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ESPR > SEC Filings for ESPR > Form 10-Q on 3-Nov-2016All Recent SEC Filings

Show all filings for ESPERION THERAPEUTICS, INC.

Form 10-Q for ESPERION THERAPEUTICS, INC.


3-Nov-2016

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our annual report on Form 10-K for the fiscal year ended December 31, 2015.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). These forward-looking statements are based on our management's belief and assumptions and on information currently available to management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events, including our clinical development plans, or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, including in relation to the clinical development of bempedoic acid to be materially different from any future results, performance or achievements, including in relation to the clinical development of bempedoic acid, expressed or implied by these forward-looking statements.

Forward-looking statements are often identified by the use of words such as, but not limited to, "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other similar terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and that could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those referred to or discussed in or incorporated by reference into the section titled "Risk Factors" included in Item 1A of Part II of this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.

The forward-looking statements in this report represent our views as of the date of this quarterly report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

Corporate Overview

We are a pharmaceutical company focused on developing and commercializing oral therapies for the treatment of patients with elevated low density lipoprotein cholesterol, or LDL-C. Bempedoic acid, our lead product candidate, is a first-in-class ATP Citrate Lyase, or ACL, inhibitor that reduces cholesterol biosynthesis and lowers elevated levels of LDL-C by up-regulating the LDL receptor, but with reduced potential for muscle-related side effects. In June 2016, we provided a clinical development and regulatory update for bempedoic acid and our clinical program, known as Cholesterol Lowering via BEmpedoic Acid, an ACL-inhibiting Regimen, or CLEAR. Our CLEAR program has two major components: 1) the global pivotal Phase 3 LDL-C lowering program in patients with hypercholesterolemia who are on maximally tolerated background lipid-modifying therapy, including patients who are only able to tolerate less than the lowest approved daily starting dose of a statin (statin intolerance), and 2) the global cardiovascular outcomes trial, or CVOT (CLEAR Outcomes), in patients with hypercholesterolemia who are at high risk for cardiovascular, or CV, disease and who can be considered statin intolerant. In October 2016, we announced that the CLEAR LDL-C lowering program will include patients with hypercholesterolemia on maximally tolerated background lipid-modifying therapy, including on any statin at any dose, based on positive top-line results from our Phase 2 pharmacokinetics and pharmacodynamics, or PK/PD, study (1002-035) of bempedoic acid added to atorvastatin 80 mg and our Phase 1 PK study (1002-037) to assess the safety and tolerability of bempedoic acid and its effects on the PK of single doses of four high-dose statins, and the previously completed Phase 1 and Phase 2 studies. Prior to year-end, we expect to initiate the three global pivotal Phase 3 CLEAR LDL-C lowering efficacy studies - 1002-046, 1002-047, and 1002-048- and our CLEAR Outcomes study. We own the exclusive worldwide rights to bempedoic acid.

We were incorporated in Delaware in January 2008, and commenced our operations in April 2008. Since our inception, we have focused substantially all of our efforts and financial resources on developing bempedoic acid. We have funded our operations to date primarily through proceeds from sales of preferred stock, convertible promissory notes and warrants, public offerings of common stock and the incurrence of indebtedness, and we have incurred losses in each year since our inception.

We have not commenced principal operations and do not have any products approved for sale. To date, we have not generated any revenue. We have never been profitable and our net losses were $17.4 million and $12.8 million for the three months ended September 30, 2016 and 2015, respectively, and were $46.0 and $36.7 million for the nine months ended September 30, 2016 and 2015, respectively. Substantially all of our net losses resulted from costs incurred in connection with research and development programs, general and administrative costs associated with our operations. We expect to incur significant expenses and increasing


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operating losses for the foreseeable future. We expect our expenses to increase in connection with our ongoing activities, including, among others:

initiating the global pivotal Phase 3 CLEAR efficacy studies and the CLEAR Outcomes study for bempedoic acid;

completing the clinical development of bempedoic acid;

undertaking development activities on a fixed dose combination, or FDC, of bempedoic acid and ezetimibe;

seeking regulatory approval for bempedoic acid;

commercializing bempedoic acid; and

operating as a public company.

Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings or through other sources, which may include collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a material adverse effect on our financial condition and our ability to pursue our business strategy or continue operations. We will need to generate significant revenues to achieve profitability and we may never do so.

Product Overview

Bempedoic acid, our lead product candidate, is a first-in-class ACL inhibitor that reduces cholesterol biosynthesis and lowers elevated levels of LDL-C by up-regulating the LDL receptor, but with reduced potential for muscle-related side effects. Bempedoic acid is being developed for patients with hypercholesterolemia. We acquired the rights to bempedoic acid from Pfizer in 2008. We own the exclusive worldwide rights to bempedoic acid and we are not obligated to make any royalty or milestone payments to Pfizer.

