Teva Pharmaceutical Industries Ltd (TEVA) 2010 Q4 法說會逐字稿

Good day and welcome to this NuPathe fourth-quarter and full-year 2010 earnings results conference call. Today's call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Mr. John Woolford from Westwicke. Please go ahead.

Thank you, operator, and good morning, everyone. With me on this morning's call are Jane Hollingsworth, NuPathe's Chief Executive Officer and Keith Goldan, Vice President and Chief Financial Officer. Jerry McLaughlin, Vice President of Commercial Operations is here as well to answer questions during the Q&A portion of the call.

We announced fourth-quarter and full-year 2010 financial results today before the open of the US financial markets. For those of you that may not have seen the release, it is available on our website at www.NuPathe.com in the Investor Relations section.

The format of today's call is as follows, Jane will begin with an overview of recent corporate highlights. Keith will then provide a summary of our financial results for the quarter, and Jane will end the prepared remarks with a brief closing followed by a Q&A session.

Before we begin, I would like to remind you that we will make various remarks during this conference call that constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995.

All remarks that are not historical facts are hereby identified as forward-looking statements for this purpose, and include, among other things, statements regarding potential benefits of, market for, and commercial value of Zelrix; the timing of the potential launch of Zelrix; and filing of IND's for our other product candidates; the sufficiency of our cash to fund future operations and capital requirements; our plans and objectives for future operations; and our expectations and beliefs.

Forward-looking statements are subject to numerous risks, uncertainties, and assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements, including those factors discussed under the heading risk factors in our Form 10-K for the year ended December 31, 2010, which is on file with the SEC. As a result, you should not rely on any such forward-looking statements. While the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so.

Also, today's call may not be reproduced in any form without our express written consent. I will now turn the call over to Jane Hollingsworth, the Company's Chief Executive Officer. Jane?

Thank you, John, and good morning, everyone, and thank you for joining us on the call today.

NuPathe ended 2010 with strong momentum, culminating with the achievement of a significant milestone, the submission of our NDA for Zelrix in October, and subsequent acceptance for review of the NDA in January of this year. The Prescription Drug User Fee Act date, or PDUFA date, for the NDA is August 29 of this year.

As many of you know, the PDUFA date is the target date for the FDA to complete its review of the NDA. Given this PDUFA date, we continue to expect to launch Zelrix in the US in the first half of 2012.

Zelrix is the first-ever NDA submission of a transdermal patch for the treatment of migraine. And its successful development through to the submission of the NDA is a real accomplishment for the Company and a significant advance for the millions of underserved migraine patients.

The NDA submission included data from our pivotal Phase III trial, which we call NP101-007, as well as data from two repeat-use twelve-month trials, which we call NP101-008 and NP101-009.

During the fourth quarter, we announced positive top-line safety and efficacy results for NP101-008. Since I discussed the data from these trials during last quarter's call, I won't go into detail today. However, I would like to stress that the data from our Phase III program demonstrated the efficacy of Zelrix across all symptoms of migraine, as well as its favorable tolerability profile, including minimal incidence of Cmax-related adverse events that patients often find intolerable with injection and oral treatments.

Over the next couple of quarters, as we prepare for launch, we plan to have a significant presence in important scientific meetings. The next major meeting on the calendar is the annual meeting of the American Academy of Urology, or AAN, being held in Honolulu from April 9 through the 16.

At AAN, we have a -- numerous events planned and we'll introduce our scientific exhibit booth. Following AAN, we will expand our corporate presence and will present detailed results from clinical studies at the premiere headache meetings, the American Headache Society Annual Scientific Meeting to be held in Washington DC from June 2 through the 5; and The Congress of the International Headache society in Berlin from June 23 through the 26.

In this prelaunch year, we are also focused on elevating awareness and understanding of the tremendous impact that migraine-related nausea and vomiting has on patients and on their ability to effectively treat their migraines. Many physicians do not appreciate the degree to which migraine-related nausea and vomiting affects patient's ability to treat a migraine in a timely fashion, if at all.

