Teva Pharmaceutical Industries Ltd (TEVA) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NuPathe second quarter 2011 earnings call. After prepared remarks, we will be opening the call to the question and answer session. (Operator Instructions) As a reminder, today's call is being recorded.

It is now my pleasure to turn the call over to Mr. John Woolford. Please go ahead, sir.

Thank you, operator, and good afternoon, everyone. With me on this afternoon'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 second quarter 2011 financial results today after the close 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 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 INDs for our other product candidates, 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 our Form 10k for the year ended December 31, 2010 and our Form 10-Q for the quarter ended June 30, 2011 which are 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 expressed written consent.

I will now turn the call over to Jane Hollingsworth, the Company's Chief Executive Officer. Jane?

Thank you, John, and good afternoon, everyone. Thank you for joining us today. Let me begin with a few personal comments. As we continue our rapid march toward launch of our first product, I am proud of our progress to date and genuinely excited about our path forward. During the quarter, we continued to forge a diverse and talented team and to develop and quickly strengthen a foundation for the value proposition of our exciting migraine patch. Let me share some of the highlights of the quarter.

We demonstrated significant progress in our preparations for a successful launch of the patch. We presented clinical data at the premiere headache meetings and continued to grow awareness of migraine related nausea among physicians. We also significantly strengthened our commercial team through the addition of two experienced and strategic sales and marketing leaders. Finally, we added cash to our balance sheet through a refund of our NDA filing fee and a term loan on our credit facility. As you know, the PDUFA date for migraine patch is August 29. I can appreciate that many of you would like a play-by-play of our dialogue with the FDA; however, it is our policy not comment on our discussions with the agency. As the FDA continues its review, we remain focused on building our commercial infrastructure and preparing for launch in the first half of 2012.

We started planning for this launch in 2007 when we brought Jerry McLaughlin on as our head of commercial operations, and we have continued that preparation ever since. During the quarter, we announced two key hires on our commercial team. Bob Murphy as vice president of sales and David McGovern as head of marketing. Both are seasoned executives with over 40 years of combined experience. Both also most recently came from Pfizer, Bob via the King acquisition and David via the Wyeth acquisition. They represent exactly what we were looking for when we set out to build a world-class commercial organization. A combination of industry experience, proven success at building new teams and launching products and understanding of the current industry environment, and importantly, a passion and excitement for what we're doing.

We've also added more resources and managed markets, sales operations and scientific affairs, keeping us right on track with our launch plan. During the quarter, we participated in two key scientific meetings dedicated to headache. First was the American Headache Society, or AHS, annual scientific meeting in Washington in early June. In addition to presenting clinical data from our open label trial, we used the opportunity to highlight the prevalence and impact of migraine related nausea, or MRN, on patients and on their ability to take their medication when experiencing nausea.

We were very cursed by the feedback. Physicians and to come away for the greater understanding of the implications of MRN on their patients. Elevating awareness and understanding of the tremendous impact that MRN has on patients and on their ability to treat their migraines remains a key goal for us in this pre-launch period and beyond. Our efforts to elevate this awareness were boosted at AHS by Dr. Richard Lipton's presentation of data from an analysis of the American Migraine Prevalence and Prevention Study, or AMP study.

The AMP study is the largest study of migraine and headache sufferers ever conducted. A landmark study is based on data compiled from 2004 to 2009 and examined nearly 163,000 Americans selected to be representative of the US population. Dr. Lipton reported several important findings in this data. First, half of all patients that experienced migraine and nausea experienced frequent MRN which is defined as nausea in at least 50% of their migraines. These frequent MRN patients tended to be significantly less satisfied with their migraine medications. Specifically, these patients reported greater dissatisfaction with medication effectiveness and side effects and experienced more interference in work, family, and social life. In Dr. Lipton's own words, these findings suggest that there are millions of people who, because of migraine related nausea as well is pain, are having a hard time finding relief from their usual migraine medication.

At AHS, we prevented additional migraine patch data from our 12 month open label trial known as MP101-008. Overall, the data demonstrated consistent relief of both migraine headache pain and related nausea throughout the entire 12 month course of the study. The patch also maintained a consistent safety and tolerability profile with success of usage over the 12 months, and there was no cumulative skin irritation with continued patch use.

We also presented data from this study at the Congress of the International Headache Society, or IHS meeting in Berlin in late June. In this study, the incidence of triptan-related adverse events such as chest discomfort, flushing, feelings the pressure and numbness was very low. During the first month of the study, only 1.6% of patients reported triptan-related adverse events. During the remaining 11 months of the study, months two through 12, there was not a single incidence of triptan-related adverse events. Overall, these data, in addition to supporting our pivotal phase 3 results, reinforce our belief that the patch, when approved, will provide an attractive option for the millions of migraine patients who could benefit from a treatment that consistently addresses both migraine headache pain and related nausea.

