Zevra Therapeutics Inc

NASDAQ:ZVRA

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Hello, and thank you for joining the Zevra Therapeutics Q2 2024 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 Oschner, Vice President of Investor Relations and Corporate Communications for Zevra Therapeutics.

[Nichol Ochsner, executive]

Good afternoon, and thank you for joining us today to review Zevra Therapeutics progress in the second quarter of 2024

[Audio Gap]

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. 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-K.

I'm pleased to welcome Zevra's management team members participating in today's call. I'm joined by Neil McFarlane, President and Chief Executive Officer; LaDuane Clifton, our Chief Financial Officer; Josh Schafer, our Chief Commercial Officer and Executive Vice President of Business Development; and Adrian Quartel, our Chief Medical Officer.

Now I'll turn the call over to Neil.

[Neil McFarlane, executive]

Thank you, Nicole, and thank you all for making the time to join us today.

During the second quarter, we made steady progress executing on our strategic objectives, preparing for the advisory committee meeting and the potential launch of arimoclomol, driving the launch of OLPRUVA and advancing KP1077 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 2024, we made investor outreach a primary objective, highlighting the opportunities and catalysts for value creation that we have as a company. 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 arimoclomol, 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 $64.5 million to our balance sheet, bringing our pro forma June 30, 2024, cash, cash equivalents and investments to $113.8 million. 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 arimoclomol 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. Let's start with arimoclomol. Our product candidate for Niemann-Pick Disease Type C or NPC. On August 2nd, the genetic metabolic diseases Advisory Committee, or GMDC, voted favorably that arimoclomol 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 first round of labeling comments last Friday and are working closely with the FDA. If approved, arimoclomol would be the first 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. with NPC, of which approximately 1/3 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.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. We are actively preparing for the commercial launch of arimoclomol. Our commercial infrastructure was built to optimize the strategic fit between OLPRUVA and arimoclomol. 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 OLPRUVA 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 arimoclomol as a potential treatment for NPC. These prelaunch activities will help ensure patients have access once available.

Now turning to OLPRUVA where we continue to make process with the commercial launch initiated at the end of January 2024. Over the last few quarters, our assumption on the limited awareness of OLPRUVA has been confirmed. However, we've made progress with health care providers to increase awareness levels and identify that we have more work to do to increase patient awareness. As a reminder, there are 1,100 UCD patients in the U.S. of which more than 800 are receiving treatment. The prescribing community has identified a significant number of these patients who can benefit from OLPRUVA. While we are encouraged by their response, the number of patient enrollments is not yet where we would like it to be. During the second quarter, 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 is receiving a paid dispense. 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 approve coverage to 75% of covered lives with improved formulary status across health care plans and have established comprehensive patient services programs designed to assist with the reimbursement hurdles experienced by the rare disease community. 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 rebalance of our OLPRUVA 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 OLPRUVA launch and will have a positive impact on our commercialization efforts for arimoclomol with limited incremental cost.

Now I'd like to turn your attention to KP1077, 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, is comprised of SERDx-mepylpenidate or SDX, which was designed to steadily release the methylphenidate, its active ingredient. 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 for controlled substance by the U.S. Drug Enforcement Administration due to demonstrated lower risk or abuse potential. At the Sleep 2024 meeting in June, we presented the pharmacokinetics of SDX when administered in the morning and at night. 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 II 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 320 milligrams daily. Adverse events throughout the study were mild similar to other methylphenidate products and did not lead to early discontinuation. KP1077 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. We are encouraged by these results showing that KP1077 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 II meeting at the end of the third quarter. With only 1 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 II data to better understand KP1077's differentiated profile position in the treatment landscape and to inform our business case.

