Aerpio Pharmaceuticals, Inc. (NASDAQ:ARPO) Q4 2019 Earnings Conference Call March 16, 2020 8:30 AM ET
Company Participants
Regina Marek – Principal Financial Officer, Principal Accounting Officer & VP, Finance
Joseph Gardner – Founder, President, Principal Executive Officer & Director
Conference Call Participants
Operator
Greetings. Welcome to Aerpio Fourth Quarter and Full Year 2019 Financial Results Conference Call. (Operator Instructions) Please note, this conference is being recorded.
I would now like to turn the conference over to Gina Marek, Vice President of Finance for Aerpio. Thank you. You may begin.
Regina Marek
Good morning, and thank you for joining us for Aerpio’s Fourth Quarter and Full Year 2019 Earnings Call. Joining me on the call today from Aerpio is Joseph Gardner, President and Founder. This morning, Aerpio released financial results for the fourth quarter and full year ended, December 31, 2019. If you have not received the news release or if you would like to be added to the company’s distribution list, you can do so on the Investor Relations page of our website at aerpio.com.
I’d also like to remind you the remarks made on the call today include forward-looking statements about Aerpio. Such statements may include, but are not limited to, those related to Aerpio and its business and its product candidates, including AKB-9778, ARP-1536 and the bispecific antibody asset; the clinical development plan therefore and therapeutic potential thereof; and the intended benefits from Aerpio’s collaboration with Gossamer Bio Inc. for GB004. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Aerpio’s reports filed from time to time with the SEC. Aerpio does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise.
I will now turn the call over to our President and Founder, Joseph Gardner. Joseph?
Joseph Gardner
Thank you, Gina, and good morning. This is Joseph Gardner, President of Aerpio Pharmaceuticals. Welcome to today’s conference call on Aerpio’s 2019 year-end financial results. I am very excited to share with you our 2020 plan for Aerpio.
As the company announced in October, we are exploring various strategic alternatives to maximize shareholder value. We plan to continue these efforts. However, in light of the strong feedback we have received from key opinion leaders, investigators and prescribers, we have also decided to conduct a Phase II trial of a topical ocular formulation of AKB-9778 in glaucoma, which we expect to readout data in the first quarter of 2021. Fortunately, Aerpio is in a very strong financial position to support this program with cash and cash equivalents of $38.5 million as of December 31, 2019.
Please recall that we announced top line data from a Phase Ib trial of AKB-9778 in glaucoma in January, but I will recap it briefly here. In a cohort of 43 glaucoma patients with a baseline intraocular pressure, or IOP, ranging from 17 to 27 millimeters of mercury, we saw a 1.58 millimeter of mercury incremental reduction in diurnal IOP on day 7 when AKB-9778 was added once daily on top of existing standard-of-care prostaglandin treatment. In fact, we saw a statistically significant improvements in IOP at all time points measured after baseline. These data are consistent with our previously reported discoveries about the mechanism of action of AKB-9778, which show increased Tie2 activation in Schlemm’s canal and lowered IOP via decreasing resistance to outflow from the eye, and the statistically significant IOP lowering signal, which we also saw in 2 previous sequential Phase II studies of systemically dosed AKB-9778 in ocular neurointensive patients with diabetic retinopathy.
Based on these preclinical and clinical data and extensive encouraging external feedback from scientific experts, we believe the recently completed Phase Ib data in glaucoma with topical drops of AKB-9778 to be very promising. The critical piece to point out is that the drug produced statistically significant reductions in IOP on top of standard-of-care prostaglandin therapy when compared against both baseline and placebo subjects. Our clinical advisers suggested that the magnitude of these effects were not only clinically meaningful, but also potentially best-in-class for adjunctive therapy. Equally important, the data suggests a favorable tolerability profile for a topical drug candidate, including a low incidence of hypovolemia and no systemic safety concerns, which is a clear differentiator in today’s market.
Our objective is to develop a differentiated drug with equal or better efficacy than competing products that is also distinguished by a better tolerability profile. We believe the Phase Ib data support moving forward into a Phase II study in glaucoma to confirm these encouraging results in a longer clinical study of 28-day duration, which we intend to design to be in line with Phase II trials of recently approved glaucoma agents. We have sufficient cash available to support the study and provide a significant runway after reporting top line data in early 2021.
We believe that glaucoma is an important opportunity. As many of you know, glaucoma is a serious condition of the eye, affecting 2.7 million patients in the U.S. Glaucoma is a leading cause of blindness worldwide. It is a progressive optic neuropathy that is associated with increased intraocular pressure or IOP. Multiple longitudinal studies have shown that IOP lowering slows progression of vision loss. Increased IOP in glaucoma is caused by increased conventional outflow resistance due to increased contractual tone and stiffness of the trabecular meshwork and changes in the conductance of Schlemm’s canal. The conventional outflow pathway in Schlemm’s canal represents the main drain that removes fluid from the front of the eye.
The most widely used glaucoma drugs are topical eyedrops and do not address the pathology of the conventional outflow pathway. Prostaglandin analogues increase drainage via the uveoscleral outflow pathway. And the older drugs like beta-blockers, alpha agonists and carbonic anhydrase inhibitors reduce fluid production. However, none of these drugs specifically target the conventional outflow pathway in Schlemm’s canal, which we believe sets up a potentially attractive commercial opportunity for AKB-9778, if approved, as a once-daily, tolerable eye drop to be used as adjunctive therapy in an extremely large market.
