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Tricida, Inc. (NASDAQ:TCDA)
Q1 2019 Earnings Call
May 8, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. Thank you for standing by and welcome to the Tricida first quarter 2019 financial results conference call. At this time, all participants on a listen-only mode. Later, we'll conduct a question-and-answer session, instruction for that time. If you should require any assistance in the call, please press * then 0 for operating assistance. At this time, I would like to turn the conference call over to Jackie Cossmon of Tricida. You may begin.

Jackie Cossmon -- Vice President of Investor Relations and Communications

Thank you, Olivia. Good afternoon and thank you for joining the Tricida first quarter financial results conference call. In today's call, Gerrit Klaerner, our CEO, president, and founder, will discuss our business progress, and Geoff Parker, our CFO, will then discuss our recent successful follow-on equity offering and our financial results for the first quarter.

Please note that in today's call, we will be making various statements that include forward-looking statements as defined under applicable securities laws. Forward-looking statements include statements regarding our future development and commercialization plans, success and duration of our postmarketing trial, recruitment milestones, planned NDA submission, financial guidance, and other statements that are not historical facts. Management's assumptions, expectations, and opinions reflected in these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from any future result's performance or achievements discussed in or applied by such forward-looking statements.

Tricida can give no assurance that these statements will prove to be correct. And we do not intend and undertake no duty to update these statements. We also urge you to read the risks and uncertainties associated with our business that are described in our filings with the Securities and Exchange Commission. For a copy of our press release that was issued prior to this call, please go to www.tricida.com and follow the link to our Investor Relations page. At this time, I'll turn the call over to Gerrit.

Gerrit Klaerner -- Chief Executive Officer and President

Thank you, Jackie. Good afternoon and welcome to our first quarter call. Just six weeks ago, we reported our 301E results that we believe expand the opportunity that we see ahead for TRC101. Based on the strength of the 301E data, we are now updating the underlying assumptions for our market forecast and our overall approach to the commercial launch of TRC101. We look forward to sharing this work with you later this year.

In today's call, I'd like to recap the results of the successful 301E trial, preview additional new findings from our clinical data, and walk you through our progress on our upcoming milestones related to our goal of submitting our NDA in the second half of this year. Following my comments, Geoff will provide our first quarter financial highlights and discuss our recently completed and highly successful $232 million follow-on equity offering. I would note that TRC101 now has a nonproprietary name, veverimer, which we have adopted for use until we unveil our brand name closer to approval. Now let me turn to our 301E results.

We saw surprising upside in this trial beyond the expected good safety profile and long-term durability of effect of veverimer and the surrogate blood bicarbonate endpoint. Following 52 weeks of treatment, we've observed evidence of clinical benefit in veverimer-treated subjects, including improved physical function and a composite of death, dialysis, a 50% reduction in eGFR. These observations are in line with the underlying pathophysiology of metabolic acidosis and its impact on bone, muscle, and kidney health.

The 301E trial was a blinded 40-week extension of the 12-week 301 trial, which randomized 217 patients with non-dialysis dependent CKD and metabolic acidosis. One hundred ninety-six subjects consisting 114 subjects in the veverimer group and 82 subjects in the placebo group elected and were qualified to continue in the extension trial. As a reminder, the primary endpoint of the 301 trial was assessment of the long-term safety profile of veverimer versus placebo. In summary, we observed fewer discontinuations, fewer serious adverse events, and a comparable rate of GI adverse events on veverimer versus placebo.

One of the most unexpected and exciting results of this trial involved a prespecified comparison of the veverimer and placebo groups for time to the composite clinical endpoint of all-cause mortality, dialysis or a greater equal 50% decline in eGFR. We refer to this as a DD50 event. Over the combined 52-week treatment period, the annualized DD50 incidence rate was 4.2% in the veverimer group versus 12% in the placebo group. This represents a statistically significant P value of 0.0224. There were seven confirmed eGFR reductions great than or equal to 50%, four deaths, and one dialysis that occurred in 10 of the 82 patients on placebo versus five confirmed eGFR reductions of greater than or equal to 50%, one dialysis, and zero deaths that occurred in five of the 124 patients on veverimer.

