Teva Pharmaceutical Industries Ltd (TEVA) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the NuPathe second-quarter 2012 earnings conference call. As a reminder, today's call is being recorded.

Now for opening remarks and introductions, I will turn the call over to Mr. John Woolford. Mr. Woolford, please go ahead.

Thank you, operator, and good morning, everyone. With me on this morning's call are Armando Anido, Chief Executive Officer, and Keith Goldan, Vice President and Chief Financial Officer. Terri Sebree, President, and Jerry McLaughlin, Vice President of Commercial Operations, will also be joining us for the Q&A portion of the call.

We announce second-quarter 2012 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. Armando will begin with an overview of recent corporate highlights, Keith will then provide a summary of our financial results for the quarter, and Armando 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. All remarks that are not historical facts are hereby identified as forward-looking statements and include among others statements regarding the adequacy of the activities undertaken to address the questions contained in the FDA's Complete Response Letter; our ability to obtain approval of our migraine patch; the potential benefits of and commercial prospects of our patch and other product candidates; the sufficiency of our cash and cash equivalents to fund debt service and interest obligations and continue operations until the end of the third quarter; the consequences of failing 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 and adversely from those reflected in such 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 express written consent. I will now turn the call over to Armando Anido, Chief Executive Officer. Armando?

Thank you, John, and thank you all for joining us this morning. It has certainly been an exciting few weeks for both the Company and for me. Having joined NuPathe as CEO less than three weeks ago, I wanted to take this opportunity to convey my enthusiasm regarding both the prospects for the Company and for NP101, our migraine patch.

For those of you who are unfamiliar with my background, I was most recently the CEO and President of Auxilium Pharmaceuticals. There I grew the company from a market capitalization of $200 million in 2006 to more than $900 million when I stepped down in December of 2011.

This increase was driven predominantly by the growth in topline revenues from $42 million in 2005 to more than $260 million in 2011 and the successful development and approval of the Company's second product.

Prior to Auxilium, I was Executive Vice President of Sales and Marketing at MedImmune, where we grew revenues to more than $1.3 billion over a six-year period.

Coming to NuPathe marks my return to the migraine space. I was Vice President Central Nervous System Marketing at Glaxo in the late 1990s, where I was responsible for the epilepsy and depression businesses, as well as the migraine franchise, including Imitrex, the most prescribed migraine medication in the world.

During my tenure, this franchise, spearheaded by the rapid growth of Imitrex, approached $1 billion in annual revenue.

I look forward to working in the CNS space again and leading the team at NuPathe to build a commercially successful, specialty pharmaceutical company.

During my first 12 months, I have four key priorities that are designed to increase shareholder value. First and foremost is to secure capital. In this effort, I am, of course, working closely with our CFO, Keith Goldan. As we announced this morning, we amended our credit facility to reduce the amount of unrestricted cash that we are required to maintain from $3 million to $1 million.

With with this amendment, we believe our existing cash and cash equivalents will be sufficient to fund debt service and interest obligations and continue operations until the end of the third quarter. To meet our capital needs beyond this point, we are considering multiple alternatives to ensure that we are properly capitalized to achieve our objectives.

My next priority is to work closely with the FDA to secure approval for our migraine patch, working alongside our President Terri Sebree. The NuPathe team did an outstanding job addressing the questions contained in the FDA's Complete Response Letter. We felt confident in the provability of our patch and believe the enhancements made and response to the FDA's questions have resulted in an even more compelling product for migraine sufferers.

In fact, in a recently completed usability study, 100% of patients were successful in applying the patch during a migraine, and these patients rated the patch very easy to use, rating it 6.8 on a scale of 1 to 7, with 7 being the easiest.

We resubmitted the NDA for NP101 on July 16, and we were advised that our resubmitted application was accepted with a PDUFA date of January 17, 2013.

My third priority is to work closely with Jerry McLaughlin, our Vice President of Commercial Operations, to prepare for the pending launch of our migraine patch. Jerry and his team have done a great job in building relationships with key opinion leaders, as well as in developing innovative sales and marketing plans focused on making the patch the standard for migraine patients suffering from nausea and vomiting.

