Antares Pharma, Inc.
Q4 2012 Earnings Call Transcript

Published: 13 Mar 2013

[Operator:]

Ladies and gentlemen, welcome to the Antares Fourth Quarter 2012 Operating and Financial Results Conference Call. [Operator Instructions] I will now hand the conference over to Jack Howarth, Antares' Vice President, Corporate Affairs. Please go ahead, sir.

[John J. Howarth:]

Thank you, operator, and good morning, everyone. Thanks for joining us on today's call. We announced fourth quarter and full year 2012 financial and operating results earlier this morning, and the press release can be found on the Antares website at www.antarespharma.com under the Investor Relations tab. Before we begin, please be advised that during the course of this call, we may make forward-looking statements concerning the company that are not historical facts. These forward-looking statements may include, but are not limited to, statements concerning the timing of product sales, market estimates, market potential and growth prospects, technology platforms and working capital needs. Forward-looking statements provide Antares' current expectation or forecast of future events. Antares' results could differ materially from those reflected in these forward-looking statements due to decisions of regulatory authorities and Antares' ability to execute on its development plans, capital needs and general financial, economic, regulatory and political conditions affecting the pharmaceutical industry generally. Additional information concerning these risks and uncertainties are contained in the Risk Factors section of Antares' annual report on Form 10-K and in Antares' periodic filings and other filings made with the Securities and Exchange Commission. Antares is providing this information as of the date of this release and does not undertake any obligation to update any forward-looking statements contained in this earnings call as a result of new information, future events or circumstances after the date hereof, except as required by law or otherwise. The company cautions investors not to place undue reliance on these forward-looking statements. Joining me on the call today are Dr. Paul Wotton, President and Chief Executive Officer; and Robert Apple, Chief Financial Officer and President of the Parenteral Products Group; and Leroux Jooste, Senior Vice President, Pharmaceutical Sales and Marketing. After the presentation, we will open the lines for Q&A. I will now turn the call over to Paul Wotton. Paul?

[Paul K. Wotton:]

