Greetings and welcome to Foamix Pharmaceuticals' first quarter 2019 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today's call, Mr. Michael Wood with LifeSci Advisors. Thank you. You may begin.
Thank you, Rob. Good morning, everyone, and thank you for joining us on the call. Yesterday, Foamix issued a press release with earning results and a corporate update for the quarter ended March 31, 2019. Press release is available on the investor relations page of the Foamix corporate website, foamix.com. This call is being recorded and webcast, and a replay will be available on the company's website for the next two weeks.
Before we begin formal remarks, I want to remind you that some of the information in the news release and on this 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 for projections, as well as words such as believe, intend, expect, plan, anticipate, and similar variations thereof 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's filings with the Securities Exchange Commission.
These forward-looking statements speak only as of today's press release and conference call. 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, Ilan Hadar, Chief Financial Officer, and also participating in the Q&A session will be Dr. Iain Stuart, Chief Scientific Officer, and Matt Wiley, Chief Commercial Officer. With that, I'll turn the call over to Dave Domzalski. Dave, please go ahead.
Thank you, Michael. Good morning, thanks to everyone for joining our call. 2019 so far has been a busy and productive year for Foamix, with a number of major accomplishments. The NDA for our most advanced candidate, FMX101 for acne, has been accepted by the FDA, putting us on track for our first potential commercial approval in the U.S. in October of this year. We are also planning to file a second NDA for FMX103 toward the middle of this year. We continue to measuredly build our commercial infrastructure and invest in our sales and marketing capabilities as we prepare to launch our products in dermatology. Let me begin with FMX101, which we are developing for moderate to severe acne.
On March 7th, we announced that the FDA accepted our new drug application and has set October 20th of this year as the targeted PDUFA action date. The NDA is being reviewed under the 505(b)(2) regulatory pathway. To date, our communications with the FDA continues to be fluid. The review of our NDA is proceeding in line with expectations. The NDA is supported by a very comprehensive data package, including the previously communicated results from our two phase III trials, studies FX2014-05 and FX2017-22. It also incorporates information on chemistry, manufacturing, and controls, and data from nonclinical toxicology studies on FMX101. Our FMX101 product will also be the subject of two late-breaking poster presentations at the annual meeting of the Society for Investigative Dermatology, which is being held in Chicago this week. Our Chief Scientific Officer, Dr. Iain Stuart, will be presenting this data.
The first poster will provide an overview of the unique properties of FMX101 vehicle on beneficially impacting sebum viscosity and melting point at skin temperature. The second poster summarizes a significant body of work characterizing the antimicrobial potency of minocycline against Cutibacterium acnes or C. acnes, which is the key driver in inflammatory acne development. Our data suggests that minocycline continues to be a highly potent bacteriostatic agent against this bacterium, with very little antibiotic resistance liability being observed in our studies. FMX103, our 1.5% minocycline foam candidate for papulopustular rosacea, will be our second product candidate that we will file an NDA for. We remain on schedule to submit our new drug application to the FDA around mid-year.
We're waiting on the final clinical study reports from our phase III program. We also plan to hold a pre-NDA meeting with the FDA later this quarter, just prior to our NDA submission. We intend to leverage much of the work we have previously conducted for FMX101, given the similarities between these two products. The FMX103 filing is also supported by strong phase III data. In February this year, we announced positive results from our long-term open label safety study, FX2016-13, that evaluated the safety of FMX103 therapy for up to an additional nine months of treatment beyond the 12 weeks in which patients were treated in our two registrational trials.
We discussed these results on our year-end earnings call. I will refer you back to our press release from February 27th for the details of these study results. In parallel with the R&D and regulatory activities around FMX101 and FMX103, we are also making progress on the commercial front as we prepare to launch these products. These efforts are being led by Matt Wiley, who became our Chief Commercial Officer last November. Key members of our commercial marketing, supply chain, managed care, and medical affairs functions have come on board, and we have been moving swiftly in our pre-launch activities. I'm quite pleased with the progress our team has made, and I look forward to providing more details on these activities over the next few quarters as we approach the PDUFA date in October and our planned launch for FMX101 at the turn of the new year.
We believe, based on surrogate launches in acne, that the environment for novel branded entrants into the market is very favorable. The most recent launch, sarecycline, which is a tetracycline-derived oral antibiotic, is particularly interesting because of both its recency and positive market uptake. While the macro prescription trends in the category have remained relatively stable over the last few years, the early market uptake of sarecycline in 2019 demonstrates a continued unmet need in the treatment of acne and a desire for novel therapeutic options. We have confidence that FMX101, with its unique product attributes and localized activity, if approved, will have distinct and favorable competitive advantages in this market and should fill these unmet market needs even further. At the R&D day we hosted earlier in the year, we provided an update on a few of our pipeline products for the first time.
