Antares Pharma, Inc.
Q2 2020 Earnings Call Transcript

Published: 6 Aug 2020

[Operator:]

Ladies and gentlemen, welcome to the Antares Pharma Second Quarter 2020 Operating and Financial Results Conference Call. Throughout today’s recorded presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. . I would now like to hand the call over to Jack Howarth, Antares' Vice President of Corporate Affairs. Sir, please go ahead.

[John Howarth:]

Thank you, Katy, and good morning, everyone. Earlier today, we announced our second quarter 2020 financial results and operating achievements. A copy of the press release and slide presentation for today's conference call are available on the Investors section of the Antares Web site.

[Robert Apple:]

Thanks, Jack, and good morning, everyone. This morning, we reported another quarter of record financial results and significant operational progress for the company. We achieved a 14% increase in quarterly revenue versus the same period last year and improved overall gross margin across the business as we continue to generate cash from operations, despite the impact of the COVID-19 pandemic on patients, physicians, our employees and communities that we serve.

[Fred Powell:]

Thanks, Bob. Throughout our business, we had a very strong quarter despite the unusual challenges we’re all facing. We recognized record second quarter revenue with $32.4 million and earnings per share of $0.01. These excellent results exceeded Street revenue expectations of $30.4 million and breakeven EPS. The second quarter marks the third time in the last four quarters that the company has achieved profitability. In addition, we generated $3.7 million in cash from operations during the quarter. And for the first six months of 2020, cash generated from operations was $9.3 million. This is a tremendous turnaround of over $20.4 million from 2019 when we used $11.2 million in cash during the first six months of that year. So let me begin with a more detailed review of the strong financial results by providing a breakdown of our revenue and operating expenses for the second quarter and first six months of 2020. Total revenue was $32.4 million for the three months ended June 30, 2020, representing a 14% increase compared to $28.4 million in 2019. For the six-month period ended June 30, 2020, total revenue was a record $65.5 million, which is a 27% increase from $51.7 million for the comparable period in 2019. Total product sales were $24.7 million for the second quarter, a 20% increase from $20.6 million in the second quarter of 2019. For the six-month period ended June 30, 2020, product sales were $51.8 million, a 33% increase from $38.9 million for the comparable period in 2019. Sales of our proprietary commercial products XYOSTED and OTREXUP totaled $14.8 million and $27.4 million for the three and six months ended June 30, 2020 compared to $9 million and $13.8 million in the same periods of 2019. The increase in proprietary product sales for the three and six-month periods in 2020 over 2019 was attributable to the continued growth of XYOSTED. Partner product sales were $9.8 million and $11.6 million for the three months ended June 30, 2020 and 2019, and $24.4 million and $25.2 million for the six months ended June 30, 2020 and 2019. The three and six-month reduction in partnered sales is primarily due to sales in 2019 of the needle-free devices to Ferring. During the second half of 2019, we completed the sale of that product to Ferring and we’re no longer recognizing sales on needle-free devices. In addition, in 2019, we sold pre-launch quantities of teriparatide pens to Teva. During the three months and six months ended June 30, 2020, we have seen significant growth in our EpiPen devices as sales have increased 64% and 76% from the comparable periods in 2019. Finally, we continue to supply product to AMAG who recently indicated to investors that they remain focused on maintaining patient access to the Makena product. Licensing and development revenue was $2.7 million and $4.4 million for the three and six-month periods ended June 30, 2020 compared to $2.2 million and $3.2 million for the comparable periods in 2019. The growth in licensing and development revenue for the three and six-month periods was primarily from Pfizer rescue pen and the Idorsia selatogrel pen development programs. Royalty revenue was $5 million for the three months ended June 30, 2020 compared to $5.6 million in the same period in 2019. For the six-month period ended June 30, 2020, royalty revenue was $9.3 million compared to $9.6 million for the comparable period in 2019. The decrease in royalty revenue for the three and six-month periods were primarily attributable to a decline in royalties recognized from AMAG on the net sales of Makena subcutaneous auto injector. Gross profit increased 24% to $19.9 million for the quarter ended June 30, 2020 as compared to $16 million in the second quarter of 2019. For the first six months of 2020, gross profit increased 34% to $37.9 million as compared to $28.3 million during the first half of 2019. It’s important to note that our gross profit as a percent of total revenue increased to 61% for the quarter ended June 30, 2020, up from 56% recorded in the same period in 2019. Again, this is driven by the increase in XYOSTED revenue. Operating expenses were $16.9 million for the second quarter of 2020 compared to $17.6 million for the comparable period in 2019 and $36.3 million and $34.9 million during the first six months of 2020 and 2019. The increase for the six months ended June 30, 2020 was primarily attributable to increased headcount as well as increased non-cash incentive compensation expense. For the quarter ended June 30, 2020, net income was $2.2 million or $0.01 per share compared to a net loss of $2.2 million or a loss of $0.01 per share for the same period in 2019. And for the first six months of 2020, net loss was 200,000 or breakeven per share as compared to a net loss of $7.8 million or $0.05 per share during the same period last year. Finally, our cash and short-term investments at the end of the second quarter increased to $51.6 million compared to $45.7 million at December 31, 2019. I’ll now turn the call back to Bob. Bob?

