FDA announcement

Aug 5, 2021

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 emailed 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 31st, 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. On Monday morning, we received notice of the CRL from Medac. We were required to put that news out before markets opened on Tuesday, as Monday was a holiday in Canada. 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 advisors, 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. As you are 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 11th 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 analyses 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 timeline. 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 their 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. There remains some uncertainty around the timeline for such approval. We look forward to updating the market as we reach 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 US 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 a Notice of Compliance to commercialize treosulfan in Canada in June under the brand name Trecondyv. 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 $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. 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 among those groups. We're fully committed to working with the FDA to bring this product to market in as short a timeframe as possible. We will now open the floor to questions. Thanks, Ken. I see some questions coming in already. Let's get 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. In order to hold the Type A meeting, we have to submit the plan to address the concerns that the FDA has. 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. It's a matter of months. The information that the FDA is requesting, Medac has been working on that prior to the CRL. 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. It's probably in a matter of months. Okay, as a follow-up, he's asking, does Medac provide you with copies of all the written correspondence with the FDA? Yes, they do. We have an observer at all meetings with the FDA, so we're fully aware of what's happening. Okay, great. 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. 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. Yes, we believe that the orphan drug exclusivity will remain for seven and a half 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 chooses 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 pivotal clinical study is necessary. The concerns of the FDA can be addressed with additional data from the existing pivotal clinical study. It's in each party's best interest to complete this registration. Okay. Can you discuss some of the details in terms of your payments to Medac? You made this initial upfront payment of CAD 5 million. What other costs or capital costs are associated with that? Sure. Yes, as disclosed, we paid CAD 5 million when we signed the deal in February. We paid another CAD 5 million, which was disclosed in our financials last quarter at the time of the funding. 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. 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 timeline. I would remind you that we signed this deal on February 2nd, plan to launch it end of September or early October. That's an extremely compressed timeline for launching such a drug. Now we'll be on more of a normal timeline to prepare. The major expenditures, 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. 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 remind you that the correspondence is between the FDA and Medac. Medac, until approval, is the party responsible for the registration. We're not at liberty to disclose exactly what was in the CRL. What I can say is what we said in the previous statement, that primarily what they're looking for is additional information from patients who have already completed the pivotal study that's under review. One of the questions from the audience was, if there are concerns from the FDA's 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. 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. 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? Was this data not quite original? Again, 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. It's a matter of compiling and formatting it for presentation to the agency. 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? Yeah. I forget the actual p-values, but they were very significant. 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. Okay. 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, but are you able to characterize the overall prospects prior to the possible eventual treosulfan approval? Yeah, 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 double digit. It's tougher to get growth when you can't access the patients or the physicians. 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, triamcinolone hexacetonide and Trispan in the U.S. and Canada. We have a product portfolio that we believe will grow. IXINITY had one of its best months ever recently. We're seeing demand growth for one of our key products. As we come out of this COVID situation, hopefully, we expect to return to significant growth. Can you remind us of the opportunity of treosulfan in Canada? We think it's in the $5 million-$10 million range. That's sort of a number. You're on track to commercialize it quite quickly, I believe. Correct. We do expect to commercialize in the fall of this year in Canada. In terms of the focus on other business development initiatives, is this CRL expected to impact any near-term BD? Not whatsoever. Our BD opportunities continue. I think that we've demonstrated that we're a strong commercial organization. That's the basis on which we're doing our business development, and we're looking for those types of products. That continues on, and hopefully we'll have something to close soon. Okay, great. There is a bit of a question around, I guess, the timing of receiving the CRL and the CFO change. Probably a good time to give Marcel a bit of an introduction, but I think as you said at the beginning of the statement, Medexus has found out about this on Monday, so it'd probably be good just to highlight again the timeline between, and rationale between hiring a new CFO. Sure. Clearly, to find a quality CFO takes months. That search has been going on for many, many months. We've been anticipating this change for some time. We clearly understand that we needed to make the change. We're looking for a strong capital market CFO with U.S. experience in a growth organization, and Marcel Konrad perfectly fits that bill, coming from a very high growth environment in his last company, which basically tripled revenue, tripled market cap. He's got deep experience in the pharma industry growing up in the Novartis world. We thought he was a perfect fit. That recruitment had been going on for many months. I think we announced it July 19th, if I'm not mistaken. We received the CRL on