Theravance Biopharma Inc (TBPH) 2015 Q3 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 third 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 as 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.

Thanks, Renee. Good afternoon everyone and thank you for joining us. We continue to make important progress advancing key programs in our pipeline and executing our commercial strategy for VIBATIV. We filed two INDs for novel product candidates both of which are advancing to Phase I studies late in 2015 or early 2016. We initiated all three studies in the Phase III program for Revefenacin, previously known as TD-4208, in COPD.

We completed the hiring and training of 30 additional VIBATIV sales representatives and medical science liaisons, all of whom were deployed in the field by the beginning of the fourth quarter. With six Phase III studies expected to read out in 2016 and 2017, multiple Phase II programs advancing, high value product candidates progressing into the clinic, a highly productive research organization and a strong financial position, the company is well positioned for both near- and long-term growth.

Over the next few minutes, I will provide additional color VIBATIV and Revefenacin and then ask Mathai to the same with our novel product candidates that are advancing into Phase I studies. VIBATIV leads our pipeline as the foundation of our acute care commercial strategy in the U.S. We believe that our acute care strategic focus is an important component of value of the company as it allows us to target large and addressable patient populations and indications where our products can be therapeutically differentiated and where the commercial potential is high.

Looking across our pipeline, many of our products are designed to treat patients with diseases that present in the hospital setting. By establishing a commercial presence in and around acute care centers we have an opportunity to capture a significant volume of patients at pivotal times starting in the hospital and expanding into the outpatient treatments setting. We believe this represents a significant growth opportunity for our company.

In support of this strategy we recently completed the hiring and training of 30 additional sales reps and our expanded sales forces was fully deployed by the beginning of the fourth quarter. Total VIBATIV revenues for the third quarter were $2.7 million consisting of revenue from collaborative arrangements of $0.4 million and net products way also $2.3 million representing about a 9% increase over the prior quarter.

Additionally, formulary wins, sales in new accounts, new contracts with outpatient centers and unit volume growth continue to trend favorably. Renee will provide additional color on these metrics in her comments. In addition to solidifying our commercial infrastructure, we are working on label expansion strategies for VIBATIV in an effort to optimize the products commercial potential.

Our Phase III registrational trial in Bacteremia is continuing to enroll patients, we recently announced that the FDA accepted for review our sNDA to expand the current label for VIBATIV to include treatment of cases of concurrent Bacteremia in complicated skin and skin structure infections or hospital acquired pneumonia.

The sNDA submission was based on data from our previously conducted pivotal trials of VIBATIV in its two approved indications. The trials were large multicenter multinational double blind prospectively designed and randomized Phase II clinical studies, enrolling and treating approximately 3,300 adult patients, including a portion of patients with concurrent Bacteremia.

Importantly, these studies involve two of the largest cohorts of patients ever studied in these diseases and included one of the largest cohorts of patients with MRSA infections studied to-date. The FDA is expected to complete its review of our concurrent Bacteremia sNDA in the second quarter of 2016.

In summary, we're making progress and implementing our commercial strategy for VIBATIV and building our acute care commercial infrastructure with our expanded sales force now active in the field selling VIBATIV, we believe we can continue to make progress towards realizing the products commercial potential as an important treatment for the patients with life threatening gram positive infections.

Now turning to Revefenacin or TD-4208. As we announced in September, with our partner Mylan, we have initiated the Phase III program for Revefenacin our investigational Long-Acting Muscarinic Antagonist or LAMA for the treatment of COPD. The Phase III program includes two replicate three month efficacy studies, which we anticipate will read out in 2016 and a single 12 month safety study which we anticipate will read out in 2017.

In total we expect to randomize approximately 2,300 patients in the Phase III program. As a reminder, we are conducting, and Mylan is fully funding, the Phase III program. Additionally, we are eligible to receive potential development and commercialization milestone payments totaling $220 million. Revefenacin has the potential to become the first once-daily nebulized bronchodilator for the treatment of COPD and to become a standard of care in the nebulized bronchodilator segment.

