Titan Pharmaceuticals Inc (TTNP) 2012 Q2 法說會逐字稿

Thank you for holding, and welcome to the Titan Pharmaceuticals second-quarter 2012 financial results conference call. At this time, all participants are in a listen-only mode. There will be a question-and-answer session following today's remarks. Please be advised that this call is being taped at the Company's request. And will be archived on the Company's website starting later today.

At this time I would like to turn the call over to Mr. Sunil Bhonsle, President of Titan Pharmaceuticals. Please go ahead, sir.

Thank you, Brian. Thank you all for joining us today. Welcome to the Titan Pharmaceuticals call to review financial and operational results for the second quarter of 2012. Before we begin, let me remind you that we filed our Form 10-Q with the SEC. And subsequently issued a Press Release on August 10, 2012 detailing our first-quarter financial results. This Press Release can be found on our website at www.titanpharm.com. On the call today from Titan we have Dr. Marc Rubin, our Executive Chairman; Dr. Kate Beebe, Executive Vice President and Chief Development Officer; and Brian Crowley, Vice President of Finance.

Before we go into the details of the second quarter performance and an update on the Company, I want to remind everyone that certain matters we will discuss today, other than historical information, consists of Forward-looking statements, relating to among other things, our expectations concerning our financial results, available cash, clinical programs, and regulatory strategies. The Forward-looking statements are not guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from the results contemplated by the Forward-looking statements. These risks and uncertainties are described in our Annual Report on Form 10-K filed with the SEC and subsequent SEC filings. You are cautioned not to place undue reliance on these Forward-looking statements which speak only as of today. We undertake no obligation to update or revise the information provided in this call, whether as a result of new information, future events or circumstances or otherwise.

Having said all that, let's start with an overview from our Executive Chairman, Dr. Marc Rubin. Marc?

Thank you, Sunil, and hello to everybody joining us today. Thank you for listening and participating. The Titan Board has been generally pleased with the ongoing progress that Titan has made in preparing the Probuphine New Drug Application, or NDA, for filing later this year. This will, obviously, be an important milestone. And, as you know, it is now expected to be completed in October, which is slightly delayed from the previously-communicated timeline of September 2012. Sunil and Kate will provide additional information on the specifics of this. And on the progress with the preparation of the overall NDA in a few minutes.

Importantly, the Titan Board has been closely monitoring Titan's partnership discussions. And is pleased with the progress being made with negotiations of a licensing agreement with the front runner. Our goal, which we have consistently communicated to all of you, has always been to complete a strategic partnership by the time of the NDA submission. And we believe we are firmly on track to accomplish this goal. Such a partnership could and should provide the full resources to complete the regulatory review and the approval process for Probuphine and prepare for its commercialization. As you know, the Board, of course, has a fiduciary duty to prepare for even unforeseen circumstances. And, as such, we are preparing backup plans for bridge financing should they be needed. Ultimately, the entire Titan team is working hard to bring a novel treatment for opioid dependence to the physicians, to the patients and to the families, who have all shown a critical need for new approaches and new therapies for this growing and devastating disease.

I will stop there and I'm going to pass the call back to Sunil. Sunil?

Great, thank you very much, Marc. Next, I will provide you with our second-quarter financial results. And will then turn the call over to Kate for a discussion of our Probuphine and ProNeura development programs. To conclude, we will open up the call for your questions for the Titan management team.

So let's start with the financial results. Total revenues for the second quarter were approximately $1.4 million compared to approximately $0.7 million for the comparable period in 2011. Second-quarter 2012 revenues consisted of royalties on net sales of Fanapt, which will be paid by Titan to Deerfield Management Company in accordance with the terms of the agreements entered into last year. Total operating expenses for second quarter 2012 were approximately $3.1 million compared with approximately $4.9 million for the second quarter of 2011. And these consisted largely of research and development expenses of approximately $2 million compared to approximately $3.9 million for the comparable period in 2011. This decrease, which was primarily in external R&D expenses, was a result of the completion of the Phase III clinical trials of Probuphine last year.