In a survey conducted by the National Headache Foundation, nearly 6 in 10 patients indicated that their physician rarely discussed the associated symptoms of migraine with them. Yet, nearly half of patients indicate that nausea or vomiting has a significant impact on how or when they treat their migraine.

Our scientific affairs team continues to elevate awareness and understanding of G.I. issues among physicians through their presence at scientific meetings and their ongoing interactions with the migraine thought leaders.

We are also committed to ensuring that patients who suffer from nausea and vomiting have a forum to learn more about the symptoms that they experience. NuPathe's efforts on this topic will lead to a more educated dialogue between patients and their health-care providers about all the symptoms of migraine, thus bridging the gap between current physician perception and the unfortunate reality that plagues many patients.

Our market research confirms that physicians believe Zelrix has the potential to offer patients predictable drug delivery while bypassing migraine-related G.I. issues and minimizing common Cmax-related adverse events.

Currently, patients are looking for treatments to overcome these issues. However, they are forced to compromise, settling for oral therapies in the face of significant G.I. issues because they lack an effective and tolerable non-oral option. Too often, this compromise leaves patients to delay or skip treatment, resulting in poor outcomes and unnecessary suffering.

Injection is the only true non-oral option on the market today. But despite providing fast, effective relief, its Cmax-related adverse events have limited its use since its introduction to the market in 1993. The growing awareness of the benefits of transdermal delivery to solve this problem bodes well for the commercial opportunity of Zelrix.

There are 7 million currently treated patients for whom migraine-related nausea and vomiting has a significant impact on when or even if they treat. In addition, at least 40% of treated migraine patients, or over 6 million, fail to achieve a consistent response to their oral medication. Peer-reviewed scientific articles attribute this inconsistent response in part to gastroparesis, a slowing of the rate of digestion.

As we approach commercialization, we continue to conduct additional market research focused on physicians, patients and payors. We also continue our preparations to market Zelrix ourselves to neurologists and headache specialists through a sales force of approximately 100 representatives.

As we have indicated in the past, we will continue to evaluate the benefits of partnering to address the nonspecialist segment of the market. We believe the proper time frame to finalize this decision is after NDA approval.

Key to our decision will be ensuring maximization of value and the commitment of any partner to Zelrix. Additionally, we continue to advance our commercial manufacturing activities and expect to have sufficient capacity to launch Zelrix in the first half of 2012, as planned. In January, we were fortunate that Bill Federici, Vice President and Chief Financial Officer of West Pharmaceuticals, joined our board of directors. Bill's experience as chief financial officer of a global manufacturer of components and delivery systems for the pharmaceutical, health care, and consumer products industries, is a great resource to us as we prepare for the commercial launch of Zelrix.

Now moving to other parts in our pipeline, the development of NP201 for the continuous symptomatic treatment of Parkinson's disease, and NP202 for the long-term treatment of schizophrenia and bipolar disorder, continue to progress. We expect to file an investigational new drug application for NP201 in the first half of this year. For NP202, pre-IND activities remain ongoing, and a 2012 IND is still planned.

With that, I would like to turn the call over to our Chief Financial Officer, Keith Goldan. Keith?

Thank you, Jane, and good morning, everyone. We reported results for the fourth-quarter and full-year 2010 before the markets opened today. In addition, we also filed our Form 10-K with the SEC earlier this morning. Given the timing of our IP on August of last year, most of my comments will be directed to fourth-quarter results.

For the fourth quarter, we reported a net loss of $6.2 million compared to a net loss of $3.3 million for the fourth quarter of 2009. Research and development expenses were $5.2 million for the fourth quarter compared to $2.5 million in the prior-year quarter. Of that increase, $1.5 million resulted from the payment of the NDA filing fee to the FDA.

Selling, general, and administrative expenses were $1.6 million in the quarter compared to $800,000 for the same period in 2009. The increase was primarily due to higher expenses related to operating as a public company.

For the full year 2010, NuPathe reported a net loss of $24.4 million compared to a net loss of $15.6 million in 2009. In 2010, NuPathe used $18.4 million of cash for operating activities and $3.5 million for investing activities, most of which was related to the purchase of commercial manufacturing equipment.

