Savara Inc

NASDAQ:SVRA

Earnings Call Analysis

Earnings Call Transcript 2020-Q2

[Operator]

Welcome to the Savara conference call. At this time, all participants are in a listen-only mode. An audio webcast of this call will be available on the Investors section of Savara's Web site, at savarapharma.com. This call is subject to copyright and is the property of Savara. All recordings, reproduction, and transmission of this call without the expressed written consent of Savara is strictly prohibited. As a reminder, today’s call is being recorded.

I would now like to turn the call over to Anne Erickson, Head Investor Relations and Corporate Communications at Savara.

[Anne Erickson, Head Investor Relations]

Good afternoon and thank you for joining us today. A press release reporting our second quarter 2020 financial results was issued earlier today, August 6, 2020, and can be found on the Investors section of our Web site, at savarapharma.com. If you have not received this release or you would like to be added to the company’s distribution list, please e-mail me at [e-mail].

This call is also being webcast live, and one hour after the call a replay will be available on the company’s Web site, and will remain available for the next 30-days. A telephone replay will be available through August 13.

Today’s conference call and webcast contain forward-looking statements within the meaning of federal securities laws, including statements regarding the company’s strategy, goals, product candidates, clinical studies, and financing matters. Such statements are subject to significant risks and uncertainties, including those described in our press release issued today, Thursday, August 6, 2020, and our recent SEC filings on Forms 8-K, 10-K, and 10-Q.

Actual results or performance may differ materially from the expectations indicated by our forward-looking statements due to those risks and uncertainties. We caution you not to place undue reliance on any of the forward-looking statements, which speak only as of today. We will take analysts’ questions at the end of the call; however we encourage shareholders to submit questions via e-mail to [e-mail]. Time permitting; we will address these questions alongside any others received by our IR team.

Joining me on the call today are Rob Neville, Chief Executive Officer; Badrul Chowdhury, Chief

Medical Officer; Taneli Jouhikainen, President and Chief Business Officer; and Dave Lowrance, Chief Financial Officer.

I will now turn the call over to Rob.

[Robert Neville, Chief Executive Officer]

Thank you, Anne, and good afternoon, everybody. Let me start by saying that I’m pleased with the progress we are making across our top line. Most notably, the value program - estimate that we now have finalized design for the Phase III IMPALA 2 clinical study.

In a few minutes, Badrul will walk you through all the details. First let me share at the technical team has been working diligently to get the operational aspects of the study in place and finalize, so that we can get the study up and running as soon as possible.

One component of that work is taking prudent proactive steps to determine how to COVID proof the study as best we can. While we hope there will be no major disruptions from the virus, we are putting proactive measures in place to preserve the continuity of study to any geographies experienced a resurgence.

Examples of such measures include telemedicine - visits where possible. Separately, our manufacturing and drugs supply for IMPALA 2 is progressing as planned with no discernible impact on COVID.

On the topic of COVID, you may recall in March, we announced that due to practical limitations caused by the virus, we stopped enrolling patients in the Phase III AVAIL study and exploratory ENCORE study. Fortunately, we were able to keep the majority of enrolled patients in both and through post collaboration with the research centers, the studies continued.

Regarding AVAIL enrollment numbers were smaller than originally expected with 133 enrolled out of the target of 150 in the primary analysis population, and that being younger patients between six and 21 years old. The older patient population completed to 55 out of targeted 50. By enrolling fewer patients than expected in our primary population, there will be a reduction in its count.

Additionally, as we near the end of the study and think about the addressable nursing market we have to consider the impacts of Trikafta the newly approved CFTR modulator that has been transformative in the treatment of CF.

While this possible of AeroVanc could be affective when added to treatment with Trikafta the AVAIL study does not assess that combination. Regardless, we remain optimistic that AeroVanc may play an important role in the treatment of Mercer infections by addressing the needs of specific patients within the CF community. And we look forward to announcing top line results to the AVAIL study in early 2021.

With regard to ENCORE, that study was about 50% enrolled with 14 patients out of the target of 50 when enrollment was halted. As a reminder, ENCORE is - non controlled 48-weeks exploratory study evaluating alternatives to the treatment of nontuberculous mycobacterial or NTM lung infection the CX. Upon this conclusion, we will determine next steps for the NTM program which also include the exploratory OPTIMA studies in non CF patients, for which we announced applied results in March.

Lastly, let's turn to our U.S. development programs. Those of you not familiar, Apulmiq is an inhaled for classism and developed for the treatments of non-CF bronchitis. Our team is further analyzing the data from the previous studies that is [OVID 3 and OVID 4] (Ph), and working closely with bronchitis key opinion leaders worldwide on the design of a conservatory program for future discussions with the FDA.

