Theravance Biopharma Inc (TBPH) 2015 Q2 法說會逐字稿

Ladies and gentlemen, good afternoon.

At this time, I would 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).

Today's conference call is being recorded.

And now, I would like to turn the call over to Renee Gala, Senior Vice President and Chief Financial Officer.

Please go ahead.

Good afternoon, everyone and thank you for joining our second quarter 2015 financial results conference call and webcast.

Following our prepared remarks, we will open the call for questions.

Joining me on the call today are Rick Winningham, Chief Executive Officer and Dr. Mathai Mammen, Senior Vice President of Research and Development.

A copy of the press release can be downloaded from our Web site or you can call Investor Relations at 650-808-4045 and we will 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 beliefs.

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 and other filings 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.

In the second quarter of 2015 and year-to-date we have focused on executing our strategies to advance 4208 to a registrational Phase 3 program positioned by VIBATIV as an important treatment for patients with life threatening infections and advance for two lead research stage programs towards the clinic.

We're pleased with the progress we have achieved with our programs to-date, and believe we have multiple opportunities to generate value across the entire portfolio.

While we remain encouraged by the quarter-over-quarter gain in VIBATIV U.S. net sales between the first quarter and the second quarter, we're facing some issues that are slowing down our projected U.S. sales ramp in the second half for the year.

These issues are driving our decision to reduce our full year VIBATIV net sales guidance for the product in the U.S. as we announced in our press release today.

I'll start with what we believe is working well in VIBATIV commercial strategy both in the U.S. and globally and then discuss the U.S. issue specifically.

Total revenue related to VIBATIV in the second quarter, revenues were $7.1 million.

Our revenues comprised of net sales of VIBATIV with $2.1 million which was an increase of 66% over the prior quarter and revenue from VIBATIV collaborations are $5 million.

Our strategy to leverage regional partners outside the US to expand our commercial reach and build VIBATIV into a global (inaudible) brand is progressing well.

In May, we established the development and commercialization agreement with SciClone Pharmaceuticals for China and adjacent territories.

China is the strategic market for VIBATIV.

In China we and our partner SciClone intend to first pursue development and commercialization of VIBATIV in hospital acquired bacterial pneumonia and ventilator associated pneumonia.

Additional indications may include complicated skin and skin structure infections and potentially bacteremia.

More recently we achieved two important ex-U.

S. approvals.

In Russia VIBATIV was approved for the treatment of complicated skin and skin structure infections as well as nosocomial pneumonia caused by gram positive bacteria including MRSA.

Our partner R-Pharm will market and sell VIBATIV, in Russia, and we expect it to become commercially available there in the fourth quarter of this year.

Also in Canada VIBATIV which was already approved for the skin indication is now approved for the treatment of HAP/VAP.

PENDOPHARM will market VIBATIV in Canada and expects to launch the product early next year.

Securing these approvals was another important milestone for our company and for VIBATIV.

Our longer term initiatives designed to generate additional efficacy and utilization data in patients are also progressing.

These include our bacteremia registrational Phase 3 trial and our 1000 patient TOUR registry, both of which are enrolling patients.

The expansion of our U.S. field force to a total 50 representatives is expected to be complete by late third quarter.

We have a strong ratio of medical liaisons to sales reps; and the medical liaisons continue to play a key educational role with physicians relative to the scientific and medical rationale for VIBATIV.

We are encouraged by the quarter-over-quarter gain in VIBATIV sales volumes as well as the continued growth in new accounts and formulary wins.

Formulary placement as many of you know is an important metric for an in-hospital branded antibiotic such as VIBATIV.

We have obtained formulary acceptance at 79 institutions to-date and at over 150 institutions cumulatively.

Now I'll turn to the recent developments that are impacting our expected US sales ramp in the second half of this year.

While we saw meaningful volume growth from the first to the second quarter, a portion of that volume is coming from institutions purchasing through the government program in which VIBATIV pricing is quite low.

This volume in this segment of our business is causing higher than expected gross to net sales ratio due to the federally mandated pricing in public health service hospitals.

To counteract this challenge we're focusing our sales efforts on higher value institutions and customers where we can achieve more attractive pricing.

In addition while our expansion of our sales force is proceeding well, we've implemented certain organizational changes and a restructuring of the sales territories in order to accommodate the expansion.

We are confident these changes will contribution to the longer term success of the product in the U.S., but there has been a near term impact on the existing field sales force and we believe this caused July volumes to be lower than what we were expecting.

We're addressing this issue through enhanced field sales management training and sales incentives.