Thanks, Jack, and good morning, everyone. By now, I'm sure you've all had a chance to review this morning's press release, and I'd like to briefly highlight some of our 2012 accomplishments before I get to the fourth quarter results. We continue to execute against our strategic plan as we build a pipeline of combination products such as OTREXUP for rheumatoid arthritis and QS T for testosterone replacement. We have made great progress on this front, but I'm also pleased to report that total revenues for 2012 increased more than 37% versus 2011, well within the guidance we gave on last year's fourth quarter call. We have strengthened the company in many ways. And financially, we ended the year with a cash and cash investments balance of slightly north of $85 million, following a successful financing done this past October. And we continue to remain debt-free. 2012 got off to a good start with the launch of Gelnique by our partner, Actavis and quickly followed up with a settlement for our generic version of EpiPen that provides for a launch date of June 22, 2015, pending FDA approval. However, the bigger picture is the progress we've made on our internal pipeline as we shift this company towards a specialty pharmaceutical company that controls its own development destiny with products such as OTREXUP and QS T. During the second quarter, we announced positive results from the OTREXUP actual human use and human factors usability studies. These studies show that OTREXUP is safe and effective for rheumatoid arthritis patients with moderate to severe hand function impairment and that self-administration of methotrexate using our Medi-Jet device is also safe and well tolerated with virtually no pain at the site of administration, offering rheumatoid arthritis patients self-dosing of injectable methotrexate. In June, we moved our stock exchange listing from the AMEX to the NASDAQ as our market cap continue to grow. The move has clearly created new levels of interest in the Antares story. We also added some very seasoned pharmaceutical professionals to the management team in order to fill expanding areas of need in both the pharmaceutical product development and the commercial side of business. We also moved our headquarters in the second quarter to accommodate our growth. Late in the third quarter, the company received a $750,000 milestone payment from Pfizer related to an undisclosed consumer health care product we licensed to them. And we also disclosed the filing of an SNDA for Tev-Tropin 10 milligram, which could potentially expand Teva's needle-free hGH brand upon approval, which we anticipate will be in time for launch in the second half of 2013. And the fourth quarter was an extremely busy one. As I mentioned earlier, we completed a financing in early October and the timing of the offering was particularly important so that we were able to end 2012 with more than $85 million in cash and investments. This gives us greater flexibility around optimizing the commercial potential for OTREXUP. It adds additional firepower to expand and accelerate our pipeline as well as the financial dry powder to complete our transition from a royalty-driven drug delivery business to a revenue-generating specialty pharmaceutical company. November brought more good news as it relates to the potential commercial positioning of OTREXUP. The final and most important clinical study necessary to support the NDA was completed. The study was designed to compare the relative systemic availability of methotrexate following all administration to subcutaneous self-administered methotrexate using OTREXUP in patients with rheumatoid arthritis. This was the key study to complete and it confirmed our hypothesis that subcutaneous dosing using the Medi-Jet device is a more effective route to use than oral delivery of methotrexate. This is the cornerstone of our product. Results of the study confirms, and I believe we are the first company to demonstrate this, that the systemic availability of methotrexate following traditional oral dosing plateaus at the 15-milligram dosage and that oral administration of the drug at a 20- or 25-milligram dose is essentially offering no significant therapeutic benefit from a 5- or 10-milligram incremental dose as it does not get absorbed by the body. This is important because more than 50% of patients who receive oral methotrexate in the United States are on doses higher than 15 milligrams. Following self-administration of OTREXUP, the systemic availability of methotrexate increased proportionately at every dose. This is important to both rheumatologists and patients because OTREXUP will extend the range of therapeutic exposure predictably and effectively up through 25 milligrams when compared to the exposure obtained through oral therapy. And we believe that this optimized and more precise delivery would extend the therapeutic efficacy of methotrexate both on its own, as a DMARD or in combination with biological products such as Enbrel or Humira. We have also filed several new patent applications for OTREXUP, and the company filed a trademark application with the USPTO for the brand name OTREXUP. Additionally at our pre-NDA meeting in November, we learned that psoriasis was a disease state that could potentially be in our product label, offering an additional treatment option with OTREXUP. This is an opportunity that we are evaluating at present, and I'm pleased to say that initial feedback has been positive. In early December, we entered into a new commercial arrangement with Teva, under which we will manufacture and supply a fully packaged sumatriptan auto-injector for the treatment of migraines. This product had previously been referred to as VIBEX 2 in all of our prior investor presentations. And under the new arrangement, we received an upfront cash payment, we will receive a commercial launch milestone payment and a 50-50 split of net profits. We will provide a fully packaged commercial product to Teva and they will distribute the product to the retail chain. On December 5, Kaushik Dave, our EVP of Product Development, and his team had a productive pre-IND meeting with the FDA on VIBEX QS T, a once-weekly subcutaneous dose of testosterone for men with low testosterone levels that uses our Vibex Quick Shot device. Both the company and the agency have identified a clinical development path forward. Based on the outcome of this meeting, we are reaffirming our development timeline, which targets a launch of VIBEX QS T in the first half of 2016. Apart from the therapeutic benefits of allowing patients to optimize their blood levels of testosterone by once-weekly self-administration, which also matches the half-life of the drug, the beauty of the QS T product is that it leverages our device technology to deliver a viscous drug through a fine gauge needle while minimizing any transference problems seen with currently marketed gels where there are black box warnings. During 2013, we will file an IND for QS T and expect to complete the first clinical pharmacokinetic study for this exciting product before the end of the year. We believe that VIBEX QS T will have an extremely positive product profile in the very large and growing male testosterone replacement market, which according to global industry analysts could exceed $5 billion in revenues in 2017. We have also continued to expand our intellectual property around this product as a result of some of the novel work that was conducted in 2012, and I believe that we will be in a strong position to protect this product for a long time to come when it gets commercialized. Finally, to close out a truly exceptional year of accomplishment, the OTREXUP NDA was submitted several months earlier than initially anticipated. The extra time and effort that went into a late December submission put us on track for a 10-month review at the FDA, which based on new regulations implemented in 2013, could have been a 12-month review if submitted in January. And although we reported a net loss of $0.04 in the fourth quarter, a large percentage of that loss was attributed to the NDA filing fee for OTREXUP for which I make no apology whatsoever. This was an important milestone in the company's history, and given the timing of the filing, keeps us on track for an early 2014 launch, if not sooner. Recently, we announced the acceptance of the filing by the FDA with a PDUFA date of October 14, 2013. Leroux Jooste, SVP of Sales and Marketing, and his commercial colleagues have undertaken the planning process for the addition of the commercial infrastructure necessary to support the launch, including the recruitment of new team members and key opinion leaders in the field of rheumatology as well as initiating pricing and reimbursement discussions with third-party payers. We believe that we have a well-defined and data-driven value proposition and preliminary discussions held thus far indicate that we are on the right path and have chosen the correct commercial strategy. I will now turn the call over to Bob to discuss the fourth quarter and full year 2012 results. After Bob is finished, I'll return to close out the call with a review of the upcoming milestones and catalysts. Bob?