During the nine months ended September 30, 2016, we incurred $12.4 million in expenses related to our global pivotal Phase 3 CLEAR Harmony (1002-040) long-term safety and tolerability study of bempedoic acid in patients with hypercholesterolemia on maximally tolerated background lipid-modifying therapy, our Phase 2 PK/PD (1002-035) study and our Phase 1 PK (1002-037) study.

During the nine months ended September 30, 2015, we incurred $12.9 million in expenses related to our Phase 2b (1002-009) clinical study in patients with elevated LDL-C already receiving statin therapy and our Phase 2 (1002-014) exploratory clinical safety study in patients with both elevated LDL-C and hypertension.

Program Developments

1002-035-Phase 2 pharmacokinetics/pharmacodynamics clinical study in patients treated with high-dose statin therapy

On October 13, 2016, we announced top-line results for our Phase 2 PK/PD (1002-035) clinical study. The eight-week, U.S.-based, multi-center, randomized, double-blind, parallel group study evaluated 68 patients on stable atorvastatin 80 mg per day. All patients in the study received atorvastatin 80 mg for four weeks. Patients were then randomized to receive either bempedoic acid 180 mg, or placebo, for four weeks. The primary objectives of the study were to assess the LDL-C lowering efficacy of bempedoic acid 180 mg versus placebo on a background of atorvastatin 80 mg, as well as multiple-dose plasma PK of atorvastatin 80 mg alone and in combination with bempedoic acid. Secondary objectives included assessment of the effect of bempedoic acid on lipid and cardiometabolic biomarkers, including high-sensitivity C-reactive protein, or hsCRP; and characterization of the tolerability and safety of bempedoic acid.

Patients treated with bempedoic acid 180 mg achieved 22 percent (p=0.0028) LDL-C lowering from baseline compared to placebo with all patients on a background of atorvastatin 80 mg. There was a 13 percent reduction in LDL-C in the bempedoic acid group and a nine percent increase in LDL-C in the placebo group when added to background atorvastatin 80 mg. Bempedoic acid also demonstrated an incremental reduction of 35 percent (p=0.0020) in hsCRP. Bempedoic acid added to atorvastatin 80 mg produced no clinically relevant effects on atorvastatin PK, and appeared to be safe and well-tolerated, with no serious adverse events reported.


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1002-037-Phase 1 clinical pharmacology study to assess the safety and tolerability of bempedoic acid added to maximally tolerated statin therapy

On October 13, 2016, we announced top-line results from our Phase 1 PK (1002-037) clinical study. The open-label study assessed the PK levels in 48 healthy volunteers receiving single doses of the highest doses of the most commonly prescribed statins - atorvastatin 80 mg, rosuvastatin 40 mg, simvastatin 40 mg and pravastatin 80 mg - when added to steady-state bempedoic acid 180 mg. The PK profiles demonstrated in 1002-037 were consistent with those seen in previous studies conducted with bempedoic acid, and did not increase with the highest doses of the statins tested in combination with bempedoic acid.

Ongoing Clinical Studies

1002-034-Phase 1 bioavailability study to assess the relative oral bioavailability of bempedoic acid 180 mg and ezetimibe 10 mg

1002-034 is a Phase 1, randomized, open-label, single-dose study which is designed to assess the relative oral bioavailability of bempedoic acid 180 mg and ezetimibe 10 mg co-administered as individual tablets versus as two different FDC formulation tablets in healthy human subjects. The development of the FDC was prompted by the results of a 12-week, Phase 2b (1002-008) study of co-administered 180 mg of bempedoic acid and 10 mg of ezetimibe, which demonstrated an almost 50 percent lowering of LDL-C from baseline; significantly greater reductions in hsCRP; and a favorable safety and tolerability profile. 1002-034, which was initiated in July 2016, will help determine the appropriate formulation for the FDC for use in our future clinical studies of patients with elevated levels of LDL-C.

CLEAR Harmony (1002-040)-Global pivotal Phase 3 long-term safety and tolerability study in patients with hypercholesterolemia on maximally tolerated background lipid-modifying therapy

CLEAR Harmony (1002-040) is a global pivotal Phase 3 randomized, multicenter, double-blind, placebo-controlled study evaluating 180 mg of bempedoic acid versus placebo in patients with hypercholesterolemia with atherosclerotic cardiovascular disease (ASCVD) and/or heterozygous familial hypercholesterolemia (HeFH) on maximally tolerated background lipid-modifying therapies, including patients on any statin at any dose. At initiation, the study included 900 patients but has been expanded to 1,950 patients to further support our regulatory submissions for an LDL-C lowering indication expected in the first half of 2019. The study will enroll patients at approximately 125 sites in the U.S., Canada and the European Union. The primary objective is to assess safety and tolerability of patients treated with bempedoic acid for 52 weeks. Secondary objectives include assessing the effects of bempedoic acid on lipid and cardiometabolic risk markers, including LDL-C and hsCRP. We initiated CLEAR Harmony in January 2016, and, as a result of the expanded enrollment, expect to report top-line results by mid-2018.