Given my experience with Imitrex, I can attest to the impact of nausea and vomiting on the treatment of migraine patients, especially the difficulty many patients have taking oral therapies.

I believe our patch has the opportunity to change the treatment landscape for migraine by making a tolerable, non-oral triptan therapy available to the over 8 million patients who frequently experience migraine-related nausea and vomiting. We believe our migraine patch is a highly innovative and clinically differentiated product that is well positioned to address the significant disease burden impacting these migraine sufferers.

And, lastly, I will be working with Bart Dunn, our Vice President of Corporate Development and Licensing, to secure a US commercial partner to complement our efforts and help us reach a broader group of potential prescribers.

We are also seeking partners to commercialize the patch in markets outside of the United States.

Let me also quickly update you on our earlier stage pipeline. We remain on target to file an IND in 2013 for NP202, our biodegradable implant for schizophrenia and bipolar disorder. This product is expected to have a three-month treatment duration, which is designed to address current medication compliance issues.

Regarding NP201, our two-month implant for Parkinson's disease, we remain in discussions for possible partnerships.

At this point I would like to turn the call over to our CFO Keith Goldan to review our financial results. Keith?

Thank you, Armando, and good morning, everyone. We have reported financial results for the second quarter of 2012 earlier this morning. NuPathe reported a net loss of $6.2 million for the second quarter of 2012 compared with a net loss of $6.5 million for the second quarter of 2011.

Research and development expenses were $3.4 million in the second quarter of 2012 compared with $3.7 million in the second quarter of 2011. The decrease was attributable in part to reduced spending related to NP201 and NP202 and to higher CMC expenses in 2011 related to the purchase and manufacture of supplies for NP101.

These fluctuations were partially offset by additional 2012 expenses incurred, a response to the CRL received from the FDA in August of 2011. Selling, general and administrative expenses were $2.4 million in the second quarter of this year, in line with the $2.5 million spent during the same period in 2011.

Net cash used in operating activities for the six months ended June 30, 2012, was $11 million, primarily the result of spending for normal operating activities or to address questions raised in the CRL and the continued development of NP101.

During the same period, we also used $0.3 million of cash in investing activities, as well as $4.3 million of cash for financing activities, related to contractual debt repayments. As of June 30, 2012, NuPathe had $7.5 million in cash and cash equivalents and a working capital deficit of $4.9 million, compared with $14.6 million in cash and cash equivalents and $3 million of working capital as of March 31, 2012.

As Armando mentioned earlier, with the recent amendment to our credit facility, we now believe that our existing cash and cash equivalents will be sufficient to fund debt service and interest obligations and continue operations until the end of the third quarter 2012. We are currently considering multiple alternatives, including equity and debt financings and corporate collaborations and licensing agreements, to fund our operations and meet our capital requirements beyond that point.

I will now turn the call back over to Armando for closing remarks. Armando?

Thank you, Keith. Again, it is an exciting time at NuPathe. We remain confident in the provability and commercial prospects for our migraine patch and look forward to the PDUFA date in January.

In the meantime, we will work to appropriately to fund the Company and work aggressively to prepare for the launch.

We continue to believe that the patch will be well received by physicians and millions of migraine patients, especially the greater than 8 million patients who suffer from debilitating migraine-related nausea and vomiting along with their headache pain.

We, again, thank all of our stakeholders for their continued support. With that, we are now happy to take questions.

Operator, please begin the Q&A session.

(Operator Instructions). Michael Schmidt, Leerink Swann.

Thanks for taking my questions. So, Armando, with you now on board at NuPathe, I was just wondering what are some of the key new initiatives that you're bringing to the Company regarding the upcoming commercial launch of the product next year? What are some of the factors that attracts you to the Company?

Yes, that is a great question, Michael, and thank you for that. I think that I did a fair amount of due diligence on the Company before accepting the position. I think the two things that many of you all are probably very interested in knowing is one about the provability and the response to the CRL. I went through and dug deep into the diligence on that and, really after extensive evaluation of it, felt that the Company had done a great job in really addressing the questions and the comments made by the FDA, and felt that the Company had done the right things in the response.

