Titan Pharmaceuticals Inc (TTNP) 2013 Q3 法說會逐字稿

Thank you for holding, and welcome to the Titan Pharmaceuticals third-quarter 2013 financial results conference call. At this time all participants are in a listen-only mode. 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 Sunil Bhonsle, President of Titan Pharmaceuticals. Please go ahead.

Thank you, Jeanine, and thank you all for joining us. Welcome to the Titan Pharmaceuticals call to review financial and operational results for the third quarter of 2013.

Before we begin, I wanted to inform you that we filed our Form 10-Q with the SEC yesterday detailing our third-quarter financial results. The press release issued yesterday provides a summary of the results and can be found on our website at titanpharm.com. Joining me on the call today from Titan we have Dr. Marc Rubin, our Executive Chairman; Dr. Kate Glassman-Beebe, our Executive Vice President and Chief Development Officer; and Brian Crowley, our Vice President of Finance.

Before we get into the details of the third-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; development programs; partnering arrangements; regulatory strategies; and business plans.

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.

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 advise the information provided on this call, whether as a result of new information, future events or circumstances, or otherwise.

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

Thank you very much, Sunil; and good morning or good afternoon to all of you who are joining us, depending on where you are located. And, of course, welcome back to those of you who had the opportunity to join us on our call just two days ago.

The third quarter has been marked by important progress for Titan, as we, along with our commercialization partner Braeburn Pharmaceuticals, have worked diligently with a team of expert advisors, evaluating all the information available from the Probuphine development program and other sources to prepare the briefing material addressing the issues in the CRL. The Board is very pleased with the progress made by Titan and Braeburn in preparation for this Tuesday's meeting with the FDA, and this has included the submission of a comprehensive briefing materials package last month.

The goals of the meeting this Tuesday, the 19th, are -- one, to understand more fully the issues raised in the April 2013 Complete Response Letter; and, two, to review and discuss the available data from Probuphine studies conducted to date and gain further clarity regarding the regulatory path forward for Probuphine. Following this meeting, we should have the ability to prepare the full and final response to the CRL, which will likely include some new data analyses.

Following receipt of this, the FDA has up to six months to respond. But, of course, the timing and the final decision are not certain as of now. As you know and as I mentioned, Titan and Braeburn have been working with a team of experts and regulatory advisors to address the issues that were raised in the CRL. This is a time-consuming and an expensive process that is ongoing.

Importantly, receipt of the CRL has clearly delayed the potential commercial entry of Probuphine. The addiction market, in the meantime, has continued to evolve, with the entry this year of additional daily-dose products. In light of the delay and the changing commercial landscape, Braeburn approached Titan and explained their need to modify the terms of our agreement in order to enable them to move forward with the program.

In turn, the delays have been and would continue to be a drain on Titan's cash, and we recognize the need to raise capital to support our ongoing operations. The Board evaluated financing alternatives and believe that obtaining capital at or near market, without warrants, was the best option at this time. Accordingly, we entered into discussions with Braeburn, and we believe the restructured agreements -- which Sunil will explain in more detail in a few minutes -- along with the investments brings the companies into better alignment.

With respect to the investment and pursuant to the terms of the stock purchase agreement, Titan will issue 6,250,000 shares of its common stock to Braeburn for an aggregate purchase price of $5 million or $0.80 per share, which was the closing price of the shares on November 11, 2013. It is very important to note that this investment includes no warrant coverage.

And I want to emphasize again that this deal structure has been the output of a very mature and a balanced business discussion between Titan and Braeburn, where we arrived at a mutual understanding of both parties' needs in this changing environment, and has led to a reasoned and balanced solution that addresses the needs of both companies. And it certainly maintains and, I think, actually strengthens our partnership moving forward.

Given the nationally-recognized, and ever-growing, and increasingly devastating opioid-dependence epidemic, there is a critical need for new safe and effective treatments that reduce the likelihood of abuse, diversion, and accidental pediatric exposure. Our goal remains the same: to make Probuphine available to those clinicians, to those patients, and families who may benefit from it. We want to thank you for your continued support.

And now, for more insights on the third-quarter financial results, I would like to pass the call back to Sunil. Sunil?

Thank you, Marc. I will provide next the third-quarter financial results, and I am sure you have seen a lot of the details in our press release, as well.

Net loss for the third quarter ended September 30, 2013, was approximately $1.1 million or about $0.01 per share. This compared to a net loss of about $8 million or approximately $0.12 per share for the comparable period in 2012. Licensed revenues of approximately $2.2 million for the three months ended September 30 reflect the amortization of the upfront license fee received from Braeburn in December 2012 for its license agreement for the US and Canadian rights to commercialize Probuphine -- which is, as you know, our investigational subdermal implant designed to deliver continuous blood levels of buprenorphine for six months following a single treatment.