Monday. The two issues are absolutely not related. There's no connection between the two. I think we should introduce Marcel. I'm really pleased to have him on board. He's very much a growth CFO for the type of company that we are today, which is $80 million in U.S. revenue, and expecting to grow strongly through the future. Marcel, welcome aboard. Sorry this is the way that we're introducing you. Thank you, Ken d'Entremont. I guess with Marcel now officially introduced, I'll go to the questions about the balance sheet. I know the company is putting out fiscal Q1 results in a few weeks, so there's maybe not too much that you can address, but can you speak to the balance sheet? I guess we'll start with that. Yeah. Certainly. As Ken d'Entremont mentioned, this is my third week, and I've been really encouraged by the company's performance, looking at the Q4 results from last year in particular. Yes, we will be disclosing our balance sheet and income statement performance very soon, and we will get more details out then during that call, yeah. As a follow-up, on the debt side, is your debt provider available if you need additional liquidity, and what are the flexibility of the terms that you have with them? Yeah. Certainly we'll be working closely with our debt providers and plan this quote-unquote, "interim period." I'm very encouraged with the initial conversations, and we will definitely manage our cash carefully going forward, yeah. We had a couple more questions just circling back to the CRL, obviously. Is it confirmed that the additional data can be acquired without the clinical trial? And if not, how confident are you on this? Yeah. As we said, the primary concern from the agency with respect to the current application is additional data from the completed clinical trial. That does not require an additional trial. It requires collection of information from the trial that's been completed. That is the path forward. As I said in the statement, there's no guarantee that they're going to approve on that basis once we do submit the information, but we're confident that we can supply the information that we've requested, and then they will do their own analysis and review. It sounds like you have a significant amount of support from KOLs as well. I know there were several KOLs who were anticipating approval. Have you received much feedback from KOLs in regards to the CRL? Yeah, quite a lot of feedback, actually. I mean, KOLs are looking for this drug. They want to have access to this drug. There's a definite need for this drug in quite a significant group of patients. Remember, there is no approved conditioning agent for AML and MDS. That's the reason that Medac got the orphan drug designation. Clearly there's a strong need for the drug. We see that in Canada too, where we are selling it via the SAP process. SAP process in Canada is for drugs that are life-saving and necessary, but not yet approved. Clearly, there's a need for the drug. We have to satisfy the FDA's concerns, and we think that will provide a path to approval. Is there any course of action that you could take to encourage the FDA to speed up the approval process, whether that's having KOLs reach out or lobbyists or anything like that? I guess we would consider all options to accelerate this process. Clearly, we think that the fastest way to approval is to satisfy FDA's concerns, rather than lobbying and cajoling. We think satisfy the question, and path to approval should be open. Okay, great. We have a couple more questions in terms of the current product portfolio. How big of a market opportunity is there for Gleolan and Trispan in terms of revenue potential? If that's related to Canada, Gleolan is only licensed for Canada. That, again, it is in the CAD 5 million-CAD 10 million range for glioblastoma. It's the only product for visualization of glioblastoma at resection, so it's very, very unique in the marketplace. It's a question of how broadly will it get utilized. Will it be restricted to only type 3 and type 4 glioblastoma tumors, or will it get used outside of that? That is a question we can't answer at this stage. The more it gets used outside of stage III and stage IV, obviously, the higher this revenue potential. For treosulfan, I think I already answered that we think it's in the CAD 5 million-CAD 10 million range in Canada. Previous guidance was that the company could hit CAD 150 million-CAD 200 million peak sales even without Trecondyv. Is that still the case? Yes, absolutely. I think we still have a very good product portfolio. We've got exciting drugs that we're launching. We think that over time, yes, we can hit those sorts of numbers. Okay. We're coming up on the half-hour mark. There's still a couple questions about the timeline. Maybe you can just summarize what your expectations are in terms of next steps for Trecondyv, and then provide us with a couple of value drivers for the company and what investors can look forward to in the next 6-12 months. Yeah. The timeline for Trecondyv, we can't define that at this stage. We need to do the work, and have the communication with the agency in order to define a timeline. I think the important variable here is the path that we see does not include an additional clinical study, which would take years to do. We think it's a matter of months, in order to get in front of the agency again, and start to satisfy their questions. We don't think it's an unusual timeline. We think we can do it with the information that already exists and is being collected. In terms of value drivers, going forward, clearly continue to grow the existing portfolio. We think that the pediatric study is near completion on IXINITY. That will be a value driver. We continue to look at options in capital markets. Obviously bringing an experienced NASDAQ CFO on board was an important step in the right direction. I want to just address this question of management credibility someone's asking. Clearly, there was no way for us to anticipate a CRL on treosulfan, particularly since the agency had given us no indication that a CRL was coming. In terms of the NASDAQ listing, that's something that we've said that we are working on, we continue to work on. We've been successful in getting the TSX graduation, and we're proud of that. We think the company's got potential, very strong potential. Management continues to invest in the company. There's a question about whether we were buying in the market. Unfortunately, we're currently in a blackout until we put our results out. We can't buy. right up until the blackout started, before the close of the last quarter, management and board was buying. Obviously, the insiders think that there's tremendous opportunity in Medexus. Great. Well, thank you for the update and for clarifying some of the issues around the CRL and the press release. If anyone has any further questions, you can feel free to reach out to me, tina@adcap.ca. We'll leave it there. Thank you everyone for joining. Thanks everybody for your interest. Much appreciated.