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Edited Transcript of FOMX earnings conference call or presentation 9-May-18 12:30pm GMT

Q1 2018 Foamix Pharmaceuticals Ltd Earnings Call

Rehovot Dec 13, 2018 (Thomson StreetEvents) -- Edited Transcript of Foamix Pharmaceuticals Ltd earnings conference call or presentation Wednesday, May 9, 2018 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David T. Domzalski

Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc.

* Ilan Hadar

Foamix Pharmaceuticals Ltd. - CFO & Country Manager

* Michael Wood

LifeSci Advisors, LLC - MD of Communications

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Conference Call Participants

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* Rohit Govind Vanjani

Guggenheim Securities, LLC, Research Division - Senior Analyst

* William Patrick Maughan

Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma

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Presentation

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Operator [1]

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Good day, and welcome to the Foamix Pharmaceuticals First Quarter 2018 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Michael Wood of LifeSci Advisors. Please go ahead, sir.

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Michael Wood, LifeSci Advisors, LLC - MD of Communications [2]

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Thank you, and good morning, everyone. Yesterday, Foamix issued a press release of earnings results and corporate update for the quarter ending March 31, 2018. The press release is available on the Investor Relations page on the Foamix website at foamixpharma.com. This call is being recorded and a webcast and replay will be available on the company's website for the next 2 weeks.

Before we begin the formal remarks, let me remind you that some of the information in the news release and on the conference call contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words that express and reflect optimism, satisfaction with current progress, prospects or projections as well as words such as believe, intend, expect, plan, anticipate and similar variations identify forward-looking statements, but their absence does not mean that a statement is not forward looking. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Foamix' filings with the SEC. These forward-looking statements speak only as of the date of today's press release and conference call, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this call.

Participating in today's call are Dave Domzalski, Chief Executive Officer of Foamix; and Ilan Hadar, Chief Financial Officer.

With that, I'll turn the call over to Dave Domzalski. Dave, please go ahead.

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David T. Domzalski, Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc. [3]

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Thank you, Michael, and good morning, everyone. We have had a strong start to 2018 with considerable progress in the clinic for our 2 lead therapeutic candidates as well as on operational and financial fronts.

Let me begin with FMX101, which is our 4% topical minocycline foam that we are developing for moderate-to-severe acne. You hopefully have seen the news that earlier this week, we announced that the final patient has been enrolled and dosed in the third Phase III study for FMX101. This is called Study FX2017-22. This is another important milestone for us. A total of 1,507 patients have been enrolled in this study. As a reminder, we enrolled the first patient in August of last year, so we're pleased with the pace of enrollments and the interest shown by patients and physicians. Getting to full enrollment means that we remain on track to announce the top line results in the third quarter of this year.

On February 14, we held a Type B pre-NDA meeting with the FDA. The purpose of the meeting was to discuss the submission of a 505(b)(2)application for FMX101. We received the final FDA meeting minutes on March 8. During the meeting, we discussed various matters relating to the overall development program of FMX101, including CMC, nonclinical toxicology studies, formats and other information required for the NDA submission. There were no unexpected action items requested of the company during the pre-NDA meeting or in the meeting minutes.

Overall, we felt the meeting went well, and we were pleased with the outcome of the session together. As the results for Study 22 meet our expectations, they will form part of our planned NDA for FMX101, which is targeted for regulatory submission to the FDA before the end of this year.

To put our regulatory strategy for FMX101 in context, let me briefly review what we have accomplished in the past year or so with this program. You will recall that we announced top line results from our 2 Phase III clinical studies, Study 04 and Study 05, in 2017. In the intent-to-treat analysis, FMX101 demonstrated statistical significance compared to vehicle on both co-primary endpoints and Trial 05. However, we did not demonstrate statistical significance on 1 of the 2 co-primary endpoints, IGA success in Trial 04. We discussed these data with the FDA, and the agency confirmed with us that statistically significant findings from a third study would constitute replication of the results from Study 05 and will be sufficient to establish an efficacy claim for FMX101. This is the purpose of this third Phase III study, Study 22, which is now ongoing and now fully enrolled.

We reached concurrence with the FDA on the design of this third study, which is very similar in design to the prior 04 and 05 studies. It is double-blind, vehicle-controlled, and patients have been randomized one-to-one to receive either FMX101 or vehicle with once-daily treatment for 12 weeks. Co-primary endpoints for Study 22 are the same as studies 04 and 05. They are first, the proportion of patients achieving success at week 12 based on an Investigator's Global Assessment. Success is defined as a score of clear or almost clear, which is a score of 0 or 1, and at least a 2 category improvement from baseline. And the second co-primary endpoint is the mean change from baseline in inflammatory lesion counts in each treatment group at week 12. Safety evaluation will also include reported adverse events, assessments of tolerability, clinical lab tests and vital signs.

