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Edited Transcript of LMNL.TO earnings conference call or presentation 14-May-20 12:30pm GMT

Q1 2020 Liminal BioSciences Inc Earnings Call

MONT-ROYAL Jun 24, 2020 (Thomson StreetEvents) -- Edited Transcript of Liminal BioSciences Inc earnings conference call or presentation Thursday, May 14, 2020 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Kenneth H. Galbraith

Liminal BioSciences Inc. - CEO & Director

* Murielle Lortie

Liminal BioSciences Inc. - CFO

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Conference Call Participants

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* Douglas W. Loe

Echelon Wealth Partners Inc., Research Division - Analyst of Healthcare and Biotech

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Liminal BioSciences, Inc. First Quarter 2020 Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would like to now hand the conference over to your speaker today, Murielle Lortie, CFO. Please go ahead, ma'am.

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Murielle Lortie, Liminal BioSciences Inc. - CFO [2]

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Thank you, operator. Good morning, ladies and gentlemen. This recorded webcast will be accessible from the Investor Resource pages on Liminal BioSciences website and will be available for replay later on today.

I'd like to remind everyone that we'll be making forward-looking statements today during the webcast, including remarks concerning future development of the pipeline, regulatory plans, our company, the impact of COVID-19 on our business and possible changes in the industry and competitive environment. These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. These statements are subject to risks and uncertainties, including those contained in our updated reports that we file with the U.S. Securities and Exchange Commission, or SEC, and the Canadian Securities Commissions from time to time, including our annual report on Form 20-F and our 6-K containing our results for the quarter ended March 31, 2020, each of which we have filed with the SEC and on SEDAR, that could cause actual results to differ materially from those contained in the forward-looking statements.

Please note that these forward-looking statements made during this webcast speak only as of today's date, and Liminal BioSciences undertakes no obligation to update these statements to reflect subsequent events or circumstances, except to the extent required by law.

During this morning's webcast, I'll present financial and operating highlights for the first quarter ended March 31, 2020, and Liminal's Chief Executive Officer, Mr. Ken Galbraith, will provide an update on the COVID-19 pandemic impact outlook along with key developments, which we will then follow with a short question-and-answer period for financial analysts. If I could ask you now to move to Slide 4 in the deck.

As a quick reminder, this part of today's webcast is based on the unaudited financial statements for the quarter ended March 31, 2020. All the figures are prepared under International Financial Reporting Standards, and the full annual information and important information can be found online at sec.gov and sedar.com.

Our financial information is presented in Canadian dollars and all references during the webcast to dollars means Canadian dollars and all references to U.S. dollars mean U.S. dollars.

Following the global outbreak of COVID-19, we've made the health and safety of our employees and those involved with our clinical trials our priority. The COVID-19 pandemic has had limited impact on our business operations in the first quarter due to early implementation of business continuity plans as per our enterprise risk planning efforts to protect our workforce and through the enforcement of travel restrictions.

In March 2020, a significant portion of our workforce transitioned to working remotely. In addition, we implemented social distancing measures in our plasma collection facilities, manufacturing facility and research laboratories. We have also implemented a range of programs to help support our employees, from additional paid leave for those who must care for vulnerable family members, enabling employees to work from home where possible and offering financial support to those who are financially affected by pandemic.

On Slide 7, I'd like to review selected information from our results from continuing operations. As a reminder, in November 2019, we sold 2 of our subsidiaries previously included in our bioseparations segment and have restated the prior periods to remove the impact of those operations from all lines in the profit and loss statements and have reclassified those results to the discontinued operations line.

Revenues were $1.1 million for the quarter ended March 31, 2020, compared to $2.3 million for the corresponding period in 2019, representing a decrease of $1.2 million, mainly due to lower specialty plasma sales. The sales of specialty plasma collected from our plasma collection center located in Winnipeg, Canada varies from period-to-period as its main purpose, along with a second center located at Amherst, New York awaiting FDA approval, is to help secure the supply of normal source plasma needed in the manufacturing of Ryplazim. There is a corresponding reduction in cost and sales.

