PLx Pharma Inc. (NASDAQ:PLXP) Q4 2019 Earnings Conference Call March 13, 2020 8:30 AM ET
Company Participants
Lisa Wilson – Investor Relations
Natasha Giordano – President & Chief Executive Officer
Rita O’Connor – Chief Financial Officer
Conference Call Participants
Elliot Wilbur – Raymond James
Esther Hong – Janney
Operator
Ladies and gentlemen, thank you for standing by and welcome to the PLx Pharma Fourth Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions]
I would now like to hand the conference to your speaker today Lisa Wilson, Investor Relations for PLx Pharma. Please go ahead ma’am.
Lisa Wilson
Thank you, Joelle. Welcome to PLx Pharma’s Q4 2019 earnings results call. This is Lisa Wilson of In-Site Communication’s Investor Relations for PLx. With me on today’s call are Natasha Giordano, President and Chief Executive Officer; and Rita O’Connor, Chief Financial Officer of PLx. You can also access the webcast of this call through the Investors section of the PLx website at plxpharma.com.
Before we get started, I would like to remind everyone that any statements made on today’s conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events and the company’s future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.
These forward-looking statements are based on information available to PLx Pharma’s management as of today and involve risks and uncertainties including those noted in our press release issued this morning and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements.
PLx specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. The archived webcast will be available for 30 days on our website plxpharma.com.
For the benefit of those who may be listening to the replay or archived webcast, this call is held and recorded on March 13th, 2020. Since then, PLx may have made announcements related to the topics discussed, so please reference the company’s most recent press releases and SEC filings.
And with that I’ll turn the call over to PLx’s CEO, Natasha Giordano.
Natasha Giordano
Thank you, Lisa. Good morning everyone and thank you for joining our call today. I’d like to begin with an update on our regulatory progress. Our regulatory path and supplemental NDA submissions are dependent on providing data to the FDA to support the changes we made in suppliers in the formulation of the approved 325 milligram and the addition of a new 81 milligram dose strength.
As our discussions continue with the FDA, we now have a clearer understanding of the data requirements for both dose strengths of VAZALORE 325 and 81 milligrams. The data necessary in the sNDAs include the typical manufacturing related information to demonstrate that the new formulation of VAZALORE is commercially scalable.
This morning we announced that we plan to conduct a bioequivalence or a BE study for VAZALORE 325 milligrams to support the sNDA filing. We look forward to confirming the BE study design with the FDA and a meeting currently scheduled for late April.
Once we’re aligned with the FDA on the study design, we can provide an estimated submission date. As we previously announced, we’ve agreed with the FDA on the requirements for their review on the VAZALORE 81-milligram sNDA, which will be filed following the 325 VAZALORE submission. We remain confident about our regulatory path and look forward to bringing VAZALORE to market.
We’re excited that Park West, our largest stockholder and new institutional investor to PLx, MSD Partners have committed to a financing of $8 million that will help support our commercialization and regulatory efforts. We will provide you with the details of the financing in a few minutes.
As a reminder we received approval for updated labeling of VAZALORE 325 milligrams in December. For over-the-counter products, the package is considered to be the labeling by the FDA. We’ve invested significantly in market research involving the consumer and incorporated feedback from retailers and the FDA in the development of the packaging design for VAZALORE.
Our plan is to apply the approved 325-milligram labeling to the 81-milligram dose strength. We consider our labeling unique and differentiating for VAZALORE, a new and innovative aspirin. We’re delighted to have our new packaging approved at this time as this is truly an important achievement for PLx.
I’ll now turn the call over to our CFO, Rita O’Connor to discuss fourth quarter results. Rita?
Rita O’Connor
Thank you, Natasha. Discussing the results of the fourth quarter of 2019, we recognized revenue of approximately $24,000 in the fourth quarter of 2019, compared to revenue of $300,000 in the fourth quarter of 2018. All the revenue recognized is attributable to work performed under an award of a National Institute of Health grant, which is nearing completion.