General and administrative expenses totaled approximately $1.1 million compared to approximately $0.9 million for the second quarter of 2011. The slight increase in G&A expenses is related to increases in consulting and professional fees of $0.3 million. Net loss applicable to common stockholders for the second quarter of 2012 was about $1.7 million, or approximately $0.03 per share. Compared to a net loss of about $7 million or approximately $0.12 per share for the comparable period in 2011. Our net loss for the six-month period ended June 30, 2012 was $6.9 million, or approximately $0.11 per share, compared to a net loss of approximately $11.5 million, or about $0.19 per share for the comparable period in 2011.

At June 30, 2012, Titan had cash and cash equivalents of about $4.1 million compared to about $5.4 million at the end of 2011. We believe that our working capital at June 30 is sufficient to sustain our planned operations into October of 2012. Which is also our current time frame for submitting the New Drug Application for Probuphine in the treatment of opioid dependence. As Marc mentioned, our goal is to establish a partnership for the future commercialization of Probuphine prior to the submission of the NDA. And this would provide the Company with the resources to complete the regulatory review and approval process in a timely manner. We believe that our progress to date keeps us very much on track for meeting this objective. At the same time, as Marc already mentioned, it is also in the best interest of the Company and our shareholders to evaluate other options available to us for additional capital, that could provide a bridge, if needed, to support continued progress with the NDA submission and the regulatory review process. We are working diligently and making very good progress with both our active, ongoing partnership discussion and our final preparation of the NDA submission for Probuphine.

And with that, I will now turn the call over to Kate to provide an update on the Probuphine program, our NDA submission process, and also to touch briefly upon our pre-clinical ProNeura program. Kate?

Thank you, Sunil, and thanks to all of you joining us today. As you know, the safety and effectiveness of treatment with Probuphine has been demonstrated in five clinical studies conducted to date as part of our Phase III program. And this includes two six-month controlled studies, two six-month open label safety retreatment studies, and a pharmacokinetic study. All of which will comprise the clinical portion of our New Drug Application. In that regard we've completed or nearly completed the harmonization of the clinical database. And the preparation of all the individual study reports; the integrated summaries of efficacy and safety; the product label; the risk evaluation mitigation strategy, or REMs; the abuse liability review; the pediatric plan, and the priority review justification. And, similarly, the non-clinical pharmacology and the CMC sections are also nearing finalization in anticipation for the last step in preparing this submission, which is the electronic publishing.

Now, the analytical testing required to complete the CMC section of the NDA is also progressing satisfactorily. And now the new facility is complete. However the commercial scale production equipment has taken a little bit longer than expected to be fully qualified. And this is due to some minor adjustment and recalibration of the equipment that was required following testing of the production line. This has now been completed and we anticipate that the first batch demonstrating the commercial scale production capability will be produced in the next couple of weeks. So demonstration of the commercial scale production capability is a requirement prior to submission of the NDA which, as Marc and Sunil have said, is now expected to occur in October of 2012.

Finally, on the Probuphine front, Titan and our research and clinical key opinion leaders will be presenting data at several upcoming medical conferences and meetings. Including the California Society of Addiction Medicine, or CSAM meeting. And that's going to be on September 5 in San Francisco, California. The International Society of Addiction Medicine, or ISAM meeting, on October 16 in Geneva, Switzerland. And the American Academy of Addiction Psychiatry, the AAAP meeting, on December 8 in Aventura, Florida.

Before turning the call back over to Sunil, I'd also like to briefly highlight our recent ProNeura progress. As you know, Probuphine is the first product to utilize our proprietary long-term drug delivery technology, ProNeura, which has the potential to be used in developing products for the treatment of other chronic conditions besides opioid dependence. And last month we announced that we had successfully completed a pre-clinical investigation into the feasibility of a long-term, round-the-clock, non-fluctuating treatment for Parkinson's disease with an already-approved dopamine agonist Ropinirole, where maintaining a stable, round-the-clock blood level may benefit the patient and improve mental outcomes. This pre-clinical study was primarily funded by a $495,000 grant awarded to Titan by the NIH under the SBIR program. And administered by the National Institute of Neurological Disorders and Stroke. Patents for this indication have been granted in several countries to date. And the prosecution continues in the US and other countries, as well. This is a very exciting development and we will continue to provide you with updates, as appropriate.

Now back over to Sunil and your questions. Sunil?

Thank you, Kate. Brian, we are now ready to take questions from the call participants.