Importantly by timing our expansion in the manner in which we did, we benefitted from the industry consolidation and the anti-infective sector and have been hire very experienced antibiotic sales reps who believe in the potential of VIBATIV and who are eager to support the brand.

With these challenges in mind we have determined that it is prudent to reduce our full year U.S. net sales target for VIBATIV and Renee will discuss this in more detail in a few minutes.

We remain confident in on our strategy to establish VIBATIV as a global brand and realize its commercial potential.

VIBATIV is the foundation of acute care commercial infrastructure which we intend to leverage to support future products such as 4208 which is progressing through our pipeline.

As a reminder for 4208, approximately 800,000 hospital admissions occur because of a sudden worsening of COPD and of those 800,000 hospital admissions annually about half of those patients are discharged on nebulized therapy.

In summary, we are committed to the VIBATIV success into the development of a high quality acute care focus, commercial and medical infrastructure to support our pipeline and work effectively with our current and future partners.

Now I will turn the call over to Mathai to discuss progress in our development and research programs.

Thanks, Rick.

Good afternoon.

I will begin with our main developments outside of VIBATIV; first, TD-4208 where phase 3 initiation; second, Velusetrag enrolling in a phase 2b study; and third TD-8954 in phase 2 development and a subject of discussion with regulators.

First 4208, 4208 is an investigational once daily long-acting muscarinic antagonist or LAMA for patients with COPD.

What's most valuable and exciting about 4208 is its potential to fill in important therapeutic needs for patients with COPD who want or need nebulized therapy.

4208 has the potential to become the first once daily nebulized bronchodilator for the treatment of COPD and to become the standard of care in the nebulized bronchodilator therapy category.

We and our partner Mylan view this as a compelling market opportunity.

We are on track to initiate the registrational phase 3 program in the second half of this year.

Our plan is to conduct two replicate three month efficacy studies which we anticipate will read out in 2016 and a single 12 months safety study which we anticipate will readout in 2017.

In total, we expect to randomize approximately 2,300 patients in the phase 3 program.

As a reminder we are conducing and our partner Mylan is fully funding the phase 3 program.

We are eligible to receive potential developments and commercialization milestone payments totaling $220 million.

Next, let me comment briefly on our two 5HT4 receptor agonist development programs for gastrointestinal disorders.

First we have Velusetrag an hourly does 5HT4 receptor agonist partnered with Alfa Wassermann in certain markets outside the U.S. The phase 2b study of Velusetrag in patients with gastroparesis is progressing and we look forward to the results of that study in 2016.

Alfa Wassermann is funding the majority of this phase 2b study.

Second we have TD-8954 a parentally administered 5HT4 receptor agonist.

Lastly, we announced that we received Fast Track designation for TD-8954 for short-term use with enteral feeding to achieve early nutritional adequacy in critically ill hospitalized patients at high risk of inadequate nutrition.

TD-8954 is being evaluated for the potential treatment of acute gastrointestinal motility disorders, including enteral feeding intolerance or EFI.

Importantly there are no FDA approved therapeutics for EFI leaving approximately the 1 million Americans who suffer from the disorder without adequate treatment options.

Of note there is growing evidence that to support the early nutrition is important.

It can reduce complication rates, length of stay in ICUs, hospital readmission rates, overall cost of care in critically ill patients and mortality.

We continue to assess accelerated development pathways for this program through conversations with FDA as well as conversations with potential development and commercialization partners.

Now I will provide an update on our two lead research stage programs.

Our neprilysin or NEP inhibitor program for cardiovascular and renal diseases and our program in ulcerative colitis.

Both of these programs are progressing towards phase 1 studies by the end of this year or early next year.

Let me begin with our NEP inhibitor program.

We are excited to have multiple NEP inhibitor development candidates moving forward through an IND enabling GLP toxicology studies.

Just last month, Novartis's Entresto a fixed dose combination of the ARB valsartan and NEP inhibitor sacubitril is approved by FDA based on very compelling clinical data.

Entresto reduces overall mortality by more than 20% that was the standard of care.

This [RNE] combination represents a paradigm shift in the treatment CHF and potentially new standard of care.

We believe that Entresto represents just the beginning of NEP inhibitor class's therapeutic potential.

We believe that our NEP inhibitor program can be a versatile foundation or platform across the wide spectrum of treatments for cardiovascular and renal diseases.

Our goal is to develop a best-in-class NEP inhibitor with several features that are all importance and differentiated from Entresto.

Our focus is to create non renally cleared compounds that will be dose one thoroughly alone or in combination with other medicines and we are pursuing both oral and intravenous doses.

