Acasti Pharma Inc. (ACST) on Q3 2021 Results - Earnings Call Transcript
Operator: Good day, ladies and gentlemen, and welcome to the Acasti Pharma Second Quarter 2022, earnings call. At this time all participants have been placed on a listen-only mode and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldmann of Investor Relations. Sir, the floor is yours.
David Waldman: Thank you. And good afternoon, everyone. I would like to welcome you to Acasti Pharma's Fiscal 2022, Second-Quarter Conference Call. On the call with us this afternoon are, Jan D'Alvise, President and CEO, Dr. Pierre Lemieux, Chief Operating Officer, Canada, Chief Scientific Officer, and Co-Founder, Dr. George Kottayil, Chief Operating Officer, U.S., Brian Ford, Chief Financial Officer, and Prashant Kohli, VP of Commercial Operations. We are planning for Q&A session at the end of our prepared remarks. But if you have any remaining questions after the call, or would like any additional information about the Company, please contact Crescendo Communications at . 200. I'd also like to remind everyone that statements on this conference call that are not statements of historical or current facts constitute forward-looking information within the meaning of the Canadian securities laws and forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. The Securities Act of 1933, and the Securities in exchange act 1934. Such forward-looking statements involve known and unknown risks and uncertainties and other unknown factors that could cause the actual results of a custody to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describes such risks and uncertainties, readers are urged to consider statements labeled with terms belief expects, intends anticipates potential should may will plans continue targeted or other similar expressions to be uncertain forward-looking listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this conference call. Forward-looking statements during this conference, call may include but are not limited to the success and timing of regulatory submissions of the PK bridging study for GTX 104 and a cost sees other pre -clinical and clinical trials, regulatory requirements or developments changes to clinical trial designs and regulatory pathways, legislative, regulatory, political and economic developments. Across these predicted cash position operating runaway, and the effects of COVID-19 on clinical programs and business operations. The forward-looking statements contained in this conference call are expressly qualified in their entirety by this cautionary statement, the cautionary note regarding forward-looking information section contained in Acasti last quarterly report on Form-10-Q. And most recent management's discussion analysis, which will be available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov, and on the Investors section of the Acasti's website at www.acastipharma.com. All forward-looking statement in this conference call are made as the date of the conference call. Acasti do not undertake to update any such forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. The forward-looking statements contained herein are also subject generally to assumptions and risks and uncertainties that are described from time to time in Acasti's public securities filings with the Securities and Exchange Commission and the Canadian Securities Commissions, including Acasti's quarterly report on Form 10-Q and most recent MD&A. In addition, any forward-looking statements represent Acasti's views as of today and should not be relied upon as representing our views of any subsequent date. While Acasti might update forward-looking statements at some point in the future. Unless legally required under applicable securities law, Acasti specifically disclaims any obligation to do so. I'd now like to turn the call over to Jan D'Alvise, please go ahead, Jan.
