Strongbridge Biopharma (SBBP) Q1 2019 Earnings Call Transcript

Strongbridge Biopharma (SBBP)
Q1 2019 Earnings Call
May. 01, 2019, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to Strongbridge Biopharma's first-quarter 2019 earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Lindsay Rocco of Elixir Health Public Relations. Lindsay?

Lindsay Rocco -- Elixir Health Public Relations

Thank you, and good morning, everyone. We are pleased that you could join us today for Strongbridge Biopharma's first-quarter 2019 earnings conference call. Joining me from Strongbridge this morning are Matthew Pauls, president and chief executive officer; Dr. Fred Cohen, chief medical officer; and Brian Davis, chief financial officer.

Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Reference to these risks and uncertainties are made in today's press release and disclosed in detail in the company's periodic and current event filings with the U.S. Securities and Exchange Commission. I will now turn the call over to Matthew Pauls.

Matthew Pauls -- President and Chief Executive Officer

Thank you, Lindsay. Good morning, everyone, and thanks for joining us. For today's call, I'll begin by providing a brief summary of our first-quarter 2019 highlights and results. I will then turn the call over to Dr.

Fred Cohen to discuss the ongoing Phase III clinical development program for RECORLEV and Brian Davis to provide the financial overview. We will then open up the call for questions. I'd like to start off with an update on RECORLEV, our lead clinical asset in Phase III development for the potential treatment of endogenous Cushing's syndrome. In the first quarter of 2019, we held a Type C meeting with the FDA to discuss the regulatory path forward for RECORLEV.

As you may recall, we went into the meeting with the expectation that the agency would, in fact, recommend an NDA submission incorporating data from both our SONICS and LOGICS Phase III studies. That said, given the positive results from the SONICS trial as well as the significant unmet need in Cushing's syndrome, we wanted to also discuss with the FDA the possibility of submitting with SONICS as the sole pivotal trial. During the Type C meeting, as expected, the agency recommended we submit an NDA inclusive of data from both SONICS and LOGICS, thereby providing a more robust clinical package with LOGICS contributing double-blind, randomized, placebo-controlled data. We are heeding the FDA's advice.

And with the additional clarity provided, we revisited our time lines, and we now anticipate we can submit the NDA for RECORLEV by the end of the third quarter of 2020, approximately six months earlier than previously anticipated. We believe this submission will be among the most comprehensive initial NDA submissions for a treatment for Cushing's syndrome. A final comment on our rare endocrine franchise, and as a reminder, we currently have a 23-person rare endocrine commercial field organization deployed in the United States that is being subsidized at approximately $7 million to $8 million per year by Novo Nordisk for approximately the next three years. The field team's presence and the valuable experience they are gaining in the rare endocrinology space should provide benefit to Strongbridge specifically as we work toward the potential approval and launch of RECORLEV.

Onto our rare neuromuscular franchise, we are pleased to report KEVEYIS delivered $4.3 million in net revenue in the first quarter in 2019 and that we are on track to achieve our full-year KEVEYIS revenue guidance of $18 million to $20 million. Finally, as noted on our year-end call, we are focused on achieving a positive KEVEYIS contribution margin by the end of the first quarter of 2020, and we are on track to do so. With that, I'll turn the call over to Dr. Fred Cohen.

Fred Cohen -- Chief Medical Officer

Thank you, Matt. Good morning, everyone. During the first quarter, Strongbridge presented a number of new analyses from the SONICS study that helped to characterize the broad utility, potential clinical benefits and safety profile of RECORLEV in the treatment of patients with endogenous Cushing's syndrome. Those results included the following three summary conclusions: First, there were no additional clinically relevant liver-related or other safety signals in the extended evaluation portion of SONICS, and the efficacy remained durable and clinically meaningful; Second, SONICS subgroup analysis showed that RECORLEV was effective and well-tolerated in Cushing's syndrome patients with diabetes, both in reducing urinary free cortisol and in significantly reducing markers of diabetes; Third, additional secondary analysis showed that RECORLEV led to significant improvements in the key signs in symptoms of Cushing's syndrome such as acne, hirsutism and peripheral edema as well as showing improvements in quality of life and depression.

RECORLEV also reduced free testosterone in women. Submission of a manuscript detailing key efficacy and safety data from the end of maintenance phase analyses of SONICS to a peer review journal remains on track for the second quarter of 2019. I will now provide a brief update of LOGICS. As you may recall, the LOGICS study was previously expanded from 35 to 54 patients to provide the best chance of demonstrating statistically significant efficacy.

