Bill McVicar - CEO Tom Wessel - CMO Elizabeth Woo - SVP, IR and Corporate Communications.

Jotin Marango - ROTH Capital Mara Goldstein - Cantor Fitzgerald Michael Higgins - Ladenburg Thalmann Roger Tung - Jefferies.

Good day, ladies and gentlemen, and welcome to the Q1 2018 Flex Pharma, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions].

I would now like to turn the call over to Elizabeth Woo, SVP of Relations and Corporate Communications. Please go ahead..

Thank you, [Indiscernible]. Good morning, everyone thank you for joining us to discuss Flex Pharma's first quarter 2018 financial results as well as our recent progress and outlook. Earlier today, we issued a press release announcing recent business highlights and detailing our first quarter 2018 results.

You can find these documents on our website at flex-pharma.com.

Today, we will be making certain forward-looking statements about future expectations, plans, events and circumstances, including statements about our strategy, future operations and the development of our consumer and drug product candidates, plans for future potential product candidates and studies and our expectations regarding our capital allocation and cash resources.

These statements are based on our current expectations, and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factors section of our 10-K filed with the SEC and other filings we make with the SEC from time-to-time.

Flex Pharma disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. We'll provide a brief overview and then open it up for Q&A. And on the call today is CEO Bill McVicar and Chief Medical Officer, Dr. Tom Wessel.

I'll now pass the call to CEO, Bill McVicar..

Thank you, Elizabeth. Good morning. Thank you all for joining us on the call today. I'll make a few brief remarks about the overall state of business and then turn the call over to Chief Medical Officer, Dr. Tom Wessel, for an update on the progress we've made in our clinical development programs.

The past few months have been particularly rewarding on the clinical front. We achieved significant milestones with positive Phase 2 data in two series and distinctly different neurologic diseases MS and ALS. We believe these data demonstrate the clear protection of FLX-787 to reduce painful cramps and spasms in these patient populations.

These new data indicate that chemical neurostimulation the mechanism we believe FLX-787 uses to activate and rebalance the nervous system made benefit patients with a range of neurological diseases. We're beginning to explore this mechanism of action in dysphagia or difficulty swallowing and in renal dialysis cramping.

This novel and important discovery has demonstrated the potential to treat cramps, spasms and spasticity arising from motor neuron and reflex hyperexcitability. Along with our positive Phase 2 read outs in MS and ALS.

We've seen an uptick in our partnering discussions both domestically and internationally which have taken place over the last month with several companies.

My recent visit to the American Academy of Neurology Annual Meeting reinforced our understanding of evolving market dynamics as numerous approved disease modifying drugs have improved MS patient's lives dramatically.

In part as a result, companies are interested in augmenting their MS franchises with symptomatic treatments so they can provide more comprehensive care for patients. We look forward to identifying a strong partner to help us accelerate development of FLX-787 across multiple indications.

We're also planning to meet with FDA to discuss the path to registration for our MS program in the next few months. With regard to our consumer business, while HOTSHOT has developed a very passionate and loyal following amongst elite endurance athletes. In order to better focus Flex under development of drugs to treat serious neurological diseases.

We decided to engage in investment banking firm to assist us with the consideration of strategic alternatives for our consumer business. That review is in process and we expect to report the results of the review in the near future.

Our cash is estimated to fund operations to mid-2019 and of note; the cash needed for operations in quarters to come is projected to be lower than it was in Q1 which was higher than usual due to the timing of clinical trials, billings and annual bonuses.

So going forward, we expect a lower level of spend in part due to reduced spending on the consumer business. Next year will be transformational for Flex.

We expect to be reporting results from our robust Phase 2b trials of FLX-787 in ALS and Charcot-Marie-Tooth patients clarifying the path to registration for MS starting down that path and learning of the potential of FLX-787 to address more of the challenges that patients with neurologic disease face every day including dysphagia.