[Robert Apple:]

Thanks, Fred. In summary, we had a great quarter with exceptional growth of our flagship product XYOSTED and continued growth of our EpiPen business that drove strong operating and net income in addition to expanding our product offerings and advancing our internal pipeline. I’d like to once again thank personally all of our employees and our stakeholders as we navigate through this unusual period of time. Everyone here at Antares is making extraordinary efforts to maintain this positive momentum of the business. We are focused on driving growth through the commercial success of our proprietary and partner products. We hope all of our employees and stakeholders remain safe and healthy. This concludes my prepared remarks for today. Operator, could you please open the lines up for the question-and-answer session.

[Operator:]

Thank you, sir. . Our first question will come from Elliot Wilbur with Raymond James.

[Elliot Wilbur:]

Hi. Thanks. Good morning. Busy day. I’m going to apologize in advance if I asked something that you mentioned in your prepared commentary here. But first, I guess for Bob and just thinking about the reinstatement of full year guidance in the range within that expectation, want to get your perspective on just sort of three different items and how they may impact your thinking about the range itself. First is with respect to Makena. Looks like that product has stabilized based on AMAG number the last couple of quarters. Just wondering kind of how you’re thinking about that product for the balance of the year in terms of contribution to your numbers. Number two, what you’re seeing in terms of EpiPen order flow from Teva heading into the peak selling months given the uncertainty around back-to-school dynamics across the country? And then sort of how you’re thinking about the ability to get back and sort of resume normalcy in terms of detailing trends with respect to in-office physician visits and what that means for XYOSTED in the back half of the year? Obviously, you’ve done very well with the asset kind of given the constrained environment. But just thinking about – I want to know sort of what you’re thinking about in terms of how much of an incremental acceleration trajectory is dependent on kind of getting back into the office, front of physicians?

[Robert Apple:]

