Teva Pharmaceutical Industries Ltd (TEVA) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen and welcome to the NuPathe Fourth Quarter Earnings Conference Call. After prepared remarks, we will be opening the call to a Q&A period. (Operator Instructions).

As a reminder, this call is being recorded. It is now my pleasure to turn the call over to Mr. John Woolford. Please go ahead, Mr. Woolford.

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 2011 financial results today before the open of the US financial markets. For those of you who 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 others, statements regarding our ability to address the questions contained in the FDA's complete response letter and obtain approval of our migraine patch; the timing of our NDA resubmission; the potential benefits of and commercial prospects of our patch and other product candidates; the sufficiency of our cash to fund future operations and capital requirements; our ability to obtain additional capital; 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, 2011, which is on file with the SEC and available through the investor relations section of our corporate website.

As a result, you should not rely on any such forward-looking statements. While the Company may elect to update 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 morning, everyone. And thank you for joining us today.

Since our last conference call, we have made substantial progress toward making our migraine patch available to the millions of patients who suffer from the debilitating symptoms of this disease, especially headache pain and migraine-related nausea, or MRN. At present, we remain focused and on completing all work related to our NDA resubmission following the receipt of the complete response letter, or CRL, from the FDA on August 29.

Since that time, we have had productive interactions with the FDA. We very much appreciate this constructive dialogue with the agency as we prepare our NDA resubmission. These discussions have increased our confidence in our ability to address all of the questions raised in the CRL in a timely fashion. As such, we remain on track to resubmit our NDA in the first half of this year and expect a six-month review.

During our last call we outlined key questions raised in the CRL and the tasks needed to address them. First, we knew that we needed to perform additional characterization of the drug product to confirm uniformity of dosage. As I indicated, we did not see any evidence of lack of uniformity of dosing in our clinical program. In fact, one of the hallmarks of our patch throughout the development program is highly consistent pharmacokinetics from patient to patient and study to study.

Nevertheless, in order to ensure that we completely address FDA's questions, we are implementing a minor packaging modification to demonstrate uniformity of dosage. As a result, we will also be conducting a new patient usability study with the revised packaging.

We also discussed the development of an in vitro method that is more closely correlated with the clinical data than the method we submitted in our NDA. This in vitro method will be used to qualify manufactured product prior to release for commercial use.

I'm happy to report that we have successfully developed a new method and validation is ongoing. We believe this new method meets FDA's criteria and we will include this method in our resubmission.

Also, as mentioned during our last call, we are developing a device enhancement to prevent skin adverse events that could result from incorrect patch application. The device enhancement will prevent the patch from turning on if the patch is incorrectly applied. To date, we have incorporated this enhancement into the patch, tested it extensively on the bench and in pilot human studies, and are preparing to initiate a final small Phase I to confirm the performance.

In addition to this Phase I study related to the device enhancement, we indicated we would conduct another Phase I bioequivalent study, as the clinical site where we conducted the original bioequivalent study did not retain product samples. This study has been successfully completed.

Finally, we are also updating our justification for a waiver for a dermal carcinogenicity study. In order to qualify for a waiver, we must demonstrate that sumatriptan is not passively absorbed through the skin. As we have significant clinical and preclinical data confirming that there is no passive absorption through the skin, we expect that this requirement will be waived. So, given the progress I've just outlined, we feel confident in the resubmission timeline and the ultimate approvability of our patch.

Now, as you know, we also continue to prepare for launch. We've completed our physician and patient segmentation research, and identified and prioritized geographic territories across the country that will drive sales at launch. A key component to our strategy is to engage and activate patients to discuss MRN with their physicians.

The facts are very clear. There are 7 million patients who are prescribed migraine medication, most often orals, who often will not take their medication on time or at all because MRN gets in the way. We also know from independent third-party research and our own market research that patients with MRN want to be heard, and are looking for migraine medication that treats both their headache pain and their MRN.

Additionally, we know from our extensive quantitative market research that physicians view our patch as superior to oral, injection, and nasal therapies for patients with MRN.

As a migraine sufferer myself, I relate to these patients. Day in and day out, I hear their stories. Whether I am speaking to experts, attending a meeting, or even out to dinner, the mere mention of migraine tends to spark intense conversation about the disability of the disease and the tremendous benefits of a patch. This daily interaction corroborates our market research and further convinces us of the significant commercial opportunity.