Although the 301 and 301E clinical trials were not designed or powered to assess all-cause mortality or the progression of CKD outcomes, we nevertheless observed a 65% reduction in the annualized DD50 event rate for veverimer-treated subjects versus the placebo group.

As you know, metabolic acidosis in patients with CKD is a chronic disease, and as such, requires long-term treatment to mitigate its deleterious consequences. In the 301E study, we demonstrated that the effect of veverimer on increasing blood bicarbonate was sustained over one year. The difference between veverimer and placebo on those two endpoints related to bicarbonate increase were highly significant compared to placebo in both studies. When evaluating the benefit of treating metabolic acidosis, it is important to remember that kidney disease practice guidelines recommend that the decision to initiate dialysis should be based primarily upon factors that relate to patient well being, such as the sign for the symptoms associated with uremia and evidence of protein-energy wasting, rather than on a specific eGFR value.

Patients with CKD are often frail and have impaired physical function, and metabolic acidosis is one factor that has implicated as a potential contributor. Acidosis has been linked to skeletal and muscle catabolism. And several clinical studies have shown that treatment of metabolic acidosis slows the deterioration of muscle mass and improves muscle function in patients with CKD. Therefore, in a very real way, improving how CKD patients with metabolic acidosis feel and function has the potential to slow their progression to ESRD. Against this clinical backdrop, I'm happy to tell you about additional analyses we've done with the data from our 301E study.

As you may recall, physical functioning was assessed both subjectively and objectively in our studies. The first physical function endpoint subjectively examined the effect treatment with veverimer on self-reported responses to the physical functioning subpart of the Kidney Disease and Quality of Life Short Form, or the KDQOL survey. This survey is a validated questionnaire for kidney disease patients designed to assess health-related quality of life based on physical function during activities of daily living.

Subjects of the trial responded to 10 questions, each with a value of 10 points, so 100 total points. After one year of treatment, while there was no improvement in the placebo group, whose mean score remained at the baseline score of 56 points; however, patients on veverimer had a more than 11-point improvement on average, moving from a mean score of 53 points to 64 points. This improvement far exceeded the three to five point change cited in literature as the minimal clinically important difference for responses to the physical function survey.

The difference between the active and placebo groups was also highly statistically significant. Additional analyses not previously reported evaluated the individual components of the 10-question KDQOL physical function survey. Several showed a statistically significant improvement in veverimer versus placebo-treated patients, and these tended to be those that assessed tasks requiring large muscle, lower body strength, such as bending, kneeling, stooping, which was significantly improved in the veverimer group compared to placebo at all three measured time points, with 12, 40, and 52.

This is particularly interesting as a finding given that the 301 and 301E studies also used, as an objective measure of physical function related to lower body strength, a repeated chair stand test. In the repeated chair stand test, subjects were asked to stand up and sit down five times as quickly as possible. And the time for these five repetitions was recorded. At the end of one year of treatment, the average time for performing the chair stand test decreased by 4.3 seconds on veverimer compared to 1.4 seconds on placebo against the baseline of 20 seconds on average for each group. This difference between the active and placebo groups was also statistically significant and fits very well with the results observed for the individual KDQOL questions.

To summarize, the improvement in favor of veverimer-treated subjects in the two measures of physical function at week 52 were both statistically significant with P values less than 0.0001 and approximately doubled compared to the observed results at week 12. We believe the results from the KDQOL physical function survey and repeated chair stand tests both provide evidence of improvement in physical function. And these effects exceed the minimally clinically important different thresholds reported in the scientific literature. We also believe these results are consistent with the basic pathophysiology of metabolic acidosis and that amelioration of deleterious effect of metabolic acidosis on physical function could provide another way to slow progression to renal replacement therapy.

