Theravance Biopharma Inc (TBPH) 2015 Q4 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 is being recorded.

Now, I would like to turn the call over to Renee Gala, Senior Vice President and Chief Financial Officer. Ma'am, please go ahead.

Good afternoon, everyone, and thank you for joining our fourth quarter and full year 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. Brett Haumann, Chief Medical Officer. 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'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 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. Rick?

Thanks, Renee. Good afternoon, everyone, and thank you for joining us. In the call today, we are going to focus on our priority programs TD-0714, our neprilysin inhibitor for the treatment of cardiovascular and renal diseases; TD-1473, our GI-targeted pan-JAK inhibitor to treat ulcerative colitis; and revefenacin or TD-4208, our once daily nebulized long-acting muscarinic antagonist or LAMA in Phase III development for COPD. We'll also provide an update on VIBATIV, review our financial performance for the year, and preview our upcoming milestones for 2016. Then we will open the call up for questions.

2015 was a great year for Theravance Biopharma. We've made significant progress in advancing our priority programs to key inflection points, and we set the stage for multiple value-creating events in 2016. Today, we reported compelling data from the Phase I study of our NEP inhibitor 714, underscoring its potential therapeutic value as a novel treatment for cardiovascular and renal diseases. The Phase I study of 1473, our GI targeted pan-JAK inhibitor for ulcerative colitis is anticipated to be completed in the first half of 2016, which could pave the way to a Phase Ib study in patients later this year. The Phase III program for revefenacin is enrolling well. At the current pace we expect to report out two efficacy studies in the third quarter of 2016 followed by the long-term safety study in mid-2017, mid to late 2017, and an NDA filing in late 2017. In addition, we continue to make progress on our commercial strategy for VIBATIV. We're encouraged by the momentum being generated by our expanded sales force, and we remain focused on pursuing strategies to expand the products label to drive further utilization.

We're enthusiastic about the year ahead. We expect to achieve key clinical and regulatory milestones in 2016, including numerous data readouts. With the productive research organization fueling innovation and a solid financial foundation, we believe our company is poised to deliver significant value for both patients and shareholders in the near and long-term.

Now I'd like to hand the call over to Brett to provide an update on our pipeline programs.

Thanks, Rick. I'll start with our Phase I clinical programs, 714, our neprilysin or NEP inhibitor for cardiovascular and renal diseases; and 1473, our Janus kinase or JAK inhibitor for ulcerative colitis.

I'll begin with our NEP program. Our research team have been developing novel NEP inhibitors with the goal of identifying a product candidate that would be best in class and be combined with other complementary mechanisms for the treatment of chronic heart failure and also potentially be first in class for other indications, including acute heart failure and chronic kidney disease. These diseases represent large market opportunities and are currently poorly served by available therapies. Roughly 26 million Americans suffer from chronic kidney disease, including diabetic nephropathy. In the U.S. alone, there are 6 million patients diagnosed with chronic heart failure and approximately 1 million hospitalizations annually for acute heart failure.

The Phase I program for 714, our lead NEP inhibitor is progressing well. We've completed the Phase I single-ascending dose study in healthy volunteers. The results of which were announced in a press release earlier today. And we've recently initiated dosing in a Phase I multiple-ascending dose trial also in healthy volunteers.

The single-ascending dose trial was designed to assess the safety, tolerability, and pharmacokinetics of 714, as well as measure biomarker evidence of target engagement and the amount of the drug that's eliminated by the kidneys. In the study, 714 demonstrated evidence of biological effect, as shown by dose-related increases in levels of cyclic GMP with maximal effect demonstrated within the lower end of the dose range. Result showed sustained target engagement for 24 hours after single dose, indicating 714's potential for once-daily dosing.

714 was generally well tolerated across the dose ranges studied with no serious adverse events reported. There were also no clinically relevant changes noted in vital signs, laboratory measures or ECG's at any of the doses tested.

Importantly, the study also confirmed low renal clearance with only a negligible amount of 714, less than 1% of the dose eliminated by the kidneys. We were particularly pleased to see insignificant levels of renal clearance with 714. The molecule is not dependent on the kidney for its elimination, therefore it will not be necessary to adjust the dose in patients with low or variable renal function in contrast to existing NEP inhibitor-based therapy. This is important because a significant number of patients with cardiac and renal disease who may benefit from NEP inhibition do have compromised renal function.