In addition, we continue to focus on our business development efforts to access the broader commercial opportunity. By leveraging our partner's commercial depth, our overall addressable market will expand and our ability to drive revenue will accelerate. This is true for the US market as well as for markets outside of the US. We look forward to updating you on our progress in business development.

Now, moving to our earlier stage pipeline. We have two promising candidates in preclinical development, each addressing the needs of a significant global population of underserved patients. Both candidates utilize our second proprietary technology, LAD, a novel, long-acting, biodegradable implant.

NP202 addresses the serious and long-standing problem of noncompliance with medication for patients with schizophrenia and bipolar disorder. As a reminder, NP202 delivers a steady, therapeutic dose of risperidone, a leading atypical antipsychotic, over a three-month period, extending delivery well beyond the currently available two- to four-week treatments. We continue to advance this program and expect to submit an IND in 2013.

Successfully bringing this three-month therapy to market will be a true breakthrough for patients with schizophrenia and bipolar disorder. Importantly, we recently announced the allowance of a US patent for NP202 that, when issued, will provide patent protection through 2025.

NP201 addresses the issue of intermittent dosing of oral medication in patients with Parkinson's disease. NP201 also uses LAD, delivering a steady therapeutic dose of ropinirole over a two-month period. We are progressing with our efforts to seek a development partner for this product.

And now, I like to turn the call over to our Chief Financial Officer, Keith Goldan. Keith.

Thank you, Jane, and good morning, everyone. We reported financial results for the fourth quarter and full year this morning. In addition, we've also filed a Form 10-K with the SEC.

For the fourth quarter 2011, we reported a net loss of $5.6 million compared with a net loss of $6.2 million for the fourth quarter of 2010. For the full year of 2011, we reported a net loss of $23.2 million compared with a net loss of $24.4 million for the full year of 2010.

Research and development expenses were $3.2 million in the fourth quarter of 2011, compared with $5.2 million in the fourth quarter of 2010. The decrease was primarily the result of the $1.5 million NDA filing fee for NP101 in the fourth quarter of 2010. As a reminder, the NDA filing fee was subsequently refunded to us in the first quarter of 2011.

The fourth quarter of 2010 also included approximately $0.9 million for a 12-month, repeat use trial for NP101 that concluded prior to the fourth quarter 2011, and also $0.6 million in expense related to both NP201 and NP202. Partially offsetting these costs were $0.6 million in expense related to two NP101 trials initiated in the fourth quarter of 2011.

Selling, general and administrative expenses were $1.9 million in the fourth quarter of 2011 compared with $1.6 million in the same period in 2010. This increase was due to higher commercial infrastructure expenses, including the growth of pre-commercialization activities related to our migraine patch.

In 2011 NuPathe used $20.9 million of cash for operating activities and $3.5 million of cash for investing activities, most of which related to the funding of commercial manufacturing equipment for our migraine patch. Additionally, net cash provided by financing activities was $8.6 million, primarily from additional debt financing obtained under the Company's credit facility, partially offset by scheduled debt repayments.

We ended the year with $23.1 million in cash and cash equivalents compared with $38.9 million as of December 31, 2010. We expect our existing cash and cash equivalents will be sufficient to fund operations, debt service, and interest obligations into the third quarter of 2012.

We are considering multiple financing alternatives, including equity and debt financings; corporate collaborations; in-licensing agreements; as well as other non-dilutive financings to fund our operations and meet our capital requirements beyond that point.

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

Thank you, Keith.

So in summary, we plan to resubmit our NDA in the first half of this year, and feel confident about the ultimate approvability of the migraine patch. We expect that the patch will be well received by the millions of migraine patients who suffer from MRN along with their headache pain. We feel passionately that focusing on the needs of patients will create value and drive our Company to success, but we thank all of our stakeholders for their continued support as we move along this progress.

Now that concludes our prepared remarks. We are now happy to answer your questions.

(Operator Instructions). Joseph Schwartz, Leerink Swann.

Thank you for providing all of the detailed information. It's very helpful.

I was wondering if I could ask first, on the minor packaging modification and the usability study that you need to run next, can you talk about what this relates to?

Sure, and good morning, Joe; thank you for the question. So, as you have heard us discuss, the idea of the storage of the patch and how the FDA gets comfortable with that has been a topic relating to really the functionality of the patch, if it is stored in different ways. So, as we have discussed with the FDA over the last month, the best way to approach that, we have this idea of changing the packaging in a minor way to see if that would really address the question.