The manufacturing and purchase cost of product candidates used for R&D purposes in Q1 2020 was $8.7 million as we invested in the production of Ryplazim to supply patients in connection with expanded access programs, including on a named patient basis and via a compassionate use program until Ryplazim is commercially available -- approved and available, if ever.

Other R&D expenses during the quarter ended March 31, 2020, were comparable to spending levels of the corresponding period in 2019. Clinical expenses decreased by $0.8 million as most clinical studies, which were active in the first quarter of 2019 were completed, terminated or put on hold in the current quarter. This decrease was offset by an increase in our Small Molecule segment for both new preclinical studies initiated for GPR84 as well as by an increase of professional fees related to consultants and patent maintenance expenses.

Administration, selling and marketing expenses for Q1 2020 was $10.7 million, an increase of $3.6 million compared to the corresponding period in 2019. This increase was mainly attributable to the increased director and officers' insurance by $3.2 million and the increase of professional fees by $0.9 million in connection with the additional public reporting costs of our listing on the NASDAQ stock market LLC, which were not incurred in the comparative period.

Finance costs decreased during the quarter ended March 31, 2020, by $5.5 million compared to the corresponding period in 2019. This decrease reflects our lower level of debt during the first quarter of 2020 following a debt restructuring that occurred April 23, 2019. The resulting net loss from continuing operations of $27.7 million was a decrease of $1.5 million versus the corresponding period in 2019.

Moving to Slide 8, I'd like to walk through the major elements that impacted our cash and cash equivalents throughout the quarter. We started 2020 with $61.3 million of cash and cash equivalents. $23.4 million was used in operating activities, an increase of $5.8 million compared to the same period in 2019. The increase was mainly due to lower revenues, higher administration, selling and marketing expenses and a normalized use of working capital compared to the first quarter of 2019.

Cash flows used in investing activities were $4 million, which includes $3.6 million related to the payments of interest and principal on lease liabilities and $0.4 million, mainly relating to payments of interest and principal, on our outstanding debt of $10 million.

Cash flows from investing activities includes an inflow of $1.2 million relating to the final adjustment of proceeds from the sale of the bioseparations operation. These uses of cash, offset by gains in foreign exchange, resulted in a cash and cash equivalents balance at March 31, 2020, of $36.6 million.

Moving to Slide 9. Our net working capital at March 31, 2020, was $41.1 million. In addition, we have also -- we also have an unutilized line of credit facility, or LOC, with a current balance available of $29.1 million that we're able to draw on until March -- May 11, 2021 and that bears a stated interest rate of 10% per annum, payable quarterly, maturing on April 23, 2024.

The combination of our net working capital and line of credit will not provide us with sufficient funds to continue maintaining our operating activities at current spending levels for a period exceeding 12 months. Key priorities for our current resources are the resubmission of the BLA for Ryplazim, supporting the FDA review of our BLA and continuing to prepare for commercialization in the U.S. market, if approval is granted by the FDA.

We have been actively managing our cash runway by pacing our investments on new research programs and reducing infrastructure and headcount costs whenever possible. We intend to pursue a number of alternative financial initiatives that could potentially extend our cash runway, if completed.

Potential sources of additional operational funding may include the following: we are continuing to evaluate potential strategic collaborations with upfront or continuous funding support; we are continuing to evaluate avenues to monetize noncore assets; and we will consider raising funds through issuance of equity instruments and grant funding.

I'd now like to welcome Liminal's Chief Executive Officer, Mr. Ken Galbraith to the call and invite him to talk about key recent developments and the impact of COVID-19 pandemic on Liminal.