So, in summary, we're very encouraged by the data from this first clinical study of 714. The multiple-ascending dose study is ongoing, and we anticipate its completion in the second half of 2016. Given the broad therapeutic potential of our NEP inhibitor program and the potential to combine our compound with a range of other mechanisms, we believe a partnership would maximize the value of this program both to patients and to shareholders. And these discussions and dialogues are ongoing.

Turning to our second Phase I program, 1473 is a pan-JAK inhibitor specifically designed for targeted delivery to the gastrointestinal tract for the treatment of ulcerative colitis, which affects roughly 700,000 patients in the U.S. Currently, there are limited treatment options available to patients. Injectable anti-TNF therapies are effective but carry the risk of systemic immune suppression. There are a number of small molecule products in development including tofacitinib, an oral JAK inhibitor, and ozanimod, an oral S1P1 modulator.

Based on the available Phase II clinical data, tofacitinib maybe the most efficacious in treating moderate to severe ulcerative colitis; thus, demonstrating the value of JAK inhibition in treating this debilitating disease. However, because yofacitinib was designed to be systemically active, it carries the risk of multiple potentially harmful side effects.

Our approach to treating ulcerative colitis is different. Our objective is to harness the efficacy that JAK inhibition has demonstrated in ulcerative colitis but without the harmful side effect profile associated with systemic distribution. 1473, our lead JAK inhibitor, was created with this objective in mind. This compound is designed through its underlying chemistry to be taken orally to pass through the stomach, penetrate the wall of the colon and have the right tissue dynamics and kinetics to be active at the site of inflammation but without being released into the broader systemic circulation.

In fact, 1473 is the first compound to emerge from our new research strategy that is focused on targeted drug delivery. This approach entails creating compounds that are designed to target their effect at the diseased organ such as the colon by blocking the immune response locally at the site of inflammation without risk of systemic immune suppression.

Our preclinical models demonstrate that this approach is effective. In preclinical models of inflammation, 1473 shows selective distribution to the tissues of the GI tract and a corresponding reduction in the disease activity score comparable to tofacitinib. In the same preclinical models, 1473 has shown no measurable immunosuppressive activity in the systemic circulation in contrast to tofacitinib. These results suggest that in preclinical models systemic inhibition of JAK is not required to treat ulcerative colitis. This data will be presented in post-reform at the ECCO Conference in Amsterdam next week.

Based on our preclinical findings, we believe that the locally acting pan-JAK inhibition of 1473 can represent a potential breakthrough approach to treating ulcerative colitis, to offer favorable efficacy and safety benefits without the risk of systemically active therapies such as anti-TNF therapies or tofacitinib. A favorable safety profile may allow it to be positioned early in the course of the disease ahead of biologics.

The Phase I clinical study for 1473 is underway to assess safety and tolerability in healthy volunteers at increasing single and multiple doses of the compound. We expect final data from this study to be available in the first half of 2016. We then plan to study 1473 in a Phase Ib trial in patients with ulcerative colitis.

Now turning to our late-stage pipeline, the Phase III program for revefenacin, our investigational once daily long-acting muscarinic antagonist or LAMA for the treatment of COPD is progressing well. In February, we announced that we'd surpassed the halfway point for enrollments. And today, we're pleased to report that we are now two-thirds enrolled in the two efficacy studies and the 12-month safety study. We've been very encouraged by the rapid rate of enrollment in our studies as we believe it indicates interest amongst patients and physicians in a once daily nebulized COPD treatment.

Despite the success of LAMA as a gold standard of care in the handheld device markets, there are no nebulized LAMA treatments currently available for patients with COPD. We believe there is a large commercial opportunity for revefenacin as the first once daily nebulized bronchodilator for COPD and to become a standard of care in this market segment. As a reminder, the Phase III program will enroll approximately 2,300 patients across three studies, two replicate three-month efficacy studies which we anticipate will read out in the third quarter of 2016, and the 12-month safety study which we anticipate will read out in 2017 and lead to an NDA filing before the end of 2017.

As a further reminder, the Phase III program is being conducted by Theravance Biopharma and is fully reimbursed by our partner, Mylan. Under the terms of the agreement with Mylan, we're also eligible to receive potential development and commercialization milestone payments totaling $220 million of which we earned $15 million in the first quarter of 2016. We're very excited to see this important therapy advancing towards the market.

Now I'd like to turn the call back over to Rick to update you on VIBATIV.

Thanks, Brett. VIBATIV is an important treatment for patients with life-threatening gram positive infections, particularly those infections caused by MRSA leading to complicated skin and skin structure infections, as well as hospital-acquired and ventilator-associated pneumonia. VIBATIV is the basis for our acute care commercial strategy in the United States.