We've reviewed it with the FDA. They like the idea. They are comfortable with that idea and we feel good that that addresses their question.

The upside beyond that really is that as we talk to the commercial people, it makes it a little bit easier for patients to apply the patch. So, we feel good all the way around that it could addresses FDA's questions and also makes it easier for patients ultimately when the product is out in the market.

So, maybe just to explain a little bit for you, Joe, if you recall that the patch initially was in sort of a book form. So the patient would open the book, two sides to the packaging. The patient would peel off the foil from the medication pads, close the book to attach the medication pads to the patch and then put the patch on.

What we have done is eliminate the opening book. So now the patch, both sides are sealed, completely sealed, so the patient doesn't have to open the book. They just pull out the foil without opening it. And that simplifies the process and lends comfort to the FDA. And that's why our commercial folks like it as well.

So that is what that is. And since there is a change to the way the patient puts the patch on, that's why we are engaging in more usability work before we resubmit.

I see. That's very helpful, thank you.

And on the new assay you've developed, to confirm that the product conforms to your release specs, can you talk about this new method and how confident you are that it will be confirmed and be what the FDA is looking for when you refile that?

Sure, you're speaking about the new in vitro method to --

Exactly.

-- release the product for commercial use, right?

Yes.

We are very confident. And the reason is because we have had discussions about what the FDA is looking for.

As you may recall, the patch that we have here works only with the active technology. There is no passive delivery of sumatriptan through the skin. So, when you are developing an in vitro method that is in an artificial setting, the challenge is how to replicate that in an artificial setting; in other words, no passive delivery.

So, when we submitted our in vitro method originally, we weren't as concerned with that because we didn't think the FDA was so concerned about it. Subsequent discussions have made us understand that they would prefer not to have passive delivery. And so, that is what we've developed in this method.

And we've tested it multiple ways. We feel very good about it. So we don't expect any issues at all in that.

Okay, great. And maybe I can just sneak one broader, bigger picture question in. As far as your discussions with the FDA, it's encouraging to hear that they have been productive. Can you summarize which groups within the FDA have you been most engaged with? It seems like a lot of the questions that you're getting now could have potentially been handled during the normal course of a standard review cycle.

And now, if you file toward the end of the first half, that places you -- well, places a lot of the review time during the summer months, which could theoretically be less productive at the FDA. So, who have you been talking to? Are you confident that it's everyone you need to be in front of? And what can you do to keep the agency -- everyone there, more engaged this time around?

Sure. Well, as you correctly point out, the engagement with the FDA is really important to having them understand what we're doing and vice versa. So, prior to the original PDUFA date, we have had less interaction than we've had since then. And one of our primary goals after we received the complete response letter was to really do everything we could possibly do to increase that interaction, so that we could have a clear understanding of what their concerns were and they could have a clear understanding of what we were doing before we resubmitted.

So, we have been very fortunate. They have been exceedingly open to that, very forthcoming with their ideas, and very open to our ideas. So we feel like it's a very healthy, scientific-based, rational discussion, which is of course, all you can really ask for.

So that has been a change, there's no doubt about it. That's been a change since the last review cycle. And I think just -- the FDA is really much more focused on this now, which we very much appreciate.

So we are meeting with and talking to anyone we feel we need to meet or talk to. So we haven't been really stymied in that respect at all, which is a huge help.

That sounds great. Keep up the good work.

Thank you, Joe.

Liana Moussatos, Wedbush Securities.

Thanks for taking my question. You mentioned two small Phase I studies yet to be completed. When do you think you can start them? How long will they take?

Well, the one, as we pointed out, was a device enhancement. And that is a small Phase I, typical Phase I numbers in the twenties somewhere, probably. And that, as you may recall, is really just to test whether the device enhancement works as it is intended to work. So it is a relatively simple, short Phase I study.

The other one we are calling the usability study, which is just a classic usability using the new packaging. So we don't expect either to take very long, and we are nearing the point where we are ready to start those.

Thank you.

Elliot Wilbur, Needham & Company.

First question, actually, for Keith. Just looking at the trend in SG&A expenses, it looks like this quarter you are down maybe about $1 million from kind of the peak spend rate during the course of the year. Obviously, there's been some scale-back of some of the pre-launch investment in NP101, but I'm just wondering if there's been any sort of permanent reduction to the SG&A infrastructure that might also account for that reduction in overall spending.

