Zevra Therapeutics, Inc.

and thank you for joining the Zephyr Therapeutics Q2 2024 Financial Results and Corporate Highlights Call. Today's call is being recorded and will be made available on the company's website following the conclusion of the call. With that, I will now turn the call over to Nicole Oshner, Vice President of Investor Relations and Corporate Communications for Zephyr Therapeutics.

Good afternoon, and thank you for joining us today to review Zebra Therapeutics' progress in the second quarter of 2024, outlining our clinical advances, operational achievements, and financial results. Before we get started, let me take a moment to provide some important information. I encourage you to access the news release, which was published this afternoon and is available in the investor section of the Zebra website. As we begin our call, it's important to highlight that certain information covered in today's discussions will include forward-looking statements. We caution listeners that actual results could differ materially from these stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. Forward-looking statements are not promises or guarantees and are inherently subject to risks, uncertainties, and other significant factors that may lead to actual results differing materially from those projections made. These forward-looking statements are qualified by the cautionary statements contained in the risk factors section in our most recent quarterly report on Form 10-Q and our other filings with the SEC annual report on Form 10-K. I'm pleased to welcome Zephyrus Management team members participating in today's call. I'm joined by Neal McFarlane, President and Chief Executive Officer, LeDwayne Clifton, our Chief Financial Officer, Josh Schaefer, our Chief Commercial Officer and Executive Vice President of Business Development, and Adrian Cortell, our Chief Medical Officer. Now I'll turn the call over to Neal.