After similar deliberations and discussions with the agency, you will have a better sense of the necessary resources to advance Apulmiq in the U.S. Options for financing and Phase III conservatory programs include partnering to various forms of project financing. With three Phase III programs in our top-line, the remainder of 2020 will be a very busy time operation. And importantly, we are confident about our ability to execute, as we believe we are sufficiently resourced through top-line results of AVAIL and IMPALA 2.

With that, I will pass the call over to Badrul, who will tell you more about our progress for the IMPALA 2.

[Badrul Chowdhury, Chief Medical Officer]

Thank you, Rob. And Hello, everyone. Last quarter, we outlined the expected design of the confirmatory IMPALA 2 study following our discussions with the FDA. As noted that we are working through some additional details of the study. That was done and we now have a protocol that incorporates suggestions from the FDA and EMEA.

New information of that is that the IMPALA 2 sample size will be 160 patients and we expect to start the study in the first quarter of 2021. It will be a double blind, placebo-controlled study with efficacy endpoints assessed by the week 24 for the primary analyses.

However the placebo control period will be 48-weeks to better assess the durability of treatment effect as well as long-term safety of the drug, which is intended to be administered chronically. Patients will be randomized in one of two arms, more than 300 micrograms administered dosed once daily or placebo administered once daily.

At the end of the consumer control period, both treatment arms will rolled over into 48-weeks open label follow on period, in which all patients will defeat no effects serum in micrograms administered once daily. While not requested by regulatory authorities, we believe follow on period will encourage patient enrollment, as it offers an incentive for patients to participate in the study. Additionally, it will provide useful information on the long-term safety of the drug.

The primary endpoint of IMPALA 2 to study will be the lung function test of diffusing capacity for carbon monoxide or DLCO. Three secondary endpoints designed to measure direct patient benefit will be evaluated. Those being St. George's Respiratory Questionnaire or SGRQ total score. SGRQ activity competence score and exercise capacity using a treadmill test. With the sample size 106 locations. IMPALA 2 is 90% powered to show a difference of 5.7% conducted improvement in DLCO after week 24 with drug and placebo has change from baseline.

From the IMPALA 2 study to be considered a winning study by the FDA and the EMEA, the statistical wing on the primary endpoint of DLCO will need to be supported by evidence of efficacy across multiple clinically meaningful endpoints. While the statistical event on the secondary endpoints is not required to transmit your data across secondary and its tertiary endpoints would be considered to assess efficacy.

Let me now compare some key elements of the IMPALA 2 studies with the first IMPALA study which completed in June of 2019.The primary endpoint for both studies is gas exchange measure. DLCO in IMPALA 2 AA gradient in IMPALA. DLCO by the second relation in the IMPALA study and showed the live separation between the ones till it goes in regimen and placebo. Due to treatment difference of 7.8% improvement of cloud over placebo at week 24.

In the IMPALA 2 study the DLCO is measured using a standardized testing procedure and all testing sites will use the same equipment which will not be the case in the IMPALA study. Therefore, we expect to have less variability in the DLCO data.

This let DLCO over AA gradient as the primary endpoint in IMPALA 2 for a variety of reasons, mainly it will standardize lung function test that is widely used in clinical practice. And when taking measurements, the DLCO test is [indiscernible] AA gradient those can be repeated at more time points.

Additionally, in the IMPALA study, the difference between the drug and placebo are more consistent for DLCO than superior gradient and given the standardized testing tool in IMPALA 2 we believe we can improve on the DLCO results. AA gradient which could be measured in IMPALA 2 but analyzed as an explanatory end point.

I would like to acknowledge that the use of supplemental oxygen during overflow blood measurement was the confounding factor in the IMPALA study that impacted the AA gradient calculation. The IMPALA study protocol allowed patients to remain on supplemental oxygen during our altered by sampling, if they could not discontinue.

The IMPALA 2 addresses the use of oxygen as a confounding factor by specifying that patients will need to come off supplemental oxygen and be tested by pulseoximetry to make sure blood oxygenation is stabilized before either gas exchange measurement.

Situations not be able to come off supplemental oxygen, we will not conduct either gas exchange measurement in these patients and data for such patients will be missing. The study and key criteria that ensure that enrolled patients can come off supplemental oxygen for a short time period.

However, it is possible that during the study the patients can use to progress particularly in the placebo arm and the patient will not be able to come off supplemental oxygen for a short time period time point in the study.

Now let’s review the secondary endpoints. SGRQ was resulted in IMPALA and as I mentioned before, with the use IMPALA 2 as well. SGRQ have three components, which are symptoms, activity and impact. SGRQ total score which will be a secondary endpoint and IMPALA 2 - all the components.

They should make a total for the secondary endpoint of IMPALA, the domestic and a nice separation between the daily dose and regimen and procedure. And in IMPALA 2, we separator outer structure activity as another secondary endpoint, as it is most applicable to aPAP and it also shows a nice separation in IMPALA.

