Theravance Biopharma Inc (TBPH) 2014 Q3 法說會逐字稿

Ladies and gentlemen, good afternoon. At this time, I'd like to welcome everyone to the Theravance Biopharma Conference Call. During the presentation, all participants will be in a listen-only mode.

A question-and-answer session will follow the Company's formal remarks.

(Operator Instructions).

I will repeat these instructions after management completes their prepared remarks. Today's conference call is being recorded.

And now, I would like to turn the call over to Renee Gala, Senior Vice President of Finance. Please go ahead.

Good afternoon, everyone. And thank you for joining our Third Quarter 2014 Financial Results Conference Call. Following our prepared remarks we will open up the call for questions. Speaking on the call today will be Rick Winningham, Chief Executive Officer; and Mathai Mammen, Senior Vice President of Research and Development.

A copy of the press release can be downloaded from our website or you can call Investor Relations at 650-808-4045 and we'll be happy to assist you.

We would like to remind you that this conference call contains forward-looking statements regarding future events and the future performance of Theravance Biopharma. Forward-looking statements include anticipated results and other statements regarding the Company's goals, expectations, strategies and belief.

These statements are based upon the information available to the Company today and Theravance Biopharma assumes no obligation to update these statements if circumstances change. Future events and actual results could differ materially from those projected in the Company's forward-looking statements.

Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater detail in the Company's Form 10-Q filed with the Securities and Exchange Commission.

And now, I would like to hand the call over to Rick Winningham. Rick?

Thanks, Renee. Good afternoon, everyone, and thank you for joining us. The third quarter was a period of significant progress for Theravance Biopharma. During which, we continued to focus our target market uptake for VIBATIV, our first commercialized product, and made progress with our lead development programs, our long-acting muscarinic antagonist TD-4208, and our peripherally-restricted opioid antagonist, Axelopran or TD-1211.

We plan to spend the next few minutes providing some color on these programs. We will also touch on some very exciting recent Phase 1 data that we announced earlier this week on TD-6450, our novel NS5A inhibitor to treat HCV.

We are planning a more complete review at our upcoming Investor and Analyst Day on Friday, December 12th, at the Millennium Broadway Hotel in New York and our meeting will begin that day at 9 o'clock in the morning. I hope you all have marked your calendars and are planning to join us for this event.

I'll start with VIBATIV. We reintroduced VIBATIV into the US market about one year ago with a highly focused strategy, as well as a phased commercial strategy, deploying approximately six reps in target territories.

We believe that VIBATIV has an important therapeutic value, commercial potential and strategic significance for our company and we're committed to its success. VIBATIV came from our laboratories. We invented it. We developed it. We've got it approved now with two major indications for difficult-to-treat Gram-positive infections.

We believe this medicine is now beginning to gain traction in our targeted markets. There is an increasing recognition within the global, medical, and scientific community and among public health and governmental bodies of the serious threat of bacterial resistance and the urgent need, societally, for new antibiotics solutions.

We think that VIBATIV has the profile of all the type of antibiotics that's needed today and in the future to address an increasingly challenging Gram-positive bacterial infection environment, particularly those that are difficult-to-treat.

VIBATIV's dual mechanism of action inhibits both bacterial cell wall synthesis as well as disrupts bacterial cell membrane function. Importantly, VIBATIV is bactericidal and can be dosed once a day. With total days of therapy for MRSA, infections in the United States estimated approximately 35 million in 2014. We think the opportunity for VIBATIV is very meaningful.

We are undertaking a number of initiatives designed to enhance healthcare practitioners' understanding of the therapeutic utility of VIBATIV and highlight the product as an important tool in the anti-infective treatment arsenal.

First let me discuss our Phase 3 bacteremia program. Bacteremia or bloodstream infections represent significant healthcare system challenge and it is associated with significant morbidity and mortality. When reviewing the bloodstream infection data from both our HABP/VABP as well as our complicated skin Phase 3 programs, we saw evidence that VIBATIV may offer an opportunity for patients with Gram-positive bacteremia.