[Robert F. Apple:]

Thanks, Paul. Good morning, everyone. The fourth quarter and full year results reported earlier today were consistent with our forecasted 2012 development goals, which call for a continued investment in our pipeline building towards an early 2014 launch of OTREXUP. In addition, and as Paul mentioned earlier, full year revenues increased 37% in line with our forecast at 30% to 50% increase we provided in the 2011 year-end earnings call. Paul and I and the rest of the team continue to believe the investments we make today will build a pipeline of opportunities that will continue to enhance value for our shareholders in the near term and beyond. I'll now take you through the fourth quarter and full year numbers. Total revenue was $5.5 million and $22.6 million for the 3 months and year ended December 31, 2012, respectively, compared to $5.4 million and $16.5 million for the comparable periods in 2011. Product revenue decreased in the fourth quarter to $1.4 million compared to $1.8 million in the prior year and increased in the full year by 20% to $9.1 million compared to $7.6 million in 2011. The slight decrease in product revenues in the fourth quarter was primarily due to a decrease in sales of needle-free injector devices and disposable components to Teva and Ferring. The product revenue increase for the full year was mainly due to sales of our oxybutynin gel 3% to Actavis in connection with our launch of Gelnique 3% in April 2012. Both Teva and Ferring's hGH product continued to grow in the fourth quarter 2012, but we ultimately do not control the inventory levels of our device and disposables at our partners' distribution centers, which can cause fluctuations in product sales quarter-to-quarter. Development revenue was $1.1 million $7.4 million for the 3 months and year ended December 31, 2012, respectively, compared to $1.7 million and $4.5 million during the same periods of 2011. The development revenue in each year was generated primarily from auto-injector and pen injector development work for Teva and development revenue earned under the Actavis license agreement. Licensing revenue was $1.3 million and $2.1 million for the 3 months and year ended December 31, 2012, respectively, compared to $600,000 and $1.2 million during the same periods of 2011. Revenue for the fourth quarter of 2012 included a nonrecurring payment received from one of our partners. And licensing revenue for the full year of 2012 also included an upfront fee received in connection with our license agreement with Daewoong Pharmaceuticals for our 3% oxybutynin gel for South Korea, along with license revenue recognized in connection with our agreement with Actavis. Revenue from royalties was $1.7 million and $3.9 million for the 3 months and year ended December 31, 2012, respectively, compared to $1.3 million and $3.1 million for the comparable periods in 2011. We received royalties from Teva and Ferring related to needle-free injector device sales and/or hGH sales and from Jazz Pharmaceuticals on sales of Elestrin. In the third and fourth quarters of 2012, we also received royalty payments from Actavis on sales of Gelnique 3% and Gelnique 10%, which was the primary reason for the increase in royalties in the quarter and year-to-date periods. Total gross profit increased in the fourth quarter of 2012 to $3.8 million compared to $3.3 million in 2011, an increase for the year to $13.1 million in 2012 compared to $9.7 million in 2011. The increases were primarily attributable to increases in licensing revenue and royalties. Total operating expenses were $8.8 million and $3.4 million for the fourth quarters of 2012 and 2011, respectively, and approximately $24.5 million and $14.1 million for the years ended December 31, 2012, and 2011. The increase in 2012 was primarily due to expenses related to the clinical development of OTREXUP, which was approximately $7.6 million, which included a fee of approximately $2 million paid in connection with the New Drug Application submitted to the FDA in December 2012. Additionally, we spent approximately $900,000 in 2012 on the development of our next significant product opportunity, VIBEX QS T. Also contributing to the increase in operating expenses was OTREXUP market development of approximately $600,000 and the addition of employees in both development and marketing. Net loss was approximately $5 million and $0.2 million for the fourth quarters of 2012 and 2011, respectively, and $11.4 million and $4.4 million for the years ended December 31, 2012, and 2011. Net loss per share increased for the year to $0.10 in 2012, from $0.05 in 2011, primarily due to the increase in research and development expenses on OTREXUP. Net loss per share increased to $0.04 for the fourth quarter of 2012 from $0.00 in 2011, primarily due to expenses related to the development of OTREXUP, including a fee of approximately $2 million paid for the NDA to the FDA. The fee to the FDA in December 2012 alone accounted for approximately $0.02 of the net loss per share. At December 31, 2012, cash and investments had totaled approximately $84 million -- $85.2 million, compared to approximately $34.4 million at December 31, 2011. It is our current policy not to issue earnings guidance. But if you look into 2013, it's the year in which we are gearing up for the potential product launch of OTREXUP in 2014, then we would anticipate seeing product revenue grow between 20% to 40% without the benefit of any new product launches. We'd also anticipate that total revenue will grow 10% to 20%, depending on the level of business development and license revenue we generate in 2013. We will see the same level of R&D investment in our pipeline with a primary focus on VIBEX QS T for testosterone replacement therapy and potentially another compound, which may be announced later this year. We anticipate an approximate increase of $6 million in sales and marketing spend in the market development and commercial launch readiness for OTREXUP. As I stated earlier today, our results this year are representative of company evolving from a drug delivery model to a commercially focused specialty pharmaceutical company. We've invested heavily in the development of OTREXUP, and we plan to continue to invest in the market development and experienced personnel to make sure we have the right pieces in place for a successful product launch. We've repeatedly stated that we are not an earnings story yet. We believe it's important to invest in a pipeline first that can deliver a sustainable future of successful marketed products based on our proprietary technology platforms. With that, I'll turn the call over back to Paul for some final comments.