And, fortunately, I think that I came at a time or started to evaluate at a time where they were almost complete with all of the responses and felt very comfortable that at the end of the day this is a product that is approvable, and it is something that I think the responses that the Company gave address the issues that the FDA put in their August 2011 CRL.

On the commercial front, also had a chance to take a look at the information that the Company had been going through. Jerry and his team have done a nice job. They have done a couple of quantitative studies, I think one with physicians, to understand the opportunity with physicians and their understanding of how they would position the patch. And also with patients. And I think the patient quantitative is very important. I think that in this marketplace patients really do have a significant say in how the products are used. And I think they are the ones that experience the nausea and vomiting, and physicians don't always hear it from the patients.

But I think that the data that was in the quantitative really gave me some very good feeling about the direction of where it was going.

I also then contacted some of my old friends in the migraine space, some of the key opinion leaders that I had spent a fair amount of time with when I was at Glaxo and really tried to get a sense for the market opportunity and what was changed -- what had changed -- and what some of the new compounds were. And they all kept coming back to NuPathe and the patch. That is something that was very differentiated and would be something that would play very well, particularly in those patients that suffer from nausea and vomiting.

And I think at the end of the day, it gave me the comfort that I think the Company has a great future ahead of it. I think the provability is something that will happen, and then I think the commercial potential is pretty significant. We are not talking tens of millions of dollars here, we're talking hundreds of millions of dollars of opportunity.

So I felt that it was the right time for me to jump in. I think what I bring to the Company is actually a commercial stage CEO experience. I have done this before. I have a good understanding of what it takes to take a company from post-IPO to make it successful. And I think that is what I'm going to bring to it.

I think the commercial team has done a great job. I'm not coming in to run the commercial department. I am here to help and make sure that we are doing all the right things and that we have the appropriate resources in order to make this product as successful as we possibly can.

Okay, great. And with regards to the launch, with the January PDUFA date now next year, do you set expectations for a first-half or a second-half launch?

Yes, I would say that you are probably looking with an approval late in the January 17 timeframe, I think that we are probably looking at about four months from that date for a launch. So I think that puts us towards the end of the first half of the year, assuming we get approval then.

And remember, that we have to have several things that have to happen postapproval. I think, first and foremost, we have to produce the product. I think that because we are looking to be very conservative when it comes to the use of cash, we will wait to produce a product upon approval.

We also will have to build out our commercial structure, our sales and marketing team. That will take some time to build it out, plus train them. And thirdly, we also have to have the promotional materials approved by the FDA before we go out the door, and that can take in some cases up to 120 days if not more.

Have you guys completed all of the manufacturing inspections necessary ahead of the commercial production?

Yes, that actually was done previously. So that has been approved at this point.

Okay, great. And then one more follow-up. You mentioned business development. I was just wondering if you are seeing any potential for the patch technology to be potentially developed for other drugs, other disease areas? (multiple speakers)

Yes, I think we do have the worldwide rights to it. So I think that there are some potential opportunities. To be quite honest, our focus right now is on the migraine patch, and I think that our efforts and energy are in getting the approval and then successfully launching this.

Okay, great. Thanks for taking my questions.

Bill Tanner, Lazard Capital Markets.

Thanks for taking the questions. First one, Armando, you did reference the usability study, 100% of patients. I think you said successfully applied the patch. And I was curious -- I don't recall whether human factors studies had been done previously.

Actually, Terri Sebree, our President, is here, maybe Terri can address that for you. Thank you.

Yes, we had done human factor studies previously last summer, and that also we had good usability. We had 63 or 64 patients successfully used it. This time we had 64/64, and they rated it as very easy to use.

And so, just the human factor study, that was done with the old design or with the new design?

The --.

For packaging.

The successful study was 64, 65 was with the new design.

Okay, okay. And then maybe just, Armando, you mentioned a partnership, obviously, to broaden the commercial or the market opportunity. I wonder if you can just maybe a high-level view as to what you hope to get out of it in terms of strategically for NuPathe.

Obviously, having some commercial effort, but also how you envision it being more broadly adopted.