In addition, other investigator-initiated studies reported successful treatment of Gram-positive bloodstream infections with VIBATIV. Given the challenge associated with treating Gram-positive bacteremia, we decided to pursue a Phase 3 clinical program in bacteremia.

Later this year we plan to initiative a registrational, multi-center, randomized, open-label study for the treatment of patients with Staph aureus bacteremia. The study is designed to evaluate VIBATIV and treating Staph aureus bacteremia as compared to standard therapy. Key secondary outcome measures of the study include an assessment of the duration of bacteremia post-randomization and the incidence of metastatic complications as compared to standard therapy.

If we're successful in this indication, VIBATIV would become the only branded antibiotic approved for these three major indications for difficult-to-treat Gram-positive infections.

Secondly, we intend to conduct an observational use registry study, called TOUR, designed to assess the manner in which VIBATIV is being used by healthcare practitioners to treat patients. By broadly collecting and examining data related to VIBATIV treatment patterns, clinical effectiveness and safety outcomes in the real world, we aim to create an expansive knowledge base to guide future development and optimal use of the drug. We are targeting enrolment of this registry's first patient in late 2014.

And finally, we're in the process of expanding our sales and marketing activities to improve or position an institution coverage in our targeted territories. Specifically, we are expanding our sales reps from 6 to 20 and we'll have one medical science liaison in the field for every two sales reps. This expansion is designed to enable us to reach more healthcare providers. Current prescribers have told us as they gain more experience with VIBATIV, they increased their use of drug and its approved indications. Our institutional reorder patterns in our targeted territories suggest the same dynamic.

As I mentioned, VIBATIV has an important strategic value to Theravance Biopharma. That's our first commercialized product and the cornerstone of our evolution into a fully integrated company, advancing products from the laboratory to the market. For any biopharma company, the business and cultural shift to a commercial stage business is a major transition and we believe our company is successfully making that transition.

Now let's turn to TD-4208. First, I'll talk about the market opportunity we see for TD-4208 and then I'll ask Mathai to add some additional comments on the program as well as discuss Axelopran and TD-6450 and Velusetrag.

The respiratory market is one that we know well and in which we have considerable expertise in both discovery and development. We believe TD-4208 can be a valuable addition to the COPD treatment regimen, and that represents a significant commercial opportunity for our company.

Here is how we do the market opportunity for TD-4208. Once daily long-acting muscarinic antagonists are currently the cornerstone of maintenance therapy for patients with COPD and are widely available for use, but only in handheld inhalers. Not all patients who have COPD prefer or are able to tolerate handheld inhalers.

The patient population that uses nebulized products for long-term maintenance therapy represents an underserved and accessible market segment. These patients are defined partly by their disease severity. They are further defined by their functional status including cognitive and dexterity issues, which can preclude being able to manage handheld bronchodilators. In addition, doctors report that they prefer to use nebulized therapy in select COPD patients to ensure they inhale their medication properly.

We believe the commercial opportunity for nebulized product that addresses the needs of these COPD patients is significant. This is a devastating disease affecting a growing number of people. More than 12.5 million patients in the United States alone have COPD and the American Lung Association notes that COPD is the third leading cause of death in the US.

Looking at the United States alone, our market data suggests that 9% or approximately 1 million treated COPD patients use a nebulized product on an ongoing basis for delivery of their regular maintenance therapy.

Muscarinic antagonists are the preferred mechanism for single-agent bronchodilator therapy in patients with COPD. In handheld products, the single most commonly prescribed maintenance therapy is a once-daily LAMA or tiotropium, which had sales of approximately $5 billion.

In the nebulizer segment, there is no once-daily or twice daily muscarinic antagonist therapy available. There's only one nebulized muscarinic antagonist available, ipratropium, which is taken every six hours. Today, there are only two nebulized beta-2 agonists available and these are taken every 12 hours. To-date, there have been no once-daily nebulized therapies approved and yet 9% of patients still prefer nebulizer maintenance therapy over handheld inhalers.

We believe there is a core US market opportunity for 4208 as the first nebulized long-acting muscarinic antagonist, providing convenience of once-daily dosing via any standard nebulizer. With 4208, we believe we can offer a therapeutic option that could enhance and enable treated COPD patients that require or prefer nebulized therapy to access the same gold-standard therapy as those COPD patients who use the handheld inhalers.