Additional Studies

Global Pivotal Phase 3 LDL-C Lowering Program - CLEAR Efficacy Studies

Prior to year-end, we plan to initiate our global pivotal Phase 3 CLEAR efficacy studies - 1002-046, 1002-047 and 1002-048 - in patients with hypercholesterolemia on maximally tolerated background lipid-modifying therapy, including patients on any statin at any dose. The global pivotal Phase 3 CLEAR efficacy studies are designed to measure the change in LDL-C from baseline at 12 weeks. Top-line results from the global pivotal Phase 3 CLEAR LDL-C lowering program are anticipated by mid-2018. The proposed high-level design details are included below and additional detail of these studies will be made available at study initiation.

1002-046: 24-week study to assess the 12-week LDL-C efficacy primary endpoint of bempedoic acid 180 mg versus placebo in hypercholesterolemic patients (with or without ASCVD) on maximally tolerated background lipid-modifying therapy. This study is designed to enroll 300 patients who are only able to tolerate less than the lowest approved daily starting dose of a statin and can be considered statin intolerant. This study is expected to initiate before year-end.

1002-047: 52-week study to assess the 12-week LDL-C efficacy primary endpoint of bempedoic acid 180 mg versus placebo in hypercholesterolemic patients (with ASCVD and/or HeFH) on maximally tolerated background lipid-modifying therapy. This study is designed to enroll approximately 750 patients and is expected to initiate before year-end.

1002-048: 12-week study to assess the LDL-C efficacy primary endpoint of bempedoic acid 180 mg versus placebo in hypercholesterolemic patients (with or without ASCVD) when added to ezetimibe. This study is designed to enroll approximately 225 patients and is expected to initiate before year-end.


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Global Cardiovascular Outcomes Trial - CLEAR Outcomes

CLEAR Outcomes is a randomized, double-blind, placebo-controlled study to assess the effects of bempedoic acid in patients with hypercholesterolemia who are at high risk of CV disease and who are only able to tolerate less than the lowest approved starting dose of a statin and can be considered statin intolerant. CLEAR Outcomes is expected to enroll approximately 12,600 patients at up to 1,000 sites in approximately 30 countries. Patients enrolled in the study will be required to have a history of, or be at high risk for, CV disease with LDL-C levels between 100 mg/dL and 190 mg/dL despite background lipid-modifying therapy. The trial will be an event-driven study with the primary efficacy endpoint of the effect of bempedoic acid versus placebo on the risk of major adverse cardiovascular events (cardiovascular death, non-fatal myocardial infarction, non-fatal stroke, hospitalization for unstable angina, or coronary revascularization; also referred to as "five-component MACE"). We intend to initiate CLEAR Outcomes before year-end, and the study is intended to support our submissions for a CV disease risk reduction indication in the U.S. and Europe by 2022.

Financial Operations Overview

Revenue

To date, we have not generated any revenue. In the future, we may never generate revenue from the sale of bempedoic acid or other product candidates. If we fail to complete the development of bempedoic acid or any other product candidates and secure approval from regulatory authorities, our ability to generate future revenue and our results of operations and financial position will be adversely affected.

Research and Development Expenses

Since our inception, we have focused our resources on our research and development activities, including conducting nonclinical, preclinical and clinical studies. Our research and development expenses consist primarily of costs incurred in connection with the development of bempedoic acid, which include:

expenses incurred under agreements with consultants, contract research organizations, or CROs, and investigative sites that conduct our preclinical and clinical studies;

the cost of acquiring, developing and manufacturing clinical study materials;

employee-related expenses, including salaries, benefits, stock-based compensation and travel expenses;

allocated expenses for rent and maintenance of facilities, insurance and other supplies; and

costs related to compliance with regulatory requirements.

We expense research and development costs as incurred. To date, substantially all of our research and development work has been related to bempedoic acid. Costs for certain development activities, such as clinical studies, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations or information provided to us by our vendors. Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical studies. We do not allocate acquiring and manufacturing clinical study materials, salaries, stock-based compensation, employee benefits or other indirect costs related to our research and development function to specific programs.