Finally, we've made progress with celiprolol, our product candidate for the treatment of vascular Ehlers-Danlos Syndrome or vEDS, which impairs call 3 A1 connective tissue and leads to vascular and hollow organ ruptures. Celiprolol'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. Celiprolol is the 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. Celiprolol has received both orphan drug and breakthrough therapy designations from the FDA. During the second quarter, we restarted recruitment of the celiprolol Phase III 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 beds 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. 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: first, to receive approval and successfully launch arimoclomol by leveraging the infrastructure built for OLPRUVA; Second, to drive the launch of OLPRUVA; and third, to discuss the design for a pivotal study evaluating the efficacy of KP1077 in patients with IH in our end of Phase II meeting at the end of Q3.

We remain focused on execution to deliver a strong second half of 2024 and are well positioned financially to execute against those objectives.

Now LaDuane will provide an update on our financial results.

[R. Clifton, executive]

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 second quarter, and our financial results also reflect discipline in our capital allocation to drive towards success in reaching our strategic objectives. Our second quarter results included net revenue of $4.4 million, which includes $3.1 million in net reimbursements from the French EAP for arimoclomol and $1.3 million of royalties and other reimbursements under the stars license. For our commercial product, OLPRUVA, we recognize commercial product revenue when shipments are received by our specialty pharmacy. 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 de minimis revenue 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 $3.2 million obsolescence reserve against OLPRUVA inventory, which is nearing expiration. This excess inventory was ordered prior to our acquisition of Acer and the previous delay in the products launch impacted the rate of usage, leading to the need for this reserve to be recognized in the quarter. Our R&D expenses for the second quarter were $10.5 million, which is a slight decrease compared to the first quarter of 2024 and primarily due to the completion of the KP1077 Phase II trial.

Selling, general and administrative expenses were $12.6 million during second 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 approval. Net loss for Q2 2024 was $19.9 million 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 million credit facility from which we took an initial draw of $60 million. A second tranche of up to $20 million is available at our discretion until October 5, 2025. And a third tranche of up to $20 million will become available upon approval of arimoclomol in each case, subject to certain terms and conditions. As of June 30, 2024, total cash, cash equivalents and investments were $49.3 million, which was a decrease of $3.4 million compared to March 31st. Use of cash during the period was $17.4 million, offset by net proceeds of $14 million from our initial draw from our credit facility. Total long-term debt was $58.3 million as of June 30, 2024.

As Neil mentioned earlier, we successfully completed a modestly sized underwritten public offering, which brought $64.5 million in net proceeds to Zevra, 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 10.6 million 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 Zevra. Combining the net proceeds from this offering with our existing resources, pro forma June 30, 2024, cash, cash equivalents and investments is $113.8 million. Our cash runway now extends into Q1 2027.

Pro forma common and fully diluted shares outstanding were $52.6 million and $67.9 million, respectively. No warrants were issued in connection with this offering. It is important to note that our cash run rate 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 OLPRUVA reimbursements from the French EAP for arimoclomol and ongoing royalties under the AZSTARYS license agreement. It does not include commercial revenue from sales of arimoclomol 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]

[Operator Instructions] We'll take our first question from Louise Chen with Cantor.

[Louise Chen, analyst]

Congratulations on all the progress this quarter. So I had a few for you. First question was how you think about OLPRUVA sales in the second half of '24, and then are you -- do you have any thoughts on initial thoughts on pricing for arimoclomol, if it gets approved? And then last question is just on arimoclomol, the patent protection and marketing exclusivity.

[R. Clifton, executive]

Thanks, Louis. 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 arimoclomol and as well as OLPRUVA. In regards to the patent protection and marketing exclusivity for arimoclomol, we rely on orphan drug exclusivity for up to 7 years. And then in regards to pricing for arimoclomol, 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 arimoclomol is widely available as possible as we can. 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 arimoclomol around what we could do for pricing as well as OLPRUVA sales in the second half of 2024. Josh?