While initially an important market opportunity, 4208 monotherapy resides in the nebulized maintenance setting for the treatment of COPD, we believe that there are additional opportunities beyond this market. As we've discussed before, we can see a significant potential for 4208 as a foundation for combination products and delivery in metered dose inhaler and dry powder inhaler products.

And with that, I'll turn the call over to Mathai to expand on the 4208 clinical data. Mathai?

Thank you, Rick. Clearly one of the highlight of the third quarter was the reporting of encouraging Phase 2b data from our 4208 dose ranging trials, study 117. The study successfully differentiated between a 5th and sub effective doses and met the primary and secondary endpoints for doses of 88 micrograms and above.

Furthermore, 4208 showed us favorable tolerability profile over the entire range of dosing study. The study is important in forming the dose selection for Phase 3 registrational sets. In addition to this dose-ranging study, the FDA requires a second and equally important test to confirm the appropriateness of once-daily dosing. Many, in fact, most bronchodilator programs have failed to pass this test.

Today, I am pleased to report the positive top line results from this study, the once versus twice-daily or QD versus BID trial of 4208 study 116. The QD versus BID study was designed following input from the FDA and is required to test whether it's possible to achieve better efficacy with a lower total dose, given twice daily at a higher dose given once daily.

The study compared 175 micrograms once-daily against 44 micrograms twice daily in a three-period, seven-day placebo-controlled crossover study in 64 COPD patients. The study met its primary endpoint and demonstrated that the lower dose of 44 micrograms administered twice daily did not produce greater bronchodilation than the higher dose of 175 micrograms administered once daily.

For the primary endpoint of change from baseline in day 7 weighted mean 0-24 hour FEV1, 4208 produced differences from placebo of 113 ml and 10 5ml for 175 micrograms QD and 44 micrograms BID respectively and the P value is less than 0.001 for both active bar.

The frequency of adverse events was low and consistent across all three treatments including placebo. Shortness of breath was the most commonly reported event, with 3, 1 and 1 reports following placebo, 44 BID and 175 QD, respectively. There was one death in the study, which occurred during the washout period following completion of the 7-day 175 micrograms dosing period.

Autopsy findings reported severe left and right coronary artery occlusion and the cause of death was reported as coronary artery insufficiency due to atherosclerosis. Arteriosclerotic coronary artery disease usually builds up over many years. The event was assessed by the study investigator as unrelated to study medication.

Taking together results from these two Phase 2 studies, give us added confidence about 4208 size. We are now preparing for an end-of-Phase 2 meeting with FDA to discuss our pivotal Phase 3 registrational program.

Now, I'd like to spend a few moments talking about Axelopran or TD-1211, which is our once a day product acute opioid-induced constipation or OIC. These peripherally restricted mu opioid receptor antagonist or PUMA for short is in development to treat OIC and alleviate gastrointestinal side effects of opioid therapy without affecting analgesia.

We've generated positive topline results from the key study in our Phase 2b program, demonstrating Axelopran's potential as a treatment for chronic, non-cancer pain patients with OIC. Recent regulatory events have provided important clarity on the regulatory path for PUMA product, creating an opportunity for us to redefine our development strategy in market assessment.

First was the outcome in June 2014 of the FDA's Anesthetic and Analgesic Drug Product Advisory Committee, which voted that the agency should not require pre-marketing cardiovascular outcomes trials for PUMA product.

Second, two new products in this indication, Naloxegol and Methylnaltrexone were approved by the FDA in September to treat OIC without such pre-approval cardiovascular outcome [since].

In our view, these events have substantially derisked our OIC program. OIC is a serious medical condition that can significantly interfere with how patients control their pain management and can result in a decrease quality of life and increase in healthcare costs. Despite currently available treatments for OIC, this remains an underserved market.

Our market research estimates that approximately 10 million people in the US, use chronic opioids for pain management and more than two thirds of these suffer from OIC. We believe that Axelopran represent a meaningful commercial and competitive opportunity, targeted normalizing bowel function without impacting both -- impacting opioid and analgesia while improving a variety of GI symptoms associated with constipation.