Jan D’Alvise: Thank you, David. And I'd like to welcome everyone on the call today. The second quarter was truly transformational for Acasti. As you know, we successfully completed the merger with Grace Therapeutics in August, creating a premier clinical stage, specialty pharma Company, focused on rare and orphan diseases. We now have a diverse technology and product portfolio comprised of unique drug delivery capabilities, and several clinical and pre -clinical stage drug assets. Our lead clinical drug candidates have been specifically designed and formulated to enhance efficacy and safety by providing faster onset of action and reduce side effects. All are being more conveniently delivered, which can ultimately increase patient compliance, and potentially lead to improved clinical outcomes. This acquisition brings us new and exciting opportunities in sizable orphan disease markets with substantial unmet medical needs. I'm really pleased to report that in the short time since completing the merger, we've achieved meaningful progress both in terms of clinical development and business operations. We've swiftly and smoothly integrated the grace in place with Acasti, and we're now laser-focused on advancing our clinical pipeline. Towards this end immediately following the closing of the acquisition, we commenced enrollment for our pivotal pharmacokinetic bridging study for GTX 104, our novel Aquia formulation of Nimodipine that's being developed as an IV infusion for patients experiencing subarachnoid hemorrhage or SAH, those triggered by an aneurysm. This important study is the next required step in the proposed 505B2 regulatory pathway and is being conducted in 50 healthy subjects as a single-center randomized two period crossover study. The primary objective of the study is to evaluate and compare the relative bio-availability of GTX 104, with the currently marketed oral Nimodipine capsules, which are the standard of care. The second objective, is to assess the safety and tolerability of GTX 104, as compared to oral Nimodipine capsules. For the study protocol, subjects will be randomized, assigned to in a one-to-one ratio, to 1 of 2 treatment sequences with a cross-over design. So Group A, will switch to Group B, where GTX 104 is administered first. Or Group B will switch to Group A, where oral Nimodipine capsules are administered first. In both groups, GTX 104 and Nimodipine will be administered intravenously over a 72-hour period. And Nimodipine will be administered orally via 230-milligram capsules with water every 4 hours for 72 hours. Throughout the study, we will be conducting safety evaluations which will include capturing any treatment emergent adverse events, serious adverse events, electrocardiogram data, clinical laboratory evaluations, physical examinations, and resting vital signs, which will include very importantly blood pressure. Subjects will be admitted to the clinical research unit or the CRU on the day prior to dosing. And they will remain domiciled in the CRU for the duration of each study period. Again, the goal of this pivotal study is to achieve blood levels with our GCCe formulation that are comparable to the oral form of the drug that is in routine use today. As previously announced, we expect to report results during the first half of calendar 2022, based on the previous encouraging results from the PK study conducted by grace, we remain optimistic that this pivotal PK study will achieve its primary and secondary endpoints. Following the data readout and its subsequent review with the FDA, we intend to determine the final design of our planned Phase III safety study for GTX 104., assuming the PK study and the FDA meetings proceed as planned, we intend to commence the Phase 3 study, in the second half of next year, calendar 2020. Both the PK study and the initiation of the Phase 3 safety study, are very important near-term, and very meaningful catalysts for the Company. As a reminder, SAH is a rare and life-threatening medical emergency, where bleeding occurs over the surface of the brain in the subarachnoid space between the brain and the skull. It's estimated to affect about, 50,000 patients per year, representing an estimated addressable market of more than $300 million in the United States alone. As they typically occurs quickly in the key to patient survival is prompt medical intervention. Normally it requires immediate surgery and on average, about 2 weeks in a neuro intensive care unit to try to prevent death and reduce the risk of long-term disability. Patients typically remain on Nimodipine throughout their stay in the Neuro ICU. Nimodipine is currently only available in an oral dosage form in the United States and many of these patients come into the hospital unconscious or have a hard time swallowing during their hospital stay. Therefore, we believe GTX-104 delivered intravenously could be a much more convenient and efficient way to deliver nimodipine. And importantly, because of its better absorption profile and more consistent blood levels, GTX-104 could potentially provide physicians with a more effective tool for hypertension management. This advantage is really important as GTX-104 could help to reduce the incidents of vasospasm, which requires immediate, aggressive, and costly intervention, and can lead to worse outcomes for the patient. Also, please note that GTX-104 has been granted Orphan Drug Designation status by the FDA. This provides us with the potential for 7 years of market