Greeting. And welcome to the Brickell Biotech Incorporated Second Quarter 2020 Financial Results Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference call is being recorded.

It is now my pleasure to introduce your host, Dan Ferry of LifeSci Advisors. Thank you, Mr. Ferry. You may begin..

Thank you. Good afternoon, everyone. Joining me on today's call are Brickell's Chief Executive Officer, Rob Brown; Chief Financial Officer, Mike Carruthers; Chief R&D Officer, Deepak Chadha; and Co-Founder and Chief Operating Officer; Andy Sklawer.

Before we begin, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially.

Please note that these forward-looking statements reflect our opinions only as of the date of this call. We do not undertake any obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events.

Factors that could cause actual results or outcomes to differ materially from those expressed in and are implied by such forward-looking statements are discussed in greater detail in our company's most recent annual report on Form 10-K and our other filings with the SEC.

I would now like to turn the call over to the company's Chief Executive Officer, Rob Brown..

Thank you, Dan. And thank you to everyone joining our call this afternoon. I will provide a business update, then ask Deepak to provide an update on our clinical program, and then I will turn the call over to Mike to review the financial results we reported earlier today.

The first half of 2020 was a very exciting period for our team with several milestones achieved regarding our lead asset, sofpironium bromide, for patients suffering from primary axillary hyperhidrosis or more commonly described as excessive underarm sweat. First, we successfully completed our 12-month Phase III open label safety study in the US.

Second, our development partner in Japan, Kaken Pharmaceuticals, presented its positive Phase III pivotal study results for sofpironium bromide at the American Academy of Dermatology Virtual Meeting Experience in June as part of the late breaking research program.

Lastly, based on these results, Kaken completed their NDA submission to the Japanese PMDA, which we announced earlier this year. Combine these events have strengthened our confidence in the strategy to advance the development of sofpironium bromide with the anticipated initiation of our US Phase III pivotal program in the fourth quarter of 2020.

Let's turn it over to Deepak to discuss the completion of the analysis of our Phase III open label long-term safety study, along with data from Kaken's Phase III pivotal study.

Deepak?.

Thanks, Rob. In July 2020, we completed the analysis of our 12-month Phase III open label, long-term safety study of topically applied sofpironium bromide gel 5% and 15% in 300 subjects, nine years and older with primary axillary hyperhidrosis.

The study results confirmed that sofpironium bromide gel at both concentrations was safe and generally well tolerated, which was consistent with the earlier Phase II clinical trial results. No treatment related serious adverse events were observed.

We are encouraged by these results as they support the potential long-term use of sofpironium bromide in patients nine years and older. With that as a review of these results, we expect to release additional details at an upcoming scientific forum.

With respect to Kaken's Phase III pivotal study, a total of 281 Japanese subjects were enrolled and randomized one is to one to apply sofpironium bromide 5% or vehicle under each arm for 42 days.

All subjects had hyperhidrosis disease severity scale or HDSS scores equal to or greater than 3 on a 4 point scale and equal to or greater than 50 milligrams per five minutes gravimetric sweat production or GSP under each arm at baseline.

First and foremost, the study met its primary and all secondary efficacy endpoints by demonstrating statistical significant differences between sofpironium bromide and vehicle.

The primary efficacy endpoint was the number of subjects reporting improvement in their HDSS to a score of 1or 2 at the end of treatment and had an equal to or greater than 50% reduction in gravimetric sweat production at the end of treatment.

53.9% of subjects on sofpironium bromide met this endpoint compared to 36.4% of subjects on vehicle, with a p value of 0.003. An important predefined secondary efficacy endpoint was the change in total GSP mean value for both arms from baseline to end of treatment.

Sofpironium bromide mean gravimetric sweat production reduction was minus 157.6 milligrams compared to minus 127.6 milligram for vehicle, with a p value of 0.015. This endpoint is one of Brickell's Phase III co-primary efficacy endpoints.

Kaken also included as an exploratory endpoint Brickell's other Phase III co-primary efficacy endpoint, that is, the proportion of subjects with equal to or greater than 2 point reduction on hyperhidrosis disease severity measure axillary 7 or HDSM-Ax 7 of 5 point patient reported outcome scale from baseline to EOT.

Sofpironium bromide subjects performed well with a 27% reduction compared to only 11.4% in the vehicle group with a p value of 0.001.

While the Kaken Phase III pivotal study met all its efficacy endpoints and we are encouraged by these results, it is important to recognize that there are certain differences in this study as compared to our prospective US Phase III pivotal studies based on the design, patient population and dose.

Regarding safety, the most common adverse events in the sofpironium bromide group were nasopharyngitis observed in 14.2% of subjects, dermatitis at application site in 8.5% of subjects and erythema at the application site in 5.7% of subjects. The severity of adverse events were predominantly mild and transient in nature.

Only 2.8% of sofpironium bromide treated subjects experienced any anticholinergic side effects. Those were dry mouth, 1.4%, and mydriasis were observed in only 0.7% of subjects. There were no severe or serious adverse events related to sofpironium bromide.