Yes, I think that it is a great question. I think our focus at NuPathe will be on trying to get to the 11,000 physicians that represent about a third of the triptan scripts. And those are predominantly neurologists, headache specialists and then a sliver of Primary Care that, in essence, acts as headache specialists.

And so we think that we can get to that audience with a relatively focused sales team of about 100 sales representatives. I think to get to the other two-thirds of prescriptions, I think finding a partner that complements us I think would be appropriate. And I think that hopefully will get us to a much broader coverage and allow us to actually ramp it somewhat quicker and also be able to grow into a much higher peak.

And so you obviously have a lot of experience with triptans and with pills and, Jerry, I know, has got a lot of experience with patches. How do both you gentlemen see then the adoption of a patch such as 101? It is, I guess, not necessarily complicated, but it is a little bit different. How do you see the adoption by PCPs there, just in terms of what kind of ramp you might see or what you need to do to really make sure that there are well-educated as to how to use it and the benefits of it?

Yes, I think you hit on the key point. I think education is going to be critical cornerstone of our campaign. I think that it is not a difficult patch to actually apply, which I think the new design helps to make it even easier for patients. And I think, though, that we are going to have to educate physicians. We are going to have to educate patients on how to do it and how to use it, and with that, I think we will -- it will take some time. But I can't really comment too much in terms of the ramp. I think that there is a high unmet need for these patients. There is 8 million of them that have nausea on the majority of their attacks.

In fact, there is 1.5 million that vomit with every single attack. So I think those folks are looking for something different than what they currently have available to them, and I think that we are going to get some of those folks are going to come in relatively early and start using it. And I think that once they see that during a migraine attack, they actually, regardless of nausea and vomiting and the like, they're going to get relief from it.

So it should be good. Maybe Jerry -- Jerry is here, so he can comment some more on it.

Good morning, Bill. In our quantitative physician segmentation work, we identified a segment of primary care physicians, I think that is where you are going, who in the array of oral formulations today they are very limited in being able to treat migraine-related nausea and vomiting in the patient population. And the patch, just based on its contract and its delivery by bypassing the gut, is very attractive. And then in the product profile, what really jumps off the page and, in fact, was statistically significant due to superior to oral injectable or nasal was its ability to treat early in an attack, which is very important in migraine.

Too often, the patients can't take their tablets. The other was the overall tolerability. That is still a big concern for many primary care physicians. And then finally, the nausea free data that we had and we tend to have in our label clearly jumps off the page as superior to the other formulations. And so when you put that with the patch, it is a very attractive offering. And on top of that, clinicians are seeking more -- many clinicians are seeking more transdermal patches.

If we had this discussion 10 years ago, it would be a very different conversation, but today patches are moving to more frontline therapy.

And then it may be premature to actually even comment on it, but I'm just curious as you contemplate what the pricing could potentially be, this would -- would this be positioned then as not a rescue therapy necessarily but a second- or third-line therapy therein may be commanding a higher price than some of the brandeds or any high-level thoughts on that?

Bill, I think that -- actually I think you're right. I think that as we have had discussions with managed care, Jerry has had those discussions. Generic oral Imitrex is probably still going to be the first-line therapy. So that is going to cover Tier 1 patients.

We probably will fit into a Tier 3, and I think that right now I think in the conversations that have been had, they are expecting us to come in at a premium price, probably not too dissimilar to where Sumavel and the injectables are at this point.

Okay. Great. Thanks very much.

Elliot Wilbur, Needham & Company.

First question perhaps for Keith, just with respect to the amendment to the credit facility in terms of maintaining or a reduction in your unrestricted cash balances, is that a time-driven adjustment or event-driven adjustment?

It is event driven from the perspective that upon completion of a financing, the covenant reverts back to $3 million minimum cash balance.

Got it. Okay. Thanks. And I guess with respect to some of the changes that were made in the product design and configuration, were there any manufacturing changes that had to be made as well, and are there any additional steps that need to be completed in terms of ramping up to commercial scale, and any capital costs associated with that?

Now, there are not. It was a change in the secondary packaging of the product, and that was all.

Okay, and then question --.

And I think the key thing about the new design is that it really does address several of the questions in the CRL and I think really does make it any easier product for the patient to apply during a migraine attack. And I think that the FDA will view it very, very favorably upon doing their review now.