We believe that the combined markets for nebulized LAMA's, which include both inpatient and outpatient settings, in which patients are retreated with single agents and single agents plus long-acting beta agonists and inhaled corticosteroids are significant. There are over 100 million patient treatment days in the nebulized COPD product segment.

Approximately 9% of COPD patients in the U.S. currently use nebulizers for ongoing maintenance therapy, and a total of 41% of U.S. COPD patients use nebulizers for bronchodilator therapy at some time during their course of their disease. Revefenacin aligns well with our acute care commercial strategy, our acute care of sales reps are calling on pulmonologists in the hospital given the use of VIBATIV in HABP/VABP.

In COPD, there is a high rate of hospital admissions for worsening of COPD conditions and nearly half of these patients are discharged on nebulized therapy. The start of the Phase III program was a major milestone for our company and we're excited to see this program advance toward the market.

We're equally excited about our research group's productivity. In the last month, we filed two INDs for exciting novel product candidates from two separate research programs that address large and underserved markets. TD-0714 is the first in our series of Neprilysin inhibitor development candidates. A Neprilysin inhibitor can be used to treat a range of major cardiovascular and renal diseases including acute and chronic heart failure, resistant hypertension, and chronic kidney disease. These indications represent large market opportunities.

In the U.S. alone there are approximately 1 million hospitalizations annually for acute heart failure, there were roughly 6 million patients diagnosed with chronic heart failure. The prevalence of resistant hypertension and chronic kidney disease are 6 million and 26 million Americans respectively.

Turning to our second IND candidate, TD-1473 is a pan-Janus kinase, or JAK inhibitor development candidate, specifically designed for targeted delivery to the gastrointestinal tract intended to treat ulcerative colitis, which affects roughly 700,000 patients in the U.S. These two recent INDs put us on a trajectory to initiate two Phase I clinical studies this year or early next year, with programs capable of altering the progression of disease in patients.

Now, I'm pleased to turn the call over to Mathai to discuss these programs in greater detail.

Thank you, Rick. Today, we're in a new era of our research strategy, one in which we're focusing on designing compounds for targeted delivery to the lung and the GI tract. The idea is that such targeting to the disease tissues intended to create medicine that are highly efficacious with minimal side effects in the range of serious medical conditions. More than 15 years of experience has enabled our team to design targeted medicines intended for inhalation with all the requisite biology, distributive and pharmacokinetic properties.

Through this work we have created internally a number of important insights relative to tissue target. We are now leveraging these insights in the design of GI targeted compounds, which can be taken orally, enter the wall of the GI tract, have the right tissue dynamics and kinetics to be active, but not be significantly absorbed into the systemic circulation.

TD-1473 our pan-JAK inhibitor to treat patients with ulcerative colitis is the first product candidate to emerge from this new research focus. We believe that TD-1473 can represent a potential breakthrough approach to treating ulcerative colitis. In today's treatment paradigm for an ulcerative colitis, injected systemic anti-TNF antibodies are used as the disease progress.

These medicines are effective in about half of patients that carry liabilities of increased infection and cancer risk. In many patients they just don't work at all and for some patients for whom the anti-TNF work initially the medication lose efficacy with time, potentially because the disease evolves or because the patient develops antibodies against the medicine.

As multiple JAK utilizing cytokines have been implicated in ulcerative colitis, we believe that pan-JAK inhibitor can be a powerful mechanism for treating the disease. Tofacitinib, or Xeljanz, Pfizer's JAK inhibitors, has proved for the treatment of rheumatoid arthritis has demonstrated efficacy in the Phase II trial, and just recently in Phase III trial.

However, Tofacitinib is orally absorbed and distributes throughout the body. The systemic exposure of results and a number of well-known side effects of limit how the drug is dosed. This compound is likely to be positioned late in the disease process as both efficacy and side effects are expected to be significant.

