Q1 2024 Talphera Inc Earnings Call

Participants

Raffi Asadorian; Chief Financial Officer; Talphera Inc

Vincent Angotti; Chief Executive Officer; Talphera Inc

Pamela Palmer; Co-Founder, Chief Medical Officer; Talphera Inc

Presentation

Operator

Welcome to Talphera first-quarter 2024 financial results conference call. This call is being webcasted live via the Events page of the Investors section of Talphera website at www.talphera.com. This call is the property of Talphera and any recording, reproduction or transmission of this call without the express written consent of Talphera is strictly prohibited. As a reminder, this webcast is being recorded. You may listen to a replay of this webcast by going to the Investors section of Talphera website.
I would now like to turn the call over to Raffi Asadorian, Talphera, Chief Financial Officer. Please go ahead.

Raffi Asadorian

Thank you for joining us on the call today. This afternoon, we announced our first-quarter 2024 financial results and associated business updates in a press release. This press release can be found within the Investors section of our website.
With me today are Vincent Angotti, our Chief Executive Officer; and Dr. Pamela Palmeras, Talphera, Founder and Chief Medical Officer.
Before we begin, I want to remind listeners that during this call, we will likely make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of Talphera. Please refer to our press release in addition to the company's periodic current and annual reports filed with the Securities and Exchange Commission for a discussion of the risks associated with such forward-looking statements. These documents can also be found on our website within the Investors section at www.talphera.com.
I'll now hand the call to Vince.

Vincent Angotti

Thank you, Raffi, and good afternoon, and thank you for joining us on the call. Today, I'll provide a status update of our NEPHRO CRRT study evaluating the nafamostat’s use as an anticoagulant in the extra corneal extracorporeal circuit. Later we'll provide some other corporate updates, and Rafi will update you on the financial results for the quarter.
And since our last call is just two months ago, we'll keep our prepared remarks brief, so we can move directly to any questions you may have.
Before we begin, I'm thrilled to welcome Dr. Shakil Aslam to the Talphera team as our new Chief Development Officer effective May 20. Dr. Aslam has over 20 years of clinical research experience specializing in the field of nephrology. He will support Dr. Palmer and the rest of the team and the development of Niyad and support preparation of Niyad for commercialization.
Dr. Aslam joins us from BioCryst Pharmaceuticals, where he was the Vice President of Clinical Development, nephrology and rare diseases. He's held development roles at Angion, Frenius and Amgen and was an assistant professor at Georgetown University Hospital for 11 years with a focus on clinical services with acute and chronic kidney disease, hypertension, renal transplantation and other nephrological diseases. His extensive experience across industry and academia as a renal expert is impressive and is a true asset to our organization. Welcome, Dr. Aslam.
Moving to our study update, as a reminder, this FDA agreed registrational study will enroll only 166 patients at up to a limit of 10 sites. Once sites are activated, we expect enrollment and completion of the study will be rapid, particularly since the design of the study cost for the primary endpoint to be achieved within 24 hours for the patient completed after only 72 hours.
We have finalized the negotiation of clinical trial agreements with five large academic institutions and just await these sites to finalize their internal administrative activities prior to beginning patient enrollment, which is expected to start this quarter. We're also advancing clinical trial agreements with the five remaining potential sites.
The principal investigators and forms that they remain eager to initiate the NEPHRO study and that they continue to believe the trial will be quickly enrolling. These PI's estimate that up to 80% of their patients currently on CRRT would meet the inclusion criteria in the study protocol, and they continue to support us in our efforts with their respective administrations to finalize their institution's requirements.
Furthermore, the number of patients receiving CRRT continues to increase, as evidenced by our quantitative market research published in the journal renal failure estimating the number of patients undergoing CRRT has increased by roughly a third since COVID remains at this heightened level. Therefore, we don't believe patient availability will be a concern that limits enrollment.
As stated in today's press release, as a result of the initial administrative delays, we expect that our previous guidance of having top line data available by September 30 will be revised. Once patients begin enrolling, we plan to provide an update on our expected study completion and PMA filing dates.
Importantly, with the PI's feedback about rapid enrollment, a 24 hour primary endpoint and 72 hour time line for patient completion. We expect the time line for a PMA filing will not be significantly delayed, and we plan to provide new estimates once we have better information available.
Now separate from the NEPHRO trial, we continue to make positive advancements in our manufacturing and related efforts for Niyad. All active ingredient and finished drug production to date have met our specifications, but we are now in the process of collecting extended stability data on our GMP-grade product to support shelf life for commercial launch.
Our manufacturing partners have done an excellent job achieving timelines, specifications and the cost expectations we've set for them. We're excited to continue to work with them as we prepare for commercial launch expected in 2025.
To gain further insight beyond the market research already performed, we recently completed some additional qualitative market research with the group of nephrologists, intensivists and pharmacy Directors on the attributes of the nafamostat. These participants emphasize defense that's a strong safety profile over the past 30 years-plus, particularly for patients with liver impairment or contraindications to heparin and citrate.
Specifically, participants commented on the nafamostat that safety attributes such as its ultra short half-life, allowing it to be rapidly cleared from circulation and potentially avoiding unwanted complication seen with longer circulating agents such as heparin and citrate.
In addition, the research continues to support uptake of Niyad at a competitive price to the total cost of citrate anticoagulation. This total cost of citrate anticoagulation includes the cost of calcium and the required monitoring of calcium levels.
Importantly, the additional market research reinforces our belief in the estimated peak market sales potential for Niyad exceeding $200 million across CRRT and intermittent hemodialysis. Our initial focus is on CRRT and the estimated peak market sales potential approximate half of this amount or $100 million.
On the IP front, we filed multiple patent applications for the Niyad product candidate in the US and other major pharmaceutical jurisdictions worldwide. During and after study completion, we expect to continue to pursue additional patent rights to enhance our patent position.
In addition to our focus on Niyad development, during the quarter, we successfully closed on two separate transactions to fund this development. Two existing investors led by Nantahala Capital Management supported the company with $18 million in total proceeds structured with $6 million at the first closed earlier in the quarter and $12 million in committed capital at the second closing after achieving the pivotal trial milestone.
Importantly, Nantahala remain supportive and committed to ensuring Talphera has -- adequate funding to reach PMA approval of Niyad. Given the potential extension, the original time line to support is highly appreciated.
Also during the quarter, we agreed to partially monetize the disputed royalty and milestone stream with Xoma Royalty, which provided us with $8 million in cash to focus on Niyad development. This non-dilutive financing allows us to participate equally in certain royalties and the milestones after Xoma has achieved, they're specified returns.
Now before handing the call to Rafi, I wanted to mention that last week we received the court's order and the class action securities litigation granting our motion to dismiss with prejudice on all claims. We're please, the court granted the motion to dismiss and while it's taken a long time to receive this order and the plaintiffs have an opportunity to appeal the order with a higher court. We're happy with the outcome.
Now I'll hand the call over to Raffi to take you through the details of our first quarter financial results.