Our final patient enrollment for Study 22, which is 1,507 patients, as I mentioned previously, this is more than 3x the sample size of each of the previous Phase III studies. The other news on FMX101 this quarter was that we announced in January positive safety data for our Phase III open-label safety extension study evaluating FMX101 in moderate-to-severe acne for a treatment period of up to 1 year. The data was presented in a poster session at the Winter Clinical Dermatology Conference in Hawaii.

The open-label safety extension enrolled a total of 657 patients, all of whom have completed 12 weeks of FMX101, or vehicle treatment in the preceding double-blind phases of Study 04 or Study 05. Patients continued for up to an additional 40 weeks of open-label treatment with FMX101. A total of 291 patients completed a total of 52 weeks of FMX101 therapy, which is in excess of the subject sample size requirements specified in the regulatory guidance for this type of safety evaluation.

No serious drug-related adverse events were reported during the open-label safety extension, validating earlier data, demonstrating that FMX101 appears to be well tolerated with an acceptable safety profile.

Nondermal adverse events were comparable in type of frequency with those reported during the double-blinded portion of the 2 Phase III studies. Application site adverse events occurred in less than 2% of patients during the 40 weeks of open-label treatment, with only 4 patients discontinuing the study for an application site adverse event.

Efficacy was also measured as a secondary endpoint in the open-label study for FMX101. The data provided some evidence that the beneficial effect of FMX101 appear to persist out to 12 months as measured by improvements in the patient's IGA scores as well as reductions in both inflammatory and noninflammatory lesions. This data was from observed cases based on summary statistics. And it is important to note that we are not making any claims of statistical difference between any treatment arms in this open-label study. We went into quite a lot of detail on these efficacy results on our last call, so I will refer you back to our press release from February 28 for further details.

Turning now to FMX103, our 1.5% minocycline foam, which is in development for moderate-to-severe papulopustular rosacea. FMX103 is being investigated in 2 identical double-blinded studies, which are studies FX2016-11 and FX2016-12, measuring efficacy with once-daily dosing over a 12-week period. We announced the enrollment of the first patient in these Phase III studies last June, and we expect to have top line results from the blind portion of both trials by the end of the third quarter, or in the beginning of the fourth quarter of this year.

Similar to the acne studies, patients in the FMX103 studies, have the option to enter into an open-label safety extension, which we refer to as Study 13. The purpose of this study, again, is to provide long-term safety data as part of a planned NDA submission. I'm pleased to note that this open-label extension study has now enrolled the required number of patients, and we are no longer rolling patients over from either of the 2 ongoing double-blind efficacy studies.

The entire Phase III program for FMX103, including safety Study 13, is expected to be complete next year in 2019. So those are our recent clinical developments.

On corporate developments, we announced in April that we entered into a securities purchase agreement with OrbiMed for a registered direct share offering. We agreed to sell OrbiMed, approximately 2.9 million of our ordinary shares at a purchase price equivalent to roughly $5.50 per share, which represented a premium to our share price at the time. Gross proceeds from this transaction were $16.2 million. OrbiMed, as you likely know, is one of the leading institutional health care investors worldwide, and we are grateful to have their support as a new shareholder.

With that, I will now turn the call over to Ilan to discuss our financial results.

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Ilan Hadar, Foamix Pharmaceuticals Ltd. - CFO & Country Manager [4]

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Thank you, Dave, and good morning, everyone. Revenues for the first quarter ended March 31, 2018, were $906,000, compared with $927,000 in the same period of 2017. The decrease is mainly due to a decrease in royalty payments in the amount of $83,000 from Bayer for sales of Finacea Foam.

Research and development expenses for the first quarter of 2018 were $22.8 million compared to $12.7 million in the first quarter of 2017. The increase in the research and development expenses resulted primarily from an increase of $9.1 million in cost relating primarily to FMX101 and FMX103 clinical trials as well as increase in payroll and payroll-related expenses, including share-based compensation due to a change in the measurement of the share-based compensation expenses of a consultant, and an increase in headcount and salary raises.

Selling, general and administrative expenses for the first quarter of 2018 were $3.5 million compared to $2.8 million in the first quarter of 2017. The increase in selling, general and administrative expenses resulted primarily from an increase in payroll and other payroll-related expenses, including share-based compensation, mostly due to an increase in headcount, salary raises and an accounting modification relating to the share-based compensation of a consultant.