Research and development expenses were approximately $900,000 in the fourth quarter of 2019 roughly flat with the fourth quarter of 2018. The expenses in both periods included continued development and manufacturing activities for VAZALORE. Spending in the fourth quarter of 2019 was related to continued stability and dissolution testing of the registration batches we manufactured last year.
Overall R&D spending for the first quarter of 2020 will decrease from the fourth quarter as we are wrapping up testing on the registration batches, but that spending will be replaced by spending on the BE study starting in the second quarter.
General and administrative expense totaled $2.8 million in the fourth quarter of 2019 compared to $1.9 million in the fourth quarter of 2018. This increase is due to sales and marketing-related activities of approximately $700,000 to prepare for the launch of VAZALORE as well as a non-cash charge of around $200,000 for stock-based compensation.
G&A expense is expected to remain at current levels for the next few quarters as we selectively spend on pre-launch sales and marketing activities, and we continue our presence at medical conferences, developing professional consumer messaging, and planning for retail trade merchandising and support.
Other income net was down $3.7 million to $1.8 million of net other income in the fourth quarter of 2019, due to $3.8 million of lower non-cash income from the change in fair value of the warrant liability, primarily due to the fluctuation of our common stock price.
As a reminder, a decrease in the stock price at the end of the quarter compared to the previous quarter end causes a decrease to the liability thus an increase in income. The decline in other income was offset by $100,000 of lower interest expense due to the paydown of our term loan combined lower interest rates. The principal balance of our $7.5 million term loan with Silicon Valley Bank was paid down to $4.4 million as of 12/31, 2019.
Net loss attributable to common stockholders in the fourth quarter of 2019 was $2.3 million, or $0.25 for basic and diluted share compared to net income attributable to common stockholders of $2.9 million or $0.34 per share for the fourth quarter of 2018. In addition to the increase in operating loss of $1.2 million, the fourth quarter of 2019 also included a non-cash gain of $1.9 million, or $0.20 per share compared to a gain of $5.7 million, or $0.65 per share in the fourth quarter of 2018 related to the change in the warrant liability.
The fourth quarter of 2019 also included a charge of $317,000 or $0.03 per share for preferred stock dividends related to the $15 million Series A convertible preferred stock financing completed in February 2019.
As of December 31, 2019, we had cash and cash equivalents of $14 million. Our overall net cash burn from the fourth quarter was a little over $4.5 million, which reflects $3.8 million of operating expenses included $938,000 of debt principal payments, partially offset by about $162,000 of net proceeds from the issuance of our common stock under our equity distribution agreement or ATM.
As Natasha mentioned, we entered into a purchase agreement with Park West Asset Management and MSD Partners to purchase 8,000 shares of Series B convertible preferred stock for gross proceeds of $8 million. The preferred stock will be issued at $1,000 per share and will be convertible into common shares at a conversion price of $3.10 per share.
Holders of the preferred stock will be entitled to an initial dividend rate of 8% per annum, which will stop accruing at the date — on the date of the FDA approval of the sNDAs for VAZALORE 325 and 81-milligram. The dividends are compounded quarterly and payable in cash or preferred stock at PLx’s option.
Another note, while we issued warrants along with this financing, the warrants are canceled when we receive stockholder approval. This financing is very similar to the Series A convertible preferred stock we closed on in February of 2019 with the main difference being an increase in the conversion price.
We expect the transaction to close in the second quarter of 2020 subject to stockholder approval and the satisfaction of certain customary closing conditions. We intend to set a date for a stockholder meeting to approve the transaction and once it is scheduled, we will send a notice and a definitive proxy statement. This financing in addition to our current cash balance should provide a cash runway until the end of the first quarter of 2021.
As we progress on a regulatory pathway, we plan to seek additional financing, once we submit the sNDAs. The timing of submissions and the amount of additional capital raised will determine the level of prelaunch marketing spending and commercial inventory build prior to the approval of VAZALORE.
With that, I’ll turn the call back over to Natasha, so she can share more details about our recent activities. Natasha?
