Trevena, Inc. (TRVN) Q1 2018 Earnings Call Transcript

Jonathan Violin - SVP, Scientific Affairs & IR Officer Maxine Gowen - CEO, President & Executive Director Carrie Bourdow - EVP & COO Roberto Cuca - Former CFO, Senior VP, Treasurer & Principal Accounting Officer

Douglas Buchanan - JMP Securities Antonio Arce - H.C. Wainwright & Co. Biren Amin - Jefferies

Good day, ladies and gentlemen, and welcome to the Trevena Inc. First Quarter 2018 Conference Call. [Operator Instructions]. As a reminder, today's conference is being recorded. I'd now like to turn the call over to Mr. Jonathan Violin, Senior Vice President of Scientific Affairs and Investor Relations Officer. You may begin.

Thank you, and welcome, everyone. Thanks for joining us on this morning's call. With me today are Maxine Gowen, our CEO; Carrie Bourdow, our Chief Operating Officer; David Geoghegan, SVP of Operations; and Roberto Cuca, our Chief Financial Officer. Before we begin, we wish to inform participants that we will make forward-looking statements on this call, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You're cautioned that such forward-looking statements involve risks and uncertainties, including risks detailed from time to time in the company's periodic reports filed with the Securities and Exchange Commission, and we undertake no obligation to update these statements beyond today. During today's call, Max will provide a brief overview of recent corporate highlights, and she and Carrie will discuss our ongoing transition to Max's retirement and Carrie's planned promotion to CEO later this year. Roberto will then review our financial results. Following this, we'll open the call for questions. I'll now turn the call over to Max.

Thanks, Jon. Good morning, everyone, and thank you for joining us today. It's been a busy couple of months since we reported our 2017 earnings in March, but we'll keep today's comments relatively brief so we can get to questions. As you know, last month, we announced my upcoming retirement. It, of course, wasn't an easy decision. However, after 10 years focused on building Trevena, it is the right time for me to step aside. The board and I spent a lot of time working on this transition, and I'm very pleased with the outcome. As you know, Carrie will be promoted to CEO when I step down on October 1. Many of you have seen or heard Carrie since she joined us in 2015 and know the passion, commitment and wealth of successful experience that she has brought to Trevena. Those qualities are also visible in her leadership inside the company, where she's already made a tremendous impact in ushering in a new phase of Trevena's evolution. I'm looking forward to seeing the company thrive under her leadership. But not just yet, however. I'll remain in my current role through September, providing a transition period and assisting with the FDA interactions in their advisory committee meeting for oliceridine. During this time, Carrie and I are working closely together to ensure a seamless transfer. I'll then remain on the Board of Directors, and I'm excited to be a part of the company's next chapter. These weren't the only changes at Trevena. As you likely saw, Roberto will be leaving us this week for a new opportunity. He joined us in 2013 and was critical to the success of our IPO and the joint finances -- financings. His new team is lucky to have him. Fortunately, he's built a strong finance and accounting team at Trevena, and he leaves us in a good position while we seek a new CFO. We've also added some key personnel. Carrie has made several important hires to the commercial and operational side of the business in recent months, including a VP of Marketing and VP of Medical Affairs, as we prepare for potential improved -- approval of oliceridine. In addition, we've recruited a new Chief Medical Officer with highly relevant experience and look forward to sharing details on this important addition as soon as we are able, probably in the next few weeks. Turning now to our ongoing activities. We remain an active dialogue with the FDA as they review our oliceridine NDA. Our team has done a fantastic job of responding to FDA questions, and as best as we can tell, everything remains on track. We are also well into our preparations for an advisory committee meeting. To remind you, the FDA has confirmed that we will have an AdCom, but we don't yet know the date. We're working with a top consulting firm with deep experience with FDA outcomes, and we're also working with a set of strong external speakers. We continue to believe oliceridine is part of a broad effort to improve pain management, the failure of which has contributed to the opioid epidemic. One interesting item. You may have noticed that I'm using the term oliceridine. Although the name OLINVO was previously conditionally accepted by the FDA, the agency recently updated one of the algorithms they used to identify names that could potentially be confused with other products, and the name OLINVO now falls just below the line of acceptability. So we'll be filing another proposed brand name, which we expect to get approved well before launch. And for now, we'll revert to the approved user name, oliceridine. Finally, I'd like to comment briefly on the two ex U.S. license agreements we announced in recent days. These are the first of our oliceridine license agreements, and they are important not just because of the near-term payments, which total $8.5 million this year assuming U.S. approval, but also because of the healthy royalty rate we've secured for any product sales in these two jurisdictions. We're very pleased with both partners. Nhwa in China is wholly focused on CNS therapies, including pain. They market 60 CNS products and have a large hospital presence throughout China. Nhwa recorded approximately $500 million in revenue in 2016. 50% of this was from anesthetics. And they also market IV opioid analgesics. Pharmbio in South Korea is a strong and rapidly growing precedent in the Korean hospital market. They have a strong track record of development and commercialization, including approval and launch of ACUPAN, onizapam in Korea. This is a CNS active non-opioid analgesic often added to opioid PCA in Korea. Both of these firms are strong believers in the potential of oliceridine and have the focus, resources and expertise to support approval and commercialization in their respective countries. We look forward to working with them, and we continue to explore additional opportunities outside the United States. These agreements provide not some -- only some near-term capital but provide us with long-term revenue opportunities. And with that, I'd like to turn the call over to Carrie.