So, let me summarize where we are based on our analysis of the extension trial. The combined 52-weeks results far exceeded our expectations. We did not anticipate that we would observe any evidence of clinical benefit beyond the increase in blood bicarbonate in patients treated with veverimer until the readout of our VALOR-CKD postmarketing trial somewhere in the 2022 to '23 timeframe. We remain committed submitting our NDA under the Accelerated Approval Program in the second half of 2019 and look forward to the result of our VALOR-CKD confirmatory postmarketing trial.

While we do not anticipate any change in the size or design of the VALOR-CKD trial, we feel good about what we've learned in the 301E study regarding safety and efficacy, increasing our confidence for a successful VALOR-CKD trial. And with an interim analysis that is triggered by 50% of the primary outcome events, we have the opportunity to evaluate this study at an earlier time point if we choose to do so.

We've now successfully completed all the clinical trials that we planned to complete prior to submission of our NDA through the FDA's Accelerated Approval Program. We've scheduled our pre-NDA meeting for mid-year, and we plan to submit our NDA in the second half of 2019. With the potential launch of veverimer in the second half of next year, our pre-commercialization efforts have moved into high gear. We will be updating on the specifics of these activities later in the year. We'll be conducting both qualitative and quantitative surveys with high-prescribing nephrologists and payers, providing them with an updated target drug profile, reflecting the recently announced 301E data.

We're also assessing the patient journey to understand how a CKD patient would be diagnosed with metabolic acidosis and potentially treated with veverimer. These data will enable us to build a revised forecast that we believe will provide further upside to our current PQS market opportunity base case of over $1 billion. With that, I'll turn the call over to Geoff.

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

Thank you, Gerrit. Before I turn to our financial results for the first quarter, I'd like to provide a few details on our successful follow-on equity offering that we completed in early April. We launched the offering on April 1st, shortly after the announcement of our positive TRCA-301E results. The initial size of the offering was for 5 million shares of common stock. Following a two-day investor roadshow, we developed a well oversubscribed book of orders and ultimately issued 6.44 million shares of common stock, inclusive of exercise of the underwriter's greenshoe.

The offering was priced at $36 per share and raised $232 million in proceeds. The final allocated order book included a blend of existing shareholders and new institutional investors, representing a significant number of the leading biotechnology investment funds. This equity financing was strategically important to establish a robust balance sheet as we continue to prepare Tricida for the anticipated launch of veverimer in the second half of 2020. Now I will summarize our first quarter financial results.

Research and development expense was $31.4 million and $16.6 million for the three months ended March 31, 2019 and 2018, respectively. The increases in research and development expense was primarily due to increased activity in connection without veverimer clinical development program, including increased drug substance manufacturing as well as increased personnel and related costs.

General and administrative expense was $6.4 million and $3.5 million for the three months ended March 31, 2019 and 2018, respectively. The increase in general and administrative expense was primarily due to increases administrative costs supporting the increased activities in connection with our veverimer clinical development program, increased headcount, and higher professional services fees.

Net loss was $37.9 million and $20.5 million for the three months ended March 31, 2019 and 2018, respectively. Net loss per share was $0.90 for the first quarter of 2019. The effect of the 6.44 million shares of common stock issued in our recent equity financing was not considered in the net loss per share calculation at March 31, 2019, since the offering closed on April 8th, 2019. Applying the total number of 48.7 million shares outstanding, following the completion of the offering, net loss per share would be $0.78 for the first quarter of 2019.

As of March 31, 2019, our cash, cash equivalents, and investments were $219 million. On a pro forma basis, for our recent equity offering, our cash, cash equivalents, and investments totaled $436.9 million. We believe our current cash position, together with the significant capital available under our recent upsized Hercules debt facility, positions us exceptionally well to fund the anticipated launch of veverimer in the second half of 2020.

I would now like to turn the call over to the operator for any questions. Operator.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, at this time, if you have a question, please press the * then the number 1 key on your touchtone telephone. If your question has been answered, or you wish to remove yourself from the queue, please press the # key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. One moment for our first question. Our first question coming from the line of Jessica Fye with JP Morgan, your line is open.