exclusivity in the United States. Provided that, we see a similar safety profile to oral Nimodipine upon completion of the Phase 3 study, we could then expect to proceed with the filing of an NDA, using the Orphan Drug Designation and the 505(b)(2) pathway. We're very excited about GTX-104 's potential, and we look forward to updating you as we progress towards the achievement of these important near-term catalysts. Now, regarding our other two clinical candidates, GTX-101 and GTX-102, we've recently been awarded for composition of matter patents between the 2 drugs. The European Patent Office, the Chinese Patent Office and the Mexican Patent Office, all have issued composition of matter patents for GTX-101, which is our novel bioadhesive film forming topical spray formulation of Bupivacaine for the treatment of postherpetic neuralgia or PHN. And as a reminder, PHN is a persistent and often debilitating neuropathic pain, which is caused by nerve damage from the shingles virus. In fact, it's still loss in sighted as the leading cause of suicide in chronic pain patients over the age of 70. It's also been reported that PHN affects approximately a 150 thousand patients per year in the United States alone, which represents an estimated addressable market of about $400 million. Based on encouraging results from a Phase one PK study conducted previously by grace, we believe that GTx 101 by delivery mechanism has the potential for rapid onset, as well as continuous pain relief for up to 8 hours. This could be a significant improvement over the standard of care, then it could potentially provide physicians and patients with an opioid sparing alternative. As bupivacaine. is well understood, it's safe and it's a non-habit forming, non-narcotic analgesic. We plan to conduct single and multiple ascending dose or SAD MAD studies with GTx 101 next year. And we expect to report those results by the end of calendar 2022. Furthermore, we intend to initiate a phase two study shortly after reporting this SAD MAD data. Now turning to GTX-102, the Japanese patent office recently granted a cost DEA composition of matter patent for this novel concentrated, easy-to-use oral mucosal spray formulation of betamethazone. We're developing this to improve the neurological symptoms of ataxia-telangiectasia or A-T. Now, A-T is a progressive neurodegenerative genetic disease that's typically diagnosed in children at a very young age. It causes severe disability as it affects many parts of the body, including areas of the brain which impact their motor function and their speech. A-T is also associated with the weakening of the immune system, predisposing these patients to infection and cancers. Sadly, A-T patients typically die in their mid-20s. This disease unfortunately affects about 4,300 patients per year in the United States, creating an estimated addressable market of about $150 million. Now based on an independent study conducted in Italy, with an oral liquid form of bethametasone, we believe GTx 102's novel concentrated oral Mucosal Spray Formulation, has the potential to simplify drug administration and improve, the symptoms of AT. Including posture and gate disturbance, as well as kinetic and speech functions. Therefore, we believe that GTx 104 could address a very important unmet medical need as no FDA approved Pharmaco therapies currently exist. In the near-term, we plan to conduct a pharmacokinetic bridging study comparing blood levels of GTX 102 to a reference product containing beta. We anticipate reporting those results by the end of next year. Assuming this trial is successful, we would then move forward quickly to conduct a confirmatory Phase III safety and efficacy trial in patients with A-T. These newly granted composition on matter patents, are very important additions to our already strong and established Intellectual Property portfolio. As they provide protection beyond 2036 and create potential opportunities for partnering in these major international markets. I hope you're as pleased as we are, by the meaningful progress that, has already been made in the two short months, since we completed the merger. We look forward to reporting on progress next quarter, as we continue to advance our lead drug candidates through clinical development and ultimately to commercialization. So with those operating updates, I'll now turn the call over to Brian Ford, our CFO to discuss our financial results for fiscal Q2. Brian.
Brian Ford: Thank you, Jan. And good afternoon, everyone. Turning to our results for the quarter, R&D expenses before depreciation, amortization, and stock-based compensation expenses, for the three months ended September 30th 2021, totaled $0.55 million compared to $0.81 million for the same three months ended September 30th, 2020, In that decrease was mainly attributable to the reduction in professional fees within the research and development departments, associated with the completed TRILOGY trials, as well as the reversal of prior period provision after assessments and correspondence from tax authorities. There were no significant R&D costs in Q2, related to the acquired assets from Grace, as these programs only began to ramp up, as of September 2021. General Administrative expenses before stock-based compensation expenses for the three months ended September 30, 2021 were $2.9 million compared to $1.1 million for the three months ended September 30, 2020. This increase was a result of increased legal, tax, and accounting, and other