If we are successful, our NEP inhibitors will become a key component of a suite of products that are both best-in-class and first-in-class opportunities for patient suffering from acute and chronic heart failure, chronic kidney disease including diabetics nephropathy and treatment resistance hypertension.

Non-renal clearance particularly important in developing NEP inhibitor based products from patients with significant renal dysfunction as exposure and corresponding efficacy and safety can fluctuate otherwise.

A large portion of patients with heart failure and chronic kidney disease do have poor renal function.

Our NEP inhibitor drug candidates are being specifically designed to have low-renal clearance, which we have validated in pre-clinical study and we expect this feature can be validate clinically in the phase 1 study.

Our NEP inhibitor candidates are being designed to support one daily administration and to have flexibility of being combined with other ARBs and at ratios other than one-to-one.

Our NEP inhibitor to therefore be combined with best-in-class one fairly dose ARBs and be administrated independently or in combination with other mechanisms such as PD-5, PD-9A, renin inhibitor and soluble guanylate cyclase activators.

In short, we believe that we have an opportunity to create multiple products targeting a broad population of patient in very large commercial markets across the range of cardiovascular and renal diseases.

The potential opportunities include the following.

The best-in-class opportunity for treating chronic heart failure and combined with a best in class ARB.

The first-in-class opportunity is in IV delivered immunotherapy.

A first-in-class opportunity for treating chronic kidney disease and combined with the best-in-class ARB and the first-in-class opportunity when combined with the best-in-class ARB in treatment resistant hypotension.

Furthermore, there may be additional product opportunities when our NEP inhibitor used and fixed those combinations with drugs or other mechanisms.

We're making significant progress in advancing our development candidates through IND-enabling GLP toxicology studies and our target is to advance the most attractive compound or compounds in the Phase 1 studies either late this year or early next year.

Phase 1 in this particular program is especially valuable as we can learn about the two key features critical to our target profile.

First, we can determine the extent of renal care.

Second, we can use biomarker evaluation to construct PK-PD relationships to project dose for Phase 2 and 3 trials leveraging data from the Entresto program.

Given the market potential of the indications for targeting and the significant level of interest in this class within the pharmaceutical industry, we believe that our NEP inhibitor program is a highly valuable asset.

Importantly, we are not aware of any other active NEP inhibitor program with non-renal clear NEP inhibitors at this stage of development.

We are in active discussions with a number of potential collaborators and their views of our programs therapeutic important and commercial potential match our own.

Second, let me describe briefly where we are with our ulcerative colitis program.

We introduced this program as an early research program in December of last year.

We have made substantial progress over the last six months with our GI inflammation program and our now in IND enabling GLP toxicology studies with our lead development candidates.

If the data are supportive we plan to enter phase 1 late this year or early next year.

When dosed orally in pre-clinical model, this compound is highly active with the wall for the GI tract, but does not appear at pharmacologically active levels in the systemic circulation.

This compound is supposing modulator the GI immune system.

If such a profile is reproduced clinically, this compounds has the ability to offer efficacy without systemic safety liability in the treatment of ulcerative colitis and potentially other gastro-intestinal inflammatory conditions.

As Rick said, we believe that we have many near-term opportunities for value creation in our development and research portfolios and are looking forward to a productive second half of the year.

Now, I'd like to turn the call over to Renee who will provide a financial update.

Thank you, Mathai.

Prior to reviewing the financial results, I'd like to remind you that the financial statements of Theravance Biopharma for periods prior to our spinoff in June, 2014 was derived from the historical consolidated financial statements of Theravance Inc.

And therefore may not necessarily reflect what the financial profile of Theravance Biopharma would have been.

Had it been an independent publicly traded company during this period.

Now turning to the financials, revenue for the second quarter of 2015 totaled $7.1 million consisting of $5 million in VIBATIV related collaboration revenues and $2.1 million in net product sales of VIBATIV in the US.

The collaboration revenue included a $3 million upfront payment from Sciclone Pharmaceuticals, resulting from a development and commercialization agreement for VIBATIV in China and a $2 million milestone payment from R-PHARM related to marketing approval of VIBATIV in Russia.

Our net product sales of VIBATIV of 2.1 million reflect an increase of 66% over the first quarter of 2015 and our cost of goods sold was $0.5 million in the second quarter.

Research and development expenses for the second quarter were $30.4 million compared with $46.3 million for the same period in 2014.

This equates to a year over year decrease of $15.9 million primarily due to lower costs associated with long term retention and incentive awards granted in 2011, and due to the reimbursement of costs and our TD 4208 program as a result of the Mylan collaboration.