Good morning, everyone. First, let me thank Max and our board for their confidence in me as I transition to the CEO role. During the past three years at Trevena, I've developed a deep understanding of our product pipeline, our people and our future customers. We have a bright future, and I'm very excited to have this opportunity. I'm also grateful to have a transition period with Max remaining in her role. We've received a few questions about the transition, so I thought I'd share a bit more this morning about how we're working together until I assume the CEO role on October 1. As you heard Max say, much of her time is spent supporting oliceridine's potential approval. And while I'm staying close to that process as well, she and I are focusing our time together on the financial and operational parts of the business. We've been partnering in building external relationships and evaluating opportunities to support Trevena's future growth. In addition, I'm focused on our internal team, ensuring our current employees are positioned for success, building on the strong culture that we have here at Trevena and building the team we need to support Trevena's mission over the coming months and years. And not surprisingly, of course, I'm remaining very close to all the activities supporting the commercial launch of oliceridine, both in the U.S. and now with our first ex U.S. partners. So I'll say a lot more on these matters in the coming months. But for now, I'll pause and ask Roberto to review our financials.

Thanks, Carrie. We disclosed key financial measures earlier today in our press release and will file full financial statements in our Form 10-Q. For now, I'll summarize the headline numbers. For the first quarter, we reported a net loss attributable to common stockholders of $9 million or $0.14 per share compared with $20.7 million or $0.36 per share for the first quarter of 2017. This reduction in 2018's expenses compared to 2017 was largely attributable to substantially reduced R&D expenses following the completion of the oliceridine Phase III program and the cessation of early-stage research in the fourth quarter of 2017. More specifically, research and development expenses were $4.6 million for the first quarter of 2018 compared to $16.1 million for the same period in 2017. General and administrative expenses were $5.1 million in the just finished quarter compared to $4.9 million in the first quarter of 2017. Cash, cash equivalents and marketable securities were $61.6 million as of March 31, 2018, which, together with the interest thereon as well as proceeds from sales under our ATM facility and from ex U.S. licensing transactions received between the end of the first quarter and today, will be sufficient to fund our operating expenses and capital expenditure requirements for at least 12 months from today's date. We continue to evaluate options to increase our resources. The recent completion of our first ex U.S. license agreements for oliceridine has been an important step in that process. Finally, I'd like to thank Max and the rest of the Trevena team for 5 great years. I'm proud of what we've accomplished. And though I'm excited for a new challenge, I look forward to watching Trevena's future success. We can now open the call for questions. Victor?

[Operator Instructions]. And our first question comes from the line of Jason Butler from JMP securities.

It's Roy in for Jason. Just had a few. The first, on TRV250. I was hoping you guys could tell us a bit about what you've learned from the first part of the Phase I migraine, if you've made any changes to the second part the trial and possibly what the plans and timing for a Phase II are.

So essentially, what we learned was that the drug was extremely well tolerated in the first half of the trial. The second half of the trial was not in any way just conducted in a different way. It just increased the doses, which is obviously fairly typical in a Phase I standing dose trial. What you're trying to do is find the limit of the dosing. We took it a good deal higher than we expected to go without seeing any adverse effects. And so it was really just the second half was different just because the doses were higher. In terms of the next study, I think we've mentioned previously that we've also been running a pilot study of an invoked migraine model, which can be conducted on an inpatient basis, which is potentially much more efficient, both in terms of time and also cost. And once we see the final data from that trial, then we'll be able to determine what kind of Phase II proof-of-concept study we'll be doing. And obviously, that then will determine when that can be done. So hopefully, we'll be able to update on that in the coming months.

Okay. So, you got cut out, was that the coming weeks or coming months?

Coming months.

Coming months. Okay, great. Then I had a few on oliceridine. Is a U.S. partnership still a possibility as you get closer to commercialization? And then can you give us a sense of the timing and what you need to do to get to the market in Asia and maybe what the market opportunity is in Asia?