Raffi Asadorian

Think events soon after completing the Xoma royalty transaction in January, all the severe royalties and milestones earned will be paid to Xoma until they reach their agreed return. Only royalties earned from DoD revenues will be recorded in revenues going forward. There were no revenues recorded during the first quarter.
Royalties earned on commercial DSUVIA sales going forward will have no revenue impact due to the accounting or the transaction. Further, we have recorded a $6.3 million liability on our balance sheet related to the transaction even though there was no recourse to tell for Talphera or obligation to repay the proceeds received from the transaction, should the DSUVIA sales not result in the achievement of the agreed return.
Our cash operating expenses or combined R&D and SG&A expenses in the first-quarter, excluding non-stock, non-cash stock based compensation of $0.3 million, totaled $3.9 million compared to $4.8 million last year. The decline from 2023 is due to the reduction in headcount and other costs related to the DSUVIA that was divested in April 2023.
Full year 2024 cash operating expenses are expected to be at the lower to middle end of the previously provided range of $21 million to 23 million. Cash and investments totaled $18.6 million at the end of the first quarter. As mentioned earlier, we completed two separate financings during the quarter, $8 million received from partial monetization of our distributor royalties and milestones and $6 million received from the first closing of our equity financing with Nantahala and Rosalin.
The second closing of this equity transaction, it's committed upon the achievement of the pivotal trial milestone. While the delay we have experienced, an initial enrollment may impact the timing of the completion of the clinical trial and therefore, the achievement of the pivotal trial milestone, our lead investor, Nantahala has expressed their continued financing support as required to ensure the company is appropriately funded through at least an approval of Niyad. We are grateful for the commitment demonstrated by Nantahala as we aim to rapidly enroll and complete the Niyad study.
I'll now turn the call back to Vince.

Vincent Angotti

Thank you, Raffi. And I'd now like to open the line for any questions you might have.

Question and Answer Session

Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)
Ed Arce of H.C. Wainwright.