I'll now turn the call over to our CMO. Dr. Tom Wessel to update you on our clinical progress..

Thank you, Bill. Let me take a moment to review the two clinical trial results in ALS and MS from the past few months that have confirmed meaningful anti-cramp efficacy for FLX-787. Our first clinical data set in a neurological condition was derived from ALS patients with frequent muscle cramps.

In this small study data from eight patients who completed the randomized double-blinded, placebo-controlled cross-over showed a statistically significant reduction in cramp associated pain and muscle stiffness, along with strong and consistent trends on multiple anti-cramp activity endpoints.

Our MS trial completed enrolment in 2017 and provided a second data set confirming the FLX-787 has the potential to benefit patients with a very different underlying neurological disease. In this Phase 2 randomized double-blinded, placebo-controlled, cross-over trial in 57 MS patients.

FLX-787 demonstrated the potential to improve both cramps and spasms as well as spasticity. FLX-787 reduced cramp spasms frequency and increased cramp-free days in MS patients in a pre-specified analysis of the parallel treatment phase in this study. Both of these results were statistically significant.

Treating physicians reported greater improvement in spasticity in patients receiving FLX-787 relative to control as measured by the Clinical Global Impression of Change or CGIC in spasticity.

This pre-specified analysis also yielded a statistically significant result and fits well with our original hypothesis that hyperexcitability contributes to cramps, spasms and spasticity. This also supports our concept that FLX-787 is an inhibition replacement treatment.

We expect to present the results from this study at an upcoming medical concept in the fall. Based on these impressive clinical data, we look forward to our upcoming regulatory discussions that will define the registration path for MS and other neurological indications. The goal is to initiate pivotal studies as soon as possible.

FLX-787 has now demonstrated a consistent anti-cramping effect reducing the median number of cramps ranging from decreases from 27% to 31% in patients with ALS, MS and the people with normal nervous systems that suffer from nocturnal leg cramps. Regarding our Phase 2 clinical trials that are currently ongoing the COMMEND and COMMIT studies.

The COMMEND trial is designed to evaluate FLX-787 in patients with motor neuron diseases primarily ALS who's suffered from cramps. We expect top line data from this clinical trial by early 2019. The COMMIT trial is designed to evaluate 787 in patients with Charcot-Marie-Tooth neuropathy. We expect top line data from this trial in early 2019 as well.

Although enrolment rates will need to increase in this trial to meet this timeframe, these two studies have identical designs. They're randomized controlled double-blinded parallel group trials with 28 days run-in periods to establish the baseline cramp frequency. Both studies are US based and are being conducted under our FLX-787 IND.

After run-in patients are randomized to receive 30 milligrams of FLX-787 administered three times a day or control of treatment.

Patients will be evaluated for changes in cramp frequency as the primary endpoint with a number of second endpoints including the patients and clinicians global impression of change, cramp related pain and of course spasticity.

We believe the recent data from Phase 2 randomized blinded-controlled trials of FLX-87 in MS and ALS demonstrate a consistent anti-cramping effect. The efficacy of FLX-787 plus it's safety profile to-date weren't expedited development to address the significant unmet medical need to treat patients with severe painful and debilitating muscle cramps.

It is our goal to deliver a new therapeutic option that can provide clinically meaningful improvement in the lives of many patients suffering from these neurological diseases. I'll now turn the call back to Elizabeth..

Thank you, Tom. And joining us for the Q&A is our Chief Financial Officer, John McCabe.

[Indiscernible] would you now open up the Q&A to give instructions for participants to ask questions?.

[Operator Instructions] our first question is from Jotin Marango with ROTH Capital. Your line is now open..

I have a question about new direction that I saw in your press release this morning. ALS in dysphagia, on that, that is interesting how do you - I guess a question for Tom primarily. How do you plan to tease [ph] the clinical affects there especially when we hear data.

What sort of clinical variables are important there? And the core of the question really is, is this something that could be evaluated in one eventual pivotal study together with spasticity in ALS which then could result in one filing or maybe a broader label.