professional fees related to the Grace Therapeutics transaction. Loss from operating activities for the 3 months ended September 30th, 2021 was $3.6 million compared to a loss of $8 million for the 3 months ended September 30th, 2020, the reduction was mainly due to a reduction in and sales and marketing expenses offset by an increase in general and admin expenses as a result of increased legal tax, tax, accounting, and other professional fees related to the great transaction for the 3 months ended September 30th, 2021. The Company also recognized 5.3 million of impairment charges, including $3.7 million related to the intangible assets and $1.6 million related to production on lab equipment for the complete program. And that was back in 2020. Net income for the 3 months ended September 30th, 2021 was 1 million or roughly $0.03 a share compared to a net loss of 6.1 million for $0.52 per share for the 3 months ended September 30th, 2020. The increase resulted primarily from a gain of $4.5 million, due mostly to a decrease in the fair value of the derivative warrant liability, as well as the decrease in R&D expenses in the trilogy Phase III clinical program was completed. Cash equivalents and short-term investments totaled $50.8 million as of September 30th, 2021, compared to $11.6 million in cash and cash equivalents at September 30th, 2020. Based on management's current projections, Acasti believes that our existing cash provides at least 2 years of operating runway. Also during the quarter as Jan mentioned earlier, we completed the acquisition of a merger with Grace Therapeutics through the issuance of 18.2 million shares that have the value of $60.8 million. Upon completion of the transaction, the Company recognized acquired intangible assets of $65.2 million, primarily related to the development assets Finally, in addition to our quarterly filing, I should report that we also filed a prospectus supplement related to our existing at-the-market or ATM facility to update our disclosures and restore available capacity to 75 billion under the terms of the related sales agreements and prospects to supplement the cash you may from time-to-time issuance of common shares have an aggregate offering value of up to 75 million. I would remind our shareholders that we currently have an estimated 2 years of operating capital that will fund several major catalysts, including the completion of our GTX-104 program. This filing of the ATM perspective supplement was simply a good housekeeping activity to regain the active status of the facility following the merger. We have no obligation or plans to use the ATM in the future. And we would only use it prudently and opportunistically with a goal to minimize shareholder dilution. With that, I will now turn the call back over to Jan. Jan?
Jan D’Alvise: Super thanks, Brian. That concludes our prepared remarks. Now we'd like to open the call to any questions. Operator, do we have any in the queue?
Operator: Ladies and gentlemen, the floor is now open for questions. . . Please hold while we poll for questions. Your first question for today is coming from Nicole Kaufman. Please announce your affiliation then pose your question.
Nicole Kaufman: Hi. Thank you. I'm with Blackridge Capital. I want to congratulate you guys on the progress so far. I do have a few questions. First, Jim, do you mind elaborating on the importance of the PK study. And then the expected timing of the Phase III of GTX 104.
Jan D’Alvise: Sure. Thanks, Nicole, appreciate the question. And thanks for attending today. I assume you're referring to GTX-104, our IV formulation of Nimodipine. Is that correct?
Nicole Kaufman: Correct.
Jan D’Alvise: Yes. So that study is well underway. We refer to it as a pivotal trial. The key here is again, being able to compare our blood levels of our IV infusion to the orally administered Nimodipine. And if we can show a comparison between the two, then we'll be able to proceed directly to our Phase 3 safety study. And again, the PK study is underway. We expect results in the first half of next year. And we would expect them to be able to start the Phase 3 safety study in the second half of next year. So certainly before year-end.
Nicole Kaufman: Then, great. And then a follow-on to that, what would be your commercial strategy following the approval?
Jan D’Alvise: Yes. Great question. So with GTX-104, it's -- we're targeting a fairly concentrated market. We'll be focused on the major Neuro ICU centers around the country. We believe that, we can reach those centers ourselves with a small, very targeted commercial team. We feel that, we can do that very cost effectively, and it gives us control of the product. So that would be our plan with GTX 104. I think it would be our plan as well with GTX 102. That's even a smaller, more concentrated market. There's probably about a dozen centers in the United States that treat these kids with, A-T. The most important center is Johns Hopkins. They probably treat about 50% of the patients in the United States. And we're very pleased that they're working with us and will be part of our clinical trial program. So I think it will be very easy for us to reach those markets directly ourselves. On the other hand, GTX-101 is a very large market and the physicians that are primarily prescribing our PCPs, primary care physicians. And so for GTX-101 will likely seek a commercial partnership in the United States. And as we will outside of the U.S. really for all of our drug assets.