Looking beyond NDA approval, we intend to bring on a sales force of approximately 100 representatives to call on headache specialists and neurologists. As we have said previously, we are also evaluating the benefits of partnering to address the non-specialist segment of the market. We continue to believe the proper timing of this decision is after NDA approval. Key to our decision will be deriving maximum value for our migraine patch and the commitment of any partner to the product.

Moving to our earlier stage pipeline, we have 2 other products in development. MP201 for the contiguous symptomatic treatment of Parkinson's disease and NP202, the long-term treatment of schizophrenia and bipolar disorder. Both products utilize our second proprietary technology, long-acting delivery or LAD. A small biodegradable implant designed to be injected into the subcutaneous base and to deliver a therapeutic dose for up to 3 months. While both of these 505B2 products are still early in development, we do believe LAD has the potential to improve efficacy, medication compliance and certain dose-related adverse events.

MP201, our product for Parkinson's disease is IND ready with a full pre-clinical package ready to go. Our plan is to file the IND once we have a partner. For NP202, our product for schizophrenia and bipolar disorder, pre-clinical development remains ongoing with a 2012 IND filing planned. With that, I would like to turn the call over to our chief financial officer, Keith Goldan. Keith?

Thank you, Jane, and good afternoon, everyone. We reported financial results for the second quarter and filed our Form 10-Q with the SEC after the markets closed today. For the second quarter of 2011, we reported a net loss of $6.5 million compared to a net loss of $5.6 million for this second quarter of 2010. For the first six months of 2011, NuPathe reported a net loss of $10.2 million compared to a net loss of $9.6 million for the six months of 2010. Research and development expenses were $3.7 million in the second quarter of 2011 compared to $3.3 million in the second quarter of 2010. The increase was primarily due to increased expenses for general development, as well as higher costs for medical affairs.

Selling, general, and administrative expenses were $2.5 million in the second quarter of 2011 compared to $900,000 for the same period in 2010. This increase was due to higher commercial infrastructure expenses, as well is higher expenses related to operating as a public company. We ended the quarter with $36.2 million of cash compared to $38.9 million as of December 31, 2010. During the quarter, we strengthened our balance sheet by adding $1.5 million through the refund of our NDA filing fee and $10 million through a term loan under our credit facility, bringing the total amount owed under our facility to $14.8 million.

Recently, we announced an after market common stock purchase agreement with Aspire Capital Fund. Upon execution of the agreement, we sold 70,721 shares of common stock to Aspire at a price of $7.07 per share for proceeds totaling $500,000. Over the 24 month term of the agreement, Aspire is committed to purchase up to an additional $29.5 million of NuPathe common stock. We may direct Aspire to make such purchases using a specified formula based on prevailing market prices as long as our trading price is not less than $4 per share. Importantly, Aspire do not have the right to purchase shares on demand. As consideration for entering into the purchase agreement, we issued 84,866 shares of common stock as a commitment fee.

Because NuPathe controls the timing and the amount of any sales of stock to Aspire, we have the flexibility to use this facility if and when appropriate. We see this arrangement as supplemental to our overall capital strategy, and this agreement in no way limits our ability to raise capital through other financing methods. We continue to believe that our cash will be sufficient to fund our operations and meet capital requirements into the expected commercial launch of our migraine patch in the first half of 2012. Nevertheless, consistent with our plan for a robust launch, we expect to add additional capital to our balance sheet prior to launch.

I'll now turn the call back over to Jane for closing remarks. Jane?

Thank you, Keith. Before opening the call up to questions, I would like you all to know that we remain very focused on execution and that we are working diligently and productively toward making the launch of our first product a success. We at NuPathe are driven by our desire to help the many migraine patients who are facing debilitating symptoms of this disease. This drive, in combination with the dynamics of the migraine market and the need for a product like ours bodes well for the future success of NuPathe.

That concludes our preferred remarks. We are now happy to answer your questions. Operator?

(Operator Instructions)

Elliot Wilbur, Needham & Co.

Thanks, can you hear me all right?

Yes, we can.

Hello, thanks, good afternoon. Jane, just real quickly, first question is post the American International Headache Society meetings in June, just wondering, any key takeaways or impressions based on Company interaction with the physician community that alters, changes, or supports how you are thinking about Zelrix, its positioning in the marketplace and any potential new ideas that were brought to the table in terms of commercialization strategy?