Yuko Oku -- JP Morgan -- Analyst

Hello, this is Yuko on the call for Jessica. Thank you for taking our questions. Could you comment on the number of sites that are open for enrollment for the lower CKD? And how is the screen failure rate for that study tracking relative to your expectation? And I have a follow-up.

Gerrit Klaerner -- Chief Executive Officer and President

Thanks, Yuko. As you know, we comment on the progress of VALOR-CKD in the context of our planned NDA submission for the second half of this year. And we've communicated that we would conduct this study in up to 350 sites in 30-plus countries, and the majority of the sites have been opened. And in terms of other assumptions, and screening, and so on, pretty much, we've communicated that we expect similar rates to what we've had in the trial before. And everything we're seeing is on track.

Yuko Oku -- JP Morgan -- Analyst

Okay. Great, thank you. And then, the 301E study, are you planning to present the full results at upcoming medical meeting? And if so, which ones should we be watching for?

Gerrit Klaerner -- Chief Executive Officer and President

Yeah, we plan on presenting at the American Society of Nephrology meeting in the late-October timeframe. That's really the main nephrology meeting.

Yuko Oku -- JP Morgan -- Analyst

Okay, great. And maybe one more. How should we be thinking about opex throughout 2019 on a quarterly basis?

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

So, Yuko, it's Geoff. As far as operating expense, are you asking about the full expense for R&D and SG&A?

Yuko Oku -- JP Morgan -- Analyst

Yeah. Well, I mean, breakdown would be great if there's any more detail to add on that.

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

Yeah, I would say there will be some lumpiness through the year. I think for the second quarter, it's likely that our total operating expense will be higher by 10% or 15%. But then, it may very well come down in Q3, and then step up again in Q4. But I would say that the overall -- it'll be in a similar ballpark. I would reiterate, again, our key guidance for the year is that we intend to utilize between $135 and $145 million of cash this year, which is the key metric that we're monitoring to make sure that we have appropriate runway for our launch of veverimer.

Yuko Oku -- JP Morgan -- Analyst

Great. Thank you for the additional color.

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

Thank you.

Operator

Our next question coming from the line of Phil Nadeau with Cowen and Company. Your line's now open.

Phil Nadeau -- Cowen & Co. -- Analyst

Good afternoon. Thanks for taking the questions and congratulations on the progress. First, one on the VALOR-CKD trial. It sounded like from your prepared remarks that you have some discretion on whether you take the interim in that study. Did I hear that or understand that correctly, and can you discuss a little bit about how you're weighing that decision if there is discretion as to whether to do the interim or not?

Gerrit Klaerner -- Chief Executive Officer and President

Yeah, I think it -- we can choose to -- at the time of 50% of the event, we do the interim, and then we can choose to do nothing as one of the three options. The other option is to stop the trial early or to recalculate the sample size. So, we would do the interim, but, effectively, one of the options of the interim analysis is to do nothing.

Phil Nadeau -- Cowen & Co. -- Analyst

And do you -- has management see the results of the interim, or do you get a recommendation from the DSMB of which of those three options to do and then decide based upon the DSMB's recommendation?

Gerrit Klaerner -- Chief Executive Officer and President

Yeah, so this is a standard time-to-event, double-blind, placebo-controlled outcome. So, I think it all goes through the respective safety and efficacy committees. And there are so many of them for a major trial. So, I can [inaudible] you. But we're not seeing anything. It all goes through these independent bodies.

Phil Nadeau -- Cowen & Co. -- Analyst

Okay. Got it. That makes sense. And then, second question is on the 301E composite data, which is very impressive. It does seem like the composite, the statistical significance of the composite, was driven by the big decrease in deaths in the treated compared to the placebo. How closely have you looked at -- been able to look at those deaths and attribute them to either progression of disease or some other mechanism that could be related to kidney dysfunction or metabolic acidosis?

