Zevra Therapeutics Q2 2024 Earnings Call Transcript

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August 13, 2024

There are 8 speakers on the call.

Operator

Hello and thank you for joining the Zebra Therapeutics Q2 20 24 Financial Results and Corporate Highlights Call. 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 Zephyrh Therapeutics.

Speaker 1

Good afternoon and thank you for joining us today to review Zevra Therapeutics' progress in the Q2 of 2024, 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 published this afternoon and is available in the Investors section of the Zevra website. As we begin our call, it's important to highlight that certain information covered in today's discussions will include forward looking statements. We caution listeners that actual results could differ materially from these stated or implied by these forward looking statements due to risks and uncertainties associated with the company's business.

Speaker 1

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 those projections made. These forward looking statements are qualified by the cautionary statements contained in the Risk Factors section in our most recent quarterly report on Form 10 Q and our other filings with the SEC Annual Report on Form 10 ks. I'm pleased to welcome Zevrist's management team members participating in today's call. I'm joined by Neil McLarlane, President and Chief Executive Officer LaDuane Clifton, our Chief Financial Officer Josh Schaeffer, our Chief Commercial Officer and Executive Vice President of Business Development and Adrian Portell, 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 Q2, we made steady progress executing on our strategic objectives, preparing for the advisory committee meeting and the potential launch of aramofolol, driving the launch of Olpruva and advancing KP-ten seventy seven for sleep disorders. These objectives are important building blocks for our long term strategic plan to build a sustainable rare disease company with reliable cash flows. An important element of executing against our strategy is to build and maintain our position of financial strength. During the first half of twenty twenty four, we made investor outreach a primary objective, highlighting the opportunities and catalysts for value creation that we have as a company.

Speaker 2

There has been a significant interest and growing momentum as we continue to execute our objectives. Last week, following the favorable outcome of the FDA advisory committee meeting focused on Aramarkamal, we undertook a modestly sized underwritten public offering to capture that momentum and build on our base of investors as we lean into the potential of our near term catalysts. With this funding, we have added net proceeds of approximately $64,500,000 to our balance sheet, bringing our pro form a June 30, 2024 cash, cash equivalents and investments to 113,800,000 This was the right time to demonstrate our confidence and take this important step to prepare for success. The proceeds will extend our cash runway and bolster our flexibility in executing both near and long term objectives, including full preparation for the potential launch of aramantamol and the flexibility to accelerate our clinical pipeline. Now I'll share a summary of our key second quarter accomplishments and outline why we remain optimistic in our ability to deliver on our strategic plan.

Speaker 2

Let's start with aramothamol, our product candidate for Niemann Pick Disease Type C or NPC. On August 2, the Genetic Metabolic Diseases Advisory Committee or GEMDAC voted favorably that aramancol is effective in the treatment of NPC. While the vote is not binding, we believe this is an important factor as the FDA completes its review. Our PDUFA date is September 21st, which is fast approaching. We received the 1st round of labeling comments last Friday are working closely with the FDA.

Speaker 2

If approved, aramothimol would be the 1st drug in the U. S. Indicated for the treatment of NPC and it would be eligible for a priority review voucher. As a reminder, there are roughly 900 people in the U. S.

Speaker 2

With NPC, of which approximately 1 third are diagnosed and treated. More than 70 of those patients are currently enrolled in our U. S. Expanded Access Program or EAP. As the FDA review continues, we will maintain the U.

Speaker 2

S. EAP to ensure access for patients until commercial supply is available. In addition, subsequent to U. S. Approval, we will seek regulatory approval in Europe, where an additional 70 to 80 patients are enrolled in our global EAP program.

Speaker 2

We are actively preparing for the commercial launch of aramaxamol. Our commercial infrastructure was built to optimize the strategic fit between Olpruva and aramaxamol. Both products address genetic metabolic diseases with multidisciplinary treatment teams that are often co located within the same centers of excellence, allowing us to reach the majority of prescribers with a targeted commercial infrastructure. Our rare disease specialists and medical science liaisons who are currently promoting and educating on Opruva and urea cycle disorders or UCDs are also engaging with prescribers when appropriate to raise awareness for NPC. Further, our market access team has initiated pre approval clinical discussions with payers regarding aramothimol as a potential treatment for NPC.

Speaker 2

These pre launch activities will help ensure patients have access once available. Now turning to Opruva, where we continue to make process with the commercial launch initiated at the end of January 2020 4. Over the last few quarters, our assumption on the limited awareness of Opruva has been confirmed. However, we've made progress with healthcare providers to increase awareness levels and identify that we have more work to do to increase patient awareness. As a reminder, there are 1100 UCD patients in the U.