As we mentioned a function, the IMPALA 2 study to assess capacity using a treadmill test as a secondary endpoint. The treadmill test is a standardized test for determining improvement in excise capacity to gradually increasing the speed and slope of a treadmill until the patient is stressed.

In contrast, the IMPALA study use six minute walk distance as a key secondary endpoint. Which showed in the medical trend, but it wasn't the [indiscernible]. Exercise treadmill test is expected to be discriminatory, because patients are stretched to the functional capacity.

Whole lung lavage is an important aspect in the treatment of aPAP patients. The first IMPALA study measured whole lung lavage as a key secondary endpoint. The percentage of patients who had whole lung lavage in IMPALA at about 10%.

In the IMPALA 2 study, we will recorded whole lung lavage as an exploratory end point. - to be double blind treatment period in IMPALA 2. We expect to have more patients under the whole lung lavage to compare between the drug and placebo.

The IMPALA 2 will have a total of 150 patients in two treatment arms, with 80 patients in each. In contrast, the IMPALA study had a total of 138 patients in three treatment arms with about 48 patients in each.

The IMPALA 2 study will only have one active treatment arm, and once daily dosing regimen. Because in policy should better treatment affect the one statement dose regiment compared to the intermittent dosing regimen.

Operationally, IMPALA 2 is conducted at approximately 50 sites across nearly 15 countries, including the U.S., Canada, Japan, South Korea, and select countries of Europe. It plans to try and open of all study centers as close together as possible. In contrast, IMPALA was conducted at 32 sites across 18 countries.

However, study centers are not activated at once. And consequently, patient enrollment ramped up gradually overtime. Once all IMPALA study centers are open, including sites in the U.S. that were added later. Peak enrollment rate for approximately 8eight to 10 patients per month.

Given that we plan to try and opening of all IMPALA 2 study sites around the same time. 20 of which will be in the U.S. and Canada. And constantly our experience and relationships with many of the centers that conducted the IMPALA study. We believe we can enroll IMPALA 2 with greater efficiency.

We will not regarding today of the timing for enrollment completion. Once all the centers have initiated and started recruiting, we will be in a better position to answer questions in this regard. There are no approved competent progress for aPAP in any country, not under any company clinical trials, which is favorable for IMPALA recruitment.

Additionally, we are stalking the IMPALA-X study, the continuation of the IMPALA study where approximately 60 patients are treated with Molgradex 300 micrograms of intermittent weekly regimen. Some patients come from IMPALA-X may be eligible for the IMPALA 2 study.

Over the last few months, we have had productive conversations with regulators in the U.S. and Europe, which have culminated in IMPALA study design that we are confident. Constructive discussions with the Japanese regulators ongoing, and we will keep you updated on most of the matters in this regard.

As I end my remarks, I want to mention that we are pleased to see that this rare disease is in the mind of the FDA as well. The agency and partnership with the PAP foundation as a national organization for rare disorders, recently hosted a patient listening session focused on tack.

These sessions for the agency to engage directly with patients or good advocates, on what it is like to low this rare disease, and to incorporate information from this session into their content. Patients are at the heart of a lot of research.

And we will happy to hear that people living with PAP could share the powerful stories with regulators. It is those stories that continually flow our drive to [indiscernible] for the treatment of this serious decease.

Thank you for your time today. I will hand over the call to Dave who will provide you with a financial update.

[David Lowrance, Chief Financial Officer]

Thanks, Badrul. And hello, everyone. Let me begin by updating you on our cash position. As of June 30, 2020, we had cash, cash equivalents and short-term investments were approximately 100 million with 25 million of debt. Under our current operating plan, including the anticipated second tranche of approximately 46 million from our December financing, we believe we have sufficient capital to fund our planned operations.

With respect to our second quarter results, Savara’s net loss attributable to common stockholders for the three months ended June 30, 2020, was 9.4 million for $0.16 per share, compared with a net loss of 21.9 million or $0.57 per share for the three months into June 30, 2019.

Research and development expenses decreased by 4.4 million or 42% to 6.1 million for the three months ended June 30, 2020 compared to 10.5 million for the three months ended June 30, 2019. The decrease was primarily related to 2.8 million in lower available study costs due to the wrap up of enrollment, the transition to processing the last patient out along with database management lock and reduction in related CMC and clinical operations activities.

Additionally, there was a decrease of approximately $1.6 million associated with our Molgradex for aPAP program as study activities associated with IMPALA and IMPALA X are wrapping up. And we are now preparing for the initiation of IMPALA 2.

General and administrative expenses decreased by $1.1 million, or 26% to $3.1 million for the three months ended June 30, 2020 for $4.2 million for the three months ended June 30, 2019. This decrease was mainly due to reduced commercial activities for the three months ended June 30, 2020.