Okay, Elliot. Let me focus on the first part of your – I guess the last part of your question which is around XYOSTED. We’ve been seen about 25% of our details overall being in-person and that really fluctuates depending on the spikes in COVID and so forth that we’re seeing across the country. But otherwise, our sales reps have been able to effectively detail the offices with a virtual platform. And I think you’ve seen that – the result of that in a very difficult time in the April, May and June timeframe of the pandemic where I think a lot of patients were actually really concerned about even going to their doctors’ offices and we still were able to grow our overall prescriptions from quarter-to-quarter, 11%, and we saw the growth from the revenue standpoint as well for XYOSTED. I think what’s different this time is that the offices are more prepared for the pandemic, so they’re now seeing patients on a more regular basis not as – it’s not as it was before the pandemic, but it’s still – I think the protocols are in the place and patients are coming in to see their doctor. So we see that as a positive change over the last month or so for our sales reps. Because importantly for us, it’s really about the patients coming in to see the doctors and less about the access that we have to the offices, because our reps can effectively detail the doctors via the virtual platform. We’re able to do virtual lunches, we’re able to do virtual detailing, we’re able to do sample – get samples to the physicians. So all these key tactical items can be done. The key for us is for the patients to keep coming in. And right now, we definitely see a difference from the early part of the pandemic. So I think there’s going to be continued growth of XYOSTED. And our range of our guidance is really – we didn’t change it. It’s still between 135 and 155. A lot of that originally was meant for the uncertainty around Makena. I think the range now is really around the uncertainty of COVID. Depending on what happens in the next few months I think gives us the flexibility just to maintain that range across all of our business. So I think XYOSTED is going to continue to grow and we’re really excited about the recent trends. We had our all-time high just last week on a prescription basis. We’re seeing new patients’ starts increasing coming back to almost pre-COVID levels. But generally patients are staying on the drug and we believe that the product will continue to grow. On the epinephrine front, I think if you listen to Teva’s call yesterday, epinephrine was – like they called it a strong driver of growth for them as it has been a strong driver of growth for us. But clearly we did – Teva did mention across their generic business, there was a much higher stocking level or purchasing level that was done by patients in Q1. It kind of dropped in Q2. We saw that a little bit on Epi, but overall it was still a really nice growth for our company. Going into the back-to-school timeframe and the order flow from them, we – from a device standpoint, we can see pretty far out their demand and it’s pretty high. We’re doing everything we can to keep up with demand. And so we don’t see any issue related to back-to-school related to our device balance. Related to what they ultimately sell and which affects our royalty, that’s a more difficult kind of question to ask because I don’t know if the virtual schooling is going to have a significant impact on epinephrine. I think that most parents are still going to refill their epinephrine – their EpiPen scripts because they expire really in 18 months or less. And I think it’s hard for us to predict how COVID is going to impact that biggest quarter for epinephrine products. But overall, I’d say the Epi business is extremely strong. Teva is doing a great job of making that a successful product for both us and them. And right now that’s a big part of our guidance for 2020. And then your first question about Makena, I kind of put them in the order of importance. Makena – in our model, we assume it continues to sell. There has been no indication at this point that AMAG will not be able to continue to provide Makena to patients. They’re working with the FDA. But it is a less material part of our business. And so it’s really for us, we’re continuing to supply them the auto injectors, the fully packed product. We continue to get a royalty. And it’s a nice part of our business but it’s really not a primary the growth of our business and our company. They continue to do well with it and we expect that to continue through the balance of the year.

[Operator:]

Thank you. Our next question will come from Anthony Petrone with Jefferies.

[Anthony Petrone:]

Thanks. And hope everyone’s doing well, staying healthy. A couple on XYOSTED and then I have one on teriparatide. Just on XYOSTED, Bob, can you give us a sense within the growth number, what’s coming from actually newly prescribed TRT patients versus kind of the pull-through from IM patients that previously received the two blood draw clearance? And then just on teriparatide. As we look at Lilly’s numbers, can you give us a level set on what the Canadian and European mix is in there, trailing 12-month numbers? And then I have one quick follow up. Thanks.

[Robert Apple:]

Sure. On XYOSTED, as far as our new patient starts, I think it’s probably equal that about half of our new patient starts are switches and then half are new to therapy, and we’re focusing on both. Both patients are excellent targets for us as far as new opportunities. The switches have been a little bit easier to get just because we have patients that we’re doing IM injections in the doctors’ offices and they – I think that a lot of them still are not comfortable going in every two weeks. And you also had some business from the old implantable testosterone pellets that not only is there a difficulty in getting into the office but there’s also a shortage of the pellets just because there’s not a whole lot of demand for that. So I think the switches are really what we’re focusing on because you don’t have to go through the prior authorization process. They don’t have to get the blood draws. It’s a bit easier for both us and the patients to get XYOSTED. On the new patient starts, there are still coming up. New patients are being introduced to XYOSTED on a regular basis. The offices are doing more telehealth but they still have to go in and get their blood draws. And again, I think the offices have been able to figure out the appropriate protocols, how to treat a patient with them being exposed hopefully. They go in. They’re socially distanced. They stagger the number of patients in the office at any given time and that again has had a positive impact on the patient flow of new patients on XYOSTED. So we expect that to continue. As you obviously hear in the news, there’s a lot of spikes in a lot of regions and we’re just trying to deal with those as best we can. But overall, the product continues to grow and it’s doing well.