Speaker 2

S. Of which more than 800 are receiving treatment. The prescribing community has identified a significant number of these patients who can benefit from Opruva. While we are encouraged by their response, the number of patient enrollments is not yet where we would like it to be. During the Q2, we had 9 new patient enrollments, which we define as a prescription for a patient who's on our Quick Start program or one who's receiving a paid dispense.

Speaker 2

We have been working to build awareness amongst clinicians who treat UCD and to ensure market access for patients. The team has done an outstanding job of engaging HCPs at Target Centers of Excellence and at medical conferences to build brand awareness. The team has successfully engaged the majority of clinicians and thought leaders who diagnose and treat UCD patients, which is remarkable since access to HCPs has become more challenging across the industry. Additionally, our managed care team continues to engage with government and commercial payers to ensure broad access for patients. We have increased OPRA coverage to 75% of covered lives with improved formulary status across healthcare plans and have established comprehensive patient services programs designed to assist with the reimbursement hurdles experienced by the rare disease community.

Speaker 2

As I mentioned earlier, there are always opportunities for refinement during launch and we are implementing changes to improve patient engagement. One key change was our transition to Orsini as our specialty pharmacy partner who is a leader in pharmacy solutions for rare diseases. This transition completed in mid June, including a rebalancing of our Opuva inventory in the channel, which impacted our net sales revenue in the quarter. LaDuane will provide more details later in the call. We believe these enhancements to our commercial infrastructure will further support the Opdivo launch and will have a positive impact on our commercialization efforts for aramothamol with limited incremental cost.

Speaker 2

Now I'd like to turn your attention to KP-ten seventy seven, our clinical candidate for the treatment of idiopathic hypersomnia or IH, a rare chronic sleep disorder. IH is characterized by excessive daytime sleepiness and difficulty waking, also known as sleep inertia. This disease impacts approximately 37,000 people in the U. S. As you may recall, KP-ten seventy seven is comprised of CERDEX Methylphenidate or SDX, which was designed to steadily release B methylphenidate, its active ingredient.

Speaker 2

Its unique pharmacokinetic profile allows for flexible dosing to overcome these primary IH symptoms and ensures patients receive the optimal drug concentration during waking hours. SDX is currently designated as a Schedule 4 controlled substance by the U. S. Drug Enforcement Administration due to demonstrated lower risk for abuse potential. At the Sleep 2024 meeting in June, we presented the pharmacokinetics of SDX when administered in the morning and at night.

Speaker 2

The clinical data showed peak exposure occurs the morning after a nighttime dose when the patient needs it most to manage sleep inertia. We also reported positive results from our Phase 2 clinical study of KP1077 in patients with IH. In this proof of concept study, KP1077 was well tolerated at all dose levels, including the notably high dose of 3 20 milligrams daily. Adverse events throughout the study were mild similar to other methylphenidate products and did not lead to early discontinuation. AP-ten seventy seven showed clinically meaningful benefits in change from baseline at the end of 7 weeks of treatment against secondary and exploratory endpoints, which included change in the Epworth Sleepiness Scale, the IH severity scale, the sleep inertia visual analog scale and a relatively new scale to assess the symptoms and severity of brain fog.

Speaker 2

We are encouraged by these results showing that KP-ten seventy seven is well tolerated and demonstrates clinically meaningful benefits. Importantly, the study successfully fulfilled the objectives of informing the design of a pivotal efficacy trial. We consulted with key opinion leaders, payers and patient advocates knowledgeable in the rare sleep space to help interpret these results and have submitted a briefing book to the FDA for an end of Phase 2 meeting at the end of the third quarter. With only one FDA approved treatment, there remains a large unmet need for therapies to address the symptoms of IH. We are conducting market research on the Phase 2 data to better understand KP1077's differentiated profile position in the treatment landscape and to inform our business case.

Speaker 2

Finally, we've made progress with saliprolol, our product candidate for the treatment of vascular Ehlers Danlos syndrome or VEDS, which impairs COL3A1 connective tissue and leads to vascular and hollow organ ruptures. Faliparol's mechanism of action is designed to reduce the mechanical stress on collagen fibers within the arterial wall through vascular dilation and smooth muscle relaxation. Faliparol is a primary treatment option in various EU countries and we believe it could address the significant unmet need in the U. S. As there are no approved treatments for the 7,500 patients with VEDS.

