Alkermes Plc (ALKS) 2002 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Alkermes first quarter 2003 financial results conference call. At this time all participants are in a listen-only mode. There will be a question and answer session to follow. When the question and answer session begins, you will need to press the "1" key on your touchtone phone to register into the question and answer lineup. Please be advised that this call is being taped at Alkermes request. At this time I would like to hand it to the host for today's call, Mrs. Rebecca Peterson, Director of Investor Relations at Alkermes. Please go ahead.

Good afternoon and welcome to Alkermes conference call to discuss our financial results for the first quarter of fiscal 2003. I am Rebecca Peterson, Director of Investor Relations here at Alkermes and with me today is Richard Pops, our CEO and James Frates, our CFO. During this call, James will review results from our financial quarter and Richard will then review recent highlights. We will then take your questions. Some of these statements that we will make during the call today contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. While we believe that our expectations in making these statements are reasonable, actual results could differ materially from our expectations as a result of a number of factors including, but not limited to whether the issues raised in the non-approvable letter for Risperdal Consta can be resolved in a timely fashion, if at all, actions by our partners with regard to marketing and regulatory filings, decisions by the FDA or foreign regulatory authorities regarding our product candidates, the outcome of clinical and preclinical work we are pursuing, potential changes in cost, scope, and duration of clinical trials, and decisions we make about the timing and scope of proprietary product development. For a more detailed list and description of these risks and uncertainties, please see the reports filed by Alkermes with the SEC. Alkermes disclaims any intention or obligation to update or revise any forward-looking statements. Now with that, I would like to turn the call over to James.

Thanks Rebecca. For our first fiscal quarter, the net loss attributable to common shareholders was $45.3 million or 70 cents basic and diluted loss per common share, compared with $8.3 million or 13 cents per basic and diluted loss per common share for the first quarter of last year. The net loss for the three months ended June 30, 2002, excluding the $24.2 million non-cash charge related to the equity loss is in our investment in Reliant Pharmaceutical, LLC, was $21 million or 33 cents per basic and diluted loss per common share. The increase in the net loss excluding our loss in Reliant was primarily a result of an increase in research and development and general and administrative expenses, as we continued to advance our proprietary product candidates and our collaborators product candidates through development and clinical trials and prepare for commercialization. This was coupled with a decrease in research and development revenues as our Risperdal Consta program evolved from a development-stage project into a commercial program.

Our cash position and total investment is approximately $119 million. Research and development revenue under collaborative arrangements was 10.3 million for the first three months ended June 30, 2002, compared with 15.5 million for the same period last year. This decrease in research and development funding arose from the receipt of a milestone payment in the prior period as well as decreased funding from J and J as Risperdal Consta evolves from a development-stage project into a commercial program. The decrease in research and development funding was partially offset by an increase in research and development funding earned under other collaborative agreements. Total operating expenses for the three months ended June 30, 2002, included $24.6 million in research and development expenses and $6 million in general and administrative expenses. This compares with $20.7 million in research and development expenses and $5.4 million in general and administrative expenses for the same period last year. The increase in research and development expenses for the three months ended June 30, 2002, as compared to the prior period was mainly the result of increases in headcount and external research expenses as we advanced our proprietary product candidates and our collaborators product candidates through development and clinical trials and prepare for commercialization. We are also continuing to expand our facilities in both Massachusetts and Ohio to prepare for these eventualities. The increase in general and administrative expenses of $600,000 for the three months ended June 30, 2002, as compared to the same period of the prior year was mainly the result of an increase in personnel as well as increased professional fees and consulting costs. We have not updated our guidance in terms of revenue or expenses since our conference call in June prior to the various regulatory outcomes with Risperdal Consta. To be clear however, that the way in the U.S. approval Risperdal Consta will lead to reduction and planned revenues and expenses for the upcoming fiscal year. We will provide updated guidance as soon as J and J determine their specific plan and expectation around U.S. launch. This plan drives their revenue expectations from Janssen-Cilag. We hope to be able to provide that as soon as we work to these regulatory issues with the FDA. With that I will turn the call over to Rich.