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Kenneth H. Galbraith, Liminal BioSciences Inc. - CEO & Director [3]

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Thank you, Murielle. I'd like to start by first acknowledging the heroic work being done by governments, physicians, nurses and other healthcare workers and first responders on the front lines of fighting this global COVID-19 pandemic and those working every day to find healthcare solutions for this virus. I'm extremely proud of our own workforce in so quickly adapting to their new working conditions and being so resilient during these times, all while managing their own personal lives and ensuring care for their own families.

Under our new safety and distancing protocols, employees have continued working in our production facilities, to keep the resubmission of our BLA to the FDA for Ryplazim moving forward. Employees in our plasma collection facilities continue to collect plasma that we will need for future production of Ryplazim as well as beginning to collect plasma from recovered COVID-19 patients. Employees in our laboratories, working with our outside contractors, have continued to make progress with our small molecule programs, including Fezagepras and our GPR84 antagonist program.

Beyond the ability to collect plasma from COVID-19 recovered patients, we continue to look for opportunities to help directly, with our industry's efforts, to find effective solutions to this virus. Liminal BioSciences has recently been conducting its own preclinical research and reviewing published data on the use of plasminogen as a potential treatment for patients affected with COVID 19. Any additional preclinical research or potential clinical studies to explore the use of plasminogen in COVID-19-infected patients would require additional evaluation and the support of government agencies, collaboration partners and funding agencies. As mentioned, we have also leveraged our plasma collection capabilities to commence collecting blood plasma from recovered COVID-19 patients to be potentially used in the manufacture of hyperimmune immunoglobulins by third parties for clinical trial purposes.

We also understand that patients afflicted with diseases other than COVID-19 are still counting on us to continue our efforts to develop therapies in our areas of focus, and we are all working every day to keep our commitments to them.

We do not believe that there's been significant impact to our operations or staff during this period due to the COVID-19 pandemic. We continue to remain focused and committed to our 2 highest priorities for 2020: first, the resubmission of our BLA to FDA for Ryplazim for the treatment of congenital plasminogen deficiency and preparing for the FDA review of our BLA. And second, initiating our Phase I multiple ascending dose clinical study for Fezagepras. However, given the unpredictability of COVID-19 for our future operational objectives, we will not be providing further public guidance on the expected progress of our business going forward, until such time as we're able to do so with an improved understanding of how COVID-19 may affect our future operations, especially in conducting future clinical studies.

Our regulatory and manufacturing and quality teams continue to work on the completion of our BLA for Ryplazim, including the incorporation of 6 months of stability data generated from our qualification batches manufactured last year as well as preparing for FDA's review of our expected resubmission and a potential inspection of our production facilities through the course of the FDA's review of our BLA.

Our upcoming BLA filing is the combination of 2 years of effort to respond to the deficiencies in our manufacturing quality framework detailed in the complete response letter received from FDA in 2018. We are very much looking forward to working with FDA in their review of our upcoming submission for Ryplazim.

In addition, we also continue to explore alternatives to provide access to patients to Ryplazim in the United States, if approval is granted by FDA, including third-party marketing collaborations. We are actively planning for the initiation of our Phase I multiple ascending dose study of Fezagepras in the U.K., and continue reviewing the most appropriate clinical indications to further explore with Fezagepras, including respiratory, liver or kidney disease indications. Finding the appropriate dose to study in those future clinical indications is crucial to moving forward into late-stage development with Fezagepras.

Given the current COVID-19 pandemic, as I mentioned previously, and pending results of the Phase I trial, we are currently not providing further guidance about the timing and nature of our future Phase II or Phase III clinical studies with Fezagepras. As material events occur with our development programs for Ryplazim and Fezagepras, we will make appropriate announcements in the weeks and months ahead, indicating our progress.

Finally, our preclinical program in developing a selective GPR84 antagonist continues to make excellent progress during 2020 and we look forward to discussing this further in the future.

Given our current cash runway and the unpredictability around COVID-19 pandemic, we will operate at a reduced spending level. We will defer investments on new research programs, and we will continue to reduce infrastructure and headcount costs wherever possible. We continue to consider and evaluate opportunities for collaborations and partnerships, disposition of noncore assets, potential issuances of equity instruments and grant funding to provide additional financing for our ongoing operations and programs beyond 2020.

