Medexus Pharmaceuticals Inc. (MDP) Earnings Call Transcript & Summary

Thank you, everyone, for joining us today, and good morning. Welcome to the Medexus Pharmaceuticals webinar discussion regarding the FDA's recently issued complete response letter of Treosulfan. On this call this morning are Ken d'Entremont, Chief Executive Officer; and Marcel Konrad, Chief Financial Officer. If you have any questions after the webinar or would like further information about the company, please contact Adelaide Capital at (905) 330-3275. I would like to remind everyone that this discussion will include forward-looking information that is based on certain assumptions that Medexus believes to be reasonable in the circumstances but is subject to risks and uncertainties that could cause actual results to differ materially from historical results or results anticipated by the forward-looking information. Forward-looking information provided in this call speaks only as of the date of this call and is based on the plans, beliefs, estimates, projections, expectations, opinions and assumptions of management as of today's date. There can be no assurance that forward-looking information will prove to be accurate, and you should not place undue reliance on forward-looking information. Medexus disclaims any obligation to update any forward-looking information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law. On the call today, management will provide an overview of the CRL received from the FDA, followed by a 20-minute question-and-answer period. Questions can be e-mailed to tina@adcap.ca or inputted into the Q&A box at the bottom of your screens. I would now like to turn the call over to Ken d'Entremont to discuss the FDA response in the form of a complete response letter.

Thank you, Tina, and thanks, everyone, for joining us on this call today. First of all, I want to address the timing of the call. Late on Friday, July 31, our licensing partner, Medac GmbH, received a complete response letter, or CRL, as it's commonly known, from the FDA in regard to the new drug application, or NDA, for Treosulfan. And on Monday morning, we received notice of the CRL from Medac. We were required to put that news out before markets open on Tuesday as Monday was the holiday in Canada. But we were not immediately in a position to hold a teleconference for several reasons, including the fact that we had not yet had the opportunity to discuss the issue in depth with our partner, Medac, the party responsible for the registration. Having had those conversations now, in addition to consultations with our regulatory advisers, we are now in a much better position to discuss the situation, although I will caution at the outset that there is still work to be done before we have a complete view of the path going forward. As previously disclosed, the NDA was submitted for the use of Treosulfan in combination with fludarabine as a preparative regimen for allogeneic hematopoietic stem cell transplantation. And as you're probably aware, both Medexus and Medac had been optimistic that a positive decision from the FDA in connection with the planned PDUFA date on August 11 would allow for commercialization and launch later this year in the U.S. However, as noted in Tuesday's press release, the FDA has determined that it cannot approve the NDA in its present form. While we are certainly surprised and disappointed by the FDA's response, we want to assure our investors and all our stakeholders that this is not the end of the story. In fact, in their response, the FDA has provided recommendations for how to address what they see as the outstanding issues, primarily around the provision of additional clinical and statistical data and analysis pertaining to the primary endpoint of the completed pivotal Phase III study. The recommendations in the CRL are already covered by Medac's existing development plan for Treosulfan, which Medac is contractually responsible to execute and fund. While we have not yet had any direct discussions with the FDA following receipt of the CRL, we are in dialogue with Medac, and we continue to have a high degree of confidence that Treosulfan will ultimately be approved for distribution in the U.S., albeit on a delayed time line. Our confidence is based on a number of factors, including the more than 100 publications related to Treosulfan and the fact that Treosulfan has already been approved by Health Canada and by several European agencies. In fact, to our knowledge, no regulatory agency thus far has denied approval of Treosulfan. Furthermore, the fact that the FDA had granted Medac orphan drug designation in 2015 highlights the significant need for this drug in the United States. We are also incredibly encouraged by the key opinion leaders in the hematological community who have continued to express the support this week following our announcement regarding the CRL. Some of those KOLs are expressing frustration as they have patients waiting for the approval of Treosulfan because they have marrow failure and existing drugs are not appropriate for those patients. As we, together with Medac, move forward with the FDA, we believe that we are well positioned to meet the agency's requests. It is our belief that the CRL provides a path to review and approve that does not require additional clinical studies, provided we can satisfy the FDA's data requirements and post-marketing commitments, which we are hopeful can be done with already available data from the existing completed Phase III study and development plan. Unfortunately, as is always the case when dealing with regulatory approvals of this nature, we are not in a position to guarantee that approval will be obtained. And there remains some uncertainty around the time line for such approval, but we look forward to updating the market as we reach new -- each new milestone. Medexus and Medac will together create a plan of action prior to meeting with the FDA and resubmitting the necessary data. As I mentioned earlier, while there is always risk, we view this as a delay to an eventual approval. We believe the investments we have made in this product to date remain justified. In addition, because of the way we structured the agreement, most of the consideration for the U.S. license is based on future milestone payments and no further milestone payments will be owed to Medac until FDA approval is obtained. It is also important to note that under the licensing agreement, Medac is responsible for funding regulatory and development plan costs. While we did hire some additional personnel in anticipation of the Treosulfan launch, we had not yet hired the sales force for Treosulfan, and the additional people will be used at this time to further our preparations for an eventual launch of Treosulfan as well as to help support IXINITY's growth. Through this process, we continue to push forward with the launch of Treosulfan in Canada. After receiving expedited review and selling through the special access program, we received the notice of compliance to commercialize Treosulfan in Canada in June under the brand name Trecondi. We expect to begin commercialization in Canada in the coming months. Beyond Treosulfan, we see tremendous potential across the rest of our product portfolio, which achieved revenue of almost USD 80 million last fiscal year. We have historically generated very strong organic growth, and we anticipate this will continue. Demand for our IXINITY product continues to grow, and we are nearing completion of enrollment in our pediatric trial. We expect to have news on that front very soon. We are comfortable with our balance sheet, and we have a number of very exciting new opportunities ahead. So to wrap up, the opportunity for Treosulfan has not gone away. We are optimistic that approval will be received in due time, and we are focused on working with Medac to satisfy the needs of the FDA. To that point, we believe that the company will be in a strong position to launch Treosulfan given the preparations we have made since announcing the licensing deal in February of this year. It is worth reiterating that the current standard of care is not suitable for numerous at-risk groups due to the high toxicity effects of existing drugs. We believe that patients in the United States are in need of a product like this, which has demonstrated excellent survival data amongst those groups. We are fully committed to working with the FDA to bring this product to market in a short time frame as possible. We will now open the floor to questions.