Our data show that Axelopran is generally well-tolerated and has no effects at high doses in healthy subjects and no dose limiting toxicity. In our Phase 2 program, we demonstrated these three significant increases. In average, complete spontaneous bowel movements or CSBMs per week which is one of the most stringent measures of efficacy.

In addition, we saw a consistent durability effect through the efficacy analysis periods and no evidence of CNS penetration. These properties taken together provide us with confidence that we have a potential best-in-class product candidate relative to both approved product and those in development.

Adding value to this asset is the program we have underway to develop the fixed dose combination by co-formulating various opioids with Axelopran in order to simultaneously treat pain and the constipating effect associated with opioid therapy.

Our focus right now is on further refining our development strategy for Axelopran and to incorporate that assessment into our overall strategic and financial planning for 2015 and beyond. In addition to these two late stage priority programs, we have a rich pipeline of product opportunity that we're similarly evaluating relative to their clinical and regulatory strategies and market potential and the resources required to advance them.

6450 is our novel oral once daily NS5A inhibitor for which we reported exciting Phase 1 proof-of-concept results in genotype 1a patients earlier this week. On Monday, we reported positive results from the first three cohorts of this study, each of which enrolled eight genotype 1a patients, seven on active, one on placebo and tested once daily oral doses of 60, 120 and 240 milligram.

Patients were dosed for three days and followed for up to 28 days for viral load measurement. 6450 demonstrated dose-dependent antiviral activity with median maximal declines of HCV RNA of 3.87, 4.63 and 4.89 logs of viral load reduction for doses of 60, 120 and 240 milligrams respectively. All doses of 6450 were generally well tolerated after three doses and for the entire 28-day observation period. There were no serious adverse events and no patient discontinuations.

We are quite pleased with the results from the 6450 proof-of-concept study. We believe the rapid robust and sustained antiviral activity demonstrated by 6450 in genotype 1a HCV patients coupled with its long half-life and tolerability profile are consistent with our overarching objective of creating a best-in-class NS5A Inhibitor that could be a core component of a highly effective short course combination regimen.

Our next steps are to complete the phase 1b study and to complete our ongoing phase 2 enabling nonclinical safety sets. The last program I'd like to discuss is Velusetrag. We are excited about the potential of the Velusetrag, our oral, investigational medicine for gastrointestinal motility disorders.

Velusetrag is a highly selective agonist with high intrinsic activity at the human 5-HT4 receptor. Velusetrag is being developed in collaboration with Alfa Wassermann in a two-part Phase 2 program to test its efficacy, safety and tolerability to treat patients with gastroparesis.

Gastroparesis as a reminder is a debilitating condition characterized by abnormally slow emptying of the stomach, leading to numerous symptoms including bloating, nausea, vomiting and pain. Positive topline results from the initial Phase 2 proof-of-concept study under this partnership, which evaluated gastric emptying, safety and tolerability of multiple dosing of Velusetrag, were announced in April of 2014.

Based on these results, Alfa Wassermann and we together have agreed to advance Velusetrag into a Phase 2b study later this year. The bulk of the Phase 2 study will be funded by Alfa Wassermann, and we are looking forward to its start.

Now I'd like to ask Renee to review the Company's financial results for the third quarter of 2014, Renee.

Thank you, Mathai. Today I will discuss the results for the quarter. Prior to reviewing the financial results, I'd like to remind you that the financial statements at Theravance Biopharma for period prior to our spin-off from Theravance on June 2nd were derived from Theravance's historical consolidated financial statement.

As such, those financial results may not necessarily reflect the financial profile of Theravance Biopharma in the future or what they would have been, had Theravance Biopharma been an independent, publicly traded company during those periods.

For the quarter ended September 30, 2014, Theravance Biopharma had a net loss of $54.5 million, or a $1.72 per share. Revenue totaled $6.3 million during the third quarter of 2014, driven by the recognition of the previously deferred revenue from our collaboration with the Clinigen Group of $5 million and from product sales of VIBATIV of $1.3 million.