Thank you, Nicole, and thank you all for making the time to join us today. During the second quarter, we've made steady progress executing on our strategic objectives, preparing for the advisory committee meeting and the potential launch of Aramaca Law, driving the launch of Olpruva, and advancing KP 1077 for sleep disorders. These objectives are important building blocks for our long-term strategic plan to build a sustainable rare disease company with reliable cash flows. An important element of executing against our strategy is to build and maintain our position of financial strength. During the first half of 2024, we made investor outreach a primary objective, highlighting the opportunities and catalysts for value creation that we have as a company. There has been a significant interest and growing momentum as we continue to execute our objectives. Last week, following the favorable outcome of the FDA Advisory Committee meeting focused on Aramocumal, we undertook a modestly-sized, underwritten public offering to capture that momentum and build on our base of investors as we lean into the potential of our near-term catalysts. With this funding, we have added net proceeds of approximately $64.5 million to our balance sheet, bringing our pro forma June 30th, 2024 cash, cash equivalents and investments to $113.8 million. This was the right time to demonstrate our confidence and take this important step to prepare for success. The proceeds will extend our cash runway and bolster our flexibility in executing both near and long-term objectives, including full preparation for the potential launch of Aramocumal and the flexibility to accelerate our clinical pipeline. Now, I'll share a summary of our key second quarter accomplishments and outline why we remain optimistic in our ability to deliver on our strategic plan. Let's start with Aramocumal. our product candidate for Niemann-Pick disease type C, or NPC. On August 2nd, the Genetic Metabolic Diseases Advisory Committee, or GEMDAC, voted favorably that Aromalcumol is effective in the treatment of NPC. While the vote is not binding, we believe this is an important factor as the FDA completes its review. Our PDUFA date is September 21st, which is fast approaching. We received the first round of labeling comments last Friday and are working closely with the FDA. If approved, Aromothymol would be the first drug in the U.S. indicated for the treatment of NPC, and it would be eligible for a priority review voucher. As a reminder, there are roughly 900 people in the U.S. with NPC, of which approximately one-third are diagnosed and treated. More than 70 of those patients are currently enrolled in our U.S. Expanded Access Program, or EAP. As the FDA review continues, we will maintain the U.S. EAP to ensure access for patients until commercial supply is available. In addition, subsequent to U.S. approval, we will seek regulatory approval in Europe, where an additional 70 to 80 patients are enrolled in our global EAP program. We are actively preparing for the commercial launch of Aromalcumal. Our commercial infrastructure was built to optimize the strategic fit between Olpruva and Aromalcumal. Both products address genetic metabolic diseases with multidisciplinary treatment teams that are often co-located within the same centers of excellence, allowing us to reach the majority of prescribers with a targeted commercial infrastructure. Our rare disease specialists and medical science liaisons who are currently promoting and educating on olprova and urea cycle disorders, or UCDs, are also engaging with prescribers when appropriate to raise awareness for NPC. Further, our market access team has initiated pre-approval clinical discussions with payers regarding aromathemol as a potential treatment for NPC. These pre-launch activities will help ensure patients have access once available. Now, turning to OPruva, where we continue to make process with the commercial launch initiated at the end of January 2024. Over the last few quarters, our assumption on the limited awareness of OPruva has been confirmed. However, we've made progress with healthcare providers to increase awareness levels and identified that we have more work to do to increase patient awareness. As a reminder, there are 1,100 UCD patients in the U.S., of which more than 800 are receiving treatment. The prescribing community has identified a significant number of these patients who can benefit from Opruba. While we are encouraged by their response, the number of patient enrollments is not yet where we would like it to be. During the second quarter, we had nine new patient enrollments, which we define as a prescription for a patient who's on our quick start program or one who's receiving a paid dispense. We have been working to build awareness amongst clinicians who treat UCD and to ensure market access for patients. The team has done an outstanding job of engaging HCPs at target centers of excellence and at medical conferences to build brand awareness. The team has successfully engaged the majority of clinicians and thought leaders who diagnose and treat UCD patients, which is remarkable since access to HCPs has become more challenging across the industry. Additionally, our managed care team continues to engage with government and commercial payers to ensure broad access for patients. We have increased OPROVA coverage to 75% of covered lives with improved formulary status across healthcare plans and have established comprehensive patient services programs designed to assist with the reimbursement hurdles experienced by the rare disease community. As I mentioned earlier, there are always opportunities for refinement during launch, and we are implementing changes to improve patient engagement. One key change was our transition to Orsini as our specialty pharmacy partner, who is a leader in pharmacy solutions for rare diseases. This transition completed in mid-June, including a rebalancing of our Olpuba inventory in the channel, which impacted our net sales revenue in the quarter. LeDwayne will provide more details later in the call. We believe these enhancements to our commercial infrastructure will further support the approval launch and will have a positive impact on our commercialization efforts for Aramocumal with limited incremental cost. Now I'd like to turn your attention to KP1077, our clinical candidate for the treatment of idiopathic hypersomnia, or IH, a rare chronic sleep disorder. IH is characterized by excessive daytime sleepiness and difficulty waking, also known as sleep inertia. This disease impacts approximately 37,000 people in the U.S. As you may recall, KP1077 is comprised of Cerdex methylphenidate, or SDX, which was designed to steadily release the methylphenidate, its active ingredient. Its unique pharmacokinetic profile allows for flexible dosing to overcome these primary IH symptoms and ensures patients receive the optimal drug concentration during waking hours. SDX is currently designated as a Schedule IV control substance by the U.S. Drug Enforcement Administration due to demonstrated lower risk for abuse potential. At the SLEEP 2024 meeting in June, we presented the pharmacokinetics of SDX when administered in the morning and at night. The clinical data showed peak exposure occurs the morning after a nighttime dose, when the patient needs it most to manage sleep inertia. We also reported positive results from our Phase II clinical study of Kp1077 in patients with IH. In this proof of concept study, Kp1077 was well tolerated at all dose levels, including the notably high dose of 320 milligrams daily. Adverse events throughout the study were mild, similar to other methylphenidate products, and did not lead to early discontinuations. AP 1077 showed clinically meaningful benefits in change from baseline at the end of seven weeks of treatment against secondary and exploratory endpoints, which included change in the Epworth Sleepiness Scale, the IH Severity Scale, the Sleep Inertia Visual Analog Scale, and a relatively new scale to assess the symptoms and severity of brain fog. We are encouraged by these results showing that KP 1077 is well tolerated and demonstrates clinically meaningful benefits. Importantly, the study successfully fulfilled the objectives of informing the design of a pivotal efficacy trial. We consulted with key opinion leaders, payers, and patient advocates knowledgeable in the rare sleep space to help interpret these results and have submitted a briefing book to the FDA for an end of Phase II meeting at the end of the third quarter. With only one FDA-approved treatment, there remains a large unmet need for therapies to address the symptoms of IH. We are conducting market research on the Phase II data to better understand KP1077's differentiated profile, position in the treatment landscape, and to inform our business case. Finally, we've made progress with Soliprolol, our product candidate for the treatment of vascular Euler-Danlos syndrome, or VEDS, which impairs COL3A1 connective tissue and leads to vascular and hollow organ ruptures. Solipilol's mechanism of action is designed to reduce the mechanical stress on collagen fibers within the arterial wall through vascular dilation and smooth muscle relaxation. Solipilol is a primary treatment option in various EU countries, and we believe it could address the significant unmet need in the U.S., as there are no approved treatments for the 7,500 patients with VEDS. Soliprolol has received both orphan drug and breakthrough therapy designations from the FDA. During the second quarter, we restarted recruitment of the Soliprolol Phase III trial, also known as the DISCOVER trial. This decentralized, event-driven trial is being conducted under a special protocol assessment. We are encouraged by the significant interest among patients to enroll in this trial, which has exceeded our expectations. underscored the unmet need within the VEDS community, and preserves the value of the program while we conduct our portfolio review. As part of the strategic planning initiative kicked off in January, we continue to assess the value of each of our programs. Our intent is to fully understand the unmet needs of the rare disease patient community within a potential market, and then develop a solid clinical and business case for how ZEVRA can develop therapies to address those needs. Looking ahead, we have three key priorities. First, to receive approval and successfully launch Arimoclomol by leveraging the infrastructure built for Olpruva. Second, to drive the launch of Olpruva. And third, to discuss the design for a pivotal study evaluating the efficacy of Kp1077 in patients with IH in our end of phase two meeting at the end of Q3. We remain focused on execution to deliver a strong second half of 2024 and are well positioned financially to execute against those objectives. Now, LeDwayne will provide an update on our financial results.