Thanks James. Good afternoon everybody and thanks to everyone for joining us at the end of the day for the call. In this brief section of the call, I am going to give you an overview of where we stand with respect to Risperdal Consta reliant to pipeline in the company in general. This won't take long, I'll do it quickly and then we will open the call for questions. It has of course been an interesting summer. Before getting to the specifics, I see the best way to describe Alkermes at this point is extremely determined. We have a superb group of people here at the company and they have performed excellently. We have a tremendous amount of pride in the company we built and the product candidates that we have developed, and the ones that we are currently developing. This pride that we have built over the last several years has been groomed in a fairly public fashion, and there are a lot of people here who are quite determined. First to reestablish the value of the company and then the continue on our plan to grow it into one of most successful examples of the commercial potential of leveraging advance drug-delivery technologies, so with that is a preamble on the Risperdal Consta; as most of you know Risperdal Consta is a long-acting formulation of Johnson and Johnson atypical antipsychotic drug Risperdal. In our formulation Risperdal Consta is intended to do improve compliance and reduce relapse among schizophrenic patients. For long-acting formulation is the first of its kind and is made possible by use of our Medisorb drug-delivery technology, which you know quite a bit about. Just after the close of the quarter, we announced that Johnson and Johnson received a non-approvable letter from the FDA related to the new drug application for Risperdal Consta. We and our partner were extremely surprised by this response as we said at the press release at the time though, we do have great confidence in relying on J and Js' ability and judgment and giving with regulatory authorities to clarify these issues in NDA for Risperdal Consta and to move forward with the FDA and the similar filings that are occurring simultaneously around the world. That confidence and happen to say is being worn out. Two weeks ago, we and J and J announced that we have received regulatory approval for Risperdal Consta in Germany. Last week, we announced regulatory approvals in United Kingdom. These two in particular are important regulatory bodies in important countries. We are extremely pleased that the drug is beginning to receive approvals in countries around the world, and then we expect this trend to continue. Along these lines, we now have approval in Mexico and we emerged in yesterday of approval in Austria as well. I think you can expect this lately in European countries to just continue to grow overtime. In these territories and the U.S. to remind you the compound will be manufactured by us as the Risperdal Consta was manufactured by us and marketed by Janssen in those countries. J and J have also made progress, I believe, with the U.S. FDA since our announcement in the beginning of July. The key issue, the FDA is related to results obtained in preclinical toxicologic studies conducted in labs. The receive of the non-approval letter triggered in a significant effort as you might imagine focused on resolving this issue. Project teams have been working to further understand the FDA's concerns and to develop an appropriate response. Within the past few weeks, J and J met with the FDA to get a clear understanding of the FDA's questions. Our expectation now is a comprehensive response would be developed and filed. We are, however, at this moment not at the point where we can give you form of guidance as with the timing of J and Js response to the FDA. Communication with respect to this time is J and Js decision and we will leave it to them. We obviously have a great interest in providing you with this information as soon as we are able to do so and we are in active discussion with J and J on that matter. As soon as we have more query on this issue, we will tell you. In addition to Risperdal Consta, of course we are developing a full pipeline of additional products at various stages of development. Two of them, I like to just focus on for now would be Nutropin Depot our extended-release formulation of human growth hormone, which is currently being marketed by Genentech and Vivitrex a proprietary extended-release formulation naltrexone, which is used for the treatment of alcohol and opium dependence and currently available in a daily oral dosage form. Our phase III study of Nutropin Depot in growth hormone deficient adults is underway and rolling on schedule and we expect to complete enrollment as planned around the end of the year. Our phase III study of Vivitrex in alcohol dependent patients is also underway. Enrollment of this study is also going extremely well and we expect to complete enrollment around the end of the year. Both of these phase III studies have six-month end points, so we expect data from these studies in the calendar year 2003.

