U.S. Markets close in 4 hrs 42 mins

Edited Transcript of ACUR earnings conference call or presentation 3-Apr-17 12:30pm GMT

Thomson Reuters StreetEvents

Q4 2016 Acura Pharmaceuticals Inc Earnings Call

PALATINE Apr 3, 2017 (Thomson StreetEvents) -- Edited Transcript of Acura Pharmaceuticals Inc earnings conference call or presentation Monday, April 3, 2017 at 12:30:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Peter A. Clemens

Acura Pharmaceuticals, Inc. - CFO, SVP and Secretary

* Robert B. Jones

Acura Pharmaceuticals, Inc. - CEO, President and Director

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day, and welcome to the Acura Pharmaceuticals Fourth Quarter 2016 Annual Results Investor Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Peter Clemens. Please go ahead, sir.

--------------------------------------------------------------------------------

Peter A. Clemens, Acura Pharmaceuticals, Inc. - CFO, SVP and Secretary [2]

--------------------------------------------------------------------------------

Thank you very much, Audra. Before we begin, I'd like to remind you that any discussion that takes place during this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of '95. Such statements reflect our current view of future events and operations, including, but not limited to, statements pertaining to the company's expectations regarding our ability to continue operations and to secure financing to fund continued operations and to maintain compliance within the covenants of our term debt financing; expectations regarding the commercialization of our AVERSION/OXAYDO product by Egalet, including related royalty revenues; expectations regarding the development of and clinical studies relating to, including estimated timing for and results related to, our LIMITX technology; expectations regarding the timing and results of our communications with the FDA regarding our lead LIMITX technology product candidate; expectations regarding the abuse-deterrent effects of our LIMITX technology and our ability to reformulate our lead LIMITX technology product candidate to provide efficacious drug levels; expectations regarding whether the LIMITX technology can be applied to extended-release applications; our expectation regarding NEXAFED, Nexafed Sinus Pressure + Pain and line extensions of the NEXAFED franchise; the meth-resistance capabilities of our IMPEDE technology; expectations regarding -- relating to the company's product development pipeline; the commercial potential of the company's products and plans to maximize its potential; future product sales; financial results; and the company's strategy for near-term financing and long-term growth.

Forward-looking statements involve certain significant risk and uncertainties, and actual results may differ materially. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Certain factors that may cause actual results to differ materially from the forward-looking statements are discussed in our press release issued March 31 and in the Risk Factors sections and other sections of our Form 10-K for the year ended December 31, 2016, as filed with the SEC.

I'll now turn the call over to Bob Jones, our CEO, for a general corporate update.

--------------------------------------------------------------------------------

Robert B. Jones, Acura Pharmaceuticals, Inc. - CEO, President and Director [3]

--------------------------------------------------------------------------------

Thanks, Pete, and good morning, everybody. Let's start today with an update on our LIMITX technology.

LIMITX is our latest patent-protected abuse-deterrent platform that is designed to address abuse by the most prevalent route, simply swallowing multiple intact tablets, also known as excessive oral tablet abuse. None of the abuse-deterrent opioids currently approved by the FDA address this oral ETA. During 2016, we completed our first exploratory study on the LIMITX technology, with the results from study AP-LTX-400 or Study 400. We also received feedback on our Study 400 results from the FDA as well as their advice on our future clinical program for LIMITX.

Study 400 demonstrated that the microparticle we used in the tablet formulation released the drug too slowly, at about half the Cmax or maximum blood concentration as the reference product we'd studied against. FDA confirmed our need to reformulate the microparticles, noting that we would need to achieve bioequivalence to the reference product to rely on its efficacy data. If not, we would be required to run a Phase III pain efficacy study.

Study 400 also demonstrated a 20% reduction in Cmax when 3 through 8 tablets were ingested, thus proving the ability of LIMITX technology to control the release and absorption of drug when multiple tablets are ingested or addressing oral ETA. FDA suggested that we consider, in future studies, to correlate this maximum -- this level of Cmax reduction to a clinical endpoint. That we have interpreted to something like a reduction in respiratory depression or drug liking. FDA also made additional suggestions for future studies to include data around the use of LIMITX with other stomach acid-modifying agents.

Finally, in Study 400, we observed a subpopulation of fast absorbers that, consistent with the technology, demonstrated much more pronounced benefits from LIMITX. For example, an average reduction in Cmax for this group was 38%, with 2 of the subjects exhibiting an estimated 66% reduction in Cmax. We recognize that a physician could not determine in advance which patients will be in this subpopulation. However, given about 50% of the patients in the study met the fast absorber criteria, we felt it was important to get FDA's views on this subpopulation. The FDA noted that to label a product for a particular subpopulation, including faster drug absorbers, prescribers should be able to understand that only a subset of their patients may benefit from use of the product.