Speaker 2

Salipolol has received both orphan drug and breakthrough therapy designations from the FDA. During the Q2, we restarted recruitment of the salipolol Phase 3 trial also known as the DISCOVER trial. This decentralized event driven trial is being conducted under a special protocol assessment. We are encouraged by the significant interest among patients to enroll in this trial, which has exceeded our expectations, underscored the unmet need within the VEDS community and preserves the value of the program while we conduct our portfolio review. As part of the strategic planning initiative kicked off in January, we continue to assess the value of each of our programs.

Speaker 2

Our intent is to fully understand the unmet needs of the rare disease patient community within a potential market and then develop a solid clinical and business case for how Zevra can develop therapies to address those needs. Looking ahead, we have 3 key priorities. 1st, to receive approval and successfully launch aramofilamol by leveraging the infrastructure built for Olpruva. 2nd, to drive the launch of Olpruva. And 3rd, to discuss the design for a pivotal study evaluating the efficacy of KP-ten seventy seven in patients with IH in our end of Phase 2 meeting at the end of Q3.

Speaker 2

We remain focused on execution to deliver a strong second half of twenty twenty four and are well positioned financially to execute against those objectives. Now LaDuane will provide an update on our financial results.

Speaker 3

Thank you, Neil, and good afternoon. As we begin, I encourage you to refer to our quarterly report on Form 10 Q, which we intend to file later today for more detailed information. We have made meaningful progress during the Q2 and our financial results also reflect discipline in our capital allocation to drive towards success in reaching our strategic objectives. Our 2nd quarter results included net revenue of $4,400,000 which includes $3,100,000 in net reimbursements from the French EAP for Aramarkimel and $1,300,000 of royalties and other reimbursements under the Astarus license. For our commercial product, Opruva, we recognize commercial product revenue when shipments are received by our specialty pharmacy.

Speaker 3

And as we previously announced, we transitioned to a new specialty pharmacy during the quarter, which required us to ship new product and recognize returns from the prior specialty pharmacy, which offset revenue for the period. The result was recognized during Q2. We believe this transition will lead to improved patient services as enrollments grow. Additionally, cost of goods sold was inflated during Q2 due to recognition of a $3,200,000 obsolescence reserve against Opruva inventory, which is nearing expiration. This excess inventory was ordered prior to our acquisition of Acer and the previous delay in the product's launch impacted the rate of usage leading to the need for this reserve to be recognized in the quarter.

Speaker 3

Our R and D expenses for the Q2 were $10,500,000 which is a slight decrease compared to the Q1 of 2024 and primarily due to the completion of KP-ten seventy seven Phase 2 trial. Selling, general and administrative expenses were $12,600,000 during 2nd quarter, reflecting our commercial team being in place for the entire quarter and actively engaged in activities to build awareness and provide patient services related to OPRAVIA. Net loss for Q2 2024 was $19,900,000 or $0.48 per basic and diluted share, which reflects an increase driven by our investments in our commercial infrastructure. At the beginning of the quarter, we announced the refinancing of our existing debt with a new $100,000,000 credit facility from which we took an initial draw of $60,000,000 A second tranche of up to $20,000,000 is available at our discretion until October 5, 2025 and a third tranche of up to $20,000,000 will become available upon approval of Eramacamole in each case subject to certain terms and conditions. As of June 30, 2024, total cash, cash equivalents and investments were $49,300,000 which was a decrease of $3,400,000 compared to March 31.

Speaker 3

Use of cash during the period was $17,400,000 offset by net proceeds of 14,000,000 dollars from our initial draw from our credit facility. Total long term debt was $58,300,000 as of June 30, 2024. As Neil mentioned earlier, we successfully completed a modestly sized underwritten public offering, which brought $64,500,000 in net proceeds to Zebra along with attracting a cadre of institutional investors well known in the biotech industry as long term supporters of innovation and solid execution. We issued approximately 10,600,000 shares at a price of $6.50 per share. This offering was significantly oversubscribed, which testifies to the strong sentiment around the potential of the several upcoming value creation opportunities for Zebra.

Speaker 3

Combining the net proceeds from this offering with our existing resources, pro form a June 30, 2024 cash, cash equivalents and investments is $113,800,000 Our cash runway now extends into Q1 2027. Pro form a common and fully diluted shares outstanding were 52,600,000 67,900,000 respectively. No warrants were issued in connection with this offering. It is important to note that our cash runway guidance is based on our current operating plan, available cash, cash equivalents and investments, including the additional cash received through our recently completed secondary offering and are subject to continued compliance with our debt covenants. Our forecast includes commercial revenue from the sales of Opruva, reimbursements from the French EAP for Aramocimel and ongoing royalties under the Astarus license agreement.