Now I will move on to the [indiscernible] Reliant. As you can see from today's press release, we announced jointly with Reliant today that we initially terminated our merger agreement. We are terminating the merger because of general market conditions. As you know, the merger agreement was scheduled to expire at the end of August, we and Reliant agreed to accelerate the schedule by a mutual termination a few weeks in advance of that day. Primarily so that each company can resume business activity separate from the merger that were precluded by [dehiscence] of the merger agreement. As noted in the release, there will not be any payments triggered by this termination on either side. The termination of the merger with Reliant does not affect strategic alliance between the two companies that we announced in December of last year and to remind you that was really designed for both of us to be able to share capabilities, to develop, acquire and market novel pharmaceutical products and our equity ownership in the company remains unchanged. Starting with the foundation of the innovative products that are based on our partners and our proprietary products based on drug delivery technologies and as exemplified by those [indiscernible] just quickly covered in this call, our goal with Reliant and without Reliant is intended to continue to building this organization to the development of our product pipeline, to the development of our drug delivery technologies, and to building this manufacturing and marketing capability that we are beginning to grow within the company. So in many ways, the business plan at Alkermes is completely unchanged. We are exiting the month of August and this quarter with a lot of significant developments under our belt, but I think pretty fierce is our determination to keep going and build the companies that we expect to build and have always expected to build. So I will finish there to keep this brief and will open it up to questions, operator.

Thank you ladies and gentlemen. At this time if you do have a question you will need to press the 1 key on your touchtone phone. If your question has been answered or you wish to remove yourself from the question lineup, press the pound key. One moment for our first question; our first question is from [Ken Katsior], please proceed sir.

Yes, just a quick question, I understand you might not be able to comment on this, but it sounds like J and J likely has all the data that they need to respond to the FDA on hand and I don't know if you would comment on that and if you do know potentially if they have done a dual track by may be initiating further animal studies in case of a data that is necessary is not there?

[Indiscernible] is a good question, I can't answer it; I would ask you take it up with J and J and I mean it seriously because they might actually provide a response to that.

Okay, just try one other question on Risperdal Consta, in Europe, do you - gone with the same economics that you do in the US, is that a similar structure?

Yeah.

Thank you.

You are welcome.

Thank you, our next question is from [William Slattery], please proceed sir.

Thanks very much. Richard, two questions; the first is, although you may not be able to speak on J and J's behalf, in reference to either milestones or reimbursement for CapEx expenses related to manufacturing build out, can you describe what disruption if any or what milestone payments we should anticipate around payments from J and J for the manufacturing build out, the Risperdal Consta plan? And the second question, in terms of the UK and Germany pools, did they have privy to the FDA non-approvable letter in the issues included in that prior to their approval decision? And if not, has there been any feedback from that and if they have what was their response to the issues raised by the US non-approvable letter? Thanks very much.

I think I will answer the second one first. I think - changed it directly on the second one, but I believe that they sent that letter proactively to the major regulatory authorities around the world. So I believe that all of them were aware of that and so that was absolutely something that was known to them prior to their issuing their approvals. As you may know these two particular regulatories are, I think it will be fair to say that they don't consider themselves [subsidiary] into the FDA at all. They have very strict scientific regulatory standards and they view themselves as strong independent regulatory bodies. So, you know, I think those that two as I said in the earlier comment, I think those two particular countries are [meaningful] as our first [approvals] for Risperdal Consta. With respect to the first question, you asked really about the build out of the facility and [indiscernible] in the financial guarantees or [remuneration] that's associated with that. The first of all, I should say that the timing of the expansion of facilities in support of the expected demands of Risperdal Consta has continued [unabated], you know, on a time length that is something that is happening at full scale I don't in [Wheaton] or Ohio facility. Interestingly, with the approval in launch in the UK and Germany, it does indeed trigger a series of payments from Johnson and Johnson pursuing to our supply agreement. That will be elucidated in the Q that we just filed today. So, it actually it will be the minimum purchases in the supply agreement we do have a very very significant continuing stream of revenue coming from J and J pursuing to that supply agreement. James you have anything further to add to that.