Thanks for taking our questions. And let me add my congratulations to Dr. Aslam. I have three questions for the team. First, on the time line delay, you mentioned a PMA filing delay would not be significant at this point out of the 10 possible sites you have now five finalized agreements. I'm wondering if we can reasonably assume top line results this year, that’s first.
Second, the opportunity size in CRRT, you mentioned that CRRT is up about a third since COVID and has remained elevated. And I'm wondering if you can give some range or quantify what numbers we're talking about here are in terms of those procedures.
And then lastly around the cost for Niyad or excuse me, the price you mentioned the total cost of citrate. I'm wondering, Dan, if you could quantify exactly that either a point estimate or some sort of a range for that?

Vincent Angotti

Thanks so much. This is Vince. We will take each of those three in sequence. From a time delay, again, we don't expect significant delays, and I'm repeating what has already been commented, but we hope to provide better guidance on our next earnings call. I think something that's important. You've continued to hear as a theme on this call is the rapid enrollment and how the PI's continue to communicate that to us.
Just to give you an order of magnitude of the size of some of these sites, Dr. Palmer has spoken to or been at many of the sites. Dr. Palmer, you can just talk about the number of machines, some of these sites have and the fact that on the high end of those numbers, those sites are actually involve with the first five we finalized agreements with.

Pamela Palmer

Yes, these are all large academic institutions. I mean, some of them have over 30 CRRT machines. So they're massive, massive ICU's, large number of beds, plenty of CRRT going on. They just feel like patients qualifying for this study was not going to be a limiting factor. And so we definitely have enrollment scenarios that do have us playing into, what you mentioned as far as top line still this year. That's absolutely within the realm of our enrollment scenarios.

Vincent Angotti

And Ed, I think importantly, on average in this was an interesting data point for us. When you look at all 10 sites that we are have ready to go or in the process ready to go about 20 machines per site and CRRT machines. And again, some sites have over 30 machines. And some of those larger sites are already involved with those initial five we've identified.
The second question, I want to be sure we understand what you're asking relative to CRRT in the $100 million in the range of procedures. Can you question that one more time, Ed?

I think you were referring to the number of procedures annually and that since the start of COVID, it's up one-third. So we are to should assume it's $133 million a year or?

Vincent Angotti

No. So, I think, the point of that what we stated in the prepared remarks is to give everyone comfort that this study will be rapidly enrolled. It's not like CRRT procedures are declining and there's not enough CRRT machines at these large academic institutions and that the study is going to be long.
So we wanted to give you comfort that, we believe this study and through our discussions with the PIs that this will rapidly enroll. And that's the point. So I mean, I think our procedures that we've outlined in previous discussions of CRRT, this 165,000 patients and increasing at a relatively good rate. It's not increasing year over year over year 33%. But the COVID definitely had an impact on the number of procedures.

Raffi Asadorian

And that $100 million was the same as we had post COVID when we realized that the number of procedures had increased. So we're reiterating that.

Vincent Angotti

So there's been no change to the market for CRRT, specifically. And then Raffi, Edi's third question was about the comment we made off of the market research on reinforcing the customer's perspective that competitive pricing would revolve around the total cost of anticoagulation with citrate. Can you comment further on that Ed, please?

Raffi Asadorian

So, we may have stated this earlier, but the total cost that we are in through the secondary market research that we've just performed. Sorry, let me restate that. It was primary market research, but a second qualitative study that we performed supported what our assumptions were of having the cost of nafamostat or the price of nafamostat at a price that is, I would say, between parity to about a 10% premium to the cost of citrate.
And that cost of citrate includes the cost of the calcium that has to be infused on the back end as well as all the monitoring. We have not included any additional HR and personnel for the nurses and bunch of other costs, but we're just focused on those direct costs. And so where that's gotten us up right now, it's going to price around $47 to $49 a vial for the famous debt. Obviously, we will continue to work on pricing and additional commercial launch prep during this year. But that's where we think we'll end up pricing.

Great. Appreciate it. That's helpful.

Operator

James Molloy, Alliance Global Partners.

Good afternoon, guys. Thanks so much for taking my questions. The let me walk through because, have you elucidated, what's sort of the main reasons for the delay. Are there particularly one or two main reasons? Or is it a variety of issues that has sort of been a perfect storm that's in a perspective a little bit? I agree it's going to it should run very quickly once it gets up and running, but the obviously a focus on getting it up and running.
And then the OpEx level, pretty good levels here. I presume others will be coming. What sort of change we expect as the trial gets up and running through 2024. And then I have a follow-up from there.

Vincent Angotti

Well, if Dr. Palmer start, Jim, with the examples of the delays we're off in your head on the OpEx.