R&D expenses for the third quarter of 2014 were $38.3 million compared to $32.3 million for the same period last year, an increase of $6 million. This increase was primarily due to increases in employee-related cost of $3.3 million and facilities and general overhead costs of $1.9 million.

Employee-related cost increased primarily due to incentive awards associated with the spin-off. Facilities and general overhead costs were higher due to allocation of a portion of these costs to Theravance, a Royalty Management Company, in the third quarter of 2013, prior to the spin-off. There were no such allocations in the third quarter of 2014.

Selling, general and administrative costs for the quarter were $17.7 million, compared with $8.8 million for the same period in 2013, an increase of $8.9 million. The increase was primarily due to costs associated with VIBATIV commercialization and incremental share-based compensation expense, including incentive awards associated with the spin-off.

Excluding stock-based compensation, total non-GAAP operating expenses for the third quarter of 2014 were $46.7 million. Cash, cash equivalents and marketable securities totaled $350.4 million as of September 30, 2014.

Now I'd like to turn the call back over to Rick for final comments, Rick.

Thanks, Renee. So in summary, the third quarter of 2014 was a period of significant progress with Theravance Biopharma. And it was our first -- fourth quarter as an independent company. The progress is reflected in both VIBATIV as well as our other lead development programs.

In addition to our considerable pipeline assets, all of which were discovered internally we believe our strong cash position, our tax-advantaged corporate structure and high quality management team provide a strong foundation for building a leading biopharmaceutical company and bringing important new medicines to patients and delivering value to our shareholders.

We look forward to a more in-depth discussion of our programs and our strategy at our upcoming Investor and Analyst Day on December the 12th and that we hope that you will join us for that event.

I'd now like to ask the operator to open the call for questions.

Thank you, sir. (Operator Instructions) And we'll pause for a moment to assemble our roster.

We'll have our first question from Brian Skorney with Robert W. Baird. Your line is now open.

Hi. Good afternoon. This is Morgan on for Brian. I just had a quick question regarding the Phase 3 for 4208. Could you kind of walk us through, what you're thinking about the design and just give us little more color on that? Thanks.

Yeah. I think about study 116, the QD BID study--

On Phase 3.

The Phase 3 study. So we are right now looking to talk to FDA, probably the questions that we want clarity on is the size of the safety database and selective doses. Other than that it's a fairly standard, two efficacy studies and safety studies. And we're hoping to gain clarity by the end of the year on these questions such as that.

Yes. That's helpful. Thanks.

Thank you. And our next question comes from the line of Tazeen Ahmad from Bank of America. Your line is now open.

Hi. Thanks for taking my questions. I guess for OIC, as you look ahead to the market opportunity, if you're not the only drug that gets approved for this indication, what would you describe as your biggest competitive advantage?

Well, that's a great question, Tazeen, because I think we've got Movantik that's in front of us that's likely to launch, according to AstraZeneca, sometime in the middle of next year. I think that if you look at the data that's been presented at medical meetings with TD-1211, you see that we have a relatively high proportion of CSBM responders, which I don't believe was replicated by other clinical studies by other companies.

As we've stated before, there is a very high percentage of our patients when I ask in exiting the Phase 2 study of -- that they would in fact stay on therapy or that they would take the therapy if prescribed by their physician, and I think that's really points to a key attribute of 1211. And the way that we've been able to design the drug is that it is generally well-tolerated and while it has a few adverse events of very short-term diarrhea, overall, the drug is well tolerated by patients.

In the Phase 3 program, we would intend to develop a patient reported outcome set of data that we believe would capitalize on what we've found in the Phase 2 studies to-dat. Mathai?

Yes. So there are two approved products, Tazeen. There is methylnaltrexone and there is naloxegol. Methylnaltrexone as you know is an injected product. It's a very different kind of product than the kind that we're producing. Our intent is how they feel that one can take that effectively normalizes bowel function. Methylnaltrexone, we see as a product that's effectively a laxative.

With regard to the other programs and all the oral programs, including naloxegol, I think, as Rick said, one looks carefully at the data -- the effectiveness data that we have published. We're very pleased with the overall level of efficacy and the responder rate.