(Operator Instructions)

Jason Napodano with Zacks.

A question on your cash runway into October. I assume that, that amount that you're calculating includes sufficient funds to complete all of the test batches and final manufacturing production that's needed for the filing?

Yes, it does. Absolutely.

Okay. What about the PDUFA filing fee?

As you probably know, Titan qualifies as a small business. And for us, this is our first NDA filing so we do not need to provide the fee. There's actually guidance for the industry on user fee waivers and so on, which we have followed and applied for a waiver of the fee. So we won't be needing to pay the user fee at this time. Which is very good for us and we like that.

Absolutely. It saves about $2 million.

Absolutely.

So you've applied for that waiver. Can you give me a little bit of color on, does the FDA, have you been granted that waiver or exemption? And if not, when will we hear about that?

In this setting, the application is essentially made to, there's a user fee waiver office, and we sent in the information that they require from us for this. This was done a while ago, in June. And since then, there has been some interaction with the Small Business Administration, which is the office that then establishes whether you are a bona fide small business. And so they have asked us for more information, which we've supplied in every case. There's been nothing that indicates that we will not be granted the small business status in the setting. So there has been an interactive process which is going on. We have heard nothing back to indicate that there is any reason we would be denied this. So we are proceeding as if this is approved and we will continue to do so and file the NDA in that manner.

Sunil, this is Marc. If I could just add, we clearly qualify as a small business under all of the criteria -- size, number of employees, et cetera. So we fully expect that we will be granted that waiver.

Got you. And as far as qualifying following a licensing agreement, are there rules on maintaining that exemption, if you do license the product?

In the licensing process, clearly the qualifications and so on are not directly related to anything other than if there is a direct control over Titan. So unless that's affected in any way there will be no effect to it.

Okay, that makes sense. So as long as you maintain the NDA as control of Titan, the exemption still stands.

That is correct. That's our understanding.

Okay. And then just as far as the update on your request for priority review, can you give us any additional color around your initial conversations there. I won't put you on the spot and ask you to predict if you'll get it, but any additional information there might be helpful.

Sure, Jason. This is Kate. You may recall that we've talked about our pre-NDA meeting that we had last October. In which the Director, the Head of the Division that we'll be submitting to, Dr. Bob Rappaport, was very good about giving us explicit guidance and details about what would need to be included in the priority review justification. Which is a substantial document that we have written that contains all the major points that would be required to support their decision.

Ultimately we won't know if we're going to get that until after we submit. But it's really essentially based on the growing epidemic of Suboxone and other forms of buprenorphine that are on the market now and are being diverted and misused. And the pediatric exposure, accidental ingestion and the mortality associated with that. And the fact that Probuphine largely solves this problem, in that it is a very abuse and diversion-deterrent formulation, is the basis for our priority review request.

Okay. And as far as when we'll find out about that, I assume that comes with the acceptance?

That is correct. That is the time frame when we will find out.

Okay. And then final question, with respect to some of the things that the FDA asks on the EVA, the safety and purity of the EVA. Can you give us any additional information on some of the data that you've generated there to provide to the Agency? And whether or not any of that information or data will be available to investors essentially before the PDUFA decision.

I can tell you that we have completed the evaluation of the EVA and assessed what the FDA had requested of us. We believe all of the information that we have generated fully supports the safety of the EVA in this setting. And that is going to be a part of the NDA submission. As far as the data itself, that will be part of the NDA and really not something that would be published separately at this stage. And it is proprietary and it is something that will be included in the NDA. And we fully believe it meets the requirements.

Okay, guys. Thanks for taking the questions.

(Operator Instructions)

Arthur Davis, a private investor.

My question is really a long-term question which concerns planning. I just happened to review the reports of Titan since 1997. And I see the only year in which there was a profit was 1997 at $0.05 per share. Has the Company considered profitability as a goal, and a year in which that would come to pass? And if so, what year?

Arthur, that is a real long-term question. And obviously, you have looked at the history, as well. As we've mentioned, our focus right now is really to make sure that we can add value through bringing Probuphine on through the regulatory review process and on the market. And partnering that, making certain that the resources are available to get that through the process. The last year that you think of as being profitable for Titan was the time that Titan entered into a partnership for Iloperidone. And, obviously, when you get payments for partnerships, it can show certainly a profitability for that year. But longer term sustained profitability truly depends upon continued revenues.