Following the dosing in Study 400, we observed tablet discoloration, so we undertook a twofold reformulation process. First, we needed to redesign the microparticle that would release faster. We have 2 candidate formulations that release approximately 67% more drug in 5 minutes than the microparticles that we used in Study 400. Secondly, we needed to reformulate the tablet composition to eliminate the discoloration.

We now have a new tablet formulation with the new microparticle that demonstrates successful 1-month stability. Thus, we are now in position to start the next LIMITX technology study. We are progressing towards a mid-May start of AP-LTX-401 or Study 401. Study 401 will be smaller and faster to complete than Study 400 as we will be studying only 2 doses, 1 tablet and 7 tablets. This design should give us a quick read on whether we have adequately fixed the microparticle release and show the impact on multiple tablets. We believe this information on LIMITX will be key to our partnering or financing efforts for the company.

Now we'll turn to our IMPEDE technology and the NEXAFED franchise. In March, we completed a licensing of our NEXAFED franchise to MainPointe Pharmaceuticals. The license includes both of our marketed NEXAFED products, NEXAFED and Nexafed Sinus, and is for the U.S. and Canada. The deal also contemplates expansion through options to more territories and more pseudoephedrine product formulations.

MainPointe is a newly created pharmaceutical company. They initially acquired the rights to the OTC product Slo-Niacin from Upsher-Smith, followed by our deal for NEXAFED. This multiple product footprint provides MainPointe with better leverage with the trade customers and may allow for certain benefits for NEXAFED with customers for which MainPointe already has distribution with Slo-Niacin. Also, MainPointe brings new contacts and relationships with customers that may further provide benefit to the NEXAFED franchise. In short, MainPointe has capabilities beyond those which Acura could bring to the marketing of NEXAFED, which we believe will serve the franchise well.

We are also impressed with MainPointe's understanding of the meth problem associated with PSE products and their dedication to using our technology to make a difference in local communities.

I'll now turn the call back over to Pete, who will review our financial results. Pete?

--------------------------------------------------------------------------------

Peter A. Clemens, Acura Pharmaceuticals, Inc. - CFO, SVP and Secretary [4]

--------------------------------------------------------------------------------

Thanks, Bob. We reported a net income of $1.5 million for the fourth quarter of 2016 or $0.13 per diluted share compared to a net loss of $900,000 or $0.08 per diluted share for the same third -- fourth quarter period in 2015. For the year, we reported net loss of $7.4 million compared to a net loss of $5 million for the same period in 2015.

The 2016 results included $3.5 million licensing revenue from KemPharm agreement, while the 2015 results reflected a $7.5 million payment arising from licensing OXAYDO tablets to Egalet. Other revenues for 2016 arising from development agreement with Bayer, royalties from Egalet and the sale of NEXAFED products amounted to about $1 million compared to $800,000 for such revenues in the prior year.

R&D expenses for 2016 totaled $4 million, a 50% increase over the prior year, as we advanced our LIMITX technology product candidate into the first human study and formulated improvements to our IMPEDE meth-resistant technology.

As Bob indicated, we are on pace to commence the second human pilot study of the newly formulated LIMITX product candidate in the second quarter of this year. We expect our R&D efforts in 2017 to continue to focus on LIMITX' product candidate clinical testing and formulation.

Selling, marketing, G&A expenses for 2016 declined 27% from the prior year due to reduced spending on NEXAFED marketing, reduction in compensation and overall effort to hold the line on discretionary spending. At March 31, 2017, we had unrestricted cash and cash equivalents of $3.7 million, which includes the $2.5 million received under our agreement with MainPointe and is after deduction of our $2.5 million compensating balance requirement under our term loan with Oxford Finance. The outstanding principal on our term loan with Oxford Finance at this time is $5.1 million.

Lastly, our auditor's report relating to our 2016 financial statements includes a going-concern explanatory paragraph as to substantial doubt of our ability to continue as a going-concern. We estimate that our unrestricted cash balances currently on hand will be sufficient to fund operations only through mid-2017. To fund operations beyond mid-year, we must raise additional financing or enter into a license or collaboration agreement with third parties relating to our technologies. We are actively pursuing such transactions, but there could be no assurance that these efforts will be successful.

Now we'll open the call up for questions. Operator, you may now begin the Q&A session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And gentlemen, it appears there are no questions at this time.

--------------------------------------------------------------------------------

Robert B. Jones, Acura Pharmaceuticals, Inc. - CEO, President and Director [2]

--------------------------------------------------------------------------------

Okay. Thank you, Audra. Thanks, everybody, for joining us today. We look forward to running Study 401 and getting those results out to you as quickly as we possibly can.

Have a great day. Bye-bye.

--------------------------------------------------------------------------------

Operator [3]

--------------------------------------------------------------------------------

And that does conclude today's conference. Again, thank you for your participation.