Also during 2010, NuPathe received $56.9 million from financing activities. Most notably, $43 million in net proceeds from its initial public offering, $10 million from the issuance of convertible notes, and $5 million from the issuance of debt.

At year end, NuPathe had $38.9 million in cash and cash equivalents. We continue to believe that our cash and cash equivalents will be sufficient to fund operations, and meet capital requirements through FDA approval and into the commercial launch of Zelrix in the first half of 2012. I'll now turn the call back over to Jane for closing remarks. Jane?

Thank you, Keith. To conclude, 2011 is likely to be a transformational year for NuPathe. We're planning for FDA approval of Zelrix, the first transdermal patch for migraine. Presentations of Zelrix clinical data at several high-profile scientific conferences; growth in our commercial infrastructure and resources; and anticipation of a Zelrix launch in the first half of next year; and an IND filing for NP201 for the treatment of Parkinson's disease.

As we move forward through the year, we look forward to updating you on our progress. That concludes our prepared remarks. We are now happy to answer your questions.

(Operator Instructions). Joseph Schwartz, Leerink Swann.

Thanks. I was wondering if you could talk some more about your strategy to educate the market and address the disconnect that seems to exist between patient reality in terms of suffering from nausea and vomiting during migraine syndromes, and the maybe lack of appreciation that might exist in some segments of the physician community. Is it going to rely on -- can it rely on things like speakers' bureaus or anything leveraging KOL expertise? Or does it just come down to advertising and your own feet on the street? Can you give us a sense of what your strategy is there?

Good morning, Joe. I think with that, I will turn the call over to Jerry. As you know, this is the pre-launch year, so we are limited to some degree, but he will give you a flavor for what our plans are.

Good morning. It's Jerry. We think there's tremendous opportunity, even prior to the launch of Zelrix, to educate the market as to the issues around nausea and vomiting. And through our scientific affairs team and the number of tactics, such as our scientific booth, publications, various interactions with the key opinion leaders and scientific projects that we'll undergo, we think there's an opportunity to address these issues that have been largely ignored over the last 20 years. And we believe that really stems from not having a viable non-oral option on the market.

And thus far, the receptivity among the clinicians has been high. And we will continue that effort through the approval and into the launch. And what we like about it from a physician perspective, we think that Zelrix is uniquely positioned to address those needs in the marketplace, so our efforts will purely benefit the patch.

On a patient side, the same thing occurs. Patients who are experiencing migraine-related nausea and vomiting have been sort of ignored and left to their own devices to find a solution, too often employing coping strategies where they have a delayed treatment or skipped treatment. And we have engaged a major PR firm to help us in those efforts with a lot of experience and marketing in the migraine space, as well as educational efforts directed towards women, which as you know, is the majority of our target population.

And thus far, the same receptivity -- it's been very, very high in terms of, we're hearing things like, finally, someone is addressing the issues that really fit my migraine; my migraine includes nausea and vomiting, and it's really refreshing to hear that. So we think there's an opportunity to sort of enhance the dialogue between physician and patient at launch through these channels.

Okay, great. I guess it makes sense that once there is a product to address these issues, that the market could be more ready to switch or evolve.

The expenses this quarter, it looked like R&D was a little bit more than we expected, and SG&A was a little bit lower than we expected. Are there any special activities that might account for that? And how do you see that going forward? Are these reasonable bases for us to grow off of or anything special that you would note?

Hi, Joe. This is Keith.

The reason for the higher R&D expenses in the fourth quarter is really preparation for and then the filing of the NDA for Zelrix. That was the primary driver. As I indicated in my remarks, there was also an additional $1.5 million expense that we incurred related to the filing fee for the NDA that we paid to the FDA.

Going forward, for 2011, I think you can take the expenses -- let me make one comment first.

We do have, in 2011, an ongoing Phase III open-label trial for Zelrix right now, and we expect to be in humans with our Parkinson's candidate in the second half of the year.

Additionally, we have Phase IIIb and Phase IV trials planned for Zelrix post approval. So there are -- there will be significant R&D expenses moving forward in the year.