Based upon these results, sofpironium bromide was demonstrated to be efficacious, safe and generally well tolerated. Let me now turn the call back over to Rob. .

Thank you for that summary of the data from those two studies, Deepak. In terms of upcoming milestones, we expect Kaken to receive a regulatory decision on their NDA for sofpironium bromide gel 5% in Japan as early as the fourth quarter of 2020. As a reminder, Kaken submitted its NDA in Japan last November.

Under our agreement with Kaken, Brickell is entitled to receive commercial milestone payments, as well as tiered royalties based on a percentage of net sales of sofpironium bromide in Japan.

We are pleased with Kaken's continued progress and look forward to supporting their success in Japan, as well as other Asian countries in which they have rights, including Korea and China. Now turning to our development strategy in the US for sofpironium bromide.

Our next step is to initiate the Phase III pivotal program later this year, which will be comprised of two trials to evaluate approximately 350 subjects per trial with primary axillary hyperhidrosis. We currently expect to begin the first Phase III study in the fourth quarter of 2020.

These randomized double-blinded vehicle controlled studies will be conducted across 40 to 50 sites and will evaluate the safety and efficacy of topically applied sofpironium bromide gel 15% concentration. Subjects will be treated for six weeks with a two week follow-up.

As previously mentioned by Deepak, the co-primary efficacy endpoints agreed to at the FDA are the proportion of subjects achieving at least a 2 point improvement on the patient reported outcomes scale, HDSM-Ax 7 from baseline to end of treatment and the change in gravimetric sweat production from baseline to end of treatment.

Importantly, we achieve statistically significant results at the 15% concentration on both of these endpoints in our dose ranging Phase IIb study. In order to support the advancement of this program, we completed a public offering in June with net proceeds of $18.7 million.

This financing allowed us to attract a number of new life science focused institutional shareholders that see the opportunity our lead program offers and the programs we've proposed. The initiation of this study will be a significant step in the development of our sofpironium bromide gel.

We look forward to keeping all of our shareholders up to date on our progress over the coming quarters. I will now turn the call over to Mike Carruthers for a financial overview.

Mike?.

Thanks, Rob. And good afternoon to everyone on the call. I appreciate the opportunity to provide a summary of our second quarter 2020 financial results.

I also encourage you to read our full consolidated financial statements and MD&A contained in our quarterly report on Form 10-Q for the period ended June 30, 2020, which can be accessed on our website once filed with the SEC.

Starting with cash and investments, as of June 30, 2020, we reported $21.6 million in cash, cash equivalents and marketable securities, having used $4.7 million in cash during the second quarter of 2020.

In addition to our cash balance, we have prepaid $4.6 million to third party clinical research organizations in anticipation of commencing Phase III clinical trials of sofpironium bromide in the United States. Net loss was $5.1 million for the second quarter of 2020 compared to $3.7 million for the second quarter of 2019.

This increased loss was the result of decreased revenue and an accrual of $1 million for future near-term milestone payments to the licensor of sofpironium bromide in anticipation of the initiation of the Phase III program in the fourth quarter of this year.

Specifically addressing revenue, we recognized $600,000 for the second quarter of 2020 compared to $2.6 million for the same period in 2019. Revenue recognition in both periods was driven by R&D activities related to the agreement with Kaken, in which Kaken provided research and development. [Technical Difficulty].

Hello, Mike. We lost Mike on his phone. Let me go ahead and finish this section and then we'll go to the Q&A. I'll go ahead and start that section over again. Specifically discussing revenue, we recognized $0.6 million for the second quarter of 2020 compared to $2.6 million for the same period of 2019.

Revenue in both periods was driven by R&D activities related to the agreement with Kaken, pursuant to which Kaken provided research and development funding to Brickell.

The decrease in revenue recognized was a result of Brickell's Phase III long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were ongoing in 2019, but were concluded or winding down by the end of the first quarter of 2020.

Conducting these studies is the basis for revenue recognition for a $15.6 million research and development payment received from Kaken in the second quarter of 2018. R&D expenses totaled $2.7 million for the second quarter of 2020 compared to $4.2 million for the second quarter of 2019.

This decrease was primarily due to having concluded the Phase III long-term safety study of sofpironium bromide gel and other clinical studies. Expenses in the second quarter of 2020 included a $500,000 licensing fee that we paid and the $1 million that we accrued for future milestone payments that Mike mentioned a moment ago.

Going forward, R&D expenses are expected to increase following the initiation of the Phase III program for sofpironium bromide. G&A expenses totaled $3 million for the second quarter of 2020 compared to $1.3 million for the second quarter of 2019.

This increase was primarily due to higher costs of $1.2 million related to operating as a public company, including professional fees for capital raise activities and insurance. We also had increased costs of stock and other compensation expenses by approximately $600,000. And with that, I'll go ahead and ask the operator open it up for questions.

Operator?.

[Operator Instructions]. Our first question comes from Leland Gershell with Oppenheimer and Co..