I will conclude my remarks by reiterating that our cash position enabled us to execute upon our strategy and continue to work on our study initiatives now I will hand the call back to Rob.

[Robert Neville, Chief Executive Officer]

Thank you, Dave. And before we close the call today, I wanted to share my enthusiasm for the future, especially as it relates to our aPAP program and let me just tell you a few reasons why. First, the FDA describes his breakthrough therapy designation from Molgradex in aPAP. In addition, the mechanism of action for the drug in aPAP is well understood and the data from IMPALA study demonstrate the drug has beneficial effects.

We are in a great position with this program, we believe in Molgradex and came wells in the patients. And the investors on bank capital tell us they also believe in it and importantly our new CMO, Badrul who ran the FDA division responsible for overseeing such therapies also [indiscernible].

With the ability to apply key learnings from the IMPALA 2 protocol, and are incorporating input from the FDA and EMA into the study design. We believe IMPALA 2 has a high likelihood of success. We are strongly positioned to improve on the tasks and exceed expectations in the future.

We are grateful for the loyalty and the patience and support of our current investors. Given what we have with IMPALA 2 a drug that is believed to work in a study that's about start. And not to even mention our other phase III top-line programs. We feel the Savara investment thesis is strong and poised to grow stronger still.

As always, we thank you for your support. And we look forward to keeping you updated as milestones met. On that note, I would like to inform you that we will be transitioning away from quarterly call such as this way. And instead, hosting web cross supports throughout the year as needed. And with a frequency that is aligned with our news flow.

We will clearly continue to disclose our quarterly updates for a press release. And we will always alert you to any webcast course one week in advance, so that you can plan accordingly.

Now I will ask Jason to open up call for analysts questions.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] First question is from Michael Higgins from Ladenburg Thalmann, Please go ahead.

[Unidentified Analyst]

Good afternoon, guys this is [Edward] (Ph) on for Michael. I appreciate you taking the question and congrats on finalizing the design from IMPALA 2, just a couple questions on the design. I'm wondering you talked about 20 sites opening up in the US and Canada. I heard that correctly.

So just wondering how many you expect to be spread through the EU and Asia? And then in terms of the timing for releasing of the data, or the data itself, I'm just wondering with the EMA or the FDA will require the full 24-week or the full 48- week data before you are allowed start to put together something like an NDA.

[David Lowrance, Chief Financial Officer]

Our size in U.S. and Canada will be 2020 approximately. The total number is size is approximately 15. And the spread, we'll have about eight or nine countries in the EU. And also some sites in Japan and Korea. The spread will be more or less even across the EU and Japan and Korea.

So exactly global scale oxides. As far as the 24-weeks versus 48-weeks for the submission of an application to the FDA or the EMA. The 48-weeks is the placebo controlled time period so if mission will happen to the read out of the 48-weeks back.

[Unidentified Analyst]

Okay. Thank you for clarifying. And in terms of the aPAP asset. I'm wondering if when you anticipate having those FTA discussions and whether they be impacted by COVID. And you anticipate running this trial in tandem with IMPALA 2 or would you prefer to wait until you get that data come in?

[Robert Neville, Chief Executive Officer]

Let me answer that one. This is Rob. So we haven't guided yet. But our internal goal is to have those discussions with the FDA deployment as soon as feasible. Hopefully this year, if not early next year.

And then as far as running the study in parallel, yes, we believe we will do those in parallel. Once that study is up and - once the study design has been set. And we have done only internal planning from a clinical operations standpoint, they will most likely be an overlap.

[Unidentified Analyst]

Okay, perfect. I appreciate all the detail. Thanks and congrats again.

[Robert Neville, Chief Executive Officer]

Thanks. Good questions.

[Operator]

[Operator Instructions]. There are no more questions in the queue. I will now hand the call over to Anne Erickson to read any questions submitted through e-mail.

[Anne Erickson, Head Investor Relations]

One question submitted. So one concern is involved with the positive impact whole lung lavage had

on the AA ingredient. Is that also the case with DLCO?

[David Lowrance, Chief Financial Officer]

I'm going to take this question. We have said that [indiscernible] still benefit a patient even after undergoing a whole lung lavage. Contract the general belief that whole lung lavage improves gas transfer. Such an effect was not shown in the IMPALA study. Perhaps it is due to the lack disease severity of the patients syndrome.

Given enrolled patients in IMPALA 2 with similar disease severity, as was an IMPALA. In IMPALA, there was a noted improvement on the - surface change after a whole lung lavage. However, the improvement was for limited duration, and the patients disease progress. We anticipate that to change in IMPALA 2.

[Anne Erickson, Head Investor Relations]

Thank you, Jason. Are there any other questions?

[Operator]

No, there are no more questions in the queue.

[Robert Neville, Chief Executive Officer]

Okay. Thank you, Jason. Thank you everybody for taking the time to join our call. I appreciate it. Take care.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.