulant. It's only a Schedule IV program. And as I said previously, cardiovascular safety really jumps out when you look at the benefit of this program compared to other drugs currently on the market.

Speaker 2

Great. Thank you so much.

Operator

We'll take our next question from Tim Lugo with William Blair. Please go ahead. Your line is open.

Speaker 9

Hey, guys. This is Lachlan on for Tim. Thanks for taking the question. I guess first one is just on the Oferuba launch. It sounds like obviously a bit low awareness.

Speaker 9

You maybe don't have a ton of experience, but can you maybe talk about the feedback that you've got thus far from those who do have experience? And then second, I understand RAVICTI is mental and is exclusivity at some point in the next year or 2. So can you just sort of talk about your expectations for that and what it might mean for the market and for alfruvary and maybe what the sort of scenarios there are?

Speaker 3

Sure. Thanks for the question. Yes, so awareness has been more for the reasons that I stated and our primary objective now is to really build that awareness working with physicians to identify those appropriate patients and to put in place programs so that patients can gain that experience with ALprova. The initial feedback that we're getting is those patients who have had experience with ALPRUVA are continuing on that. We have a number of patients who are continuing to get refills of ALPRUVA and that really bodes well for future uptake.

Speaker 3

In terms of RAVICTI and their patent expiration or I guess it's really the entrance of authorized generics. We are aware that later next year it's likely that an authorized generic the first authorized generic for RAVICTI will come into the market and potentially a second thereafter. We view that really as entrance into the higher end of the market, specifically products competing with RAVICTI in the same formulation. ALTRUVA is very much clinically differentiated from RAVICTI and any authorized generic that comes into the market. And we believe that we've got a great clinical benefit and we're well priced to be able to compete in this market.

Speaker 9

Great. Thanks.

Operator

And next we have a follow-up question from Oren Livnat with H. C. Wainwright. Please go ahead.

Speaker 5

Thank you. Just to follow-up again on OPREVHA. I know it's quite early, but as you get more patients hopefully into the funnel, into the referral network and then as you try to get them through adjudication to paid therapy, Are you finding that you're being held to the hurdle of being compared to generic bufunil from a cost perspective? Or is the bar most more likely lower and that you're essentially being benchmarked against market leading RAVICTI? And regarding the patients you're going after, are you assuming current RAVICTI patients are low hanging fruit given you've got a presumably much superior product here from the patient perspective?

Speaker 5

Or conversely, are they maybe the stable business and not your target patient?

Speaker 3

Yes, thanks. So all products all branded products in this space are required to have some form of step edit. And so it's not unique for Ultrala to have a step edit where a generic bufunile is required first. But we're seeing patients stepping through that very, very quickly. And then physicians and patients are making a decision as to what's the next best clinical opportunity for patients.

Speaker 3

Many of the physicians that we've been speaking with and albeit it's been in just a few short weeks that we've had that exposure, we really find Ultruva to have the most clinically differentiated and beneficial profile for these patients. So it's a little too early to give you the definitive answers to that, Warren, but the early signals are that again the profile of ARPUVA is really lending itself towards patients switching both from Severin and RAVICTI to Opryla.

Speaker 2

Warren, I might add one additional comment to that. One additional comment to that, I think that's an important perspective. As Josh mentioned, the approach to getting patients on therapy is fairly consistent. Our improvement of the reimbursement of covered lives from 55% up to 70% really puts us close to par also in that area, which then we then can drive that awareness and clinical differentiation from the other products in the market. And with the Quick Start program and other awareness campaigns that we're moving forward will allow us to be able to give patients an option and physicians an option.

Speaker 5

Thanks. Good luck.

Speaker 3

Thank you.

Operator

And this does conclude the Q and A portion for today's call. I'd now like to turn the call back over to Neil McFarlane for any closing remarks.

Speaker 2

Thank you, operator. The Q4 2023 was a period of tremendous transformation for ZEMRA. We made solid progress towards achieving our mission of building a leading patient focused rare disease company. As we look to 2024, our key strategic priorities are clear and we look forward to updating you in the future. Thanks for joining us today.

Operator

This does conclude today's program. Thank you for your participation and you may disconnect at any time.

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