Okay, thanks. My last question for you, Armando, with respect to the possibility of a partnership for the product and specifically focusing more on primary care, how critical do you view that as to the initial launch success? Obviously, your negotiating hand seems to improve quite a bit once you actually have the approval in hand. But I am just sort of thinking about, do you think this is something that needs to happen simultaneously, or is this really something more that needs to be driven specialty first and then ultimately broadening out to primary care?

Yes, I think that I view this as we have the ability hitting on the specialty community and the top 11,000 prescribers, I think that we can make this thing pretty successful on our own. I think that the addition of a partner, I think, helps to complement that effort, and if it allows us to increase the ramp at a faster rate, hit to a higher peak, I think that is in the best interest of all of us and our shareholders.

So I think that we are really looking for a good partner. We look for somebody that can give us a breadth of coverage that is important to this market, and we are looking for somebody that this is going to be a significant piece of what they do.

So I hope that we are able to do that because I think that it only helps to increase the overall value for our shareholders.

All right. Thank you.

(Operator Instructions). Annabel Samimy, Stifel Nicolaus.

Thanks for taking my question. Most have been answered. But just quickly in terms of the marketing activities and the preparations you have been doing over the course of the last nine months while you have been resubmitting the NDA, I guess you have been to a number of scientific meetings. Have you had a chance to get any kind of near-term reception from the physicians? Because intuitively the patch is not necessarily an acute therapy, and I'm just wondering how much education you're going to have to do there to sort of change that mindset.

This is Jerry McLaughlin. Early on that was an education process. It is actually from a patient perspective; patients perceive patches work very fast. And historically, as you mentioned, patches from a physician standpoint have been for more chronic therapy. The enabling technology, our SmartRelief active transdermal technology, overcomes that perception. And when you back that up with our data with our PK data, along with our clinical data, we show a separation at 30 minutes, reaching statistical significance in one hour, both for headache pain relief and nausea freedom, which is quite important.

And that is right in what you would expect to see with an oral triptan. And so from that respect, it overcomes any perception.

What we are really excited about is with the new design at the most recent American Headache Society meeting we had a chance to review the new design with our -- several of our investigators, and the feedback was overwhelmingly positive around the ease-of-use and the attractiveness of the design.

Okay, great. And just one more clarification. You mentioned that all the manufacturing inspections or preparations have been conducted before. I think there was a slight -- if I recall correctly, there was a slight change to the patch, so there would be an automatic shutoff. How is that folded into all the various inspections and the things that the FDA had to conduct before potentially approving the product?

In terms of the enhancement, one of the enhancements to the patch was actually that there is now firmware that basically checks for the pad being appropriately aligned onto the patch. And once a patient touches a button to start to activate it, it will go through a quick cycle to make sure the pad is appropriately aligned.

If it is appropriately aligned, it starts going forward and activating it. So, from the standpoint of inspection, we don't believe that is a change that requires a new inspection of the facility.

Okay. And great. Then one more, if I may. In terms of the -- actually, I just lost my last question. So nevermind. Thank you.

Bill Tanner, Lazard Capital Markets.

Recalling that in the Complete Response Letter I think there was some commentary, some observation by the FDA about adverse skin reactions. And just going back through some of the transcripts, it sounds like that was -- is that entirely attributable to inappropriate application?

Absolutely. Bill, that is a great question, and I think that it was regarding the misapplication or actually the misalignment of the pad onto the patch. It previously did not have the firmware that allowed it to be tested, so that is a new advance that I think helps to do it.

But, secondly, the way the patch is not designed, actually sitting right on top of it, and all you are doing is pulling out the foil in between where the patch and the pad are, actually now will further minimize and probably eliminate the potential for a misalignment or misapplication of the pad on the patch.

So but all of those events of concern that the FDA had were related to a misapplication of the pad onto the patch.

Okay. That is helpful. Thank you.

And with no other questions in queue, I will turn it back to Mr. Anido for closing remarks.

Great. Thank you all very much, and we appreciate you spending some time with us this morning and hearing our progress, and we look forward to catching up and telling you of our future progress in the future. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's conference.