Thank you, Neil, and good afternoon. As we begin, I encourage you to refer to our quarterly report on 410Q, which we intend to file later today for more detailed information. We have made meaningful progress during the second quarter, and our financial results also reflect discipline in our capital allocation to drive towards success in reaching our strategic objectives. Our second quarter results included net revenue of $4.4 million, which includes $3.1 million in net reimbursements from the French EAP for Aramacamo, and 1.3 million of royalties and other reimbursements under the ASTARIS license. For our commercial product, OPRUVA, we recognize commercial product revenue when shipments are received by our specialty pharmacy. And as we previously announced, we transitioned to a new specialty pharmacy during the quarter, which required us to ship new product and recognize returns from the prior specialty pharmacy, which offset revenue for the period. The result was de minimis revenue recognized during Q2. We believe this transition will lead to improved patient services as enrollments grow. Additionally, cost of goods sold was inflated during Q2 due to recognition of a $3.2 million obsolescence reserve against approval inventory, which is nearing expiration. This excess inventory was ordered prior to our acquisition of ACER, and the previous delay in the product's launch impacted the rate of usage, leading to the need for this reserve to be recognized in the quarter. Our R&D expenses for the second quarter were $10.5 million, which is a slight decrease compared to the first quarter of 2024, and primarily due to the completion of the KP-1077 Phase II trial. Selling general and administrative expenses were $12.6 million during second quarter, reflecting our commercial team being in place for the entire quarter and actively engaged in activities to build awareness and provide patient services related to OPRUVA. Net loss for Q2 2024 was $19.9 million, or $0.48 per basic and diluted share, which reflects an increase driven by our investments in our commercial infrastructure. At the beginning of the quarter, we announced the refinancing of our existing debt with a new $100 million credit facility from which we took an initial draw of $60 million. A second tranche of up to $20 million is available at our discretion until October 5th, 2025. and a third tranche of up to $20 million will become available upon approval of Aramacamal, in each case subject to certain terms and conditions. As of June 30, 2024, total cash, cash equivalents, and investments were $49.3 million, which was a decrease of $3.4 million compared to March 31st. Use of cash during the period was $17.4 million, offset by net proceeds of $14 million from our initial draw from our credit facility. Total long-term debt was $58.3 million as of June 30, 2024. As Neil mentioned earlier, we successfully completed a modestly sized underwritten public offering, which brought $64.5 million in net proceeds to Zebra, along with attracting a cadre of institutional investors well known in the biotech industry as long-term supporters of innovation and solid execution. We issued approximately 10.6 million shares at a price of $6.50 per share. This offering was significantly oversubscribed, which testifies to the strong sentiment around the potential of the several upcoming value creation opportunities for Zebra. Combining the net proceeds from this offering with our existing resources, pro forma June 30, 2024, cash, cash equivalents, and investments is $113.8 million. our cash runway now extends into q1 2027 pro forma common and fully diluted shares outstanding were 52.6 million and 67.9 million respectively no warrants were issued in connection with this offering it is important to note that our cash runway guidance is based on our current operating plan available cash cash equivalents and investments including the additional cash received through our recently completed secondary offering, and are subject to continuing compliance with our debt covenants. Our forecast includes commercial revenue from the sales of approval, reimbursements from the French EAP for Aramaclimo, and ongoing royalties under the Astoris License Agreement. It does not include commercial revenue from sales of Aramaclimo, nor the sale of the PRV, which would follow FDA approval. We are optimistic about the outlook, and our focus is to create long-term value for shareholders through disciplined execution against our plan in support of our mission to become a leading rare disease company. Now we will turn the call over to the operator for questions.