Speaker 3

It does not include commercial revenue from sales of aramoclimal nor the sale of the PRV, which would follow FDA approval. We are optimistic about the outlook and our focus is to create long term value for shareholders through disciplined execution against our plan in support of our mission to become a leading rare disease company. Now, we will turn the call over to the operator for questions.

Operator

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

Speaker 4

Hi, congratulations on all the progress this quarter and thanks for taking my questions. So I had a few for you. First question was how you think about Opryvaz sales in the second half of twenty twenty four? And then are you do you have any thoughts on initial thoughts on pricing for our Omokamol if it gets approved? And the last question is just on our Omoca Mall, the patent protection and marketing exclusivity.

Speaker 4

Thank you.

Speaker 2

Thanks, Louise. Why don't I start with the last question and I'll tee up the pricing and then I'll hand it off to Josh to talk a little bit about aramothamol and as well as Olpruva. In regards to the patent protection and marketing exclusivity for aramothamol, we rely on orphan drug exclusivity for up to 7 years. And then in regards to pricing for aramofamol, it's a little early for us to be talking about pricing as we're just now in the labeling discussions. But I think it's I want to make it clear to everybody that it is our goal to make Aramakimal as widely available as possible as we can.

Speaker 2

And with that, I'll hand it off to Josh to talk a little bit about what we've been doing around understanding the market for Aramarkamal around what we could do pricing as well as all proof of sales in the second half of twenty twenty four. Josh?

Speaker 5

With regards to Aramarkamal pricing, we have conducted pretty extensive market research with payers. And we've gone out and we've tested the clinical profile and really pressured them around responding to the value proposition and the clinical value of aramocamol for patients with MPC. I have to say that it's widely been viewed as what could potentially be foundational therapy if approved by payers. But of course, the final label will ultimately influence the final price and how payers view that. But we're working very closely with them.

Speaker 5

We're putting in place patient services and other resources to make sure that aramaximol will be as widely available to patients as possible. And then with regards to Ultruva in the second half, and I'd like to just remind everyone that the first half was really built or was really focused on building awareness where there was very little awareness within the prescribing community for Ultruva. We're very happy with the progress that the team made in terms of getting in front of prescribers and payers and really building that awareness across that prescribing community. And we have more than 75% covered lives for patients with UCD. We've also put in place some other resources and tactics including a free trial program and a demonstration program to be able to allow the physicians and prescribers to see how Ultralvoo works.

Speaker 5

And we've made a change to our specialty pharmacy. All of this, I think bodes well for the second half. And as we really begin to focus on building more awareness within the patient community, we're looking forward to seeing increased enrollment.

Speaker 1

Thank you.

Operator

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

Speaker 6

Thanks for the question and congratulations on all the progress. It's been an obviously transitional quarter. I guess after the AdCom, it seems like combination use with miglostat is going to be maybe occurring a little bit more than I maybe had expected. I just love to hear your thoughts around combination use in the real world once approved and how does that fit into your pricing thoughts? And then maybe also some initial kind of feedback you've heard from the patient advocacy groups post AdCom?

Speaker 2

Thanks. Thanks, Tim. I think let me handle your first question and then I might actually ask Josh to talk a little bit about the advocacy engagement and or Adrian. I think one of the things that's really important is you get what you study when it comes to labeling discussion. And we studied aramofol versus placebo with underlying routine care.

Speaker 2

And those patients could have been stratified to miglustat or some other kind of primary treatment that the patient had, but routine care I think was standard. And our discussions and in the adcom, and I think now as we're driving into our labeling discussions, you usually get what you studied. And for us, that's aramaxamol versus placebo. That's the outcome that we're looking for. So I can't But I do think that there's precedent around study, you get what you study.

Speaker 2

In regards to the initial feedback from the patient advocacy

Speaker 5

Yes. I think if anyone tuned into the advisory committee meeting 10 days or so ago, you would have seen overwhelming support for aramaximol from prescribers, caregivers and patients. And that really is a reflection of the benefits that many patients have received from aramofamol through our expanded access program and open label program. And as we move forward, we expect that supports it to really continue. I can also say that as we've gone out and we've talked with payers and physicians and done some market research and tested the profile, many of them really see aramocamol as the first approved drug for NeimanTik really is the foundation for therapy for these patients.