How does this play together with the other program in the same patients? Thank you very much..

Sure, obviously we see this as a potentially very important for clinical expansion. We have number of exploratory studies that we're now starting, one is already well underway.

Obviously there are different gradations of clinical measures that you can pursue in these type of studies, very simply you can first look at tongue mortality and fasciculations in the tongue and so forth. Those are relatively easily performed and accessible studies.

However, we will use sort of the clinical norms that are applied to dysphagia assessment and to studies that involve video fluoroscopy and other more technical measures to ascertain how these patients perform.

Our initial goal is to look in particular at ALS patients where there is great interest obviously, but also in Parkinson disease patients that suffer from dysphagia early on.

And here the outcomes that we will measure will definitely include video fluoroscopy which allows a radiographic capture of how many so called penetrations and aspirations actually occur, so these are gradations in the amount of liquid and food that actually enter into the airway, which is obviously very dangerous and can cause bronchitis and pneumonia and it is actually a major source of morbidity and mortality in these patient groups.

So we're obviously at the beginning, but I think there is great interest amongst the neurologist and speech therapist and other involved parties here. And we will certainly try to be aggressive in taking these next steps that will go from exploratory studies than to more carefully thought out randomized studies..

And Tom, are these the same type of patients as in your other ALS study or are these more advance, so different segment within the disease?.

I think there is going to be some degree of overlap.

You know that in ALS there are patients that have a bulbar [ph] unfit of the disease obviously in those patients these symptoms occur much earlier, those are the patients that we think might actually benefit very early on in their disease course from this type of an intervention, so those would definitely be patients that we would want to target initially.

Having said that, dysphagia is actually a very broad problem in a number of neurodegenerative diseases, but also just simply associated with ageing itself. One set of data that we recently reviewed indicates that about half of all nursing home residents have dysphagia.

And I think that, this is an area that is relatively unexplored and where there are no other pharmacological treatments available..

Thank you very much..

Our next question is from Mara Goldstein with Cantor Fitzgerald. Your line is now open..

I have one follow-up question on dysphagia. But also Tom, I saw something enrolment meeting to increase to make certain goals.

Maybe can you just go say that in a little bit more detail and the question that I had just on dysphagia as you think about the clinical trial process is really understanding not so much [indiscernible] but dysphagia is fairly broad indication and how you can sort of I suppose bucket patients such that you could get a consistent bio population to determine whether or not you have activity..

Yes, maybe I'll let Bill speak a little bit too our clinical strategy and how we're expanding from the relatively small groups in ALS and CMT..

It's question of course we're thinking carefully about, Mara because it applies not only to dysphagia but also to cramping and spasms.

We've seen now this pattern where you have anti-cramping and spasm activity in ALS patients and now in MS patients and of course we've seen evidence previously in, nocturnal leg cramps patients and so the question is, does that become a generalizable [ph] symptomatic relief, using the drug and if that is the case, how do you construct a registration file that leads to a more sort of general anti-cramping spasms label.

And I think we are in a similar situation, which you've already actually discerned with dysphagia because it does cut across many different neurologic indications.

And so I think these will be issues that have ultimately are resolved with our discussions with FDA, but it's why at the beginning of our investigation of the potential for dysphagia we're looking at both ALS patients and in a separate pilot study we're planning to look at Parkinson's patient because there maybe differences in the way the different subjects with different neurologic backgrounds react.

If we get the same kind of pattern we're seeing with cramping and spasms that is, it works kind of independently of the underlying neurologic state, then we can kind of do a more generalized regulatory process and I think that's going to be faster and then of course that product will be applicable to a large pool of patients.

If it turns out, that there is distinct differences based on the path of physiology then we'll be compelled to kind of separate investigate those individually. Tom, did you want to follow-up and answer Mara's question and let her know what we're thinking about for the CMT enrolment challenges we have..