Yes. Certainly, a partnership in the U.S. is possible as we get closer to commercialization or we're post commercialization. I think these kinds of products are usually acquired by companies who tend not to take R&D or approval risk. And so I think post approval or even post commercialization, I think that's very possible. With respect to the Asian markets, the first part of your question was?

Just what you need to do to get to market and tie it with the timing on getting to market.

Sorry, yes. So that is different in the different territories. So at the moment in China, we expect that the first move is a PK study. This is very standard in Asian countries. And then it's possible or it appears likely that an efficacy study will be required. So that's probably a 2- to 3-year development period. However, regulations in China are changing. There is a tendency to be able to use more data that is generated outside of China. So that is possible. But it could be sooner. And Nhwa is currently in discussions around that with the Chinese regulators. In South Korea, our data package should be appropriate for the approval of the drug in South Korea, again following a PK study done in Korea. So there, the timing could be within a couple of years.

And then with regard to the market opportunity in China in 2016, the IV opioid market was almost $1 billion. Korea -- South Korea, as you might imagine, is a much smaller market, so we don't necessarily have IV opioid guidance or data on that yet. But both of these companies, Nhwa and Pharmbio, are very focused in the hospital market. They both have a presence in the hospital market and are talking to the same groups of customers in ANSU biology and ICU. So that's certainly one of the reasons why we went with both of these companies, because they have a track record and they have a consistent presence in the hospital arena.

And our next question comes from the line of Ed Arce from H.C. Wainwright.

So first, for Carrie. Have there -- since the last call, have there been any further refinements or comments that you could share on prelaunch activities in your targeted facilities or in further refinements to marketing to the targeted patients?

Yes. So thank you, Ed. It's -- I think I mentioned on the last call, and you've heard me talk about our 600 hospitals that we've identified as early adopters. We're continuing to refine that list, and we're profiling those customers now. So certainly, we knew which hospitals were -- had a high IV opioid volume, which of those hospitals adopted branded agents. But now we're starting to parse out which of those accounts also are focused on patient-based outcomes, which of those accounts are part of innovative health systems. And so all of that work -- while I don't have an update, all of that work is ongoing. And I actually think we'll refine that list of target hospitals. I'll be presenting that in the next few months because that, of course, then is linked to the number of representatives we think will need at launch to get early uptake. A traditional hospital company starts with between 60 or 100 representatives. I actually think we can get lower than that by identifying these early adopters and then get strong uptake in early days, look for triggers and then expand beyond that. But the team is also working on messaging and then, of course, continuing to refine our pricing strategy, which I'll talk more about as we get a little bit closer to launch.

Okay, great. The other question was -- I appreciate the commentary around the transition from Max to you. And congratulations, by the way. Just wondering if there's any transition anticipated for the CFO role.

Yes, absolutely. So we already have a search ongoing, and we'll complete that just as soon as we find the right candidate.

Okay. Then just one last question. You had mentioned, I think, $8.5 million this year from the two new partners, assuming approval in terms of milestone payments. Are there any other details you can share on what the milestones would look in early commercialization? Any milestone targets?

So we have not disclosed any additional deal terms there. We can talk about -- we've -- we talked about the royalty rates, but no further disclosure on the milestones.

[Operator Instructions]. And our next question comes from the line of Aaron Amin from Jefferies.

This is Biren on for Aaron. So I wanted to ask you on the FDA label. Do you expect to get a broad label across pain models? Or -- because we -- it seems like we're in a new era within FDA's pain division. So -- or do you expect that the FDA is going to be more restrictive just to the pain models that you've evaluated?

I'm sorry, I couldn't make it Biren, but the -- we absolutely expect to get a broad indication statement. We follow the guidance absolutely. The indication statement has been discussed numerous times with the FDA. The -- there are no kind of wrinkles with regard to a broad indication, I think, for oliceridine in the way that there may have been for other products that have been approved in recent years because it's a systemic drug. The doses -- the reason for using the drug does not drive the dose so -- in a way that it would if you are, for example, delivering a drug locally for a particular kind of surgery that is going to differ from surgery to surgery. So yes, I think the short answer is we do expect a broad indication statement.

[Operator Instructions]. And I'm showing no further questions. I'd like to turn it back to Mr. Jonathan Violin for closing remarks.

Thank you very much. I'd just like to remind everyone that a replay of this call will be available on the company's website at www.trevena.com. So on behalf of the management team here at Trevena, I would like to thank you all for joining us, and I'll be available for any further inquiries following the conclusion of the call. With that, we can wish you good morning, and thank you, Victor, for your help.

My pleasure. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.