On the SG&A front, we will be operating as a public company for the full year. And additionally, we will have -- we will see significantly more commercial expenses once we get approval for Zelrix that triggers a lot of the immediate prelaunch activity.

And as far as manufacturing product, you'll be expensing that rather than capitalizing that; is that correct, and that will be in R&D?

That's correct. We won't be capitalizing any inventory or anything like that until post-approval. We're moving forward with the funding agreement for LPS, which we talk about in the 10-K and the S-1. That's for commercial supply. But we will be doing all of our scale-up, qualification and validation throughout the year, and that will be part of R&D expense.

Okay, great. Thank you very much.

(Operator Instructions). Bill Tanner, Lazard Capital Markets.

Thanks for taking the question. Jane, just on the -- having the commercial product ready in the first part of 2012 for the rollout, can you remind us what the shelf life is and any -- and Keith or someone, can you speak to the anticipated inventory that you would have or anticipated product that you would have, at least at the outset?

Sure, Bill. So we expect two-year dating at launch. It's possible that it will grow from there, but we're pretty confident in that two-year dating, which is a very comfortable place to be.

And in terms of inventory, we are expecting to have plenty of inventory by early in the year and that's in part how we arrived at our proposed launch date that we are planning for in the first half of the year. So, there's plenty of room there to have a really aggressive launch in terms of our inventory, so we will be comfortable with supply.

Okay. And then maybe just -- because of product positioning, maybe a question for Jerry. In some of the survey work we've done we know suggest that there is, at least at the specialist level, some awareness about nausea. But just thinking about what kind of -- how you could potentially position the product so it's not viewed as perhaps a slower onset of action; I guess the folks in the treatment community that we speak with think that clearly the ability to treat and not cause any nausea or any of the triptan-related effects could be somewhat related to the Cmax. So I guess there's no perfect drug out there. How much do you guys anticipate that being at least a first push-back?

Bill, when we get into the conversations with physicians, if you look at the data, Zelrix is fast. It's every bit as fast as what you would see with an oral medication. We see separation starting at 30 minutes and reach significance at one hour in our data, so we're very confident in the speed. And some of that may stem from maybe a perception of the patch, and that's where the SmartRelief technology really plays a significant role. We are controlling the delivery.

And given the way we have programmed the patch, we're able to reach therapeutic levels very quickly and right on the heels of that, seeing pain relief.

Okay. All right. Thanks very much.

Yes, it just has not really been an issue when we talk about it. Some perceive a patch in general to be slower. Some perceive a patch in general to be faster. It's very interesting. But when you get into the data of our specific product, being anything but fast does not really come up.

Okay, thank you.

And one of the things, Bill, when you think about many of the population is actually delaying taking their medication, and for those patients, they are often delaying an hour or two hours because of the nausea or the fear of vomiting that comes with the migraine; and in fact, that leads to a delay.

And the other issue is around absorption. And one of the things that physicians have told us very clearly is that they appreciate the predictable drug delivery that comes with Zelrix because at times, oral medication can be unreliable at its rate and extent of G.I. absorption.

Yes. Okay. Thanks very much.

Elliot Wilbur, Needham & Company.

Thanks. Maybe just a couple of follow-ups on some of Keith's earlier commentary, specifically with respect to R&D. Would it still be reasonable to assume that on a full-year basis, that R&D should still increase in 2011 versus 2010? And then understanding the patterns probably will still be rather lumpy, but how should we think about -- is there any one particular quarter that maybe sort of might have kind of an outsized R&D expense burn in it [because of] these other quarters?

Good morning, Elliot. We're not going to give specific guidance as to what the 2011 numbers are expected to be, but I'll just kind of reiterate what I said earlier, in that we still expect to have significant R&D expenses moving forward in this year. You know, we have a number of clinical activities planned, but as was raised earlier, there's a number of manufacturing activities planned. And all of our validation scale-up, qualification and then the actual production of the validation batches, that will all be part of R&D expense. So, we would expect there to be significant R&D expenses in 2011.

Okay, thanks. And then respect to the cash burn rate in the quarter, any reason to believe that that doesn't just sort of gradually increase on a per-quarter basis over the course of 2011?