Nicole Kaufman: Thank you very much. I appreciate the detailed response to add them. I look forward to hearing more development sort of you guys. I'll jump back in the queue if I have further questions.
Jan D’Alvise: Thanks, Nicole, appreciate it. Have a good day.
Operator: Once again, .You do have a follow-up question coming from Nicole. Nicole, your line is live.
Nicole Kaufman: Hi. Again, I do have another question. So thanks for taking me again. I see you do have sufficient cash. Can you explain how you're going to be deploying that and your plans for it?
Jan D’Alvise: Yes, sure. Happy to do that. It's difficult to precisely estimate the total cost of each of these programs at this point. We don't have final design, for example, for the Phase 3 programs for each of these products. But we will be getting that tremendous amount of input from the FDA over the next year, as we complete our Phase 1 PK programs and getting input into the Phase 3 in case of GTX-104 and 102. With GTX-101, we do expect will proceed to a Phase 2 next year. But the current cash that we have, we believe is adequate to take us through complete development through Phase 3 of GTX-104, and it should significantly advance both GTX-102 and 101. So I don't know if that answered your question, Nicole. Can I expand on that?
Nicole Kaufman: No, I think that's great. That answered my question. I appreciate the time, Jan.
Jan D’Alvise: You bet. Yeah, thanks again.
Operator: I would now like to turn the floor back over to Jim Caldwell. Your line is live.
Jim Caldwell: Thank you. Hello, Jan. Just wondering if you could outline what's happening with CaPre. And the second question is, do we have some investment firms that we're following Acasti beforehand with CaPre? I'm just wondering if they're still on the scene.
Jan D’Alvise: Yeah. Thanks, Jim. Great to hear your voice. Thanks for the question. With CaPre, what I can tell you is, as we've stated previously, we are continuing to evaluate several strategic options for CaPre and those are progressing will continue to keep you apprised. As this progress -- process progresses. So we'll keep you posted on that. And your second question. Yeah, we're very, very hopeful that will be able to pick up coverage, analyst coverage with some additional firms in the near future. But I really don't have, I can't really comment on the timing as because I don't have any insight into the timing at this point.
Jim Caldwell: Okay. Thank you.
Jan D’Alvise: Thanks, Jim.
Operator: Your next question is coming from Sean Canavan. Your line is live.
Sean Canavan: Hey Jan, good afternoon. Coming from a shareholder, question I have for you is, we were going back to Ford, would be Investor Relations teams. I mean, even yourself on several calls. There's a lot of shareholders impacted with that reverse stock split. What is the plan moving forward to kind of recoup some of that? Right. And not being that you guys said that was the absolute last resort, what do you guys do prior to that before beginning the last resort?
Jan D’Alvise: You're speaking the reverse split. Yes. We worked with NASDAQ to try to delay the implementation. Hoping that, the market would react to the news of our merger with Grace. That did not happen and we simply ran out of time. In order to maintain our listing, NASDAQ required that, we get our share price backup above $1. So we really had to implement that, at the time that we did. And now honestly, all we can do I think is, really focused on execution. And I hope you can see that, we've made significant progress in the last two months just since the merger. We have a number of studies either underway or about to start. These are very important catalysts for the Company. And I think we'll have the potential to create a lot of value as we go forward. And it's also up to us to get the word out. I mean, what I'm realizing that, is that so many of our investors really don't understand the new business of Acasti. They're not familiar with the assets. I think we've got to get out and we've got to educate, we've got to communicate, and we are doing that now. We're going to a number of conferences. We've been to several just since the acquisition was completed. We have participated in a number of interviews. We've had a couple of publications. We just need to do more of that, Sean. And I think if we can show in a very short period of time, for example, I mentioned that we'll have our PK results in the first half of next year. If we can start showing results with additional studies following that one, then I think -- the Company will -- should be able to significantly improve our value. I know it's frustrating. We're all frustrated over it, but we really did the best we could to postpone doing the reverse split to the very last moment.
Sean Canavan: I heard the same thing prior to the reverse split, but again, I'm all on with you guys, got my fingers crossed.