We believe that TD-1473 represents an innovative approach. It is delivered orally and drives its benefit by local action with no systemic concentration or corresponding systemic pharmacology. In preclinical models of inflammation, our compound shows selective distributions to the tissues of the GI tract and a corresponding reduction in the disease activity score comparable to Tofacitinib. And related model TD-1473 has shown no measurable activity in systemic circulation where Tofacitinib shows substantial immunosuppressant.

We plan to begin the Phase I study by early 2016 to assess safety and tolerability of healthy volunteers at rising doses of the compound. We would then plan to study TD-1473 in patients with ulcerative colitis and potentially other indications. Based on our preclinical studies to-date, we believe the TD-1473 can be a meaningfully efficacious medicine with a safety profile that may allow to be positioned early in the course of the disease, potentially ahead of biologics.

All in all, we continue to advance in developing lung- and GI-directed medicines and look forward to keeping you apprised of our progress. Let me turn now to our NEP inhibitor program. We're advancing a series of three NEP inhibitors through preclinical development with the goal of developing a best-in-class NEP inhibitor, differentiated in important ways from Sacubitril the NEP inhibitor in Entresto.

Entresto is a promising new product for treatment of heart failure with reduction ejection fraction. Unlike Sacubitril , our NEP inhibitors are being designed to have standalone IP that are not expected to be limited to a one-to-one fixed dose combination with Valsartan or any other product. As a result, we expect to be able to combine them with any mechanism of action. Our NEP inhibitor is also intended to be minimally, renally cleared an important distinction for patients with renal disease and heart failure, in whom kidney function is often poor.

We believe we are at the leading edge of understanding and using natriuretic peptide biology to create a new category of medicine. Natriuretic peptide AMP, BMP, and CMP are all important because of their direct vasoactive effects. Importantly they appear to reverse pathological changes in heart, vascular and kidney tissues. A particular interest to us is their potential anti-fibrotic effects in these tissues, potentially enabling not just treatment, but disease modification in a range of important cardiac vascular and renal diseases.

For example, large vessel fibrosis may play a role in wide pulse pressures and isolated systolic hypertension. Cardiac fibrosis maybe an important pathophysiological mechanism in heart failure. Kidney fibrosis maybe an important mechanism in the loss of kidney function that can accompany diabetic nephropathy.

Inhibiting NEP leads to increases in the levels of the natriuretic peptides, but only at the sites of the body where natriuretic peptides are being made and released. Such an approach accentuates natural and useful biology and we're confident can lead to safe and beneficial effects in a number of diseases.

We filed an IND for TD-0714 and plan to be in dosing healthy subjects in the Phase I study this year. We successfully completed IND enabling GLP toxicology studies for a second development candidate, for which we plan to file an IND in the near future and have recently initiated IND enabling GLP toxicology studies for a third candidate. The objective of taking three compounds forward is to find a single optimal compound that we can advance into Phase II.

In our Phase I trial we intend to assess oral bioavailability, safety and tolerability. We will also assess pharmacokinetics, whether the half-life supports BID or QD dosing and the extent to which our compound is cleared renally. Our strategy is to create a platform for multiple combination products with our NEP inhibitor as potential treatments for a wide range of cardiovascular and renal diseases that represent large market opportunities.

These include acute and chronic heart failure and cardiovascular conditions where the patients are at risk of developing heart failure. Additionally, we believe NEP inhibitor combination product could have significant potential in treating diabetic nephropathy and other forms of chronic kidney disease. Finally, we believe that our NEP inhibitor in combination with other mechanisms could treat isolated systolic hypertension and treatment resistant hypertension.

Given the broad therapeutic potential of our NEP inhibitor program, our strategy is to seek a development and commercialization partner. Today we are engaged in active discussions with multiple global pharmaceutical companies. We are excited to be advancing novel product candidates in both our NEP inhibitor and JAK programs and their potential to offer new therapeutic options for patients with serious unmet medical needs.