We are fully committed to continuing our work of developing product candidates for patients and focused on delivering on our highest priorities for 2020, and we look forward to reporting on our progress in the weeks and months ahead.

We would now like to address any questions that any financial analysts on the call may have.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Doug Loe from Echelon Wealth Partners.

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Douglas W. Loe, Echelon Wealth Partners Inc., Research Division - Analyst of Healthcare and Biotech [2]

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Ken, I mean, no surprise that all my questions here will be sort of COVID-19-related, does seem to be the topic of the day. Encouraged that you're actually advancing on collecting hyperimmune from COVID-19 previously-exposed patients. It was just -- you didn't comment too explicitly on any sort of regulatory path that might be germane to making that available for patients. Any discussions with FDA or Health Canada as it relates to what clinical trials however modest, might be required before you could deploy hyperimmune more extensively?

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Kenneth H. Galbraith, Liminal BioSciences Inc. - CEO & Director [3]

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No, I think as I said, Doug, we're trying to work in collaboration with governments and other collaboration partners who may have infrastructure for working with us on that as well as funding agencies. And it is really great to see the collaborative spirit of our sector, trying to come together to find some solutions for treating COVID patients or also developing vaccines for COVID in the future. And I think as those collaborations come together, you'll see us announce those and the path for moving forward. And I don't want to get ahead of those collaborative partners. So we'll wait and make some further announcements as necessary as we go forward.

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Douglas W. Loe, Echelon Wealth Partners Inc., Research Division - Analyst of Healthcare and Biotech [4]

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Sure. That works. And then, as you probably know, COVID-19 pathology isn't just exclusively limited to the lung, and it is relevant to liver and kidney inflammation and fibrosis. So just a little bit of a leading question here, but you didn't really talk too much about -- I can't pronounce the new name of PBI-4050 Fezagepras, call it 4050. Any interest either from your partners to perhaps explore the utility of that drug in targeting secondary pathologies for COVID-19 lung infection?

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Kenneth H. Galbraith, Liminal BioSciences Inc. - CEO & Director [5]

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Yes, and again, some of you can call it Fez for short, if you like. Yes. Sorry. I think we've been very clear in statements I made today that we're seriously evaluating our work around plasminogen's potential application in COVID-19 patients and that work's ongoing now. And I think if we see an opportunity where we could have something which might be effective, then we'll pursue that, again, in collaboration with governments and other collaborators because I think there's a lot of folks working hard to try and find solutions. We want to make sure all these efforts are coordinated so the best possible solutions get to move forward. So we're looking at that.

Obviously, we have a company who's strong capabilities and focus is in fibrosis, in multiple organs, respiratory, lung and kidney specifically that we would always evaluate applicability of any of our molecules or any of the technology we might have that might be applicable for those patients. And as with you, we are reading about complications that might arise from people who recover from COVID in terms of having additional fibrosis in multiple organ systems. So I think it's something as we see more data being presented out of that, we'll evaluate further whether any of our small molecule programs may have some applicability in treating some of those patients.

Beyond that, the most important thing for us to do with Fez is to get the appropriate dose for moving forward in clinical studies that we can. It was the big best chance of being successful and then deciding which clinical indications we move into in Phase II and III after that. And we'll follow more of those data announcements about the impact and what's happening in patients who recover from COVID-19.

So I'm sure we'll find some other interesting things as we start to understand this virus and the implications further.

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Operator [6]

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(Operator Instructions) There are no further questions at this time. I will turn the call back over to the presenters.

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Kenneth H. Galbraith, Liminal BioSciences Inc. - CEO & Director [7]

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Thank you very much, operator, and we look forward to updating you on our progress in the weeks and months ahead. And please, everyone, keep safe and stay well during the COVID-19 pandemic. And thank you very much for today.

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Operator [8]

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Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.