No, I think that the launches were [indiscernible] payments and those revenues can aggregate up to a $150 million over the course of 10 years and that more than reimburses us still from what we invested in the plan.

Does that answer your questions now

It does in both points. Thanks very much.

Our next question is from Ms. McMann, please proceed, ma'am.

Yeah just a couple of questions. One thing that you mentioned was that the FDA had concerns of preclinical toxicological data and I was wondering if you can specify that's toxicology and not [indiscernible] genicities is that right?

No, I was making no distinction between general toxicology and [indiscernible].

Okay, so just a general preclinical.

Right.

Okay, my next question is just a clarification you mentioned that you would be completing phase III studies this year, did you mean this calendar year or this fiscal year?

I am sorry, I think I said that were completing [roman].

I am sorry, in roman.

Yeah, in this calendar year.

Okay.

I said around you know and this is an inexact [sign] but they are [indiscernible] well in their own pace for completing the roman around the end of the year.

Okay, and then my final question is, has the Germany and UK launch actually taken place for Risperdal Consta.

I understand from Rebecca, who has been talking to J and J routinely on this, Germany occurs tomorrow and UK,

Was Tuesday?

Was Tuesday.

Okay. Thanks very much.

Thank you. Our next question is from [Frank Bianco] from McMahon Securities. Please proceed sir.

You know I understand with Risperdal is still up in the yearend,

this question might be difficult to answer. But can you sort of give us an idea what your burn rate might be including CapEx for the year?

Yeah. We - and unfortunately, it is hard to answer obviously, because the revenues and expenses frankly associated with Risperdal are up in the yearend. The sooner we have more information, we will update history widely on that.

Okay. Can you do that just assuming that it is not approved?

Well. I think it depends on the orders that come out of J and J from the rest of the world obviously as well. So we were working through all those numbers right now and rather than give you bad guidance.

Okay.

We are working with J and J right now to make sure that what we give you will be close to what occurs.

Yeah, just this is [indiscernible] to give you little more on that, because you know you have to make an assumption about the US timing and because we are the commercial supplier, J and J made significant orders in advance, which will flow through the P and L. So until you can't just say it has not happened this year, therefore zero out the revenue for this year, it wouldn't have happened that way.

I got you and it's fair enough and can you remind us what the economics are both in Europe and for US for that matter?

Yeah. Well. We haven't disclosed in particular with any of our deals.

Okay.

We guide people the modelling, the royalty rate that we received from Johnson and our other partners, roughly 10 percent of net sales and that is the same in the US and rest of the world.

Okay. Great, thank you.

Thank you. Our next question is from Ms. [Gostean] from CIBC World Markets. Please proceed.

Yes. Is there anything with respect to inventory for Risperdal Consta that we should expect to see, my assumption I guess is that since there had been anticipated launch in the near time in the US, that some products were shipped to them?

Yeah. That's a good question, in fact, we don't carry the inventory on our books, generally it's going to be carried on Johnson's books.

Okay.

And the, you know, again the production schedule as to the US versus the rest of the world, you know, many ways from our prospective it's fungible, so.

Okay. Do you carry a receivable with that or?

We will, once the product is actually shipped.

Thanks.

You are welcome.

Thank you very much. At this time there are no further questions. Once again if you did have a question, the one key on your touch-tone phone will get into the line up. One moment, our next question is from [Cindy Glass] from [Sphinx]. Please proceed.

Hi. Good afternoon. I was wondering if you have got any information from J and J on European pricing, and how that corresponds to the pricing of oral Risperdal?

Cindy. It has not been publicly disclosed as of yet.

Thanks.

Okay. With that I think we will wrap it up. Thank you all very much.

Thanks everyone.