Pamela Palmer

Yes, I mean, there are some consistent factors. I mean, the budgeting offices and the contracting offices at these massive institutions are understaffed basically and have a lot of different you lined up a queue for their attention. And luckily, we've been inactive for a while. So as you can you heard of half of our sites have already finalized the CTAs with.
In addition to CTAs and budgets there is a nurse education, there is a pharmacy work that needs to be done to bring in new investigational products to get it, and sort of storage location, get it on their computer systems, et cetera.
So that there's a common things and also unique things in each site. But once we get through these and clinical trials are never easy, especially when they're in large academic institutions, the enthusiasm of the PIs and the additional number of patients that need anticoagulation for CRRT on a daily basis, leads us to believe that we're through the painful part of this clinical trial, and that will hopefully be in a risk through sailing very shortly.

Vincent Angotti

Second question, Rof?

Raffi Asadorian

Yes, and James, so the OpEx levels we had this quarter -- on a cash basis were $3.9 million. The guidance for the full year, we've given a range of $21 million to $23 million. We'll probably end up in that $21 million to $22 million range. So you can see it's going to ramp up a little more as the clinical study starts enrolling much quicker. So I think it's similar to the guidance that we've given, but probably in the lower to mid of that range, if that's helpful.

Great, thank you. It was very helpful, actually, because I heard the $21 million, $23 million I was wondering what you were referencing earlier. Thank you very much for clarifying that for me. Some more on Ed's question earlier, you mentioned the $47 to $49 per vial and rough estimate how many vials per patient you anticipate you'll be using?
And then, that back in December, the KOL-- on your call estimating that if approved nafamostat could replace for all of the 30% said the citrate market, CRRT, almost half of the temporary market, certainly gives us additional research on that? How about those numbers sort of change or stay the same given what you guys have seen subsequent to last December when we had the KOL call?

Vincent Angotti

I can take the first part of that and what the assumption is that we use in terms of number of days. So we've assumed about 10 vials a day and six days on therapy. So it's ranges five to seven days on a CRRT therapy. So,10 per day and about six days of therapy is what we've assumed.

Raffi Asadorian

And the comment was about replacing citrate and half of heparin, et cetera?

Vincent Angotti

Yes, we're remaining that's actually been consistent feedback, but we'll remaining what I'll call measured communications on the peak sales at the $100 million, depending on which physician you speak to every institutions different. Some have a standard of care, both no anticoagulation. And the rationale for that is they find heparin and citrate to be dirty drug as it relates to this, particularly use in the training required and the risk involved for the patients.
Others have opposite views on where they'll use citrate as a standard of care. And now clearly, citrate comes with limitations, in particular, based off of training of the staff and anybody with liver compromised liver function, you can't use it. So there is a clear opportunity for simplicity. If the study achieves what we certainly expected to achieve based off the 30 years use outside the US.
And then to your point on heparin. Heparin has been an old standby. And what I'll call there's been tolerant use of it where they can use it because of the longevity of experience with it, but it's often used at risks in patients where they prefer not to. And we all know that in the ICU, the risk of bleeding can be high. These are very fragile patients are there significant mortality rates involved with them. There's complications.
So depending on the institution you speak to some could say could take more than half. Some would say take half on, some might say, a little bit less, but there's clearly a high medical need for this alternative. And I think, I'm going to leave it at that.
Our guidance of $100 million remains where it is, but the receptivity towards this product is extraordinary. As matter of fact, I was on a call of one of our clinical sites this morning, one of our large academic institutions. And again, as we had mentioned, the eagerness of the PI and what was interesting to me, the entire nephrology team and intensivist group's interest in this product to get it into their clinic was extraordinary. As you hear them comment on the safety profile of our product versus what they're using it as standard of care, their standard of care happens to be heparin.
Thanks, Jim. We appreciate the question. Is there additional question, Jim?

Operator

Sorry, there are no further questions at this time. I would now hand over the call to Vince Angotti for closing comments. Please go ahead.

Vincent Angotti

Again., thank you to Ed and Jim, for being on the call today and your continued interest in and sharp questioning relative to our commentary. I just want to thank the balance of you for joining us today and your continued support.
Outlook we remain absolutely focused on driving long-term shareholder value, especially on the execution of the NEPHRO study to make Niyad, which we certainly believe is a very promising product candidate to be made available to patients who can have a real change in standard of care for these patients undergoing CRRT.
Do you have any additional questions after the call on, please don't hesitate to contact me us through our investor line, and we certainly look forward to sharing with you our future developments and progress.
Alan, thank you for the call.

Operator

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