And for us, our goal is to generate those continued revenues through this type of a partnership for Probuphine. And based on that, we certainly expect to get to profitability at the future date. But at this stage, I do not want to speculate on specific years. Our goal is really to get this partnership done and this product on the market. And as we go through that process, and once that is ongoing, we will look at the long-term objectives of Titan, the profitability, as well as what's Titan and the programs and the strategies that we need to follow.

Could I infer from your response that since the last year in which there was a profit was the year in which a partnership was consummated with Novartis concerning Iloperidone, that if you consummate the partnership with the front runner, who's been referred to today, by the date of the filing of the NDA, that this calendar year would show a profit?

Arthur, I will not speculate until we have actually completed and put numbers out and then you will know.

The last question I have is, the term front runner has been used. Traditionally in the past, we've heard three to five potential partners who had passed the initial stage of due diligence and entered the nitty-gritty stage. Are there still up to three to five potential partners, other than the front runner, who are still at the table?

What I'll comment on, Arthur, in this case is certainly there is continued interest expressed by other companies. But we are focused on concluding a transaction with the front runner, and that really is our goal right now.

And has that progressed past the term sheet phase?

We have certainly gotten into the agreements and negotiating agreements, as we mentioned in the press release and so on. Okay?

Thanks very much. I appreciate your candor in answering these questions. I realize that you must forebear to some extent. Thank you.

Mark Cohen with Westside Investment Management.

I had a question with respect to the NDA filing and the timing of announcing the potential partner. Is it more important to Titan from a financing standpoint, or more important from the partner's point of view to be contributing to the NDA with respect to the announcing of who that lead partner is?

In all honesty, Mark, it's both. (laughter) I'm sure you realize that.

No, I understand that but I'm just trying to -- this has been going on for a little bit. You've announced or you've mentioned that you have or are considering contingency financing. And after the last round of financing, I sure hope that's not anything that comes to fruition. But I'm just trying to weigh the importance of the partner contributing to the NDA in the event that the partnership agreement isn't or has not come to fruition by the time you file.

I think the way I can summarize it, Mark, is it is truly in the best interest of all parties, in this case, to make sure that the NDA progresses smoothly in a timely manner. And in a way that satisfies both parties. And that truly is the goal here and that's what's being worked on.

Is there anything that's holding up announcing who the partner is with respect to finalizing the transaction, other than just regular last-minute negotiating? Are there any what you would consider to be material points of disagreement?

What I can reemphasize in this case is we clearly are working on the agreement. And we expect fully to be on track with this time frame. And I don't want to speculate one way or another, or comment on specifics, Mark. You understand that.

No, I understand but I have to ask. (laughter)

I appreciate that.

Okay, thank you very much and good luck.

(Operator Instructions)

[Dr. Jonathan Elias] who is a private investor.

Thanks for taking my question. My question is, once you obtain that partnership and your resources increase, are there plans to start doing studies, or increasing the studies for chronic pain? Or are you planning to wait until after approval of the NDA?

In this case, clearly, Jonathan, for us, the potential of looking at additional indications for Probuphine is very attractive, as it would be for a partner, as well. However, the goal first is to get Probuphine approved for the treatment of opioid dependence. And our focus and our resources, even after filing the NDA, will be geared towards that. There is continued support of that NDA that will be necessary and we will continue to do that. We expect, as you know, those interactions with the FDA and so on that will continue on. And that requires a lot of time and effort on our part and that's what the focus will be. The other indications will be looked at once that is all completed.

And if you do get approval, the fast track, what's the time frame of that usually for approval?

The time frame for that is typically a six-month clock that the FDA works on. And that's what we will be looking at. So it's very intense and very fast, in some ways.

Great. Thank you for taking my questions.

And this brings the Q&A session to a close. I would now like to turn the call back to Mr. Sunil Bhonsle for his closing remarks.

Thank you very much, Brian. And thank you all for participating in this call. We remain confident in our belief that Probuphine, once approved for marketing, could be a revolutionary new treatment for opioid dependence. And we truly appreciate your ongoing support. Thank you all.

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