Thanks, Ken. I see some questions coming in already. Let's go to Scott Henry from ROTH Capital has a question. When would you expect that there would be a type A meeting with the FDA?

That's a great question. So in order to hold the type A meeting, we have to submit the plan to address the concerns that the FDA has. And so it's really a question of how long will it take us to prepare that document, submit it and then request the type A meeting. So it's a matter of months. The information that the FDA is requesting, Medac has been working on that prior to the CRL. And so it's a matter of figuring out exactly when that will be complete, so that we know when we can submit the development plan and then request the type A meeting. So it's probably in a matter of months.

Okay. And then as a follow-up, he's asking, does Medac provide you with copies about the written correspondence with the FDA?

Yes, they do. And we have an observer at all meetings with the FDA. So we're fully aware of what's happening.

Okay. Great. And Justin Keywood from Stifel is asking, does the orphan drug status of Treosulfan prevent possible competitors from entering the market as Medexus and Medac evaluate options for resubmission?

Good question. Yes. So the orphan drug designation continues. The exclusivity is initiated at approval. There is patent protection for some period of time to prevent a generic of Treosulfan. And so yes, we believe that the orphan drug exclusivity will remain for 7.5 years. Remember, we do believe that we will have the pediatric indication as well.

Okay. Great. There are some questions in terms of your relationship and the licensing agreement with Medac. If Medac choose not to fund another trial, what happens to the licensing agreement?