Natasha Giordano
Thanks, Rita. In these next critical months, we will focus on meeting our regulatory requirements to support our submissions. Although conducting a BE study will impact our time line, we believe this will result in a stronger sNDA filings to support VAZALORE. For those who may be unfamiliar with VAZALORE, let me briefly share some highlights of why we believe it holds such promise for health care professionals in such a large patient population.
VAZALORE is the first liquid-filled aspirin capsule, an important innovation in a category that has not had anything new in decades. VAZALORE is a new, better and more reliable aspirin therapy for the treatment of vascular disease. Our addressable market includes vascular patients, which is comprised of people who have had a heart attack, stroke or a vascular procedure.
This market also includes diabetics, who have a higher risk of having an initial vascular event and whose doctors recommend aspirin therapy. These two patient groups together represent more than 40 million people in the United States and a potential $10 billion retail market.
Central to our launch strategy is to raise awareness amongst the medical community and communicate VAZALORE’s scientific results. We continue to invest and engage with thought leaders in cardiology, neurology and gastroenterology to ensure that we understand their clinical needs and they understand the unique benefits of our innovative aspirin therapy in the treatment of vascular disease.
An essential component of commercialization is the execution of our publication strategy. In February, an original poster entitled bioavailability of aspirin in fasted and fed states of a novel formulation of a pharmaceutical lipid aspirin complex was presented at the 2020 International Stroke Conference. The premier meeting dedicated to the science and treatment of cerebrovascular disease and brain health.
The study was simultaneously published in the Journal of Thrombosis and Thrombolysis. The results established that VAZALORE may be coadministered with food without significant impact on aspirin bioavailability. The fact that VAZALORE can deliver aspirin reliably, irrespective of whether it is taken on an empty stomach or with food is clinically significant.
The feedback was extremely positive and there was genuine enthusiasm for a better product in the aspirin category. We’re excited that two other abstracts have been accepted for presentation at ACC. The first is entitled improved pharmacologic profile of a novel liquid aspirin formulation compared with enteric coated aspirin a pooled patient level analysis of two randomized crossover studies.
And the second is impact of weight on the anecdotal effects of aspirin, results of a pooled analysis of two randomized crossover studies comparing a liquid aspirin formulation with enteric coated aspirin. Although the ACC conference has been canceled, we are waiting for confirmation on whether or not these meetings will be held online.
In December, we participated in panel discussions at the Cardiovascular Clinical Trialist Forum in Washington D.C., which is a unique interactive meeting for leading global experts in cardiovascular clinical trials. In January, we attended The Neurology Update and Stroke Intensive Review 2020 meeting, which focuses on developments in the diagnosis and management of neurologic disorders.
We believe that our presence at these prestigious forms with experts in the field of vascular disease is a key component of our preparation for commercial launch. As we engage with these specialists, it is evident that robust scientific data is critical to their understanding of our product and ultimately to establish VAZALORE as an important component in the treatment of vascular disease.
Our pre-commercialization efforts continue to include productive discussions with the retail trade and developing marketing plans aimed at consumers who will ultimately make the purchasing decision. Together these three constituents health care professionals, retailers and consumers are key to our pre-launch activities and commercial strategy.
With that, I’ll open the call for questions. Operator, please go ahead with the instructions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Elliot Wilbur with Raymond James. Your line is now open.
Elliot Wilbur
Hey, thanks. Good morning. Just a couple of additional follow-up questions on the BE study. So I thought the update back in early January essentially sort of gave you the clarity you needed in terms of bridging the new and the old 325 and then eventually bridging the 325 to the 81-milligram formulation. So I’m curious maybe first, kind of what has changed or evolved in the agency’s thinking since then that has kind of led you down this somewhat new path?
Then the BE study itself what exactly is the — are the two competitors in the study? Is it the new 325 versus the old 325 or is it 325 versus some other reference drug? And then would you also include an 81 in the BE? Or is it simply the 325? I’m just trying to basically bridge sort of what has to happen going forward on the two strengths using that the new BE protocol versus what you had expected to occur back in early January?