The most advanced product is FCD105, which is our combination foam product of minocycline and adapalene for the treatment of acne. Adapalene is one of the most widely used retinoids for comedonal acne and is an active ingredient in the leading acne brands. We believe combining adapalene with minocycline could present another significant advancement in topical therapy for acne patients. Plans are now at an advanced stage to initiate a phase II study in the U.S., and our goal is to enroll the first patient by the end of the second quarter. As we have said, as we bring new and innovative products to the market, our goal is to address unmet needs of patients and healthcare providers while also creating long-term value for our shareholders. One of our key objectives to achieving this goal is to create durability around the acne and rosacea franchises.
We believe the development of a product like FCD105 behind FMX101 and FMX103, plus the earlier-stage programs we have in development, can provide new and potentially better options for patients and establish a substantial, profitable, and sustainable business in these therapeutic areas. Finally, in February and in April of this year, we had two additional patents granted to support FMX101 and FMX103 that will be listed in the Orange Book. These are continuation patents to previously filed applications that should further consolidate our position and provide composition claims of differing scope to support our products. With that, at this point, I'd like to now turn the call over to Ilon Hadar for a review of the financial results. Ilon?
Thank you, Dave, and good morning, everyone. Our total revenues in the three months ended March 31st, 2019, were $308,000 compared to $906,000 in the three months ended March 31st, 2018. The decrease was due to reduced royalty payments from LEO Pharma to us for sales of Finacea Foam and is the result of supply issues related to the Finacea Foam product. LEO has informed us that they are working diligently to resolve the matter. We do not view this decrease as material to our business, and it is important to note that the supply chain issue for Finacea is not related to the manufacturing, production, or supply of any of our products, including FMX101 and FMX103.
Our research and development expenses for the three months ended March 31st, 2019, were $10.8 million, which were reduced significantly from the $22.8 million we reported in the first quarter of 2018, primarily as a result of lower clinical trial costs as the registration studies for FMX101 and FMX103 came to conclusion. This was offset by an increase in payroll-related, and consultant expenses. General and administrative expenses for the three months ended March 31st, 2019, were $5.3 million compared to $3.8 million reported in the first quarter of 2018. The increase year-over-year resulted primarily from an increase in expenses mostly relating to pre-commercialization activities and market research. In the three-month period ended March 31st, 2019, we reported financial income of $504,000 compared to $73,000 in the comparable period of 2018. Our financial income includes mostly gains from marketable securities and interest earned on our bank deposits.
Our net loss for the three months ended March 31st, 2019, was $15.2 million, or $0.28 per share, compared to $26 million, or $0.69 per share in the first quarter of 2018, representing a decrease of $10.8 million, or 42% year-over-year. As of March 31st, 2019, Foamix had cash and cash equivalents of $82.4 million compared to cash and cash equivalents of $99.4 million at December 31st, 2018. Based on our cash flow forecast for 2019 and 2020, we believe that we have sufficient cash to support our operations until mid-2020. For further details on our financials, please refer to the Form 10-Q and the financial statements filed with the SEC yesterday. I will now hand the call back to Dave for closing remarks.
Thanks, Ilan. This is a very exciting time for Foamix. With one product now under review at the FDA and preparations underway for a second NDA filing by mid-year. I am very pleased with our progress and the execution of our plans by the team here at Foamix. As we transition to commercialization, we see a great opportunity to serve the dermatology community as well as create value for our shareholders. Before I open the call to questions, just one reminder that we will be presenting at the Bank of America Merrill Lynch Health Care Conference next Tuesday, May 14th, in Las Vegas. Details of the presentation slot are on our website. We hope to see some of you there in person. The presentation will also be webcast. With that operator, I will now ready to take on some questions.
Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Louise Chen with Cantor Fitzgerald. Please proceed with your question.
Yes, thank you. This is Sujal Loganathan in for Louise. Thanks for taking the questions. I got a few here. First, what are the future goals for the FCD105 asset? Since FMX101 is on track to launch for the treatment of acne vulgaris, what will be the difference in the indication or patient population for FCD105 treating acne vulgaris? Secondly, do you have any plans for ex-U.S. expansion for the FMX101 or 103 programs? If so, will there be a partner? How does the acne rosacea market differ or is it similar to the U.S.? When can we anticipate details on this front? Thirdly, my last one, you mentioned that plans expect to see a net plan price of approximately $200-$400. What are the different factors going into the lower versus higher end of that range?