[Paul K. Wotton:]

Okay. Thanks, Bob. And 2012 was a great year for the company. We met or exceeded all of our goals for the year, both on the development side and on the financial side of the business. In 2013, we will continue to transition from a royalty-driven business model to a product revenue-generating business model. And in order to grow the company, we will need to deliver on the following highly focused goals over the next 12 to 18 months

[Operator:]

[Operator Instructions] Our first question is from the line of Louise Chen of Guggenheim Securities.

[Louise Alesandra Chen:]

I had a few. My first one is on your expanding relationship with Teva. Now that Teva is focused more on these new therapeutic equivalents, could you talk about that? And then secondly, based on ClinicalTrials.gov, it looks like the Pfizer consumer product that you're working on with Pfizer is possibly an Advil Gel. If you can't confirm that, could you at least say what the value proposition of an Advil Gel would be, potential size of the market opportunity? And then lastly, what other diseases is methotrexate used to treat aside from or in addition to RA and psoriasis?

[Paul K. Wotton:]

Thanks, Louise. This is Paul here, and those are all good questions. So with respect to Teva, I think that what we're doing here at Antares -- and it's not just Teva who are looking for this type of approach now, is consistent with their wish to develop branded products using technology such as the platforms we have here at Antares, which give you branded opportunities and a very short development cycle so you can get products out to market quickly. I think one of the good things about Antares is the extent of the intellectual property we've generated here and we continue to expand it. I just was informed yesterday that over the last couple of years, we've actually filed 70 patent applications around testosterone and methotrexate and I think that those type of programs should be very interesting for companies like Teva. On the Pfizer program, which we're under a confidentiality agreement so I can't comment specifically on the Advil Gel question, but I can comment on the value proposition. I think if you look to these nonsteroidal anti-inflammatory products, the success of the Voltaren Gel product over here in the United States has been quite significant. Over in Europe, a lot of these gels are available over-the-counter where they're very successful. And the reason that they're successful is they actually are effective painkillers and you minimize some of the side effects you would otherwise see with a nonsteroidal anti-inflammatory. And I have to say, in the past I've been known to use these myself when I'm recovering from a sports injury or something like that and they actually are very effective. So I think that's the value proposition. I think, potentially, it's a large market over here for these kind of -- type of gel-based therapies. And if it was Advil Gel, I'm sure that they'd be able to leverage the brand name very effectively. With respect to methotrexate, we have developed the product for rheumatoid arthritis. We did all of our clinical studies in RA patients and these are patients with very, very moderate to severe hand function impairment. But it shows that our device is very easy to use for patients. Methotrexate is actually used in other disease states like psoriasis, which is on the label. It's also used in disease states such as lupus, Crohn's and ulcerative colitis. I believe those are off-label applications. But nonetheless, what's important is that methotrexate is an established drug, but it's already sort of gaining more utility as an anti-inflammatory agent. And in fact, there was a really good publication just came out recently in arthritis and rheumatism, probably just a couple of weeks ago, actually, which was interesting data. It was a 25-year analysis of over 5,000 patients who had rheumatoid arthritis and the use of methotrexate, whether or not these patients were on a biological, was associated with a 70%, a 7-0, reduction in mortality. And I think what's nice about methotrexate is that it's a little bit like aspirin in the sense, it's an old, established drug that people trust and what we're doing is making it more effective. So we'll look to the psoriasis application. I guess it will probably also find application in other diseases, likely for some Crohn's, for example, as the product grows and gets accepted.