Gerrit Klaerner -- Chief Executive Officer and President

That's a good question. So, we -- the most frequents event in the composite in the placebo group was actually the greater equal 50% eGFR reduction with seven events. And then, of course, we had four deaths and no deaths in the active group. And one as we've described before, one was truly a renal death where a patient refused dialysis and then died. And another death had renal involvement. And then, a couple of other deaths are the typical type of cardio-renal-related death in this population. We'll have more detail on that in our disclosure of the -- our presentation of the data at the meeting and also in the publication that we're working on. But I think we didn't have any accidental or sort of death that are unexpected in this population.

Phil Nadeau -- Cowen & Co. -- Analyst

Got it. That's very helpful. Then, third, just on the physical function data that you had -- that you mentioned in the prepared marks. At one point, you were discussing or thinking about taking those to the European regulators to discuss. Any update on your plans in Europe and how that physical function data could impact European filing timelines?

Gerrit Klaerner -- Chief Executive Officer and President

Yeah, I think the physical function in intriguing, I think. As we work with our experts to really understand the data in detail, it's interesting that this objective measure with 10 questions, the patient report outcomes, they appear to actually improve in the area that is also responsible for the improvement in the repeated chair stand test. And so, I think that we were excited to actually share this with you today. And we think that this makes a very compelling argument in really showing that veverimer has potential to improve health patient fields and functions. And then, you connect that with the fact that the nephrology community is really moving away from an eGFR-centric view of initiating those to more an overall well being in recent years. I think that this will -- has the potential to be well received by European regulators and payers as well in the US.

Phil Nadeau -- Cowen & Co. -- Analyst

Do you have any sense of when you could have those European discussions? Or is that still undetermined?

Gerrit Klaerner -- Chief Executive Officer and President

I think -- what have we been saying, Geoff?

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

We intend that we should be able to achieve European approval probably within 18 months of US approval. So, that would imply that we would be filing with European authorities within 12 to 15 months after we file in the US.

Gerrit Klaerner -- Chief Executive Officer and President

Yeah. And as we've said before, I think later this year, we plan to talk to European payers first. And then, probably next year, to talk to EMA.

Phil Nadeau -- Cowen & Co. -- Analyst

Got it. Okay. That is very helpful. And last, Geoff, for you, I think after the Q4 call, you had suggested that on the R&D expense specifically in 2019, it was gonna be weighted toward the second half of the year due to timing of some CMO charges. It looks like maybe some of that was brought forward, based on the comments that you just made in reference to the last question. So, has that changed? Is now the R&D expense gonna be a bit more balanced throughout the year?

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

Yeah, I would say R&D will be a little bit higher in Q2. And if the timing goes as we expect, we'll be lower in Q3 and then slightly higher Q4. And so, there is a bit of a lumpiness there. But on average, it should be right in the $32 to $35 million per quarter range.

Phil Nadeau -- Cowen & Co. -- Analyst

Got it. That's helpful. Thanks for taking my questions.

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

Okay, Phil.

Operator

And as a reminder, ladies and gentlemen, to ask a question, please press the * then the 1 key your touchtone telephone. At this time, I'm showing no further question. I would like to turn the conference call back over to Gerrit Klaerner for closing remarks.

Gerrit Klaerner -- Chief Executive Officer and President

Thank you, all, for joining us on today's call. If you happen to attend the upcoming Goldman Sachs healthcare conference in June, we hope to see you there. And we look forward to reporting our progress in our next quarter call. Please don't hesitate to contact Jackie if you have questions.

Jackie Cossmon -- Vice President of Investor Relations and Communications

Operator --

Operator

Ladies and --

Jackie Cossmon -- Vice President of Investor Relations and Communications

Oh, now thank you.

Operator

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.

Duration: 28 minutes

Call participants:

Jackie Cossmon -- Vice President of Investor Relations and Communications

Gerrit Klaerner -- Chief Executive Officer and President

Geoffrey Parker -- Chief Financial Officer and Senior Vice President

Yuko Oku -- JP Morgan -- Analyst

Phil Nadeau -- Cowen & Co. -- Analyst

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