Titan generated no grant or royalty revenue during the three months ended September 30, 2013. Our total operating expenses for the third quarter were approximately $2.3 million compared with about $3.9 million for the comparable period in 2012, and these consisted largely of research and development expenses of about $1.7 million compared to approximately $3 million of R&D expenses for the comparable period in 2012. This decrease in R&D costs was primarily associated with a decrease in external R&D expenses related to the preparation and review of our NDA for Probuphine.

General and administrative expenses for the quarter were about $0.6 million compared to approximately $0.9 million for the comparable period in 2012. The decrease in G&A expenses is primarily related to decreases in non-cash stock compensation of about $0.2 million and lower legal fees of about $0.1 million.

At September 30, 2013, Titan had approximately $9 million of cash compared to about $18.1 million at December 31 of 2012. Titan believes that its working capital at September 30, together with the $5 million in proceeds from the recently-announced sale of common stock to Braeburn, is sufficient to fund its planned operations into January 2015.

As Marc mentioned earlier, and as we discussed in our press release issued earlier this week on November 13, Titan announced the $5 million equity investment by Braeburn Pharmaceuticals as well as adjusted terms to its license agreement for the US and Canadian commercialization rights for Probuphine. In summary, under the terms of the license agreement amendment, there will be a reduction in the milestone payment upon approval by the FDA of the Probuphine NDA from $45 million to $15 million and an increase in the total amount of potential sales milestones payments to Titan from $130 million to $165 million.

Also, the sales threshold to achieve the highest royalty tier has been lowered. Braeburn also will assume all responsibility for all third-party expenses related to the Probuphine regulatory process.

The amendment also contains a provision entitling Titan to receive a low single-digit royalty on sales by Braeburn of other mid- or long-term continuous delivery treatments for opioid dependence, up to a maximum of $50 million. This is in addition to the royalties that Titan will receive on Probuphine.

Also, Titan has the right to elect to participate in sales by Braeburn of other products in the addiction market in exchange for similar reduction in Titan's royalties on Probuphine. This amendment will be effective upon the closing of the sale of shares.

At this time, I would like to turn the call over to the operator for your questions. Jeanine?

(Operator Instructions) Michael Higgins, Empire Asset Management.

Pretty straightforward quarter and call. Just to confirm, are there any additional expenses that Braeburn is covering? Or a better way to ask, are there any additional expenses that you guys are covering as it relates to the regulatory submission on Probuphine? Because if memory serves, it seems like Braeburn is covering pretty much everything at this point going forward, outside of any potential additional clinical trial class. Is that a fair summary?

In terms of the regulatory process, obviously, following the CRL and so on -- Braeburn is covering all of those expenses. I mean, there are certain things that we are obligated to do that are not related to that directly, but those we will -- you know, which were there from before -- we will continue to do. And that is how the projections are based.

Okay. Based on the burn guidance, it looks like this is a reasonable quarter to continue modeling going forward.

The second question I've got is on the pipeline investment. Can you give us any guidance as to when you may turn that on -- namely, in the Parkinson's space, or other ideas? And certainly pain is one that has been written about recently in your filings. Any updates for us on when you turn on the spigot to invest in the pipeline?

Well, clearly, in terms of pain with Probuphine -- and that is something that will be a Braeburn decision, and we will certainly keep you updated as that moves forward. With respect to what Titan is looking at, such as the Parkinson's and some other areas with the ProNeura technology, the work associated with moving that to an IND stage is something that we have focused on previously. We will do a little bit of it, but certainly, the decisions to move quickly with that will depend also on how things go over the next few months with Probuphine. Our primary focus always needs to be Probuphine right now.

Yes, Michael, this is Marc. As Sunil said, the focus clearly is on getting Probuphine approved. And so, really, all effort is focused on that now. But as we have said, we do have other things, like Parkinson's and some other things we have not talked about, that we are very excited about. And we certainly hope to be able to move those forward quickly, once -- assuming, and hopefully assuming, that the Probuphine issue does get resolved, and it can be approved.

Jason Napodano, Zacks.

Just trying to understand from a timing standpoint -- obviously, appreciate the goals that you guys are trying to accomplish from the FDA meeting next week. I just think it's interesting that you mention, following that meeting, you should be able to be in position to file a response and hopefully hear back from the FDA at six months after that response.

It is almost like you are assuming there will be no additional studies that need to be completed following -- coming from that meeting. So I guess two questions from that. How confident are you that there will be no additional clinical work that needs to be done after that meeting? And if that's the case, where are you with the NDA refile? If you come out of that meeting -- what is kind of the best-case scenario coming out of the meeting and being able to get application back to the FDA?

Well, Michael, I think the best-case scenario is that, obviously, we do not need to conduct any -- certainly any onerous studies; and that the material we provide ultimately will be sufficient to address the issues; and that we can have a positive outcome in that time frame.