[Anthony Petrone:]

That’s helpful. And then just looking into the teriparatide launch. Again, what is the branded mix in Canada and Europe? And maybe the follow up there would be, is there any kind of indication from Teva how they’re going to proceed with pricing initially? And maybe just to clear up the timing on the U.S. launch, is that sort of a first half '21 event? Thanks, again, and congratulations.

[Robert Apple:]

Thanks, Anthony. Yes, as far as teriparatide pricing and how Teva is going to introduce their products into these markets, that’s really a question for Teva. We have no insight into their strategy there. What we’re doing is we make sure that we supply them the pens for that product. They then do all the distribution, they do all the marketing. And so we haven’t received our first royalty report. So to be honest, I just don’t have any insight as to their pricing and in net selling price and things like that. They just launched a few weeks ago and we were excited about the launch and they continue to add countries, and I think that’s the most important thing. Adding Canada was a surprise for us because it was outside of Europe and they got the approval and were able to get a launch going there. And they continue to add countries pretty much what appears to be like every week. And so our first royalty report will be due 90 days after the quarter and then we’ll get a sense as to where they’re seeing the best penetration. Obviously, Forsteo is an expensive product in the U.S. It’s not priced the same way in Europe and in other countries. Obviously most other products are less expensive in Europe and in Canada and we don’t see any difference in that with Teva’s Forsteo. But overall the biggest piece in the market potentially is the U.S. And the only thing I can say about that is we still believe that there is going to be an approval for that product before the end of this year and the launch plans will really be dictated by Teva and how quickly they can get their product ready for the U.S. after the approval. Unfortunately, I can’t give you any specific timing. But overall, we feel pretty good about teriparatide and Forsteo and look forward to that launch in the U.S. as well as the launch in Europe and in Canada.

[Anthony Petrone:]

Thank you very much, Bob.

[Operator:]

Thank you. . We have a follow up from Elliot Wilbur with Raymond James.

[Elliot Wilbur:]

Let’s put Fred in the hot seat. Specifically on a couple of expense items, you’ve done a good job of holding – spending in line I guess sort of the peak of the pandemic, but obviously would expect numbers to kind of ramp up in the second half of the year. Could you just maybe give us a little bit of directional color on SG&A and R&D trends as well as a little bit of guidance or at least your perspective on how we should be thinking about operating cash flow trends in the second half of the year? Thanks.

[Fred Powell:]

Sure, no problem at all. As you know, we have guidance for revenue. We don’t give it for EPS. And so what we’re looking at right now for the trends are really impacted by COVID. If we continue to see COVID impacting commercial operations in particular, we should see relatively flat commercial expenses for the rest of the year, no significant increase or decrease because, as Bob said, we’re about 25% back in the field. So if we remain at that level, I wouldn’t be surprised if we were to take the first six months of this year and then really look to double that to again the proximate amount for the full year. When it comes to G&A expenses, again, that’s fairly level. We’re not looking at any significant increases or decreases. We’ve been very fortunate that we’ve been having a growing business. We maintained all of our staff. And we see that the business is being very, very strong in going forward. And so, as I mentioned, if we look at the first half of this year, again, that’s a good indicator of what we should be looking as the back half of the year. When it comes to the R&D piece, again, we may see some increases but I always suspect that it would be relatively flat. Bob went through the presentation as to our internal pipeline where we’re at with the program with INDs and looking at 2021 for clinical trials and that’s really where we would see the uptick in the expenses take place in 2021. And so overall, we’re looking at about $36 million for the first half of the year in our total operating expenses, and I wouldn’t be surprised very similar to the back half. May be a slight increase, but not much of a change overall from first two quarters versus back half. Then you also asked me about the cash question, sorry about that. With cash, I suspect that we will continue to have cash generated from our operations. We think if we’re going to have – our revenue will continue to hit the guidance that’s out there, if our expenses remain fairly consistent, we generated cash, over $9 million in operating cash in the first half of this year, there’s no reason why we wouldn’t continue to generate operating cash in the back half of this year as well. So I think we’re in a good position there financially as we look at our cash and our investments.