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

Renee Gala: Thank you, Mathai. Prior to reviewing the financial results, I would like to remind you that the financial statements of Theravance Biopharma for periods prior to our spin off in June, 2014 were derived from the historical consolidated financial statements of Theravance Inc. And therefore may not necessarily reflect that 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, total revenue for the third quarter of 2015 was $10.7 million, with $8.4 million associated with collaborative arrangements. Revenue from collaborations is primarily associated with the license granted to Trek Therapeutics for TD-6450, an internally discovered next generation investigational NS5A Inhibitor in development to treat patients with hepatitis-C virus or HCV.

Trek has already initiated a Phase IIa clinical study of TD-6450 in combination with Faldaprevir and Ribavirin in patients infected with HCV genotype 4. And this study is expected to read out in 2016. The remaining revenue from collaborative arrangements is associated with our VIBATIV collaborations outside of the U.S.

Net products sales of VIBATIV in the third quarter were $2.3 million which represented an increase of 9% over the prior quarter and cost of goods sold for the quarter totaled $0.6 million. As Rick noted in his introduction, we completed the expansion of our sales force, which was trained and in the field by the beginning of the fourth quarter. In addition, we continue to see growth in new accounts. Year-to-date we have obtained formulary acceptance at 106 institutions and at over 233 institutions cumulatively.

As we discussed in our last call, we experienced a higher than expected percentage of sales to public health service institutions in the second quarter and this trend continued in the third quarter. The gross to net sales ratio in this segment of our business is quite high due to federally mandated pricing. Now that we have completed the expansion of our sales force and restructuring of sales territories, we expect to see growth in higher value segments over time, including out patients centers located in an around the acute care setting.

As you recall in August we provided guidance that expected 2015 total revenue related to VIBATIV of $15 million to $18 million with the majority of the revenue coming from expected net products sales in the U.S. of $9 million to $12 million. Now at this point in the year, based on sales results to-date and our evaluation of factors impacting VIBATIV sales in the remainder of 2015, we currently estimate that our full year VIBATIV related revenue including ex-US collaboration will be around $15 million and net sales of VIBATIV in the U.S. will be around $9 million.

R&D expenses for the third quarter of 2015 decreased to $30.4 million compared to $38.3 million for the same period of 2014. The decrease was primarily due to non recurring long-term retention and incentive awards that impacted the third quarter of 2014 and the decrease in program related expense due to the reimbursement of expenses associated the Mylan collaboration for revefenacin.

Total R&D share based compensation expense with $6 million in the third quarter of 2015. SG&A expenses for the third quarter of 2015 were $22.8 million compared with $17.7 million for the same period in 2014. The increase was primarily due to cost associated with VIBATIV commercialization. Total share base compensation expense and SG&A was $6.2 million and also contributed to the year-over-year growth in SG&A expense.

Cash, cash equivalents and marketable securities, excluding restricted cash, totaled $196 million as of September 2015. The quarter in cash balance excluded proceeds related to the recently completed sales of $55 million of equity to Woodford Investment Management. The quarter in cash balance also excluded $19.6 million in receivables from our collaboration partners, which are generally received one quarter arrears.

In addition to our strong financial position and the internal pipeline assets we're providing updates on today we would like to remind you the valuable financial aspects 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 closed triple and/or MABA products that may be made by GSK pursuant to its agreements with Theravance Inc.

The closed triple combines the active ingredients of both ANORO and BREO or triple therapy in a single delivery device. GSK is conducting two Phase III studies of the closed triple, which will enroll approximately 11,800 patients and are estimated to be completed in 2016 and 2017. Recently GSK provided an update on the regulatory time line for the closed triple. Currently the EU regulatory filing is expected at the end of 2016 and the U.S. regulatory filing is expected in the first half of 2018.