Sure. Well, I think, first thing is the AHS meeting, as well as the HIS, and even the neurology meeting which preceded that, have really focused us on the appropriate positioning for the product. We've mentioned the AMP study when we went through our prepared remarks; and that's something that really came to light this year and we discussed with a lot of these physicians at these 3 meetings, including the AHS meeting. In addition, a different study that really highlighted the fact that nausea is a predictor of poor response to oral treatments was a major light bulb going off for a number of these physicians as that data became obvious and known to more of them during these meetings. So, I think the positioning is clear for the product -- it's migraine related nausea is the key here, many patients suffer from it, we know that, and raising awareness of the physicians to the real problems their patients are having is becoming easier for us with this data now becoming more well-known.

Okay. Fair to say you think that potentially the new data could, in fact, influence prescriber behavior?

Absolutely. As one of the opinion leaders said when they were looking at our data relative to this data, meaning, if nausea is a predictor of poor response to oral treatment, how does NP101 or our migraine patch indicate a response? And, what we see in our data is, it doesn't matter. So, whether you have not nausea or not, you get a response to our migraine patch, and that was a big eye-opener for some of these physicians.

Okay, thanks. And then I just have 2 questions for Keith. In terms of some of the expense line items, specifically R&D directionally, what should we be thinking about for the balance of the year? And then, also, just related to the recent common stock financing arrangement, I guess -- and these are my words, not yours. Certainly don't sound like a Company that is lacking confidence in terms of timing of FDA approval. But, some would argue that, that arrangement came at a rather odd time, given the potential signaling effects. Keith, maybe if you want to elaborate on it a little bit or comment on the Company's thinking about entering that arrangement ahead of, potentially, very positive inflection point.

Sure, I can answer those questions, Elliot. I'll take them in order. With regards to R&D expenses, while we are not giving specific guidance, I'll give you some comments that could maybe help you shape your own opinions. We, in addition to Zelrix, NP101, we also have NP202 in our pipeline that we are actively progressing up. As we stated in our earnings release, that's our product that -- treatment of schizophrenia and bipolar disorder, and that's advancing well in preclinical development. But, the majority of growth in the R&D line, we expect to be really from the addition and growth of our medical affairs department as we prepare for launch.

So, a lot of contingent expenses specific to medical affairs are going to be triggered after approval. Additionally, we do have a phase 3B and phase 4 plans for Zelrix, and those are also -- a lot of those expenses is contingent upon approval. So, we expect to see ongoing investment in the R&D area certainly going forward.

NP201, we have said that we will -- we are holding off on moving forward with an IND with that product until we secure a partner. Specific to your question on the timing of the Aspire transaction, certainly, as you say, we were not trying to signal anything. We basically see the deal as good corporate housekeeping. Just good to have in place. As we have stated, we are not required to put any shares to Aspire under the deal, and they are not -- and they do not have the right to demand to purchase any shares. So, notwithstanding the timing around PDUFA, or expected approval of our product, we just believed it was good corporate housekeeping to get the deal in place.

All right, thank you, those are my questions.

Bill Tanner, Lazard Capital Markets.

Thanks for taking the question. Jane, I think you probably may have mentioned it on the last quarterly call, could you remind us where you are with respect to the manufacturing, how many units have been manufactured thus far? If you don't want to comment on that, what is the turnaround time? And then, at launch, what kind of a stockpile or inventory would you have?

Sure. From a manufacturing perspective, we are not giving exact numbers, but we have been manufacturing a lot of batches of this product over a number of years now. So, we feel very comfortable with the volume that we have available to us from LTS, our manufacturer. That includes any drug product or patch or device components regardless. So, when we look at our forecast, and we look at our ability to manufacture, we have well more than we need, either for launch year or beyond. And then, expanding over time, which we would think we might need to do as we go for years into this launch, we have that capacity; all we would need to do is put another machine in place at LTS, and we will have plenty of time to do that if we need to. Capacity-wise, we are in good shape, and timing-wise, we are in good shape for a 2012 launch.

And as -- [sounds as we're] in the front of a train. And, as I recall --

Yes, it's going right by us (laughter).

And as I recall, it's a -- is it a 2-year shelf life? Around there?

We won't know specifically until we get approval what the shelf life is, but our data show that we should expect that. And, over time, it could be more.

And then, one last question, not getting into the play-by-play thing, but just out of curiosity, with respect to any kind of, how complex, any kind of a like a REMS program is going to be or any thing like that, any kind of a safety monitoring program? Just a general snapshot of it?

Bill, I appreciate the question, but I'm afraid at this stage of the game, we just -- it's not a good idea to be talking about discussions with the FDA. That would include any REMS or anything along those lines.