Our research and development expenses are expected to increase in the foreseeable future. Costs associated with the development of bempedoic acid will increase as we further its clinical development, including in connection with the commencement of our global pivotal Phase 3 CLEAR efficacy studies and our CLEAR Outcomes study. We cannot determine with certainty the duration and completion costs associated with the ongoing or future clinical studies of bempedoic acid. Also, we cannot conclude with certainty if, or when, we will generate revenue from the commercialization and sale of bempedoic acid, if ever. We may never succeed in obtaining regulatory approval for bempedoic acid. The duration, costs and timing associated with the development and commercialization of bempedoic acid will depend on a variety of factors, including uncertainties associated with the results of our clinical studies and our ability to obtain regulatory approval. For example, if the Food and Drug Administration, or FDA, or another regulatory authority were to require us to conduct clinical studies beyond those that we currently anticipate will be required for the completion of clinical development or post-commercialization clinical studies of bempedoic acid, or if we experience significant delays in enrollment in any of our clinical studies, we could be required to expend significant additional financial resources and time on the completion of clinical development or post-commercialization clinical studies of bempedoic acid.

General and Administrative Expenses

General and administrative expenses primarily consist of salaries and related costs for personnel, including stock-based compensation and travel expenses, associated with our executive, accounting and finance, operational and other administrative


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functions. Other general and administrative expenses include facility related costs, communication expenses and professional fees for legal, patent prosecution, protection and review, consulting and accounting services.

We anticipate that our general and administrative expenses will increase in the future in connection with the continued research and development and commercialization of bempedoic acid, increases in our headcount, expansion of our information technology infrastructure, and increased expenses associated with being a public company and complying with exchange listing and Securities and Exchange Commission, or SEC, requirements, including the additional complexities and related costs of our transition from an "emerging growth company" to a "large accelerated filer" under the rules of the SEC. These increases will likely include higher legal, compliance, accounting and investor and public relations expenses.

Interest Expense

Interest expense consists primarily of cash interest costs associated with our credit facility and non-cash interest costs associated with the amortization of the related debt discount, deferred issuance costs and final payment fee.

Critical Accounting Policies and Significant Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments on an ongoing basis, including those related to accrued expenses and stock-based compensation. We base our estimates on historical experience, known trends and events, contractual milestones and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-02 which is intended to improve financial reporting about leasing transactions. The updated guidance will require a lessee to recognize assets and liabilities for leases with lease terms of more than twelve months. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a capital or operating lease. Unlike current GAAP - which requires only capital leases to be recognized on the balance sheet - the updated guidance will require both types of leases to be recognized on the balance sheet. The standard is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. We do not believe the adoption of this standard will have a material impact on our financial position, results of operations or related financial statement disclosures.

In March 2016, the FASB issued ASU 2016-09 which includes provisions intended to simplify the various aspects related to how share-based payments are accounted for and presented in the financial statements. The updated guidance will require all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. Additionally, under the updated guidance companies will have to elect whether to account for forfeitures of share-based payments by (1) recognizing forfeitures as they occur or (2) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. The standard is effective for public business entities for fiscal years beginning after December 15, 2016, and interim periods within those years. Early adoption is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. We do not believe the adoption of this standard will have a material impact on our financial position, results of operations or related financial statement disclosures.

There have been no other material changes to the significant accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.


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Results of Operations



Comparison of the Three Months Ended September 30, 2016 and 2015



The following table summarizes our results of operations for the three months
ended September 30, 2016 and 2015:



                                Three Months Ended September 30,
                                   2016                 2015           Change
                                         (unaudited, in thousands)
Operating Expenses:
Research and development     $          13,498    $           7,247   $  6,251
General and administrative               4,214                5,672     (1,458 )
Loss from operations                   (17,712 )            (12,919 )   (4,793 )
Interest expense                           (89 )               (130 )       41
Other income, net                          399                  248        151
Net loss                     $         (17,402 )  $         (12,801 ) $ (4,601 )

Research and development expenses

Research and development expenses for the three months ended September 30, 2016, were $13.5 million, compared to $7.2 million for the three months ended September 30, 2015, an increase of $6.3 million. The increase in research and development expenses was primarily related to the further clinical development of bempedoic acid, which includes increases in our headcount and increased stock-based compensation expense.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2016, were $4.2 million, compared to $5.7 million for the three months ended September 30, 2015, a decrease of $1.5 million. The decrease in general and administrative expenses was primarily attributable to a reduction in pre-commercialization activities partially offset by increases in costs to support public company operations, increases in our headcount and other costs to support our growth.

Interest expense

We incurred interest expense of $0.1 million and $0.1 million for the three months ended September 30, 2016 and 2015, respectively. Interest expense was related to our credit facility.

Other income, net

Other income, net for the three months ended September 30, 2016, was $0.4 million, compared to $0.2 million for the three months ended September 30, 2015. This increase was primarily related to an increase in interest income earned on our cash, cash equivalents and investment securities.

Results of Operations



Comparison of the Nine Months Ended September 30, 2016 and 2015


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