Operator

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

Speaker 7

Thank you for taking the questions. Let me add my congrats to the outcome of the AdCom. Just so I'm clear, you mentioned you've entered the first round of labeling comments with our discussion with the FDA. Can you say if you've actually had any explicit additional information requests or anything new you've had to provide in this process? I have a

Speaker 2

follow-up. Thanks, Oren. So the answer to your question is, we have gotten our 1st round of labeling negotiations. I think your second question was in regard into any specific information requests. We have received additional information requests, as you can imagine, throughout this process, you continue to get them.

Speaker 2

In regards to new data to be provided, we have not been at had any request to add new data more so than what has been shared specifically with the advisory committee.

Speaker 7

All right.

Speaker 2

Sorry, with the FDA, not the advisory committee, with the FDA.

Speaker 7

Okay. Perfect. Assuming you're approved in late September, do you have any expectations for timing for product availability given the significant overlap with Ultruva? I assume that would be relatively quickly. But I'm curious if you need to set up any different reimbursement support infrastructure, given this is a new indication unlike UCD.

Speaker 7

UCD. And in the MPC community and centers of excellence, I guess someone already asked the feedback post adcom. But I'm just curious if there's any are you getting the sense that there's any particular preparation or expectations there post adcoms? Are you hearing about warehousing of patients or any proactive outreach maybe to patients and families in anticipation of potential approval?

Speaker 2

Let me start by talking a little bit about the potential for our PDUFA at the end of September. We are on track in order to be able to have product in the channel within the customary timeframe, let's call it 8 to 12 weeks maybe even smaller than that, 8 to 10 weeks post launch, which is fairly standard. Let me turn it over to Josh to talk a little bit about new infrastructure and or the needs in the MPC community post the advisory committee.

Speaker 5

Yes. Hey, Oren. As a reminder, we built the commercial team to really focus not just on ALKUVA, but in anticipation of an approval and launch of aramofamol. So it is really right sized to be able to optimize both products. And we also have the benefit of having a team out there now talking to prescribers about UCD.

Speaker 5

Oftentimes these are the same physicians who are seeing Niemann Pick patients. And so our team is out there profiling some of these physicians, understanding where the patients are. Our team on the market access side is having conversations with payers on the clinical differentiation of aramofol and the need to treat. So the team is in place. We feel quite confident that it's right sized for both products.

Speaker 5

And we will be well positioned to begin commercialization as soon as drug is in the channel. In terms of where these patients are, we continue to work very closely with the investigators in our expanded access program. As a reminder, we've got more than 70 patients here in the U. S. Who are in that program, as well as other patients who are being seen by those same investigators who are eagerly awaiting the approval of veramofil.

Speaker 7

And I guess just lastly, you segued into the EAP patients. Is there any preparation you can do separate or in addition to standard market pre commercial activities with regard to this EAP population in particular since you know the patients and have relationships with them directly to some extent, is there anything you can do to expedite their transition to commercial product when this product is available as opposed to maybe what the process would be with a new patient?

Speaker 2

So thanks, Lauren. Couple of things. One is, I think number 1 is we should get on the table here is that we're going to continue to support these patients in the EAP program until we've got commercial supply and access for patients to be able to transition. Answering your second part of the question and we are working directly with investigators, not necessarily with patients directly, because recall the EAP program is still collecting data and we don't have direct hands on with patients. The next thing you asked about is in regards to can you set up your EAP program to allow for more seamless transition.

Speaker 2

So that I think I want to make it clear, it's our goal to be able to transition our EAP patients to commercial supply within the 1st year post launch. And that will allow us to be able to move on to other areas that we can collect data and real world data and other things that can help patients move forward. So there are things that we can do and we're working with those sites and investigators. One of them is around supply. We may give a 90 day supply then it may go to a 60 day supply.

Speaker 2

But we're doing this in a very cautious way to ensure that every patient continues to have access to the EAP and supply. I can't be more emphatic about the fact that we are here to make sure that we're taking care of these patients in the EAP until they can get transitioned.

Speaker 7

Thank you so much. I appreciate it.

Operator

Thank you. This does conclude the Q and A portion of today's call. I would now like to turn the call back over to Neil McFarlane for any additional or closing remarks.

Speaker 2

Thank you. We continue to make solid advances towards achieving our mission of building a leading patient focused rare disease therapeutics company. As we look to our upcoming catalysts in the second half of twenty twenty four, our priorities are clear and we look forward to updating you in the future. Thank you for

Operator

joining us today. This does conclude today's program. Thank you for your participation and you may now disconnect.

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Zevra Therapeutics Q2 2024
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