There are provisions within the agreement to exit -- either party can exit. Neither party has any intention of exiting because we do not believe that an additional clinical study -- pivotal clinical study is necessary. The concerns of the FDA can be addressed with additional data from the existing pivotal clinical study. So it's in each party's best interest to complete this registration.

Okay. And can you discuss some of the details in terms of your payments to Medac? You made this initial upfront payment of $5 million. What other costs or capital costs are associated with that?

Sure. So yes, as disclosed, we paid $5 million when we signed the deal in February. We paid another $5 million, which was disclosed in our financials last quarter at the time of the funding. And there's one more payment that has been paid that will be disclosed when we release our quarterly financials in a few weeks. There are no more regulatory milestones due until the product is approved.

And on the operating cost side, I think you mentioned the sales team and certain personnel hires that will be reallocated to IXINITY. Are there any other operating costs attributed to Treosulfan while you wait for approval?

No, no additional operating costs. We clearly will continue to prepare for commercialization of the product, albeit on a normal time line. I would remind you that we signed this deal on February 2, plan to launch it end of September or early October. That's an extremely compressed time line for launching such a drug. So now we'll be on more of a normal time line to prepare. The major expenditure obviously is the sales force. We didn't incur any of those costs. We did add 12 people who were hired primarily because we would need them for Treosulfan but certainly can be deployed on other products as we prepare for Treosulfan.

Okay. And can you provide any details on what analysis specifically the FDA has requested? Or are you able to do so?

Unfortunately, I'm not able to do so. I'll remind you, the correspondence is between the FDA and Medac. Medac, until approval, is the party responsible for the registration. So we're not at liberty to disclose exactly what was in the CRL. But what I can say is what we said in the previous statement that what -- primarily what they're looking for is additional information from patients who have already completed the pivotal study that's under review.

And one of the questions from the audience was if there are concerns from the FDA side, how come they were not addressed before the CRL?

Because I think the FDA saw a path to approval without the data that they've now requested. It's their prerogative to change their mind. They've elected to wait for the data, which they knew was being collected and review that data prior to approval. So we understand that position. There was no indication at the various meetings that are held, which are mandatory -- there was no indication of a CRL. It appeared until the very end that it was going to be an approval. But the FDA changed their mind and wants to see this particular information, and the company is preparing it.

I think you already answered this, but since the FDA does its own data analysis, can you clarify what data from the current study could answer their concerns? And was this data...

I can't get into the specifics of what they're looking for, but I can say that the information they are looking for, Medac is compiling. It exists. And it's a matter of compiling and formatting it for presentation to the agency.

And we have another question from Scott Henry from ROTH. Can you remind us of the approximate p-values for the primary endpoint and the overall survival secondary endpoint?

Yes. I forget the actual p-values, but they were very significant. So we're very confident that both for the primary endpoint, which was event-free survival; and for the secondary endpoint, which was overall survival, the p-values were very strong.

We have a follow-up from Justin Keywood as well from Stifel GMP. Can you speak to the growth prospects of the base business? There appears to be some maturing of assets along with new assets starting to contribute. Are you able to characterize the overall prospects prior to a possible eventual Treosulfan approval?

Yes, it's a great question, and it's challenging to answer that question given the COVID situation, which is so fluid. Obviously, COVID benefits existing and mature drugs, which we see in Rasuvo, which in the face of a competitor continues to increase its market share, although at a small rate versus IXINITY, which had been growing very dramatically prior to COVID, continues to grow nicely. It's a double digit, but it's tougher to get growth when you can't access the patients or the physicians. And so I would answer the question by saying, we believe there's still significant growth in the product portfolio, particularly in IXINITY and other new product launches that we're going through, like Treosulfan in Canada, Gleolan in Canada, TH and Trispan in U.S. and Canada. And so we have a product portfolio that we believe will grow. IXINITY had one of its best months ever recently. So we're seeing demand growth for one of our key products. And so as we come out of the COVID situation, hopefully, we expect to return to significant growth.

And can you remind us of the opportunity of Treosulfan in Canada?

We think it's in the $5 million to $10 million range, that sort of a number.