And additionally, one other point is where we've run studies even Phase 1 at relatively high doses looking for the ability of Axelopran to penetrate the CNS and don't see that.

In addition, if you look at all our data across the four Phase 2 studies we've done, there has been no evidence of a central penetration event triggering opioid withdrawal -- central opioid withdrawal. And I think that, if one starts to look at all the data from all the programs, you'll see that's also a point of differentiation.

I guess in keeping up with what you just said, would you have any interest in doing a head-to-head versus naloxegol?

I think, I doubt that would show up in the registrational program. I think we'd like to take sort of one step at a time. We'll then first get reach agreement with FDA on the registrational program and the PRO. And I think between those two datasets, we should have adequate data to differentiate our compound going forward, because there is really a lack of patient reported outcome data to-date in labels that exists.

And again, I think if you look at the data of our patients coming out of our Phase 2b program that would point you in the direction where they found the therapy that they were on quite beneficial.

I'll just add one other point to this, which Mathai alluded to in his remarks, is that we believe there's an opportunity for single agent 1211. We also believe that there's an opportunity for 1211 co-formulated with opiates.

We currently have a Phase 1 study ongoing, that is 1211 combined with a long-acting opiate. We expect to have the data probably early in the first quarter of next year. And if that data is positive than I think that points us to a program over the longer term that's not only focused on developing a medicine for opioid-induced constipation, but focused on developing overall a better pain medicine.

Okay. I guess, switching to VIBATIV, you're making a pretty meaningful increase in your sales force? Can you -- you gave us a little bit of detail on that but can you talk to what exactly are you increasing? Going from 6 to 20, are you obviously expanding your geographic reach or are you trying to take areas that you think you've done well in and just penetrate them further?

Well, I would say a little bit of both. The primary objective is expanding the geographic reach into more territories. As we've begin to rollout the strategy for VIBATIV and we see the type of representatives that are effective with the product in the type of institutions, that's sort of enabled us to develop a template for further expansion into further territories and where we think that the next increment of 14 reps that we add, we will be able to have them on the ground and have them be effective in relatively short order.

The other, of course, important and very meaningful part of the strategy for us is a ratio of medical liaisons to sales reps that's a little bit higher than one might ordinarily find. And I think the medical support that we're -- that we will be providing to physicians as exemplified by the registry is going to be an important component of the VIBATIV strategy going forward.

Are you getting any use of VIBATIV right now? Are doctors trying to use it off label potentially for bacteremia?

Well, we don't track that. I mean, we promote for complicated skin in hospital-acquired pneumonia, ventilator-associated pneumonia for MRSA when other agents are not suitable. There have been publications by Yale -- a group at Yale and by a group at MD Anderson of the use of VIBATIV in bloodstream infections -- problematic bloodstream infections, where the MICs to vancomycin or declomycin are high.

And that data has been presented both at ICAAC and IDSA over the last year or so. But that's really where we're aware of the use in bloodstream infections is really coming from these research projects by investigators at these two sites.

Okay. And I guess the last question, either Rick or Mathai. Can you give us an update on 9855? Where it stands on fibromyalgia?

So as we have reported before, we've completed the study and we have positive data from fibromyalgia on two endpoints. One is on release of pain and the other, very interesting and important one, is on addressing a fatigue symptom.

But right now what we're doing is we're looking to -- as we've said before, we're looking to potentially partner that program and I think that the original intent was to go after a broad pain indication, and that's a fairly substantial Phase 3 program. We don't know that fibromyalgia on its own is satisfactory. Our vision forward is broader than that.

Okay. So, I guess, would you move forward in any trials without securing a partner?

Right now we're going to -- we have completed the trial and we're going to probably look for a potential interest in this program.

Okay. All right, thanks.

Thank you. It appears we have no further questions on the phone. I'd now like to turn the conference back to Mr. Winningham. Please go ahead, sir.

Thank you very much, Operator. And I'd like to thank everyone for participating, for their questions, and have a great day. We look forward to seeing you hopefully on December, the 12th, in New York. Thank you.

Thanks.

This does conclude today's conference call. We thank you for your participation. You may now all disconnect.