Auspex Pharmaceuticals Posts In-Line Year-End Results, Data From FIRST-HD Expected in the Fourth Quarter

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Auspex Pharmaceuticals reported year-end operating results on Thursday afternoon, March 27, in the company’s first update since its initial public offering last month. We largely view the company’s financial results over the next several quarters as less important than the ongoing development of SD-809, which is currently in a broad clinical program in three indications including chorea associated with Huntington’s disease, tardive dyskinesia, and Tourette’s syndrome. In addition to SD-809, Auspex has disclosed the next clinical compound entering the clinic from the company’s product pipeline. The company has initiated a Phase I study for its deuterium-containing form of pirfenidone, a product approved in Europe for the treatment of idiopathic pulmonary fibrosis (IPF), and likely to be approved in the United States following recent positive results from the ASCEND trial.

For the company’s financial results, Auspex reported a loss of $7.59 million, which was ahead of our estimate of a $5.6 million loss. R&D expenses during the fourth quarter of $3.5 million approximated our $3.6 million estimate, while SG&A expense was also relatively in line with our estimates. The most significant variance between our estimates and actual results was in the change in the fair value of a preferred stock warrant liability of $2.5 million, which we had not included in our other income estimate. Auspex ended the fourth quarter with $36.6 million in cash and equivalents; however, this cash number does not include the $87.1 million in capital raised during the company’s initial public offering, which was executed during the first quarter.

Regarding the company’s development program, SD-809 is in a Phase III program for the treatment of chorea associated with Huntington’s disease, with efficacy data from the FIRST-HD clinical trial expected to read out during the fourth quarter of this year. We believe the efficacy threshold in FIRST-HD is relatively achievable given the known efficacy of tetrabenazine in this indication. And based on the improved pharmacology of the deuterated form of tetrabenazine, we believe SD-809 has the potential to show both reduced side-effects and improved dosing in comparison to tetrabenazine. In addition to FIRST-HD, an open-label clinical trial for SD-809 (ARC-HD) is in progress to evaluate long-term safety (ARC-HD Rollover) and provide guidance on how to switch patients currently on tetrabenazine to SD-809 (ARC-HD Switch). Top-line data from the ARC-HD trials are also expected during the fourth quarter of 2014.

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