[Operator:]

Thank you. Our next question comes from Anthony Petrone with Jefferies.

[Anthony Petrone:]

Great. Just a follow up on Idorsia, the Phase 3. Bob or Fred, just wondering how large that study is intended to be and what sort of uplift you would expect in auto injectors once that gets underway? And maybe what that would suggest on the manufacturing front maybe towards the end of this year? Thanks, again.

[Robert Apple:]

Thanks, Anthony. As far as Idorsia Phase 3, they’re still working that out with the health authorities. But it’s estimated that there’s probably going to be about 15,000 patients in that study, which is typical for a cardiovascular type of study. And so it’s a significant amount of auto injectors. We’re clearly not delivering them all by the end of this year. Phase 3 is starting in the first half of next year. But we will be working towards devices for the bridging study as well as the Phase 3. So those devices are in our forecast or in our guidance because we know we have to deliver them. We know that there – what the volume is that they’re requesting at least by the end of the year. So there shouldn’t be any significant change into our product revenue other than just the growth that we expect to see in order to hit our guidance. And so we think program is going to drive some additional development revenue as well as device revenue, but that again – that will all be in our guidance.

[Anthony Petrone:]

Okay. And then the last one would be on the rescue pen 505(b) pathway and the IND filing. I guess the right way to think about that is the actual filing would be a 2021 event which would --?

[Robert Apple:]

Yes, the IND would be a 2021. It’s a relatively short program. We believe that we can get it done in a timely fashion. But we want to make sure we get formulation right. We want to get the PK program in front of the FDA and then we’ll be able to give better guidance. But overall, I think it will be a relatively short clinical program with a nice potential product that we’ll disclose once we go into the IND.

[Anthony Petrone:]

Okay, all right. Thanks, again.

[Operator:]

Thank you. Our next question comes from Wally Walker with Hana Road Capital.

[Wally Walker:]

Good morning and congratulations on the progress in the quarter. The reinstatement of the four-year revenue guidance infers acceleration of revenue in the second half of the year. Anything to elaborate on what gives you that confidence?

[Robert Apple:]

So again – thanks Wally for the question. When we look at the two main drivers of our business being XYOSTED and Epi; XYOSTED, we’re looking at the trends we’re seeing. We’re seeing a lot of positive trends on the growth of the prescriptions. We’re seeing positive trends obviously on the net selling price which always happens – we always do the best in the second half of the year from a net selling price because we’ve gone through co-pay support, we’ve gone through a lot of the support that we have to give the patients in order to get the drug in the first two quarters, so the net selling price goes up. So XYOSTED is a big growth driver for us for the second half of the year. And then the same with Epi. Like I mentioned earlier, we have pretty good visibility into the demand from a device standpoint from Teva. And so we know what we need to deliver. Barring any issues with COVID, we expect to be able to deliver those. So far we’ve been fortunate with our manufacturers and our suppliers that it hasn’t impacted us tremendously. We obviously have had the same impact as most other companies where there is people coming in and out of the plants with COVID, so you have to deal with that. But overall, the Epi business is pretty predictable and we expect that to be a growth driver. And on top of that, our development programs continue to ramp up. Idorsia and Pfizer and in some of the Teva work that we do, we have a lot of development work that’s getting done in the second part of the year. So you’ll see additional developing revenue that’s driving the growth of the revenue as well.

[Wally Walker:]

Great. Thanks. Very helpful.

[Operator:]

Thank you. . I am currently showing no further questions in the queue at this time. I’d now like to turn the call back over to John Howarth for closing remarks.

[John Howarth:]

Thanks, Katy. And thanks again for joining us on today's conference call. If you have any follow-up questions, you can reach me at 609-359-3016. That concludes today's call.

[Operator:]

Thank you. Ladies and gentlemen, this concludes today’s teleconference. You may now disconnect.