The study is progressing well. However, due to slower-than-anticipated enrollment, we now believe that receipt of top line data before the end of this year is at risk. Therefore, we are updating our guidance to the first quarter of 2020, which supports submitting an NDA in the third quarter of 2020. Turning to our rare neuromuscular franchising, KEVEYIS.

We look forward to presenting long-term efficacy data from the hyper and hypokalemic periodic paralysis study known as HypoPP at the 71st annual meeting of the American Academy of Neurology which begins later this week. The data demonstrate that long-term treatment with KEVEYIS was efficacious and provided durable reductions in attack frequency and severity in patients with primary periodic paralysis. The poster will be available to download from our website immediately following the presentation. With that, I will now turn the call over to Brian Davis for a financial overview.

Brian Davis -- Chief Financial Officer

Thank you, Fred. Our press release contain details of our financial results for the first quarter of 2019. Rather than read through all of those details, my comments will provide some context on our cash spend and runway. As is customary in our industry, our quarterly net cash spend will vary, sometimes significantly, depending on the timing of payments for such things as clinical and regulatory expenses, inventory purchases and annual bonuses.

In addition, in our case, quarterly net cash spend will also be impacted by the timing of reimbursement we receive from Novo Nordisk for funding our endocrine commercial field force. Those payments to us will occur semi-annually and in arrears. Please note that the revenues and expenses related to the Novo Nordisk agreement are included in other income and expenses on our statements of operations. Strongbridge ended the quarter with $104.3 million of cash, cash equivalents and no outstanding debt.

We are reiterating our guidance that we have sufficient cash resources along with anticipated KEVEYIS revenues to fund our operations at least through the first quarter of 2021. And operator, with that, we are ready for questions. Operator?

Questions & Answers:

Operator

Thank you. [Operator instructions] And our first question comes from the line of Annabel Samimy of Stifel.

Annabel Samimy -- Stifel Financial Corp. -- Analyst

Hi, guys. Thanks for taking my questions. I was wondering if you could possibly characterize the Type C meeting for us a little bit. Did the FDA lay out the requirements that you needed in terms of the long-term safety ICH guidelines, number of patients? Was there any specific requirements around adders given the urgency of the condition they sort of rolled some of that back? Any other issues also that came up with regard to safety of RECORLEV? And then, secondly, just on KEVEYIS.

Can you give us a sense as to what the retention of the patients are on KEVEYIS since you've implemented, I guess, more of the patient support and the patient assistance, education to keep patients compliant?

Matthew Pauls -- President and Chief Executive Officer

Annabel, this is Matt. Thank you for the questions. Let me take the KEVEYIS question first, and then I will turn it over to Dr. Cohen to answer the question regarding RECORLEV.

With regard to KEVEYIS, all I'll say at this point right now is that the tactics that we implemented really in the second half of last year, including we now have engaged patient ambassadors. Those are patients who are currently taking KEVEYIS, and they are helping patients who are new to KEVEYIS during the process. We have increased our efforts related to our patient access managers and, again, their engagement with patients and caregivers early in the process as well as our case management at CareConnections. So those are just a few of the key tactics that we have implemented.

And what I will say is we are seeing a positive trend related to patients converting to -- over to KEVEYIS and staying on therapy. So more to come later in the year with regard to potentially more details in those areas, but suffice to say that our focused effort is we're seeing positive trends. Fred?

Fred Cohen -- Chief Medical Officer

Thanks, Matt. So with regard to the Type C encounter and the long-term safety information related to RECORLEV, so at this particular Type C meeting, we gained valuable clarity regarding the NDA package and what the agency was looking to see, and we've discussed the fact that data from both SONICS and LOGICS will be included in the package, making it among the most comprehensive packages that make up an initial NDA in this condition. In terms of the long-term exposure, I'll remind everyone that at the last call, we reported that over 50 patients from the SONICS trial were exposed to the product for at least a year. Based on that information and the LOGICS study, which was not included among that number, we believe that the total safety package will provide substantial and sufficient long-term safety information for the NDA package.

And this is based on prior guidance that we've received from the division to that question.

Annabel Samimy -- Stifel Financial Corp. -- Analyst

OK. Great. And did I just hear correctly that anything related to MACRILEN revenues or expenses are going to be in a nonoperating income line?

Brian Davis -- Chief Financial Officer

Yes.

Annabel Samimy -- Stifel Financial Corp. -- Analyst

OK. So that includes the royalty as well?

Brian Davis -- Chief Financial Officer

No. Sorry. The royalty is going to be in the top line, but the funding of the field force, that revenue will be on the other income line, so it will be a nonoperating income. And the expense associated with that will also be nonoperating expense.