We're pressing ahead. Obviously we have now initiated the full activation of all these sites, we have over 20 sites across the United States that are members of the Inherited Neuropathies Consortium, we've talked with these investigators on a regular basis and have reinforced that now just an AN meeting.

We will of course utilize other measures through our partners at the Inherited Neuropathy Foundation, Allison Moore [ph] has been very helpful there to really utilize her electronic databases to reach out to patients.

Then we have another partner that we're working with to utilize social media and quick screening out through other social media instruments to enhance the enrolment. So CMT is a little bit of an area that is not as well trodden as other neurological indications.

This is one of the very few interventional type of trials that is underway and in the future, since we now have a better understanding of the potential for generalizability [ph] of the anti-cramping, anti-spasms and anti-spasticity effects. I think our life will become a little bit easier as we're entering into the MS domain in the United States.

We already have a number of contacts in that area and I certainly have been reaching out to many of the MS investigators that I've worked with in the past and I think there is great enthusiasm there to really explore the consequences of this type of very safe.

It appears to be very safe intervention that can be used to enhance any type of anti-spasm or anti-spasticity therapy that MS patients commonly use. As you know about 80% of MS patients develop spasticity and the majority of those patients eventually do require some anti-spasticity medication in the more advance stages of their disease.

So we think that from a clinical trials perspective, things should get a little bit easier as we go into these larger neurological indications..

Okay and if I could just ask a practical question about cash and resources.

I know you should - into 2019, but can you may be just characterize how far you can get to the clinical trial process with the resources you have available?.

Yes, just to be very clear about that. Those resources allow us to complete the both the ALS and the CMT trial. However a new and potentially large and ideally pivotal MS trial is not yet in the plan..

Okay, thank you..

Our next question is from Michael Higgins with Ladenburg Thalmann. Your line is now open..

Couple questions if I could, first off I believe you mentioned potentially partnering 787, I don't believe we've heard that before. Can you give us little additional color around that? If that's globally that's ex-US, that 2018 event and if that includes [indiscernible]..

Thank you Michael. Yes I would say that's just the natural expression of the now third patient population that we've shown activity in and our interest are of course both local in the US and internationally.

These are markets as you know that we're interested in and right now our core clinical development is in the US and it would be great to be able to expand our development programs and be able to fully fund all of the opportunities we have including things like dysphagia or renal dialysis cramping..

Okay, thanks. Can you give some updates speaking globally on your discussions with EMEA and then when it might be the optimal timing for partner? I would think post COMMIT data but, just curios if your thoughts on that thing..

Yes and I just realized I forgot to answer part of your question which is whether the partnering efforts including the consumer business. And I'd say the consumer business is actually separate from those, we're now talking really about the drug development efforts.

I think we would be interested in partnerships that would add both expertise potentially in other parts of the world, development expertise as well as additional support to move the programs forward, well before we have some of the data that's going to be coming in the first half of 2019..

Okay and one last question.

How do you gaze the potential fast track in CMT like you have in ALS?.

That's interesting question. I don't see why it is substantially different, we know that the cramps can be as painful and as disabling in that patient population.

There may be a smaller percentage of CMT patients that suffer from cramps at the severe and disabling level, but since there's 10 times as many patients it maybe an even more significant patient population.

So I would say we haven't specifically addressed that, but I don't see a fundamental difference why those two patient populations would be treated differently or interpreted as different levels of need..

Okay, appreciated. Thanks guys..

[Operator Instructions] our next question is from Roger Tung with Jefferies. Your line is now open..

So my first question is, if we have positive results for the safe [indiscernible] ALS and CMT trial, can you remind us what will be the Phase 3 program [technical difficulty] look like. Bill as you mentioned you seem to see some [indiscernible] kind of benefit across [technical difficulty]..

Regulatory registration programs look like. You can imagine though, that where FDA - to accept the notion that the treatment of cramps and spasms is a symptomatic benefit that cuts across a number of neurological indications that you could use a number of pools of neurologic patients to construct such a regulatory dossier.