Share based compensation accounted for $6.8 million of the $30.4 million in R&D expense for the quarter.

Selling, general and administrative expenses for the second quarter were $21.5 million compared with $13.1 million for the same period in 2014.

The increase was primarily due to costs associated with VIBATIV commercialization and share based compensation.

Of the $21.5 million in SG&A expense, share based compensation was $7.8 million.

Cash, cash equivalents and marketable securities excluding restricted cash totaled $228.8 million as of June 30.

This quarter in cash balance does not include $25.5 million in receivables from collaboration partners primarily comprised of reimbursements due from Mylan related to the R&D expense incurred during the second quarter.

In addition to our strong financial position and the internal pipeline assets we're providing updates on today, we'd like to remind of the valuable financial assets we hold related to the respiratory programs under development by GSK and Theravance Inc.

We are entitled to receive an 85% economic interest in future royalty payments on worldwide net sales of the close triples that may be made by GSK pursuant to its agreements with Theravance Inc.

The close triple combines the three active ingredients of both ANORO and BREO or triple therapy in a single delivery device.

GSK is conducting 2 Phase III studies of the close triple which will enroll approximately 11,800 patients and are estimated to be complete in 2016 and 2017.

As a reminder, all of our financial interests in the GSK development assets as well as our IP and our pipeline are held by entities in low tax jurisdictions which should result in a favorable effective tax rate on future potential cash flows resulting from these important assets.

Now turning to our financial guidance and as Rick noted, there are a few developments that are impacting our expected U.S. sales ramp for VIBATIV in the second half of the year.

We are aggressively addressing these issues.

In the meantime, we believe that the prudent course is to reduce our full year's U.S. net sales target for VIBATIV and we are providing updated guidance that includes the impact of all VIBATIV-related revenues worldwide.

2015 total revenue related to VIBATIV is expected to be in the range of 15 to 18 million, with the majority of the revenue coming from net product sales in the U.S. which are now expected to be in the range of $9 million to $12 million.

We believe that reporting on VIBATIV revenues including U.S. net sales, revenues from ex-U.

S. sales and sales on milestones generated from our ex-US partnership more accurately reflects the overall value that VIBATIV contributes to our performance.

Our non-GAAP operating loss guidance for the full year of 2015 remains unchanged at a $120 million to $130 million.

Non-GAAP operating loss guidance includes all revenues, and cost and expenses from operation excluding share based compensation.

This does not include the impact of business development transactions that may be executed in the second half of 2015.

Now I'll turn the call back over to Rick.

Thanks, Renee.

In summary we have a pipeline of high-value assets at various stages and commercialization and development.

We remain confident in our strategy to establish VIBATIV as an important antibiotic in the treatment of serious infections globally, and we are committed to see it realize its commercial potential.

TD-4208 is progressing towards our registrational Phase 3 program in COPD.

We have promising new differentiated therapeutics on major disease areas emerging from our research platform as Mathai delineated.

We also have a number of programs in mid stage development that we consider to be partnerable assets.

These include Velusetrag in the U.S., TD-8954, TD-6450 our HCV program in Axelopran and as well as the fix dose combination of Axelopran/Opioid, and TD-9855.

We are having productive discussions with potential partners with many of these programs and look forward to making additional progress to best position these assets for clinical and potentially commercial success.

We have an exciting lineup of value generating near and mid-term milestones towards which we're working including major data readouts.

We expect four data readouts in 2016 including the Velusetrag Phase 2b study, two TD 4208 efficacy studies and the closed triple lung function study.

Plus three additional data readouts in 2017 including the telavancin Phase 3 bacteremia study, the closed triple exacerbation study, and the TD-4208 long term safety study.

In total six phase 3 studies, five of which were funded by partners and one Phase 2b study which is also funded largely by a partner.

And we are excited to advance our early stage product candidates in targeting cardio vascular and renal disease, as well as ulcerative colitis with the goal of advancing both programs to phase-1 studies in late 2015 or early 2016.

As Mathai mentioned we're in active discussions with a number potential partners for neprilysin inhibitor program.

And finally with our strong financial position and efficient corporate structure, we believe that we are well positioned for future value creation.

And now I'd like to turn the call over to the operator for questions.

Okay thank you sir.

(Operator Instructions).

It appears we have no questions in the queue.

I'd like to turn it over to Mr. Winningham.

Thank you very much operator and I'd like to thank everyone for participating in our call today and have a great day.

This concludes today's conference call.

We thank you for your participation.

You may now disconnect.