Drugs use in conjunction with prostaglandins, either as adjuvant therapy or in fixed-dose combinations, represent roughly 33% of the market for glaucoma therapy. That segment is currently estimated at $2.1 billion of the over $6 billion per year global glaucoma market. Based on the published science, supporting the role of Tie2 in the maintenance of Schlemm’s canal, we believe that AKB-9778 has the potential to become the first disease-modifying therapy for glaucoma. Let me repeat that. We believe AKB-9778 has the potential to become the first disease-modifying therapy for glaucoma, and we are very enthusiastic about this opportunity for our shareholders. We expect to initiate dosing of patients for the planned Phase II trial of AKB-9778 in the third quarter of this year.
Now in addition to the glaucoma opportunity, I also want to summarize our pipeline of Tie2 activators and other assets for which we continue to explore strategic alternatives. Aerpio has pioneered the field of Tie2 activation by developing both small molecule and antibody drug candidates that activate Tie2. Tie2 is a receptor tyrosine kinase, uniquely expressed in vascular endothelial cells in all vasculature, and importantly, is also expressed in Schlemm’s canal in the front of the eye. We have learned over the years that Tie2 activation stabilizes vasculature in a variety of settings, as demonstrated by our publications. Aerpio’s Tie2 activators have the potential to treat multiple diseases where the underlying pathology is driven by unstable vessels. These diseases include diabetic nephropathy in addition to glaucoma.
In the recently completed Phase IIb study, TIME-2b, AKB-9778 demonstrated the ability to lower proteinuria, as measured by decreasing urinary albumin creatinine ratio by about 20%. And this replicated a result that we had found in a previous Phase II study. The decrease in proteinuria suggests that AKB-9778, and our other Tie2 activating drug, ARP-1536, may have the potential to improve kidney function in diabetics, potentially delaying progression to kidney dialysis.
The company’s second asset, ARP-1536 is a humanized monoclonal antibody, observed to activate Tie2 receptors in a dose-dependent manner in preclinical models. Aerpio believes ARP-1536 holds the potential as a monthly or a biweekly systemic therapy to treat diabetic complications, including diabetic nephropathy.
The company’s third asset is a bispecific antibody that binds both VEGF and VE-PTP, which inhibits VEGF activation and activates Tie2. This bispecific antibody has a potential to be an improved product for treating wet age-related macular degeneration and diabetic macular edema. These antibodies would be dosed intravitreally into the eye in the same fashion as the current anti-VEGF drugs like EYLEA and LUCENTIS.
Lastly, the company has a fourth asset, AKB-4924, now known as GB004, which is not related to Tie2 activation. The drug candidate is a hypoxia-inducible factor activator that is being developed for ulcerative colitis by our partner, Gossamer, and has currently completed a Phase Ib trial. Under the terms of that agreement, Aerpio is eligible to receive payments upon the satisfaction of milestones and royalties upon net sales of this product, if it is approved and commercialized.
We thank you for your attention during this call. We are very excited about the prospects for Aerpio and believe that our glaucoma program could be transformative for the company. I will now turn the call back over to our VP of Finance, Gina Marek.
Regina Marek
Thank you, Joseph. The earnings release details our financial results for the fourth quarter and year-end 2019. So I won’t repeat for you what is written in the release. For those interested, you can find additional details on our operations, results and financial conditions, beyond what is in our press release in our 10-K, which will be filed at the end of the day.
However, I’ll take this time to quickly point out a couple of items. Let me start with the income statement. For the 3 months ended December 31, 2019, our net loss attributable to common stockholders was $4.4 million, down from $8.5 million in the same period in 2018. Operating expenses for the fourth quarter of 2019 were $4.7 million compared to $8.9 million for the same period in 2018. For the full year ended December 31, 2019, net loss attributable to common stockholders was $23.3 million compared to $10.4 million for the full year ended December 31, 2018. The approximate $13 million increase in net loss year-over-year was attributable to the $20 million upfront payment we received and recorded as revenue in June 2018, as part of our license agreement with Gossamer for AKB-4924, which is now known as GB004.
Operating expenses for the full year ended December 31, 2019 were $24.4 million compared to $31.3 million in 2018. The approximate $7 million decrease in operating expenses year-over-year was attributable to actions taken by the company in 2019 to lower expenses, including some clinical trial wind down and restructuring. Research and development expenses for the year ended December 31, 2019, decreased by approximately $5 million or 28.2% to $12.8 million from $17.8 million for 2018. This was the result of decreased spending on our lead candidate, AKB-9778, primarily for the TIME-2b trial in diabetic retinopathy, partially offset by increased spending in our glaucoma development program. General and administrative expenses for the full year ended December 31, 2019, decreased by approximately $3.7 million or 27.7% to $9.8 million from $13.5 million in 2018. This decrease was primarily attributable to decreased stock compensation, headcount reductions and general office expenses.
One quick note on the balance sheet. Our cash position at December 31 was $38.5 million, and we have no debt.
That concludes the financial summary. At this time, I will turn it back over to Joseph for final comments. Joseph?
Joseph Gardner
Yes. Thank you, Gina. I would like to thank everybody for participating in this morning’s call. We are looking forward to sharing top line results from the Phase II trial in glaucoma patients in the first quarter of 2021. If you do have questions, you can direct those to the company via e-mail, or at the phone line. Again, thanks for — again for participating, and we are very excited about the plan for 2020. Have a great day.
Operator
Thank you. This concludes today’s conference. You may disconnect your lines at this time, and thank you for your participation.
Question-and-Answer Session
End of Q&A
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