And you'll see that in our 10-Q filings [Inaudible].

Annabel Samimy -- Stifel Financial Corp. -- Analyst

And then in that vein though, is there -- do you have any sense as to what's going on with MACRILEN whether Novo Nordisk has prioritized or deprioritized this program? I think that royalty is down quite a bit.

Brian Davis -- Chief Financial Officer

No. I think, obviously, the transaction closed in December, as you may recall, just really right before the beginning of the quarter, and we look at the first quarter as being one of transition. So the royalty, I'll say, it wasn't unexpected from our standpoint. It was somewhat nominal.

More importantly, we have our 23-person field force that is being funded. Strategically, that's of significant value to us as we hope to bring RECORLEV along in the relative near term and have a field force already out there. But that $7 million to $8 million per year is a very significant revenue stream for us over the three-year period.

Operator

Thank you. Our next question comes from the line of Justin Kim from Oppenheimer.

Justin Kim -- Oppenheimer -- Analyst

Thank you. Good morning. Looking at the SONICS data, considering patients had a median time to diagnosis of approximately three years, was there a sense of historical pharmacotherapy exposure that these patients came into study with outside of the mandated wash-out period for each drug and proportion of naive treatment patients which, if I'm correct, was about one-third?

Fred Cohen -- Chief Medical Officer

Right. So yes, we haven't provided details around historical medicines yet. I think some of that will be presented in the upcoming manuscript and other data releases. Suffice to say that a relative -- relatively small proportion of patients had received prior medicinal therapy for Cushing's syndrome.

So as I think I said on other calls, the population, while relatively severely affected, I think moderately to severely affected by their Cushing's syndrome on average, is a relatively younger population and relatively new to the diagnosis. You pointed out what the median time was to diagnosis is around 3 years, but there was a substantial number of patients who were very recently diagnosed within a matter of weeks. And so 27% of the population at baseline had never received any therapy, not even surgery yet. So it's an interesting population in that regard, and we obtained very valuable information not only on the experienced -- treatment-experienced patients, patients that had washed off other medicines, but now on completely therapy-naive patients, which from what I can gather, are somewhat unique in the realm of clinical trials in Cushing's syndrome.

Plus we had a broad Cushing's syndrome population. So overall, it gives a very broad exposure with the drug and some very, very valuable experience.

Justin Kim -- Oppenheimer -- Analyst

Got it, got it. And then at this point, do you have a sense of what proportion of the SONICS study patient population would participate in LOGICS?

Fred Cohen -- Chief Medical Officer

Yes. So we -- the study is still enrolling, but one thing to note there is that when we took the sample size up from 35 to 54, we knew that at that point, all of the SONICS patients that we're going to get in were already in. So those 19 additional will all be treatment-naive. And in fact, the majority of the patients in LOGICS will be completely naive to the drug, with a meaningful minority coming from the SONICS study.

Justin Kim -- Oppenheimer -- Analyst

OK. And then maybe just one last one. We recently hosted a KOL to provide a commentary that in clinical practice for Cushing's, the dose titration periods can often take a slow and steady approach, something maybe very analogous to KEVEYIS. Is there anything that you're observing from the long-term experience with RECORLEV and the extension period for treatment that might indicate that RECORLEV would have improved tolerability when following this type of approach?

Fred Cohen -- Chief Medical Officer

Well, yes. I mean we've share data recently from the extended evaluation phase of SONICS showing that the incidence of new events or worsening events was much, much lower after the subjects had already been in the maintenance phase for six months, and we're in the second six-month portion of that maintenance. And so what that indicates is that if you are going to develop an adverse event related to the product, for example, a mild increase in the liver function enzymes, that's going to tend to occur early. The same is true of tolerability issues like GI upset, for example.

The other thing to point out is a lot of the adverse events that we're seeing in our study are ostensibly ascribed to lowering that high cortisol levels called cortisol withdrawal syndrome, and there's a pretty rich literature on that subject. The kind of adverse events you see with cortisol withdrawal when it's been high for a long time are exactly the kind of adverse events that we reported were common in the SONICS study. And that again occurs early. Overall, low and slow is the way to go, start out at 150 milligrams BID, titrate in 150 milligrams every two weeks.

That's how the studies are being conducted, and that's how we expect labeling.

Justin Kim -- Oppenheimer -- Analyst

Thank you so much and I'll jump back in queue.

Operator

Our next question comes from the line of Liisa Bayko from JMP Securities.