Thank you. At this time, if you would like to ask a question, please press star and 1 on your telephone keypad. You may remove yourself from the queue by pressing star and two. Again, it is star and one to ask a question today. We'll take our first question from Luis Chen with Kantor. Please go ahead. Your line is open.

Hi, congratulations on all the progress this quarter, and thanks for taking my questions. So I had a few for you. First question was how you think about approved sales in the second half of 24. And then do you have any initial thoughts on pricing for our remote mall if it gets approved? And the last question is just on our remote mall's patent protection and marketing exclusivity. Thank you.

Thanks, Luis. Why don't I start with the last question, and I'll tee up the pricing, and then I'll hand it off to Josh to talk a little bit about Aromothymol and as well as Opruba. In regards to the patent protection and marketing exclusivity for Aromothymol, we rely on orphan drug exclusivity for up to seven years. And then in regards to pricing for Aramocamol, it's a little early for us to be talking about pricing as we're just now in the labeling discussions. But I think it's – I want to make it clear to everybody that it is our goal to make Aramocamol as widely available as possible as we can. And with that, I'll hand it off to Josh to talk a little bit about what we've been doing around understanding the market for Aramocamol around what we could do for pricing as well as old proof of sales in the second half of 2024. Josh?

With regards to Aramoclomol pricing, we have conducted pretty extensive market research with payers. And we've gone out and we've tested the clinical profile and really pressured them around responding to the value proposition and the clinical value of Aramoclomol for patients with MPC. I have to say that it's widely been viewed as what could potentially be foundational therapy if approved by payers. But, of course, the final label will ultimately influence the final price and how payers view that. But we're working very closely with them, and we're putting in place patient services and other resources to make sure that Aramocamol will be as widely available to patients as possible. And then with regards to Alproova in the second half, and I'd like to just remind everyone that the first half was really built It was really focused on building awareness where there was very little awareness within the prescribing community for Alprova. We're very happy with the progress the team made in terms of getting in front of prescribers and payers and really building that awareness across that prescribing community. And we have more than 75% covered lives for patients with UCD. We've also put in place some other resources and tactics, including a free trial program and a demonstration program to be able to allow the physicians and prescribers to see how Alpruda works. And we've made a change to our specialty pharmacy. All of this, I think, bodes well for the second half. And as we really begin to focus on building more awareness within the patient community, we're looking forward to seeing increased enrollments.

Thank you.

We'll take our next question from Tim Lugo with William Blair. Please go ahead. Your line is open.

Thanks for the question, and congratulations on all the progress. It's been an obviously transitional quarter. I guess after the adcom, it seems like, you know, combination use with MIGLISTAT is going to be maybe occurring a little bit more than I maybe had expected. I'd just love to hear your thoughts around combination use in the real world once approved and how does that fit into your pricing thoughts. And then maybe also some initial, you know, initial kind of feedback you've heard from the patient advocacy groups post-ADCOMM.

Thanks. Thanks, Tim. I think, let me handle your first question, and then I might actually ask Josh to talk a little bit about the advocacy engagement and or Adrian. I think one of the things that's really important is you get what you study when it comes to labeling discussion. And we've studied Aromaclomol versus placebo with underlying routine care. And those patients could have been stratified to Biglestat or some other kind of primary treatment that the patient had, but routine care, I think, was standard. In our discussions and in the adcom, and I think now as we're driving into our labeling discussions, you usually get what you studied. And for us, that's Aromocomol versus placebo. That's the outcome that we're looking for. So I can't talk more about combination therapy at this point in the game because we're in the process of round one. But I do think that there's precedent around study. You get what you study. In regards to the initial feedback from the patient advocacy organizations, let me ask Josh to talk a little bit about where we're seeing some excitement from the advocacy organizations today.

Yeah, I think if anyone tuned into the advisory committee meeting 10 days or so ago, you would have seen overwhelming support for Aramacumal from prescribers, caregivers, and patients. And that really is a reflection of the benefits that many patients have received from Aromaclomol through our expanded access program and open label program. And as we move forward, we expect that support to really continue. I can also say that as we've gone out and we've talked with payers and physicians and done some market research and tested the profile, many of them really see Aromaclomol as the first approved drug for Niemann-Pick really as the foundation for therapy for these patients.