The company recorded a net loss for the quarter ended March 31, 2018, of $25.7 million or $0.69 per share, basic and diluted, compared to a net loss of $14.4 million or $0.39 per share, basic and diluted in the quarter ended March 31, 2017.

Net cash used in operating activities was $23.2 million in the 3 months ended March 31, 2018, compared to $12.1 million in the 3 months ended March 31, 2017. The increase was attributable primarily to increasing activity related mostly to clinical trials and payroll expenses. We expect the net cash used in operating activities to remain at this level in the near-term due to ongoing Phase III clinical trials for FMX101 and FMX103, and decrease towards the end of the year as we remain on track to announce the total results for FMX101 in the third quarter of 2018, and for FMX103 towards the end of the third quarter or the beginning of the fourth quarter of 2018.

At March 31, 2018, we had $53.1 million in cash and investments compared to $76.4 million at December 31, 2017. As Dave mentioned, subsequent to the end of the quarter, we completed the financing transaction with OrbiMed, which raised a further $16.2 million in gross proceeds. We believe, based on our current business plan, that our existing cash and investments, we fund operating expenses and capital expenditure requirements through the completion of our third pivotal Phase III clinical trial for FMX101, and our 2 pivotal Phase III clinical trials for FMX103.

For additional details on our financials, please refer to the Form 10-Q and financial statements filed with the SEC.

I will now hand the call back to Dave for closing remarks.

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David T. Domzalski, Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc. [5]

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Thanks, Ilan. I'm very happy with the progress made by the Foamix team so far in 2018. The remainder of the year is going to be busy, with a number of potential value-enhancing milestones, including the confirmatory Phase III data readout for FMX101 and the Phase III data readout for FMX103. So thank you to everybody on this call for joining us today and for your continued support as we work to execute on our plans and deliver long-term value and sustainable growth.

That concludes our prepared remarks, and we are happy to now open the call for questions. So I'll turn it back to the operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We will now take a question from Bill Maughan, Cowen and Company.

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William Patrick Maughan, Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma [2]

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So as we near the readout for the final pivotal acne trial, what mechanisms, if any, beyond the normal training of the sites are available to you to ensure that sites continue to measure patients' response accurately, and to make sure that nothing changes as the trial progresses? And then have you had any access to any still-blinded data that gives you a hint as to how the trial is progressing?

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David T. Domzalski, Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc. [3]

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I'll take the first -- the second part of the question, regarding data. Obviously, the data is blinded. We will not be commenting on any date until final results are tallied, unblinded. And obviously, we'll communicate that to the entire investment community immediately as soon as we have that. Regarding the operational oversight question, this has been a major emphasis for our company since we received the results from the first 2 Phase III studies last spring. I'm quite encouraged by the significant work that our clinical operational team has deployed in working with our CRO. We have put in place several mechanisms to do the best we can, to ensure that there is continuity amongst the investigators, especially when it comes to assessments of IGA rating scores, which as we discussed in the past is one of the more subjective endpoints. And IGA success is the one endpoint that we missed on one of our 2 initial Phase III studies. So a couple -- as a reminder, a couple of the initiatives that we put in place is that, first of all, we have significantly increased our own internal manpower through employees as well as full time consultants that have been deployed and that are literally out meeting with investigators on a daily basis. We have board-certified dermatologists on each coast that are working with our CRO, with the investigator sites. We have a dedicated -- a clinical research associate team. We have a data monitor in-house, that in real time, is monitoring the enrollment of patients. And we have colleagues that run our past Phase II studies, including our Phase II study in Germany from -- and Israel that literally come here on a weekly basis, and that are working with sites. So we have roughly, a half dozen or so internal colleagues that are out at the sites on a daily basis, both visiting the sites on their own and monitoring our clinical research organization on a daily and weekly basis. So that's just the manpower component of the work that we've done. Additionally, we have put in place multiple refresher training assessments, if you will. From the beginning of this third Phase III study, we had 2 investigator meetings to obviously train the investigators and to get them set up so they can begin seeing patients enrolling with the study. We have had 6 additional refresher trainings that have taken place, and we have a few more that are scheduled before the -- we anticipate the study will come to a conclusion. And we're doing this for both acne -- for both the acne program as well as the rosacea program. So these are just some of the initiatives that we have in place. We're out there in the field with investigators. We've had multiple training sessions for the investigators. We use real-time data to provide this assessment. We've had multiple initial investigator meetings as well. So hopefully, that provides a bit more detail on what we're doing to try to mitigate the inherent risks that are associated with this more subjective endpoint.