[Joshua Schafer, executive]

Yes. With regards to arimoclomol 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 arimoclomol for patients with NPC. 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, and we're putting in place patient services and other resources to make sure that arimoclomol will be as widely available to patients as possible. And then with regards to OLPRUVA in the second half. And I'd like to just remind everyone that the first half was really built was really focused on building awareness where there was very little awareness within the prescribing community for OLPRUVA. We're very happy with the progress 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 OLPRUVA works. 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 enrollments.

[Operator]

We'll take our next question from Tim Lugo with William Blair.

[Tim Lugo, analyst]

Congratulations on all the progress, obviously, a transitional quarter. I guess after the AdCom, it seems like combination use with miglustat is going to be maybe occurring a little bit more than I maybe had expected. I'd 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 initial kind of feedback you've heard from the patient activity groups post AdCom.

[Neil McFarlane, executive]

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 arimoclomol versus placebo with underlying routine care. And those patients could have been stratified to miglustat or some other kind of primary treatment that the patient had a routine care, I think, was standard. And our discussions and the AdCom, we -- and I think now as we're driving into our labeling discussions, you usually get what you studied. And for us, that's arimoclomol versus placebo. That's the outcome that we're looking for. So I can't talk more about the combination therapy at this point in the game because we're in the process of round 1. But I do think that there's precedent around study -- you get what you study. In regards to the initial feedback from the patient advocacy organizations, let me ask Josh to talk a little bit about where we're seeing some excitement from the advocacy organizations today.

[R. Clifton, executive]

Yes. I think if anyone tuned into the advisory committee meeting 10 days or so ago, you would have seen overwhelming support for arimoclomol from prescribers, caregivers and patients. And that really is a reflection of the benefits that many patients have received from arimoclomol through our expanded access program and open-label program. And as we move forward, we expect that support 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 arimoclomol as the first approved drug for Neiman tick really is the foundation for therapy for these patients.

Operator.

[Operator]

[Operator Instructions] We'll take our next question from Oren Livnat with H.C. Wainwright.

[Oren Livnat, analyst]

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 the discussions 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? And I have follow-ups.

[Neil McFarlane, executive]

So the answer to your question is, we have gotten our first round of label negotiations. And 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 as you continue to get them. In regards to new data to be provided, we have not been -- had any request to add new data more so than what has been shared specifically with the advisory committee.

[Oren Livnat, analyst]

All right...

[Neil McFarlane, executive]

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

[Oren Livnat, analyst]

Okay. Perfect. Assuming you're approved in late September, do you have any expectations for timing for product availability, given the significant overlap with OLPRUVA.I assume that will 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. And in the NPC community and centers of excellence, I guess I'm going already asked about the feedback post AdCom, but I'm just curious if there's any -- you didn't sene that there's any particular preparation or expectations there post AdCom? Are you hearing about warehousing of patients or any proactive outreach maybe to patients and families in anticipation of potential approval?

[R. Clifton, executive]

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 time frame, 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 NPC community post the advisory committee.

[Neil McFarlane, executive]

Oren, as a reminder, we built the commercial team really focused not just on OLPRUVA, but in anticipation of an approval and launch of arimoclomol. So it is really rightsized to be able to optimize both products. And we also have the benefit of having a team out there now talking to prescribers about oftentimes, these are the same physicians who are seeing Neiman 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 arimoclomol and the need to treat. So the team is in place. We feel quite confident that it's rightsized for both products. 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 were being seen by those same investigators who are eagerly awaiting the approval of arimoclomol.

[Oren Livnat, analyst]

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 products when this product is available as opposed to maybe what the process would be with a new patient?

[R. Clifton, executive]

So thanks, Oren. A couple of things. One is, I think, number one, we should get on the table here so 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 to direct the hands on with patients. The next thing you asked about is in regard to, can you set up your EAP program to allow for more seamless transition to 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 first 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. 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.

[Operator]

This does conclude the Q&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.

[Neil McFarlane, executive]

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 2024, our priorities are clear. and we look forward to updating you in the future. Thank you for joining us today.

[Operator]

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