Operator?

As a reminder, if you'd like to ask a question today, please press the star and 1 keys on your telephone keypad. We'll take our next question from Oren Livnet with HC Wingright. Please go ahead. Your line is open.

Thank you for taking the questions. Let me add my congrats to the outcome of the adcom. Just so I'm clear, you mentioned you've entered the first round of labeling comments with our discussions with the FDA. Can you say if you've actually had any explicit additional information requests or anything new you've had to provide in this process?

Thanks, Oren. The answer to your question is we have gotten our first round of labeling negotiations. I think your second question was a regard into any specific information requests. We have received additional information requests. As you can imagine, throughout this process, you continue to get them. In regards to new data to be provided, we have not had any requests to add new data more so than what has been shared specifically with the advisory committee.

all right um sorry with the fda not the advisory committee with the fda okay perfect um assuming you're approved in late september do you have any expectations for timing for product availability given the significant overlap with Olpruva. I assume that would be relatively quickly. But I'm curious if you need to set up any different reimbursement support infrastructure, given this is a new indication, unlike UCD. And in the NPC community and centers of excellence, you know, I guess I'm going to ask about the feedback post-adcom. But I'm just curious if there's any Are you getting the sense that there's any particular preparation or expectations there post adcoms? Are you hearing about warehousing of patients or any proactive outreach maybe to patients and families in anticipation of potential approval?

Let me start by talking a little bit about the potential for our PDUFA at the end of September. We are on track in order to be able to have product in the channel within the customary timeframe, you know, let's call it eight to 12 weeks, maybe even smaller than that, eight to 10 weeks post-launch, which is fairly standard. Let me turn it over to Josh to talk a little bit about new infrastructure and or the needs in the NPC community post the advisory committee.

Hey, Oren. As a reminder, we built the commercial team to really focus not just on Alproova, but in anticipation of an approval and launch of Aramaklamal. So it is really right-sized to be able to optimize both products. And We also have the benefit of having a team out there now talking to prescribers about UCD. Oftentimes, these are the same physicians who are seeing Niemann tick patients. And so our team is out there profiling some of these physicians, understanding where the patients are. Our team on the market access side is having conversations with payers on the clinical differentiation of Aramoclomol and the need to treat So the team is in place. We feel quite confident that it's right size for both products and we will be well positioned to begin commercialization as soon as drug is in the channel. In terms of You know, where these patients are, we continue to work very closely with the investigators in our Expanded Access Program. As a reminder, we've got more than 70 patients here in the U.S. who are in that program, as well as other patients who are being seen by those same investigators who are eagerly awaiting the approval of Aramofilm.

And I guess just lastly, to segue into the EAP patients, is there any preparation you can do separate or in addition to standard market pre-commercial activities With regard to this EAP population in particular, since you know the patients and have relationships with them directly to some extent, is there anything you can do to expedite their transition to commercial product when this product is available as opposed to maybe what the process would be with a new patient?

So thanks, Lauren. A couple of things. One is I think number one is we should get on the table here is that we're going to continue to support these patients in the EAP program until we've got commercial supply and access for patients to be able to transition. Answering your second part of the question, and we are working directly with investigators, not necessarily with patients directly, because recall, the EAP program is still collecting data, and we don't have to direct hands-on with patients. The next thing you asked about is in regards to can you set up your eap program to allow for more seamless transition so that i think i want to make it clear it's our goal to be able to transition uh our eap patients to commercial supply within the first year post launch and that will allow us to be able to to uh to move on to other other areas that we can collect data and real world data and other other things that can help patients move forward so there are things that we can do and we're working with those sites and investigators One of them is around supply. We may give a 90-day supply. Then it may go to a 60-day supply. But we're doing this in a very cautious way to ensure that every patient continues to have access to the EAP and supply. I can't be more emphatic about the fact that we are here to make sure that we're taking care of these patients in the EAP until they can get transitioned.

Thank you so much. I appreciate it.

thank you this does uh conclude the q a portion of today's call i would now like to turn the call back over to neil mcfarland for any additional or closing remarks thank you we continue to make solid advances towards achieving our mission of building a leading patient-focused rare disease therapeutics company

As we look to our upcoming catalyst in the second half of 2024, our priorities are clear, and we look forward to updating you in the future. Thank you for joining us today.

This does conclude today's program. Thank you for your participation, and you may now disconnect.