Okay, all right, well, good luck on the 29th.

Thank you.

Annabel Samimy, Stifel Nicolaus

Hi, this is actually Elaine Olson Gaiman for Annabel Samimy, and my first question is about the outreach programs. We understand the peer-to-peer physician programs, but could you talk a little bit about the outreach programs that you're planning to patients? And then, the second question is in relation to the agreement with Aspire. How should we think about the price that NuPathe would be selling the stock to Aspire at, the original batch? Was it $7.07 but going forward, would it be at discount to the market price? Or could you elaborate on that a little bit? Thank you.

Sure, I think what I'll do is I'll turn the commercial question over to Jerry McLaughlin, and then I will ask Keith to follow up on the Aspire.

Yes, Jerry McLaughlin. Around the question of outreach to patients and engaging patients, we look at the data from the AMP study, which was ended in June, and we think that's extremely powerful data and really underscores how debilitating migraine-related nausea is, and how many millions of patients really suffer from it unnecessarily and the need for potential treatment options that can improve their lives. We've already begun the process of reaching out from a disease awareness standpoint, and we will continue to do so as we lead up until the launch of the product.

Once we launch, we intend to really focus on a direct-to-patient initiative through a lot of electronic means using social media, direct marketing approaches. What we like about this target audience is it's predominantly female and it's predominantly ages 25 to 50. And that's very target rich, it's a very involved patient group --they are on line, they are conversing with one another, they are our thought leaders within the field of migraine from a patient perspective. And, we intend to continue to build our relationships with them, and we think they could be real helpful from a disease awareness perspective and, then, eventually will help Zelrix in the marketplace.

And, with regard to your question about the Aspire transaction, there are 2 methods by which we can elect to put shares to Aspire -- one method is at known prices, based on the prevailing market price; the second is based on a 5% discount to the volume weighted average price. But, in order to help you with your model, unfortunately, at this point, we are not giving guidance as to how or when we would use the facility. Again, we put it in place, as I said before, as what we thought as good corporate housekeeping, and we will be prudent as to how we draw down capital over the 24 months.

Thank you, that is helpful. Just a quick follow-up on the Aspire. Would it potentially allow you to maybe raise less in the fourth quarter of 2011? Or, if you can't comment on that, that is fine.

We look at it all holistically, as probably your question alludes. So, obviously, there is a certain amount of capital that we would like to have, and it will be opportunistic as well. And, we look at a variety of sources for that. The Aspire is one, but not a primary source, as Keith mentioned. So, clearly, if we get capital from one avenue, we'll need less from another.

Right, thank you.

(Operator Instructions)

Michael Schmidt, Leerink Swann.

Hi, thanks for taking my question. Just another follow-up on the timing of the launch, assuming approval in August. When do expect the bulk of the sales force to come on board? Do you expect commercial revenues already this year, and how many physicians are you going to be targeting initially?

We continue to guide toward the first half of 2012 launch, and what we have been saying is, from a rep perspective, we would not bring those reps on until closer to launch. So, probably around 30 days before launch we would have them all on board full time. So, I think it is safe to say that 2012 is what we're looking at in terms of product on the market, revenue in, as well as rep expense on the books. Jerry, do you have anything to add?

Yes, that field sales force of 100 representatives that Jane had mentioned during the remarks earlier, they will focus on the neurologists and headaches specialists predominantly. It's 3% of prescribers, or about 10,000 doctors who drive 30% of the market directly. And, if you dig into that, we've just completed a quantitative physician segmentation study, which will help us further segment that market and be very fine-tuned with our targeting. So, we think that will support a nice ramp at launch and the ability to get out of the gate strong by targeting the right physicians with the right message and targeting 30% of the market. What we think will happen, eventually, is many patients will filter through a headache specialist or neurologist, but then eventually are managed by their primary care physician. And we think that gives us an opportunity to really impact a much larger percentage of the market than the 30% that we will be hitting directly.

Thanks. And, on the manufacturing side, what are -- do you have contractual minimums in place with your suppliers, and what gross margin can we expect to see initially during the launch?

As is true with probably a lot of manufacturing arrangements, that goes on a rolling basis. So, we are in good shape there. We don't have any commitments that we think aren't appropriate at this stage of the game.

And, we are not giving any guidance right now in terms of gross profit margins.

Okay, great, thanks for taking my questions.

And, seeing no further questions at this time, I would like to turn the conference back over to Jane Hollingsworth for any additional or concluding remarks.

Well, thank you all for joining us this afternoon. We look forward to speaking with you again in the near future. That concludes our call. Goodbye.

Ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.