And we certainly intent to raise those issues with FDA..

Yes and I think just to add to that, I would anticipate that the regulators would ask us to have populations that represents both large central nervous system pathologies such as ALS and MS and we think we've already addressed that.

but you know the potential for this drug to also address cramping as it occurs in peripheral neuropathies is something that we don't know very much about yet, we have some suggestions that it works, and I think that here the FDA might ask for a clear clinical data set that demonstrates that this mechanism applies to peripheral neuropathy related cramps and spasms as well.

As obviously as Bill just indicated, we have to have that discussion with the FDA and it will determine what the design and size of the Phase 3 studies, the pivotal studies what that will look like..

Understood. Yes thank you very helpful. So my next question Bill you also mentioned since during the AN last week we got a lot of attention from the potential partners.

so my question is, regarding the reason MS read-out any qualitative feedback from the MS, KOLs [ph] regarding the clinical meaningfulness, how excited they are, can you just give us some kind of color there?.

I think it's - they're obviously excited about any additional tool they can put in their therapeutic toolbox that can improve spasticity because as Tom was saying and just to look at MS patient specifically.

We talked to them about their MS patients, they all were - the vast majority 85% to 90% half spasticity with about half of them being moderate to severe and in those moderate to severe patients, their spasticity is rarely controlled by the existing drugs that have a bunch of side effects.

So everyone that we've spoken to is highly enthusiastic about an additional therapy that could improve spasticity control. And in particular, they like the idea that this particular additive therapy has a nice safe clinical profile and that means, it can be added in these patients that might be on several other drugs with other co-morbidities.

So I think the enthusiasm has been pretty high. The thought leaders that we spoke to are intrigued by this and we kind of have a really nice situation in which we can look in for example MS patients at both the anti-cramping and spasm activity and will look at all of the spasticity endpoints as well.

And boy I think we get a very positive response if we can move the needle on both..

Just to add to that, you have to remember that the tools that neurologist and rehab physicians have, to influence spasms and spasticity are relatively limited.

The go-to drugs initially are always Baclofen and Tizanidine, but they have tremendous sedating side effects and central nervous system side effects that limit the usefulness of these therapies.

Of course over the last decade or so there is been a flurry of activity to utilize Botox and other agents that are injected into those muscles that are spasming [ph] or have a high tone that degrades the quality of the patients life and their motor performance.

So here we have a new situation where this agent could be added to these other therapies and because of the lack of systemic exposure there is great enthusiasm to test this out quickly to see whether this is going to be useful new therapeutic approach.

So the MS doctors that we have talked to that have a particular interest in symptomatic therapies are very enthusiastic and just yesterday. I was talking one leading rehab physician out on the West Coast, who said well we want to be part of those trials as soon as possible because they have large patient groups that are really underserved right now..

And let me just add that, I was recently in Japan and I had a chance to meet with some Japanese KOL's [ph] and as you know in Japan they prescribe a lot of drugs and they have a disproportionate focus on safety. So when we described our clinical data to-date they were very encouraged.

They of course have only the same tools that we have in the US for managing spasticity. Baclofen, Tizanidine [indiscernible] Baclofen as a sort of last resort and they also showed great enthusiasm for a drug with this kind of profile..

Yes, got it. Very encouraging. Congrats on the progress. Looking forward to the next update. Thank you..

And I'm showing no further questions. I would now like to turn the call back to CEO, Bill McVicar for any further remarks..

Thank you, [indiscernible]. Fueled by the consistent efficacy demonstrated by FLX-787 against cramps and spasms and the promise of the potential to impact spasticity.

The Flex team and I are excited to driving towards more important clinical read-out to the year to come as we work to deliver effective treatments for patients with serve neurologic diseases. Thank you all for your time this morning..

Ladies and gentlemen. Thank you for participating in today's conference. You may now disconnect. Everyone have a great day..