As a reminder, all of our financial interest in the GSK development assets as well as the IP in our pipeline are held by entities in low tax jurisdictions, which should result in a favorable effective tax rate on future potential cash flows stemming from these important financial assets. Finally we are reiterating our full year 2015 non-GAAP operating loss guidance, which we expect to be in the range of $120 million to $130 million for the year, excluding share based compensation.

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

Thanks, Renee. We view this as a very exciting and productive time for Theravance Biopharma. We're making progress in the execution of our commercial strategy for VIBATIV and we expect the FDA to complete its review of our sNDA for concurrent Bacteremia in the second quarter of 2016. We're advancing our first Neprilysin Inhibitor in the Phase 1, which represents an excellent opportunity for us, with the right partner, to pursue multiple cardiovascular and renal indications targeting highly underserved patient populations.

Our novel pan-JAK inhibitor TD-1473, for ulcerative colitis and potentially other GI inflammatory conditions, is expected to enter the clinic in the coming m months. As noted in the press release, we issued earlier today, we expect a series of FDA events plus numerous data read outs in 2016 and 2017 across our mid and late stage pipeline including two Phase III efficacy studies for Revefenacin in COPD in 2016, which along with the Phase III long-term safety study expected to read out in 2017 will form the basis for our registration package in the U.S.

The Phase III FULFIL study of the closed triple combination in COPD in 2016 along with an EU regulatory filing at the end of 2016, Phase IIa study of TD-6450 in HCV, which is expected to read out in 2016, which is being conducted and paid for Trek. A PDUFA date for concurrent Bacteremia application of the second quarter in 2016, in addition to the Phase III registrational study of telavancin in primary Bacteremia, which is expected to read out in 2017, and will serve, if positive, for the basis of an sNDA application in primary Bacteremia.

Phase IIb study of Velusetrag in gastroparesis, which is now expected to read out in the first half of 2017. As a reminder, the study is being conducted by us but is largely funded by our partner Alpha Wasserman. And the Phase III IMPACT study of the closed triple combination in COPD, which is being conducted in approximately 10,000 patients and is expected to read out in 2017, with the U.S. regulatory filing planned in the first half of 2018.

In closing, with six Phase III studies expected to read out in 2016 and 2017 multiple Phase II programs advancing with high value product candidates progressing into the clinic, our productive research organization and the strong financial position the Company is well positioned to create value for patients, the healthcare system, and our shareholders.

Now I would like to turn the call over to the operator for questions.

(Operator Instructions) Thank you. Our first question comes from the line of Tazeen Ahmad of Bank of America. Your question please.

This is Peter Staper on for Tazeen. Lot of exciting things coming up in the future. I wanted to ask what you think are really key catalyst coming in 2016 and I know there is a lot of Phase III read outs but which product do you think could advance the most in the coming year?

Thanks, this is Rick Winningham. I'll take that. I think clearly for us the Revefenacin Phase III efficacy studies in 2016, those are two Phase III studies both of which were readout in 2016 and I think we will provide valuable information on product and its value relative to patients.

Clearly, the Telavancin Phase III registration study in Bacteremia we're reading out 2017 as well as the Revefenacin long-term safety study in 2017. Both of those are quite important Revefenacin because it completes the data necessary to file for approval in the United States and Telavancin or VIBATIV the registrational program in Bacteremia because it provides the third indication for VIBATIV, having VIBATIV really contain the broader set of indications with any branded gram gram-positive antibiotic.

I think equally for us with the light sage programs, the progress that we've made in research over the last couple of years in our Neprilysin program for heart failure and renal disease, as well as the JAK program for ulcerative colitis, because of the uniqueness of our approach can both be value driving for the Company. And I might have Mathai just another moment on our GI targeted pan-JAK inhibitor.

Hi, Peter. Mathai here. So, our pan-JAK inhibitor, I think the right way to think about this is to look at some of the Phase II to Phase III data coming out of alternate mechanisms and look at how we might position a compound that has efficacy that might approach that of Tofacitinib Phase II program. We don't know all the details of their Phase III success recently, but if it's truly GI restricted could have the tolerability of some of the safer programs out there like S1P1 modulator.