Jon Wolleben -- JMP Securities -- Analyst

Hi. This is Jon on for Liisa. Just a quick bookkeeping one for Brian on KEVEYIS. I was wondering what gross to net was for this quarter and what you're expecting for the year.

Brian Davis -- Chief Financial Officer

So we haven't talked specifics on gross to net, Jon, but I will say that it was elevated in the first quarter. As you likely know from following these companies, that is typically the case in the first quarter, given the resets on -- particularly on folks with commercial insurance. So it was elevated as it was in the first quarter of last year. And we expected to -- the gross-to-net percentage to improve as we go through the year.

I will say that demand looks good. Matt talked a little bit earlier about some of the tactics on an earlier question. And so we are looking forward to reporting out in the subsequent quarters on that front, on the revenue front.

Jon Wolleben -- JMP Securities -- Analyst

Great. And then regarding LOGICS, can you tell how many patients you have currently enrolled? And are you implementing any initiatives to speed enrollment? Or are you confident with your current timing guidance?

Fred Cohen -- Chief Medical Officer

Yes. So we're confident with the current timing guidance. We're just at risk in terms of being able to share by the end of this year the top line results, so we push it off to the beginning of next year, the first quarter. We're confident in that guidance.

Our tactics are working. We're making great progress. And yes, so we're confident with that guidance.

Jon Wolleben -- JMP Securities -- Analyst

And can you say how many patients you have enrolled as of today?

Fred Cohen -- Chief Medical Officer

Yes. So we haven't been giving guidance on the enrollment number at this point. So we don't have any update on that.

Jon Wolleben -- JMP Securities -- Analyst

Great. Thanks, guys.

Operator

Our next question comes from the line of François Brisebois from Laidlaw.

Francois Brisebois -- Laidlaw and Company -- Analyst

Thanks for taking the questions. Just a couple here on -- in terms of KEVEYIS, is there any way -- are you guys ever going to provide kind of metrics to try to help us understand how many patients are staying on versus the ones that were on that weren't necessarily staying on the right dose and getting out because of issues? Or just to help us kind of understand better how to see the growth here on out.

Matthew Pauls -- President and Chief Executive Officer

Frank, this is Matt. Thanks for the question. I do appreciate it. So I think as each quarter goes by and we learn more about the primary periodic paralysis space and KEVEYIS, I think you can expect that, over time, there will be more -- potentially more metrics, key performance indicators shared.

I think what's really important here is that we are affirming our guidance of $18 million to $20 million this year. And I -- and we have said obviously -- publicly, we have said that we are looking that life cycle management opportunities related to KEVEYIS in our rare neuromuscular franchise and more to come on that front, hopefully, by the end of the year or the beginning of 2020. So again, affirming the guidance of $18 million to $20 million in revenue this year as well as we're hopeful that we'll be sharing some additional details related to some potential KPIs.

Francois Brisebois -- Laidlaw and Company -- Analyst

OK, great. And then just on the LOGICS enrollment. Can you just remind us of the original reasoning for growing the -- increasing the enrollment? And then what is it -- it seems like you have some incentives. You're not giving any guidance on the number enrolled, but what is it that has caused it to be a little slower? Is that surprising? Or was the time line maybe a little ambitious?

Matthew Pauls -- President and Chief Executive Officer

Yes. So again, I think it's important note that we're making a timing adjustment to our guidance because we think that by the end of the year, top line data for LOGICS is at risk. So in the spirit of prudency and the fact that we've effectively pulled forward our NDA submission to the third quarter of 2020, which is approximately six months or two quarters earlier than our previous base case, we just feel like it's the right thing to do to slightly shift it into the first quarter of next year. These clinical trials, Fred will tell you, they're lumpy, and what happens here is you'll get a bolus of patients and then it'll -- be a little slow due to whatever factor, and then you'll get another bolus.

So again, in the spirit of being prudent, we feel that the responsible thing to do is just to shift the guidance into the first quarter. Fred, do you have any other additional comments?

Fred Cohen -- Chief Medical Officer

No, not really. Our tactics are working. We are seeing enthusiastic participation. And no.

I think Matt's right. It's more of a situation of lumpiness and just sort of the normal variability, and you can't always predict with 100% accuracy.

Matthew Pauls -- President and Chief Executive Officer

So -- and the other part of your question, Frank, if I may, and I'll have Fred opine on this, but actually, going from 35 subjects to 54 was a choice that we made based on the positive results of SONICS. Clearly, in parallel to SONICS, we had initiated a second Phase III trial in LOGICS. And while the original powering was appropriate, part of the way we looked at it was we need to ensure that we take as much risk out of it as you can. Fred, any comments there?