Okay, thanks, Sujal. I'll take the question regarding ex-U.S. plans. As we've said for some time now, our focus is on the development of our products and commercialization of our products here in the United States. We're certainly open to partnerships outside of the United States, and we continue to have ongoing dialogue with different organizations regarding such in different regions around the world. Obviously, at this stage, nothing is imminent, but we do look at those opportunities. That dialogue or those discussions have certainly increased to quite an extent post our positive phase III results for both acne and rosacea towards the back end of last year. We'll continue to explore those opportunities, certainly where it makes sense. Again, we're in dialogue with various potential partners. If we do engage in such partnerships, obviously we'll be looking for those partners to lead the activities going forward.
Regarding goals for FCD105, I'll turn it to Iain, Dr. Stuart, to provide an overview of the program itself and the differentiation, if you will, between this study and what we've done for FMX101. Iain?
Dave. Thanks for your question, Sujal. In relation to differentiation, as Dave outlined on the call, this is a 505(b)(2) pathway for FMX101. We anticipate to have comparable indication to our reference-listed drug, which is Solodyn. Just to remind you, that's for the treatment of inflammatory lesions of non-nodular, moderate to severe acne vulgaris. Anticipation for the corresponding indication for FCD105 is there will not be a qualifier as the treatment of inflammatory lesions. It will be treatment for the entire disease, which will include comedonal acne as well. That's how the two of them differentiate in relation to indication or at least anticipated indication. In relation to the phase II study, we've already communicated that this is a four-arm study. FCD105 will be one arm, second arm will be 3% minocycline foam. The third arm will be 0.3% adapalene foam and vehicle.
This is a standard acne protocol here, where we compare the mono treatment activities and safety to the dyad, which is obviously the combination. It will be a 12-week study, very similar to many acne studies, where patients will self-apply the product once a day. Clearly, we'll be looking at our IGA treatment success and reduction of both inflammatory and non-inflammatory or comedonal lesions. Of course, the standard safety assessments will be taken as well.
Thanks, Iain. Regarding, Sujal, your question of net price to plan, I'll turn to Matt for some additional thoughts.
Thanks, Iain. As we think about the net to plan range that was communicated in the last conference call, it's really predicated on a couple different things. One is our market entry pricing strategy, our contracting strategy. That range is really going to dictate whether the product is non-preferred, meaning tier 2 or perhaps tier 3 with a simple step edit or prior authorization.
It's going to be dependent on the pricing and contracting strategy. Those decisions are yet to come.
Great. Thank you.
Yep.
Our next question comes from Vamil Divan with Credit Suisse. Please proceed with your question.
Hi, this is Anupam Rama for Vamil. I know last quarter you guys were sort of expecting to launch FMX101 shortly after the PDUFA. Right now, sort of said that it's then going to be early next year. Have there been any changes to your commercialization plan, timeline, or strategy? Secondly, in terms of the Finacea Foam payments, when can we sort of expect those to come back and should we expect them to continue in the $1 million range? Thirdly, could you talk a little bit about your R&D spend expectations for 2Q as you sort of enroll FCD105 and also possibly submit the application for FMX103? Thanks.
Sure. Regarding first the question on the launch of FMX101, nothing has changed at all. In fact, I have been quite clear and consistent in our communication. We have our anticipated PDUFA date, which is October 20th of this year. We anticipate it will take a few weeks, assuming the product is approved, to actually load the trade. That obviously takes you right through the holiday season here in the U.S. We would obviously look to get product through the trade and potentially book sales for the organization as early as the end of this year, but in terms of a formal launch with our sales force, that would likely take place right after the new year. Not an ideal time to be launching products with a commercial infrastructure during the holiday season. That is really what we are looking at. Always been consistent. PDUFA date, October 20th.
A formal launch with the sales force right after the turn of year. Regarding Finacea Foam payments, as we outlined, we saw a decrease in the royalties. We are talking hundreds of thousands of dollars. We are not talking millions of dollars. We do not view and have not viewed that these payments from LEO Pharma or previous to that, Bayer's material to our business. We identified or LEO Pharma informed us that there is a supply issue with the Finacea Foam product. They are working to address it. We have confidence that will get addressed as quickly as possible. When that happens, we would anticipate or hope to see a return to levels that we have seen previously. Last comment, again, I will just reinforce, it is important to note that the supply issues have absolutely nothing to do with the manufacturing, production, or supply of our products in development, FMX101 and FMX103.
Last, regarding R&D expenditures, as we outlined in our call, those costs certainly for the quarter have significantly been reduced since we have wrapped up the studies for 101 and 103. We have not provided really any specific guidance on R&D costs for the balance of the year. We have been running at a burn rate of around $15 million or so per quarter. That is where we have been tracking at. We anticipate that our SG&A costs will continue to increase as we move towards launch. We have sufficient capital to get us through mid-2020 with the cash we have on hand.