Jan D’Alvise: Yeah. Well, just let's see what we definitely plan to show you we can execute. We've got a great team and we're well underway with the PK trial. And as I mentioned to Nicole, this is really a pivotal study. These results are very important, the safety of Nimodipine is well accepted. The fact that all that we have to do after this pivotal PK trial is a safety study, it bodes well for our ability to get approval of GTX 104. And so we've just got to keep putting one foot ahead of the other here and I think we've got the team to do it, we've got some exciting assets, so you're going to see a number of catalysts over the next year that, I think, hopefully will make a difference. We appreciate your hanging in there.
Sean Canavan: Thank you.
Operator: Your next question is coming from Sahil Kathmi. Your line is live.
Sahil Khathmi: Hi, Jan and team. Thanks so much for taking our questions and congratulations on all the progress. Just a couple of brief one from us. Curious about how you're thinking about the commercial potential here across both 104 and 102? And how that might differ across the different geographies, whether be in the U.S. or the EU? Are there certain prescribers you're targeting? And just in general, how should we think about the ramp as we go into the PK study through the safety study and then into 2023?
Jan D’Alvise: Yes, great. Sahil, thank you for joining today, appreciate it. I'll turn this question over to Prashant. Prashant is our VP of Commercial Operations. Prashant, can you respond on the commercial question?
Prashant Kohli: Sure happy to. in terms of -- I will just take them one at a time, 104 and then 102. 104 has Jan alluded to the market is fairly concentrated through the comprehensive and advanced stroke centers in the country. We believe based on the segmentation and the market analysis that we have conducted, there are about 400 such centers in the country that handle about 70% of the patient volume. So with the relatively small footprint of sales force, highly experienced hospital. Based sales force, we believe we can cover a major portion of the market. GTX-104, which is an IV formulation of nimodipine, we believe has potential outside the U.S. as well. There is a intravenous formulation of nimodipine available in certain geographies in Europe. However, there are significant benefits to our formulation, the biggest one being that it can be peripherally infused as opposed to a central line, which adds a lot of complexity bedside. So we believe that there is a strong value proposition outside the U.S. and opportunistically, we plan on partnering for those or such opportunities. For GTX-102, once again, Jan mentioned, that's a very -- that's a much smaller market from a clinical perspective. There are about a dozen such centers in the country. So with a relatively small sales force we can capture a lot of the value and cover those markets. Similar to 104, our plans are to partner with international biopharma to take our drug to those markets. Does that help answer the question?
Sahil Khathmi: Yeah, I now. Thanks so much. Great. And then just a brief follow-up on 104. From our perspective it looks like a relatively de -risk path forward here. But if you can talk about pending the PK study, a little bit more color on what that sort of Phase III pivotal safety study might look like from a design perspective. And maybe when you plan to read that out as well.
Jan D’Alvise: Yeah. So, I'll give you a brief answer here and then Pierre or George could jump in. Ultimately, we're going to have to sit down with the FDA but preliminary discussions would indicate that we would need maybe about 100 patients. So it's not a big study. And again, the important focus of the study is going to be on safety. And again, what we've seen so far with the IV form of Nimodipine is that it may in fact even be more safe or have a reduced number of adverse events, as compared to the oral. Simply because, it's easier to control the administration and you see less variability in terms of blood levels. So this could be important. And I think the other thing to mention is, while it's not required for the design of this study, we do want to collect some Pharmaco economic endpoint data. Because we do believe that, this will be a very important aspect or benefit of our IV formulation. For example, we believe that, it's going to require less nursing time, less prone to medication errors. Certainly want to capture, whether there's a reduction in the any sort of rescue therapy that's required. And ultimately, does it lead to a shorter stay in the ICU? Do these patients -- are the outcomes better? So these are the sorts of things that, we want to collect. It won't be designed as an outcome trial, but we'll be able to collect data, such as I described. And then our thoughts would be to try to publish that data.
Sahil Khathmi: Excellent. Thanks so much. And once again, congrats on the progress, we look forward to following the story.
Jan D’Alvise: Yes. Thanks, Sahil. Really appreciate it. Take care.