Fred Cohen -- Chief Medical Officer

That's right. At the time we initiated LOGICS, we had no data from other randomized withdrawal, placebo-controlled studies in this space to use as a benchmark in terms of -- with the maintenance of the active treatment group, the response at the end of 8 weeks as well as the placebo group. We did have some experience with patients coming off of drug in SONICS and patients who were staying on drug on SONICS. What happens then spontaneously? We built that into our assumptions.

So basically, our assumptions are conservative for the sample size. They were conservative. It's just, basically, we took the power up a bit. And as Matt said, why take excess risk or, really, any effective risk with LOGICS? When you have a positive SONICS study, you want LOGICS to hit.

We believe we have positioned LOGICS to demonstrate efficacy and importantly also safety, and it's going to now be a key part of our NDA filing.

Brian Davis -- Chief Financial Officer

Yes. And I'll just kind of wrap up that piece with we are already starting to feverishly work on the construction of the NDA with the data that, of course, we have now and are confident that we will see the results that we expect and need and want from LOGICS in the first quarter of next year. Obviously, it's drug development. There's always risk associated with that, but we think that the trial design itself of LOGICS as well as the increased sample size put us in a really good place.

Francois Brisebois -- Laidlaw and Company -- Analyst

OK. Great. Thank you. That's it for me.

Operator

Our next question comes from the line of Esther Hong of Janney.

Esther Hong -- Janney Montgomery Scott LLC -- Analyst

Hi. Thanks for taking my questions. So first, given the agreement with Novo included about three years of using Strongbridge's sales force and reimbursement team to promote MACRILEN, can we still expect a commercial infrastructure to be in place for RECORLEV if U.S. launch occurs after 2021? And then second, how is the launch of MACRILEN proceeding? How are endocrinologists viewing MACRILEN?

Matthew Pauls -- President and Chief Executive Officer

Yes. So first of all, thanks for the question, Esther. Just with regard to timing, actually, the way this is shaping up is it's shaping up really nicely with regard to kind of continuity and fluidity with regard to our 23-person rare endocrine field-based commercial team. Filing in the third quarter of 2020 has us potentially launching in 2021, and the timing fits very, very nicely.

So we actually kind of get the maximum benefit on a number of fronts from that perspective. I hope that makes sense. And then the second part of the question was related to MACRILEN. It's not our asset anymore.

So we're really not commenting on it. We just -- our 23-person rare endocrine field force is out every day in partnership with Novo, and they are -- they're working away. And that's really the only comment that we can make, given the fact that we no longer own the asset.

Esther Hong -- Janney Montgomery Scott LLC -- Analyst

OK. And are plans still that Novo will retain 16 members of the sales force for MACRILEN?

Matthew Pauls -- President and Chief Executive Officer

No. So the structure of the deal is for 2019, '20 and '21, our 23 employees, so these are Strongbridge employees, are working with Novo on a daily basis on MACRILEN and in the rare endocrine space. But they're our employees. And at the end of that 3-year deal, they remain our employees, right? So there's no retainment component, there's no crossover to -- of our employees over to Novo, etc.

Does that make sense, Esther?

Esther Hong -- Janney Montgomery Scott LLC -- Analyst

It does. Great. Thank you.

Operator

I'm showing no further questions at this time. And I'd now like to turn the call over to Strongbridge Biopharma's CEO Matthew Pauls for closing remarks. Mr. Pauls?

Matthew Pauls -- President and Chief Executive Officer

Thank you. In summary, we are very encouraged by the discussions we've had with the FDA to date and are focused on advancing the RECORLEV clinical development program and regulatory submission as quickly as possible. The data we are generating from this Phase III program are providing important insights into the understanding of Cushing's syndrome and the use of RECORLEV. We look forward to working with healthcare professionals and patients to raise awareness of Cushing's syndrome and to providing a potential new treatment option for this difficult, devastating rare disease.

Thank you for joining today's call and for your continued support.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the call. You may now disconnect. Everyone, have a wonderful day.

Duration: 33 minutes

Call participants:

Lindsay Rocco -- Elixir Health Public Relations

Matthew Pauls -- President and Chief Executive Officer

Fred Cohen -- Chief Medical Officer

Brian Davis -- Chief Financial Officer

Annabel Samimy -- Stifel Financial Corp. -- Analyst

Justin Kim -- Oppenheimer -- Analyst

Jon Wolleben -- JMP Securities -- Analyst

Francois Brisebois -- Laidlaw and Company -- Analyst

Franois Brisebois -- Laidlaw and Company -- Analyst

Esther Hong -- Janney Montgomery Scott LLC -- Analyst

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