Natasha Giordano
Okay. Thanks, Elliot. So we have continued our interactions with the FDA pretty regularly and we have been discussing data modeling approach as well as we announced back in January, and we could continue down that path. However, they have recommended that we do a bioequivalent study, a very simple crossover bioequivalent studies, was their advice to us. And so we plan to continue those discussions.
We have a scheduled meeting in the end of April to really align on the bioequivalency study design. So I probably won’t comment on what the comparators are until we do align with the FDA. But we feel very confident that this approach is going to strengthen our submissions, but also confident because the FDA will be in alignment. And their approach typically is to recommend a bioequivalency study.
So to answer your question on whether or not we’ll be doing this study on both doses, we plan to do the bioequivalent study, a simple one, for simply the 325-milligram dose and, again, to bridge back to our originally approved 325-milligram formulation.
And then, we’ve already aligned with the FDA on what they require for the 81-milligram dose, which is supplying them with information, the manufacturing-related type of information that would cross-reference and bridge back to the 325 milligrams. Did I answer all your components?
Elliot Wilbur
Okay. Well, I just — I mean, it sounds like basically the BE study is comparing the new formulation versus the prior? Is that fair?
Natasha Giordano
Well, like I said, we have submitted a proposal to the FDA on what we think the study design and the comparators should be. And once we align with them on that Elliot, we’re going to come back to you and let you know what that is. And that should be shortly, since we’re meeting with them at the end of April.
Elliot Wilbur
Okay. And then, I guess, I mean, obviously, it should be a relatively quick study, but maybe from kind of start to finish in terms of what your thinking is around the time line and, obviously, these are relatively low cost, but maybe Rita could just comment on the incremental expenditures necessary to complete this based on what you now know?
Natasha Giordano
Yes. So, in terms of the study, you’re right, it is a relatively simple study, probably standard like most BE studies are conducted. I think that we’ll have better insight once we understand this study design. If they agree, if the FDA agrees with this simple design that we’ve proposed, then it should be like any other standard bioequivalence study. Why don’t you take the cost?
Rita O’Connor
Yes. In terms of the cost, yes, it should be relatively inexpensive compared to other studies. And so we’ve kind of built that into the cash burn forecast. So the good news is we’re going to be spending less on manufacturing testing that will be replaced starting in the second quarter with the cost of a BE study. So it’s going to kind of come out to relatively similar levels that we’ve been spending on R&D.
Elliot Wilbur
Okay. Those were only questions. Thank you.
Rita O’Connor
Thanks, Elliot.
Operator
Thank you. [Operator Instructions] Our next question comes from Esther Hong with Janney. Your line is now open.
Esther Hong
Hi, good morning. So can you provide any updates on the stability testing that was taking place? Has this already been completed? Thanks.
Rita O’Connor
Sure, Esther, it’s Rita. So yes, so we actually are in the process now. We’ve completed the stability and the good news is, it’s much more stable than the old formulation which again was one of the reasons that we decided to go with this formulation. And we’re going to continue doing stability testing which is normal for protocol three months, six months, nine months and then ultimately 12 months. So we’ve completed what we need for the filing. And we’ll be able to be ready for the submission once the BE study is completed.
Esther Hong
Okay, great. And are there any other gating factors prior to sNDA submission?
Natasha Giordano
Just completing the BE study of course and then completing the data package that forms the CMC portion of the supplement which we’ve been working on all along. So we anticipate that we’ll have all the pieces to make this a strong submission for the FDA.
Esther Hong
Thank you.
Natasha Giordano
Thank you, Esther.
Operator
Thank you. I’m not showing any further questions at this time. I would now like to turn the call back over to Natasha Giordano for closing remarks.
Natasha Giordano
Thank you. We’re excited to continue to advance in our regulatory and commercial efforts. The PLx management team is on a mission to bring a new and better aspirin alternative to health care professionals and to millions of patients at risk for vascular disease. VAZALORE has the potential to disrupt and transform the aspirin market and become the new standard of care. Thank you again for your time and have a great day.
Operator
Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.
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