In 2015, we focused on expanding and solidifying our commercial infrastructure. We started the year with six sales reps. By the beginning of the fourth quarter, we had a full complement of 50 sales reps in the field trained and active in their respective territories. We're encouraged by the positive sales ramp we saw in November and December of 2015, and we remain optimistic about our prospects for VIBATIV in 2016.

We continued to see strong growth and formulary additions in the hospital and outpatient setting. We've made important progress in implementing our commercial strategy for VIBATIV but we have more work to do. Additionally, we're working on label expansion strategies for VIBATIV in an effort to optimize the product's commercial potential as well as investing in our TOUR registry program to collect real world data for publication.

We anticipate that the FDA will complete its review of our sNDA in the second quarter of 2016, which could support label expansion to include treatment of cases of concurrent bacteremia in both complicated skin and skin structure infections as well as hospital-acquired pneumonia and ventilator-associated bacterial pneumonia. Our Phase III registrational trial in primary bacteremia continues to enroll patients, and we anticipate completion of this trial in 2017.

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

Thank you, Rick. 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 were derived from the historical, consolidated financial statements of Innoviva, Inc., previously notes previously known as Theravance, Inc.

I'll now cover the financials for the fourth quarter and full year of 2015, and provide 2016 financial guidance. Revenue for the fourth quarter of 2015 was $3.9 million including revenues from collaborative arrangements of $0.2 million and net product sales of VIBATIV of $3.7 million. VIBATIV product sales consisted of U.S. net product sales of $3.1 million and ex-U.S. sales of $0.6 million. Revenue of the full year of 2015 totaled $42.1 million and consisted of revenue from collaborative arrangements of $32.7 million and net product sales of VIBATIV of $9.4 million.

Cost of goods sold for the fourth quarter of 2015 totaled $3.2 million, which includes a charge of $1.9 million for write-down of inventory due to dating of the product. Cost of goods sold for the full year totaled $4.7 million.

R&D expenses for the fourth quarter of 2015 were $32.4 million, representing a decrease of $9.8 million compared to the same period in 2014. The decrease was primarily due to non-recurring long-term retention and incentive awards, and the decrease in program related expense due to the reimbursement of expenses associated with the Mylan collaboration for revefenacin. Full year R&D expenses were $129.2 million or $103.4 million, excluding share-based compensation.

SG&A expenses for the fourth quarter of 2015 were $24.1 million, representing an increase of $2.3 million compared to the same period in 2014. The increase was primarily due to cost associated with VIBATIV commercialization. Full year SG&A expenses were $90.2 million or $61.9 million excluding share-based compensation expense.

Cash, cash equivalents and marketable securities as of December 31st totaled approximately $215 million. The year end cash balance excludes $35.2 million in receivables from collaborative arrangements and a $15 million milestone that was recently achieved through our collaboration with Mylan.

We made significant progress in 2015 in advancing our priority programs, which paves the way from multiple potential value creating events in 2016. We initiated Phase I clinical studies for potentially best-in-class programs with both our NEP inhibitor, 714, for cardiovascular and renal diseases; and our GI-targeted pan-JAK inhibitor, 1473, for ulcerative colitis. We initiated all three studies in the Phase III COPD program for revefenacin and entered into an important strategic collaboration with Mylan.

In addition, we continued to execute our commercial strategy for VIBATIV including the hiring and training of additional field personnel establishing regional partnerships outside of the U.S. and initiating clinical studies, which have the potential to expand the products label to further drive utilization. All of this was achieved within our 2015 stated operating loss guidance of $120 million to $130 million excluding share-based compensation.

Our financial for 2016 will again be based on an operating loss metric excluding share-based compensation. And we anticipate that loss to be in the range of the $120 million to $130 million. This guidance excludes the potential impact of any new business development transactions that the company may enter into over the course of 2016.

Now I'd like to turn the call back over to Rick.

Thanks, Renee. To recap, we're excited about the lineup of events for 2016, including top line results from the two Phase III efficacy studies of revefenacin and COPD, complete data for the ongoing Phase I studies 714 and 1473 as well as the upcoming PDUFA date for our concurrent bacteremia indication for VIBATIV.

Also included in our lineup of expected milestones in 2016 is the completion of the Phase III FULFIL study of the closed triple and COPD being conducted by GSK, with an expected regulatory filing in Europe before the end of the year. As a reminder, we have an economic interest in the closed triple and MABA products of GSK, and we're entitled to receive 85% of future potential royalty or milestone payments on these products that maybe made by GSK pursuant to its agreement with Innoviva.