Good morning, and thanks for the question, Elliot. You are absolutely correct that the reduction that we saw in Q4 was partially related to the pullback in the pre-commercialization expenses.

If you look at the trend in SG&A, it's been relatively consistent. And here in the first quarter there's likely to be some trade-off. The reduced commercial prelaunch preparation expenses are going to be replaced with some additional work to respond to the CRL. But all in all, we expect the trend to be relatively consistent.

Okay, and then a question for you, Jane, as well. I guess one of the upside advantages of maybe the -- if you can call it that, of the delay in NP101 is that you've had a lot of time to learn about the product, get the feedback from the physician community, and also watch the performance of some other next-generation migraine products that have been launched into the marketplace.

And -- just wanted to know if there's been any sort of change in terms of your game plan, of how you plan to attack the market based on some of this feedback and watching the performance of some other products.

Well, Elliot, I definitely wouldn't say change. But you are right that this time provides us with opportunity.

So, what we have been able to do is complete a lot of this market research, a lot of the segmentation, a lot of the work on identifying the most productive, most profitable territories and where we can really make a lot of progress at launch. So the external expense has gone down somewhat, but we have a stellar team internally that we are now using in a little bit different way than we would have used had we been on the market.

So the way I look at that is it provides a lot of education; a lot of information; and a lot of ability to understand the market that we might not have otherwise had for our commercial as well as scientific teams.

So what that tells us is we feel much better prepared for launch. We feel like the launch will be that much stronger and that much more efficient. And I have Jerry here with me as well, so I'll ask him if he has anything else to add.

Yes, and we get more bullish on the opportunity all the time. There is a growing focus on migraine-related gastrointestinal issues in the market.

And this time has allowed us to stoke those embers and support the awareness around nausea and its impact on patients, this tremendous disability; the economic burden that folks with nausea -- how much they cost the system in terms of hospital stays and missed work. So we were able to pull that altogether and start to build a broader story for the patch that is really resonating with physicians.

And as Jane alluded to earlier, every time we touch a patient, there is another potential individual with our disease state awareness that we are conducting now. So, this time has been tremendously beneficial for the commercial team.

Okay. Then I have one last question for Keith and/or Jane.

I think about six months ago you guys entered into a stock purchase agreement with -- I believe it was Aspire Capital for around $30 million. I think there was initial upfront investment of about $0.5 million. But I don't believe that any additional shares have been sold pursuant to that agreement.

I'm just wondering, given the obvious need for financing here in the near term, based on all the multitude of restrictions around that particular stock purchase agreement, how viable that is in terms of a financing option versus other more direct means.

Yes, thanks for the question, Elliot. We always looked at the Aspire facilitate as one of tools in our financing armamentarium, if you will. We are going to continue to consider that facility as an alternative, but it's unlikely that that's going to be the ultimate solution to our financing.

It is quite viable, Elliot, however. So we can use that and we do consider that with the other options.

All right, thank you.

(Operator Instructions). Yelena Ofengeym, Stifel Nicolaus.

Thank you for taking my question. I would like to touch on that financing question.

What are you thinking in terms of that? Do you view corporate collaborations and licensing agreements as a potential option that is maybe preferred to a debt or equity raise? And are you expecting to establish a potential partnership ahead of the Zelrix launch, either on Zelrix earlier pipeline?

Thank you, Yelena. Clearly a partnership has advantages, and we are having discussions about that right now. We will continue to have those discussions.

One thing that we are very committed to is figuring out the best way to build value and to add the necessary capital to our balance sheet. So we will not just do a business development partnership because we think it is non-dilutive, and therefore an easier way to raise capital.

We want to balance the short-term and the long-term value here. So if we are fortunate to find the right partner at the right time, and I will say that we are a little bit bullish on that right now, because we are having good discussions, then obviously, we will pull the trigger.

But the key to any partnership is building value and having the right partner. We have all seen partnerships that don't work. We have seen partnerships that do work. So we don't want to and will not fall into the trap of doing something just for the sake of doing it.

Right. And when you talk about the current ongoing partnership discussions, is that mostly in relationship to Zelrix? Or is that on the earlier pipeline as well?

That is correct. It is mostly related to our patch, although we are having discussions on the earlier pipeline as well.

Okay, thank you.

And at this time, I will turn the call back over to Jane Hollingsworth for any additional or concluding remarks.

Well, thank you all for joining us this morning. We look forward to speaking with you again in the near future. Have a good day.

And again, that does conclude today's call. We do thank you for your participation.