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William Patrick Maughan, Cowen and Company, LLC, Research Division - Equity Research Associate in Specialty Pharma [4]

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Absolutely. And one more follow-up, if I may. So for the rosacea enrollment, now that you're fully enrolled for the safety extension, with enrollment for the efficacy still ongoing, did the safety extension enroll more quickly than expected? Or is this just the case of having built-in margin on enrollment rates? And -- actually, yes, that's the question.

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David T. Domzalski, Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc. [5]

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Yes. I'd say it's a bit of both. Obviously, we took a very similar approach in setting up the -- what we anticipate to be the sample size in the enrollment pace for the safety extension in rosacea, as we did with acne. So we've seen very good enrollment for rosacea. We've seen low discontinuation rates for the study. And so we've obviously been able to roll patients into this long-term extension at a pretty rapid pace. I think that's an encouraging sign that patients obviously want to continue in the study. And so we've hit the number that we felt would be more than sufficient and making sure that we get the requisite number of patients completed for regulatory guidance. Again, it will be the same, roughly around 100 subjects will need to complete, 1 year of exposure to the drug. So we've hit the numbers that we anticipated or we were shooting for at a pretty good pace, and so we no longer need to roll any more patients over into the safety extension.

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Operator [6]

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(Operator Instructions) Our next question comes from Rohit Vanjani of Guggenheim.

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Rohit Govind Vanjani, Guggenheim Securities, LLC, Research Division - Senior Analyst [7]

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The OrbiMed offering you mentioned was $6.2 million gross. What was the net cash on that offering, after expenses and other costs?

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Ilan Hadar, Foamix Pharmaceuticals Ltd. - CFO & Country Manager [8]

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We are still gathering the exact expenses, but you can expect it to be roughly around $16 million -- $16.0 million.

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Rohit Govind Vanjani, Guggenheim Securities, LLC, Research Division - Senior Analyst [9]

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Okay. And OpEx came in a little higher for the quarter than maybe I was expecting. Are you still expecting around a $60 million burn for 2018 given that you already burned around $27 million for the quarter?

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Ilan Hadar, Foamix Pharmaceuticals Ltd. - CFO & Country Manager [10]

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That's correct. As I explained in the script, first quarter, we are still running -- first and second quarter, where you can expect that we are still running the 3 Phase III clinical trials. And of course, those trials are consuming cash. As we said that we expect the top line results in Q3, and then rosacea will come at end of Q3, towards Q4. You can expect the cash burn to decrease.

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David T. Domzalski, Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc. [11]

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Yes. Rohit, to underscore that point, we're at a bit of -- to underscore the point, we're at bit of a bolus in this first quarter because we're -- we just announced that the enrollment for the acne program just wrapped up. Obviously, we're looking at top line readout for that study in the third quarter. We'll continue to recruit at a good pace for the rosacea program, at some point in time that will wrap up. So these are kind of right in the peak points. Once the acne study is done, I mean there's really no more work to be done on the clinical side because we've already completed the safety extension. I think for rosacea, as I shared with the -- for the previous question, we're moving at a really good pace for that. So you could -- you clearly will be able to see that as we move towards the back end of the year, certainly, the second half, R&D cost associated with running these clinical trials will decrease quite meaningfully. And so we remain on target for the burn rate through the year.

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Rohit Govind Vanjani, Guggenheim Securities, LLC, Research Division - Senior Analyst [12]

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And sorry, so then the cadence will be the spend and 2Q will be similar to 1Q, and that's a big drop in the second half '18?

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Ilan Hadar, Foamix Pharmaceuticals Ltd. - CFO & Country Manager [13]

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You can expect the burn in the second Q to go down some and continue the trend into Q3 and Q4.

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Rohit Govind Vanjani, Guggenheim Securities, LLC, Research Division - Senior Analyst [14]

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Okay. Great. And then the last question for me is, I just want to confirm that you will announce the last patient enrolled for the combined Phase III rosacea study, that's still the plan?

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David T. Domzalski, Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc. [15]

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Yes, that's confirmed.

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Operator [16]

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Ladies and gentlemen, if there are no further questions at this point of time, I would like to turn the call back over to the management team for any additional or closing remarks.

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David T. Domzalski, Foamix Pharmaceuticals Ltd. - CEO, Director & President of Foamix Pharmaceuticals Inc. [17]

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Thanks, operator, again for your assistance on the call today, to Michael Wood at LifeSci and obviously, to all attendees on this call. Again, our continued thanks to our shareholders for your support, and we look forward to keeping you updated on the progress of our business over the course of the coming months in the next quarter or so. So thank you very much. Have a great rest of the week. Bye-bye.

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Operator [18]

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That will conclude today's conference call. Thank you for your participation. You may now disconnect.