As I said a few moments ago, 2015 was a year of great progress for Theravance Biopharma. We're equally confident about our prospects for 2016 and beyond highlighted by the following milestones -- data from three Phase III trials in 2016, data from three Phase III trials in 2017, further development in support of the non-renally cleared NEP inhibitor for patients with chronic kidney disease and chronic heart failure, and importantly advancement of a novel approach to treat ulcerative colitis through the creation of a pan-JAK inhibitor designed to target inflamed tissues of the gut without being released into the broader systemic circulation. We believe this approach has the potential to dramatically improve the therapeutic benefit for patients suffering from this debilitating disease.

In closing, we are very pleased with the progress that we've made and look forward to making additional progress across our pipeline, and providing meaningful business updates throughout the course of the 2016. And now, I would like to turn the call over to the operator for questions.

Thank you. (Operator Instructions) Our first question comes from the line of Brian Skorney of Robert W. Baird. Your line is open. Please go ahead.

Hi, this is [Nina] on for Brian. So I was just wondering if you could tell us a little bit more about the pathway for the NEP inhibitor. So assuming the multiple ascending dose study is positive in the second half of the year. Of the pathways that you outlined on your slides, what's kind of the most likely pathway in terms of combination work and then what types of combinations are looking at for the IV?

So let me just touch on this and then I'll turn it over Brett. If you look at our slides, there are three slides from IR, there are three potential pathways for our NEP inhibitor program -- acute heart failure, chronic heart failure, and chronic kidney disease. Acute heart failure is an IV, would be an IV formulation of the NEP inhibitor alone and potentially combined at some point in time perhaps at discharge from the institution with ARB, then the patient would like be discharged at least in our view on some sort of NEP-ARB combination. The acute heart failure program is a program that's manageable. But the greatest impact that can probably be made on healthcare, we think are the chronic heart failure indications and chronic kidney disease indications.

And, Brett, do you want to take those?

Thanks very much, Rick. And, Nina, great questions. As Rick has described, you could imagine a continuum of care where patients present to the hospital with a history of chronic heart failure, existing therapies possibly having failed them, and then be placed onto acute therapy. It's quite usual for patients to have other therapies withdrawn when they end up in the hospital. We think that there is a perfect opportunity there for the introduction of a NEP inhibitor on its own as an intravenous formulation.

As patients improve in the condition of their acute de-compensation, it will be appropriate to switch them on to an acute therapy. But during that period they remain vulnerable particularly in terms of a renal function. So it's not ideal to put them on to some sort therapy that might still be dependent on renal function, renal clearance, for its elimination. And, again, we think that our NEP inhibitor and the profile that we have would be particularly well suited as patients are coming out of that worsening of their heart failure.

And then on an inter-chronic therapy and as Rick has described, there are several complementary mechanisms that are of interest in the chronic heart failure space. Entresto has obviously precedented the use of a NEP inhibitor with ARB, but there are other complementary mechanisms which might be suitable there.

And then in chronic kidney disease, really the unmet need is quite profound. There are very few appropriate therapies well suited to chronic kidney disease. What's interesting in the medical arena is that the heart and the kidney are rarely directly coupled and it's quite common for somebody who's got a primary heart failure condition to have secondary renal dysfunction and failure. Conversely, we also see patients who have initially a renal disease and they heart fail secondarily. So this access of the heart and the kidney is a very important one for NEP inhibition, and similar combinations might be effective in chronic kidney disease.

So really the spectrum is large. We think, as Rick has rightly said, acute heart failure with single agent NEP inhibition is a near-term concrete program that we could certainly take on ourselves that we remain heavily invested in partnership discussions to explore other complementary therapies that could be used with this.

And the treatment of chronic kidney disease, the use of [NEP] and ARB, irbesartan has been approved, and there is data available that the combination of an ARB and NEP inhibitor would in fact improve the function of the kidney. So the other mechanisms that Brett alluded to potentially a PDE5, PDE9, a renin inhibitor, all these mechanisms to complement a NEP inhibitor are on the table, I think, for the long-term development program of 714.

Does that answer your question?

Yes, great. Thank you.

Okay.

Thank you. (Operator Instructions) I am showing no further questions, and I would like to turn the conference back over to Mr. Rick Winningham for any further remarks.

Thank you very much, operator, and thanks, everyone, for participating in our year-end update as well as our look-forward into an exciting year of 2016. Have a great day.

This concludes today's conference call. Thank you all for your participation. You may all disconnect.