We see this is as potentially really important program that will mature over the next one or two years, so it's not in the next quarter or two. What we plan on doing next year is take this program forward into healthy volunteers, to look at the extent of GI restriction. Our preclinical model suggest that it's a nicely GI restrictive, and should lead to minimal systemic exposure and I am hoping to confirm those results in human beings next year.

And then we onto Phase II potentially not only in ulcerative colitis but maybe another indications as we indicated in the call just now. So I think it's potentially big winner of a program, little bit more time needed to mature completely but very excited about that.

Great. Thanks a lot guys.

Thank you. Our next question comes from Brian Skorney of Robert W. Baird. Your line is open.

Hi, this is Nina in for Brian. I have two questions the first one is TD-714 and TD-1473, could you layout for us the Phase I timelines, as well as if in the multiple [hemming] does portions there will be any biomarkers that you're going to evaluate in order to give an indication of drug activity?

Yes, I'll take that. So let's start with TD-1473. So we see most of this coming year, 2016, being in different segments of the Phase I program. First the single ascending dose study and then multiple ascending dose study. It's a good question you're asking with respect to biomarkers, we're actually still thinking that through. If we incorporate such a program, which would give us a feel for target engagement, productive target engagements in gut, we would initiate that towards very end of next year. But we remain undecided on whether we would conduct such a small study as part of the map, or go on to perhaps a highly relevant Phase II study.

So, we have not yet decided which way we'll go with that. With TD-0174, this is our first NEP inhibitor candidate. As we indicated in the call, this is the first of three NEP inhibitor candidates. This particular one should go into Phase I imminently, in December, before the end of the year. And again we'll spend a larger chunk of next year in both SAD and MAD studies. The key there is to look at biomarkers. We will be able to get read out of productivity systemic NEP inhibition in that program in a combination of both [Sad and Map] studies.

We should be able to assess importantly pharmacokinetics, it's important to us to be at least BID if not QD dose product, consistent exposure be safe. And importantly, our clearance should be low and largely non-renal. Because there is a level of uncertainty always when such taking a compound forward into Phase I based on preclinical data, we have two additional compounds, two additional shots on goal to give us confidence that we will come out at the end of year or next year with a NEP inhibitor that we think can be best-in-class, and can compete effectively in the marketplace is a really important medicine. So the short answer is maybe biomarkers with the JAK program and yes definitely biomarkers with the NEP program.

Excellent. Thank you, and my other question is, I know you didn't talk about the Axelopran product at all, but the last time we heard about it you are looking at potentially during Axelopran coated opioids, is that something that you are still looking at and do you have any plans on running pivotal studies with the agent and potentially partnering the agent?

Sure. So, this is Rick Winningham. And I appreciate you bringing up that program, but we presented data at pain week about a month ago on our fixed dose combination of Axelopran with Oxycodone. So a proprietary coat technology that we've developed utilizing Axelopran where we can spray coat Oxycodone, we believe we can spray coat any available either normal opioid or abuse resistant opioid.

The findings in the study presented at pain week demonstrated that Axelopran doesn't alter of the systemic exposure to oxycodone when delivered as a fixed dose combination relative to co administration of the individual tablets. We believe this is a very large and underserved market because then with a coated Axelopran opioid you won't might be able to actually have a product for severe pain relief without the opioid induced constipation.

I think relative to where we're going, we're in partnering conversations around this program and will provide and update to investors at a future point in time. But clearly the ability - the flexibility that the coding technology provides has the stimulated significant partnering interest around this program.

Great. Thank you.

Thank you (Operator Instructions) Thank you it appears we have no further questions on the phone. I would now like to turn the conference back to Mr. Winningham. Please go ahead, sir.

Well thank you very much. I would like to thank all of you for joining us for our third quarter update call. We've got a very exciting fourth quarter and we are looking forward to an event filled 2016. Again thanks for participating and have a great day.

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