[Operator:]

[Operator Instructions] Our next question is from the line of Matt Kaplan with Ladenburg Thalmann.

[Aaron Hartley:]

This is Aaron Hartley in for Matt. Can you please give us an update on the Gelnique franchise potential for 2013?

[Paul K. Wotton:]

Yes, Gelnique, we're anticipating that -- the product has grown slowly since that product was launched. It has actually -- what's happened is, is that our Gelnique 3%, if you look at the data, is replacing the Gelnique 10% product. And the product was heavily sampled by Watson. I know that they're spending a lot of money on the marketing and promotion of Gelnique, and I'm anticipating we'll see some successful outcomes of that over 2013.

[Aaron Hartley:]

Okay. And can you give us a little more detail on what you're doing internally to prep for the OTREXUP launch?

[Paul K. Wotton:]

Yes. Actually, I have Leroux Jooste with me today. So I'll ask Leroux to comment on that. It's a good question.

[Leroux Jooste:]

We are actually on track in establishing our own internal strategic and leadership capabilities to support the commercial launch of OTREXUP. I recently hired 2 additional senior level individuals, one responsible for the managed market side of the business; someone else responsible for market development. This looks at key opinion leader development, advocacy building publications, scientific communications, et cetera. And we had already hired a very experienced individual in the rheumatoid arthritis marketplace to head up our marketing group. Later in the year, we will continue to expand our internal capabilities as we gear up to launch early 2014 or potentially sooner, as Paul had said. We are working with and have established relationships with third-party contract sales organizations and managed markets organizations to provide us with feet on the ground, so to speak, with a transition plan in place to be able to take on full responsibilities when it makes sense to do so.

[Aaron Hartley:]

If you don't mind, we have another one for you. Could you give us a little more detail on the new sumatriptan agreement?

[Paul K. Wotton:]

Sure, Bob can comment on that.

[Robert F. Apple:]

Yes, I think sumatriptan was originally VIBEX 2. And what -- Teva came to us and realized that we've been doing much more on our own with methotrexate and products like QS T, so they wanted to have us do more of the development work further downstream. And so what the agreement is currently is that Teva will make the sumatriptan in a prefilled syringe and send that to our manufacturers where we will make the device, assemble the device with the prefilled syringe and do the final packaging, all on our equipment. And so it's truly taking us all the way down to the commercial supply of the product, which is very different than our other agreements with Teva where we typically just supply them with the devices and then they do everything after that. So we felt that was a real positive step in our relationship in providing them the flexibility to have us complete the product development for them. Once the product is completed, we will ship it to Teva and they will distribute it into the retail marketplace. Obviously, sumatriptan is -- we believe, it's an ANDA and we will believe it'll be AB rated for substitutability to IMITREX. And that once the product is sold, it's basically net sales minus cost of goods and then we split the profits. I think it's a great opportunity for us to get, like I said, further down the commercial stream with them.

[Paul K. Wotton:]

Yes. I think it's also a reflection of how far we've come as a company because as a result of our taking charge of our own destiny with methotrexate and now testosterone, we've been able to grow the infrastructure, get the right people in place to enable the downstream development of these type of programs.

[Robert F. Apple:]

Yes, and we're going to be doing all this with the same equipment that we're using in methotrexate, and that were doing all the methotrexate manufacturing and commercial packaging on. And so there's a real synergy from a capital standpoint to be able to do this.

[Operator:]

[Operator Instructions] And I'm showing no additional questions. I'd like to turn the call back to Jack Howarth for closing remarks.

[John J. Howarth:]

Thanks, operator, and thanks again for listening to today's conference call. If you have any follow-up questions, please call me at [phone] -- I'm sorry, 359-3016. That completes today's call.

[Operator:]

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.