Great. Thank you very much.
Our next question comes from Stacy Ku with Cowen and Company. Please proceed with your question.
Hi. Good morning. Congratulations on the progress and thanks for taking my questions. First, given the recent pricing pressures in the pharma world, we'd appreciate any insight into the current pricing decisions for FMX101 and potentially 103. Could you add some commentary around the payer appetite to reimburse for FMX101? I have a follow-up.
Yeah, sure. Right now the payer environment is changing, as you know. The landscape, because it is evolving, is going to require us to continue to monitor and do another pricing research study closer to launch. The decision on final price will be made very close to the PDUFA date. As we know, the value proposition to payers has indicated that they do see a net to plan range of $200-$400, as was stated earlier. We understand roughly what the payers are willing to pay, given the clinical value proposition. We're going to continue to evaluate that as well between now and PDUFA, and that'll feed into our final decision.
Okay, that's helpful. I'd also like to follow up with another question on the FMX101 launch. Can you add any additional commentary on the pre-launch activities? Importantly, can you help us understand the strategies in place to address the six-month lag in coverage? Thanks.
Sure. We're doing a lot of the traditional work now as it relates to market prep. We want to condition the market specifically on the vehicle technology. Some of that's being done through medical affairs activities. Some of that will be done through commercial activity as well in an unbranded format. As it relates to the 3-9 month lag in
Coverage. First of all, we will have our PDUFA date on October 20th. That'll give us some time before commercialization to begin to speak with payers and hopefully get to a P&T review. As it relates to the balance of that time, we believe that we will have to use some synthetic coverage to help patients access the drug until we do have payer coverage.
Yeah, this is Dave. I would additionally add that in terms of our pre-launch activities, I'm thrilled with the effort from the team here. We have our key functional positions in place, have already been engaged with the various partners, if you will, and audiences. We've had ongoing market research, really good feedback on the market research about the prospects for our product, if approved. As I alluded to in my opening formal comments, when we see what's been happening in the category itself with a product such as the sarecycline drug, which is an oral antibiotic, and see the uptake of prescription trends for that, we're even more bullish about the prospects for our product, FMX101.
When we look at the environment and the uptake of recent new products, couple that with the fact that there aren't a lot of competitors out there, and ease, I guess, for share of voice and less mind share to compete against, quite bullish about our prospects to see a successful uptake of our drug once it's approved, assuming it's approved.
Okay, great. Thank you.
You're welcome.
Our next question comes from Jason Gerberry with Bank of America. Please proceed with your question.
Hi, good morning, everyone. This is Chion for Jason. A couple of questions from me. First, going back to the robust launch of SEYSARA oral tetracycline and the net pricing range. Given the value proposition of 101 being a foam version of minocycline, do you see sort of a pricing premium relative to where SEYSARA may be coming at a net price basis? Secondly, can you comment a little bit about the FDA pre-approval inspection notice on the 10-Q? They noticed some minor inspection observations that are being addressed. Doesn't seem like a major impediment of any kind. If you can provide any color on what these inspections are, whether they are pretty common for an NDA review and maybe a timeline on when we can expect an update on that would be great. Thanks.
Matt, go ahead, take the first part. On the question of sarecycline, that product was launched in the market with a WAC of $860, which is a premium to many of the products on the market, a discount to some of the branded antibiotics. We have to see, and we have the advantage of examining the payer reaction to that price and what the market access strategy will be as far as contracting and net plan. We do have some good visibility as we're evaluating our pricing strategy. It's not an intuitive strategy to price into a tier 4 type of WAC position. We're continuing to monitor, and we'll make that determination later in the year.
Thanks, Matt. Chion, regarding the NDA review and the inspection process from the FDA, as I alluded to in my opening comments, we're pleased with the progress. Things continue to progress in line with our expectations. Regarding our comments in our 10-Q, these were just a few operational observations, not uncommon commentary during the process. It's just that, not uncommon. The observations that were provided, much of which we had already addressed and provided the appropriate feedback to the FDA or are in the process to do that. We do not believe anything that has any material impact at all to the continued review of our NDA.
Thank you.
You're welcome.
Our next question comes from Ram Selvaraju with H.C. Wainwright. Please proceed with your question.
Good morning. This is Edward Marks on for Ram. Couple of questions. You mentioned that there's a lot of work going into the FMX101 launch from the commercial perspective. Wondering how much overlap there is with FMX103, whether you're communicating currently, whether you're undertaking any sort of commercial endeavors with FMX103 yet, or whether you're going to wait closer till maybe a potential PDUFA date.