But we can't make any assumptions at this point. We don't know what the FDA is thinking. And so as far as assumptions on clinical trials, or lack thereof, we can't make any at this point. We certainly hope that that is the case. We believe we have a very good case in justifying that, and have gone to great lengths to be able to explain that and to address the issues raised in the CRL. But we just can't make any predictions based on that now. We have to wait and see how it goes and what the FDA thinks.

Got you. Okay. And then, I guess I will just leave it at there. I wanted to hear more about, if possible, some of the additional data and analysis that you guys have -- will be showing the FDA, but I assume that you are not willing to share that with us at this time.

Well, that's right. As we talked yesterday -- two days ago, when we had the call -- I mean, we are obviously looking at all the data we have. And we will bring in a little bit of new data to help explain and address the issues raised by the FDA and explain our responses. But we can't go beyond that now.

Arthur Davis, Private Investor.

Hello?

I'm sorry. We have Jefferson Fuller, who is also a Private Investor.

Quick question. I am not sure if you can go into detail on this or not, but was it -- the request for a Type B meeting -- you know, the FDA turned around and is offering a Type C meeting. What's -- can you give any guidance behind that, their logic behind doing that; and what that might imply as far as what is going on in their minds as far as the regulatory process going forward?

In terms of the Type B or type C meeting, that is really only a classification from within the FDA. In terms of our interaction with the FDA for us, it really does not signify any difference at all. It is essentially -- our goal was to get a meeting where we could present the information that now we have submitted in our briefing book, and have the ability to have a dialogue with the FDA about these issues so that we know exactly what may be necessary for the final approval.

And that was the purpose of our submission. They just classified it for their internal purposes in a certain way, and that is the Type C. But it makes no difference in the type of meeting for us.

Yes. Importantly, Type A, Type B, Type C do not designate relative degrees of importance, or anything like that. It is often misinterpreted. It really is just an administrative categorization based on what is being submitted and where things stand. So this is officially classified as Type C, but it has no bearing on their views or the outcome whatsoever.

Okay. But does it have -- I know you mentioned a six-month response window that they have after you submit the final package to them following the meeting. So that is a little accelerated versus some of the other meeting types, or is it? Within the Type C?

Jefferson, there is no direct correlation between what Marc mentioned in terms of the six months to any of the type of meetings. That really has to do with the NDA, which has already been filed. It will be refiled with updates based upon the CRL. And the timing of review for the FDA is based upon which classification in terms of the refiling of the NDA. And that is where we believe it will be up to a six-month time frame for that review period.

We have Kate Beebe on the line. Kate, do you have anything you would like to add, just to clarify the categorization that is Type B, Type C meetings?

No. I think you have covered it all, Marc.

Okay.

At this time we do have one question remaining in the queue. (Operator Instructions) Arthur Davis, Private Investor.

Hello again.

Hello, Mr. Davis. I guess we lost you, there.

I was apparently leapfrogged in the middle of my question.

Apologies.

That's quite all right; I'm back again. I was little bit confused on the threshold for sales, and exactly how much it is lowered, and when.

Sure. In terms of the royalty and our different thresholds for the graduated royalty rate, we have not disclosed that detail, as you know; and that has been maintained confidential in the filings that we have done with the SEC. So I cannot tell you what the specific new threshold is. I can say that the lowering of the highest threshold level -- it is significant for Titan.

Okay. I guess, given your answer, Mr. Bhonsle, my next question would be: investors are limited in the information that they receive. And we were aware, until the recent amendment was made, that there would be a $50 million or $45 million payment on approval. So that was known to us.

And now, the amendment to the agreement in effect adds a new element involving an increase in the royalties from $130 million to $165 million. But by not disclosing the details, you have in effect reduced the level of knowledge that we have.

I hear what you say, Mr. Davis, but that is currently the way -- the information that we can provide. One thing I think you, I'm sure, understand and realize is that as we go forward and over time, we hope to be able to provide additional information that will provide the details that make things maybe more -- easier to look at. But right now, this is all we can say.

Well, that is okay. But at some point in time, I wish you would consider the plight of the poor, lowly, loyal, long-term investor.

I certainly hope that we can provide additional detail. And trust me, we consider every shareholder to be important for Titan.

This does conclude today's question-and-answer session. At this time I would like to return the conference back over to our speakers for any additional or closing remarks.

Thank you, Jeanine, and thank you all for participating in this call. We remain confident in our belief that Probuphine has the potential to be a transformative new treatment for opioid dependence, and we appreciate your ongoing support. We will continue to provide updates regarding Probuphine in our anticipated upcoming FDA meeting to discuss the regulatory path forward as they become available. Thank you and have a great day.

This does conclude today's Titan Pharmaceuticals third-quarter 2013 financial results conference call. We thank you again for your participation.