Just a few from me. First wanted to ask if you could put into perspective what a 2 point reduction for your primary endpoint really means for the axillary hyperhidrosis sufferer.

To what extent would that improve their quality of life and so forth? And also, wanted to see if you can help compare the endpoints that you're using for the study with the program that Qbrexza went through. I think there are just some minor differences there. Perhaps you can just compare them side by side. Thank you. .

Deepak, you want to handle those two questions?.

I think you have two questions. Your first question was around what this 2 point or greater change on the HDSM-Ax scale really relates into the quality of life. So, let me just tell you a little bit more on the HDSM-Ax scale. As mentioned, it's a 5 point scale.

And to get into the study, the patient, they have to be 3 or 4 on a 5 point scale, which is 0, 1, 2, 3, 4. So, basically, they are severe or very severe. So, to make a 2 point shift, they have to come down to mild or moderate. So, that's on the – just the rating scale itself. So, in terms of the quality of life, it's a level question scale.

And as part of the primary analysis, we have to look for the first level question. So, clearly, the quality of life from the severity of the hyperhidrosis, with a 2 point shift, they move from severe to mild. Or if they are getting in at very severe, they have to come down to moderate. So, that's the answer to your part one.

And the second thing you were asking about how this PRO scale compares to Qbrexza. So, as you know, Qbrexza PRO, they have a one question, a 11 point scale, ASDD. And basically, they have to move four points on a 11 point scale. So, both are patient reported outcome scale, but they are two different scales.

And it's only one question as part of their primary endpoint analysis, whereas HDSM-Ax is a multi-domain scale. So, 4 point shift on an 11 point scale. And in our case, it's a 2 point shift on a 5 point scale. .

Just to add one other comment, in addition, obviously, the co-primary endpoint is the gravimetric sweat production, which was used in both studies..

And actually, one quick follow-up if I may. As you are pursuing the new composition of matter with the Cocrystal, just want to check in and see if there's any movement there, any progress to report just on that being [indiscernible]. Thanks. .

This is Andrew Sklawer. We're not providing guidance at this stage on that..

Congrats on all the great progress..

Our next question comes from Thomas Flaten with Lake Street Capital Markets. .

How dependent is your fourth quarter guidance for a study initiation on COVID and surges we've seen or how that might play out? Do you have any thoughts on how risky that timeline is, if I can phrase it that way?.

Obviously, it all depends, Thomas, on the severity and how it goes. When we talk to IQVIA, which is the group we're working with to run the study, as well as the offices where the patients are coming from, there's a pretty high degree of confidence in our ability to run the study. We have a few things going for us in this regard.

One is, is it's a short study. And each patient is really only engaged on drug for six weeks during the study. So, you can kind of get in and out.

In addition, because we're picking 40 to 50 sites and there will be a broad geographic variance in those sites, we can kind of change the mix in terms of number of patients based on where the hotspots are in the United States at that time. So, IQVIA feels pretty good about our ability to do this. The sites are excited to do it.

As you might imagine, there hasn't been that much work going on, research and development work going on in their offices, so they're very committed to kicking this off. And that gives us a lot of confidence.

Obviously, there's a lot of variables we can't control and, therefore, there's a bigger error bar around the ability to start this thing or recruit patients than there normally would be. But at this stage, we feel pretty positive about our ability to meet that timeline and kick off this study and get a patient to enroll reasonably quickly. .

And then, with respect to starting the second study, is that primarily gated by enrollment pace in the first study or is there some other factor that's going to drive that decision?.

At this time, we've not given guidance on the second study. And frankly, we just want to get the first study started in this variable. Obviously, the COVID situation comes into play in this. And so, what we want to do is get the first study started, and then make a call.

It's not unusual that when you have two studies, you don't start them on top of each other. We want to get the sites trained and up and running. And then, we can look around and make sure it's working right before we make the decision on how to start the second study. .

And then one final one, if I may.

I'm not that familiar with the regulatory sequencing running up to approval in Japan, but has Kaken had regular dialogue with the regulatory authorities? And has there been anything unexpected there, anything we should be mindful of or is it proceeding according to plan, but based on what they're telling you?.

Yeah, yeah. So, obviously, we're not intimately involved in that. But the questions they get often, we provide some of the data for those. So, we do follow along. What we've seen is the interaction has gone quite well. There is regular interaction between companies and the regulatory authorities in Japan.

So, we're cautiously optimistic that they're on schedule for what would be typical a 12-month approval timeline. .

Thank you. There are no further questions at this time. I'd like to turn the floor over to Mr. Brown for any closing remarks you may have. .

Great. Well, thank you for taking the time this afternoon to listen to our update. We remain committed to building on the encouraging progress we've made this year. We recognize that the current situation with respect to coronavirus presents a challenge for all of us.

I want to take this opportunity on behalf of the whole Brickell team to wish the best to everyone on the call and their families. As always, please feel free to reach out to us with any questions at any time. Thank you very much. .

Ladies and gentlemen, this concludes today's webcast. You may now disconnect your lines at this time. Thank you for your participation and have a great day..