Edward, one of the things that's nice, as we've often said for the launch of these two products is it is the same active minocycline, different concentrations, different indications. We view these products as distinct and unique. In the same breath, we will be able to leverage very much or most of the infrastructure that we have or are in the process of putting in place for the FMX101 launch. We'll have distinct strategies behind the launches, distinct materials for the launches. They are two different indications. We get to leverage very much the infrastructure and the spend to support those launches. They'll obviously have unique activities behind it. There will be some incremental spend when we get ready to launch FMX103.
As I've often said, it's not as if we are launching to two different target audiences, need to build out two different infrastructures, need to build out different teams. We get to leverage very much what we have done for FMX101. I'll turn to Matt to provide some additional commentary on more of the specifics to the extent that he wants to.
The process that we get to a strategic plan and our final launch strategy, we've kicked that off already. We've developed our situation analysis, et cetera, and we're putting that strategic plan together. Some of the things that we're doing concurrently with the FMX101 launch, such as contracting strategy, pricing strategy, sales force sizing, that's all being done concurrently. Those things do have a knock-on effect for one another. We make sure that those things are tightly defined now, so we don't have any potential issues down the road. Those are the types of things that we're focused on 103 today. Because we have a little bit more time, we are basically taking the same approach that we took beginning last November with 101 and going through the process of truly examining the market and the upside opportunities in it.
That makes sense. From the 101 and the filing perspective, just wondering if you've received any, from like a multidisciplinary review letter from the FDA currently.
Regarding the review of the NDA, we anticipate that we'll have a mid-cycle review sometime towards the middle of the year. A late cycle review towards the end of the year. Assuming all goes well, we'll be looking at label negotiations as we get into the third quarter, which is really standard process for NDA reviews.
Finally, considering the conferences starting this week, just wondering what you think some of the most important information you guys will be presenting at the investigative dermatology meeting is.
Yeah, I'll turn that to Iain since he's presenting at that meeting. Go ahead, Iain.
Yeah, thanks for the question. As David said at the top of the call, we're presenting two posters this week. I'm actually in Chicago just now. The first one really does speak to the uniqueness of the vehicle, our topical vehicle system for FMX101, and its very beneficial impact on the viscosity and flow, as it will, on sebum, which is obviously a major component of the pathogenesis of acne. This really does underline this uniqueness of our vehicle and really is very different from anything else in the market. The second one is really establishing or reestablishing our understanding of the potency of minocycline against the target microbe Cutibacterium acnes. As you know, that's the primary initiator of inflammatory acne.
Minocycline has been in the market for many, many years, and there's always concern in antibiotic use over these large periods of time on resistance development or drug failure. In our studies, we showed this potency is still very, very high and that the resistance liability that we've seen in our studies is very, very low. Again, this is a unique data set for the molecule in the tetracycline class, and again, very differentiating from other tetracyclines and antibiotics that are being used in this space. Those are the two posters that we're doing this week.
Perfect. That's all for me. Thanks for taking the questions.
Thanks, Edward.
Our next question comes from Patrick Dolezal with LifeSci Capital. Please proceed with your question.
Hi, thanks for taking the questions. I was just curious if there's any major differences in the payer views on reimbursement for products in the acne space versus rosacea, or if payers typically view these two indications in a similar light, and how might pricing differ for 101 versus 103?
On the question of major differences, as we've done our landscape analysis, we don't see any true distinction between how the payers are viewing 101 and 103. More to come on that. We're doing a full landscape study on 103. If anything turns up, we would believe that the value proposition is going to be similar for 103 and be received that way. The question on pricing differential, our operating assumption is that we will be pricing on a per mg basis, there shouldn't be any difference in our price.
Okay, thanks. Could you just provide an update on the status of the FMX109 study and if there's any guidance on the timing of data?
Iain, you want to take that? Iain, did we lose you?
Sorry about that. Sorry, my phone just packed in on a little second there. Yeah, sure. The guidance on the study, we're enrolling the study right now. I would still hope to have top-line results in Q3 of this year. Running concurrently with this study is our formulation development work as well. We hope to provide some additional guidance in Q3.
Great. Thank you.
Ladies and gentlemen, we've reached the end of the question and answer session. At this time, I'd like to turn the call back to management for closing comments.
Well, thank you. Again, thanks to everyone for taking time out of your busy schedules. As I shared, it's been an exciting time for Foamix, off to a very strong start and I look forward to providing everyone with updates over the course of the next several quarters. Thanks. We look forward to speaking with you soon.
This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.