I would say that's a reasonable expectation, Elliott. As we move forward, we're going to be -- we're still a very nimble organization. We're below 30 employees right now, but we expect to grow our teams moving forward as we approach the PDUFA date and then into the launch of Zelrix. So I think having an increase in those costs as we move through 2011 is reasonable.

Okay. And then final question for Jane, with respect to some of the upcoming data presentations, anything in there that you might want to key us in on in advance of those that we should be looking at that perhaps we haven't seen before or you think maybe just offers more affirmative support in terms of the Zelrix value proposition?

Well, we have submitted a number of abstracts. We don't know which ones will be accepted yet, and we will obviously, before, in advance of the presentations, let everyone know that and announce that. But I think suffice it to say that, obviously, it relates to all the work we've been doing with Zelrix and includes some of the long-term data that we'll be accumulating and have not yet announced.

Annabel Samimy, Stifel Nicolaus.

Thanks for taking my question. I was wondering if you can give us an update on where you are in partnership discussions, and how you might be building up your own sales force ahead of either the approval or maybe after the approval?

Good morning, Annabel. So from a partnership perspective, we continue to have, I would call them good discussions, but we're not pushing any of that because we expect to make a decision after we get the approval of the product. So, and that relates to really evaluating the interest of a partner effectively as well as the value that we can get for the part of the market that we would partner. So, that continues. We will prepare ourselves between now and the approval for that decision. And that's where we remain on that.

In terms of the other point, I will turn that over to Jerry.

Hello, Annabel. As far as bringing on a sales force, we will not bring on a sales force until after approval. We intend to have the sales force on the books approximately one month prior to launch.

What we're doing now, we're beginning to build the commercial infrastructure. We anticipate having a vice president of sales and head of marketing in the near-term join our team, and we will quickly start to build out our reimbursement team as well in advance of approval. We think that is a critical -- those are critical success factors and we wanted to have that core team in place to prepare for the launch. But then we will ramp up and have everything ready to go one month in advance of launch, bringing the sales force on.

Okay, great. And a question regarding the open-label study that you have ongoing, when might that data be available? And is that information that needs to be submitted to the FDA prior to approval?

So we expect that data -- we have a few more patients that are just finishing up their twelve months. We over-enrolled significantly in that trial which is why it's not an issue for the NDA itself. We didn't submit the NDA until we had all the data that the FDA required.

So, the only regulatory issue there is that as you would do with any data, you would just update your safety data with the FDA at the appropriate time. And we submitted some of that with 120-day safety update when that was due recently. And we will continue that on annual renewals etc. So, midyear, we expect to have all the data appropriate from that study analyzed, etc., and prepared to announce it.

Okay, great. And then if I can ask a question regarding manufacturing capacity, just wanted a quick refresher of how much capacity you have and for what number of patients or what number of patches, units --

Good morning, Annabel. This is Keith. We will have adequate supply ready for our expected first-half 2012 launch. And that includes not only stocking the chain, but also for sample supplies. So the guidance we're giving us just that we will be prepared for a robust launch in the first half of 2012.

And the current people that you have contracted with have sufficient capacity to expand if necessary?

They do; they do. Our contract manufacturer is LTS, one of the largest patch manufacturers in the world. We'll be registering their sites in Andernach, Germany, as well as West Caldwell, New Jersey. And there is expansion capacity available, but even in our aggressive launch scenarios, we have adequate supply with the commercial scale that we're putting in place right now.

Okay, great. And any discussion on your out-licensing to Europe?

Well, we have early-stage discussions on that as well, but our priority right now is the US, both our own launch, as well as evaluating a partnership for the US, where the largest part of the market is.

So, clearly, we have rights x-US, both in Asia and Europe, where the largest x-US markets are. And we will be evaluating that, but for now, our priority is the US.

Okay, great. Thank you.

Ladies and gentlemen, that will conclude today's question-and-answer session. I will turn the call back over to your host for any additional or closing remarks.

Thank you all for joining us this morning. We look forward to speaking with you again in the near future.

With that, that will conclude today's conference. We do thank you for your participation.