Antares Pharma, Inc.
Q1 2015 Earnings Call Transcript

Published: 11 May 2015

[Operator:]

Ladies and gentlemen, welcome to the Antares Pharma First Quarter 2015 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. [Operator Instructions] I will now hand the conference over to Jack Howarth, Antares’ Vice President of Corporate Affairs. Please go ahead, sir.

[John Howarth:]

Thank you, [ph] Ardrey, and good morning, everyone. This morning we released our First Quarter 2015 Operating Results, and recent achievements, and a copy of the press release can be found on the Antares website at www.antarespharma.com under the news section. In addition, this morning’s teleconference also contains an interactive slide presentation. If you’ve dialed into the audio-only teleconference, you can follow along with the slides which can be found on our website under the Investor Information section. The conference call and slide presentation will be simultaneously webcast on the Investor Information section of Antares’ website under the webcast tab. If you are currently unable to access our website, the conference call and slide presentation will be archived under the webcast tab at the conclusion of today’s call. 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 closing of the firm commitment underwritten public offering of $23 million of the Company’s common stock at a purchase price to the public of $2 per share, and the net proceeds there from. The impact of OTREXUP total care on the reimbursement process, the timing of actions by the company’s third party partners, the timing of actions by the FDA regarding the company’s product candidates and those of its third party partners, the company’s promotion of OTREXUP psoriasis, the design, timing and cost of additional clinical trials for QuickShot Testosterone, approval by the FDA of the end of the therapeutic equivalents rating for Teva’s epinephrine pen, potential benefits of OTREXUP and the products and development, time of launch of products and development and the growth of product sales and timing thereof. Forward-looking statements provide Antares current expectation or future forecast – or forecast of future events. Actual 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 Eamonn Hobbs, President and Chief Executive Officer; Robert Apple, Executive Vice President and Chief Operating Officer; and Jim Fickenscher, Chief Financial Officer. I’ll now turn the call over to Eamonn Hobbs. Eamonn?

[Eamonn Hobbs:]

Thanks, Jack, and good morning, everyone. Thanks to all of you for joining us on today’s call. Please turn to slide three. I will begin today’s call with an overview of our first quarter 2015 accomplishments. Bob Apple will provide an update on OTREXUP and Jim Fickenscher will take you through the first quarter financial results. I will then discuss our upcoming milestones, after which we’ll have time for questions. Moving on to slide number four. The company has set a number of significant milestones during the first quarter and past several weeks. This morning we expect to close our fully underwritten public offering, which we announced on May 5. We have been notified by the underwriters that they have exercised their option to purchase $3 million additional shares which means we sold a total of $23 million shares. We expect net proceeds to the company after considering all commissions and fees payable by the company to be approximately $42.8 million. This new capital will be used for general corporate purposes including business development, in-licensing and acquisitions. We appreciate the support that we received from many of our larger shareholders and welcome a strong group of leading life science specialist’s investors who participated in the financing. With respect to OTREXUP, we announced the settlement of all litigation between Antares and Medac Pharma through a royalty free cost license of our respected intellectual property. This settlement will allow us to focus on the real business in hand, building a market for a subcutaneous injectable methotrexate therapy. It also eliminates the significant spending and management distraction associated with the litigation. Last month we announced that we have regained the marketing rights to OTREXUP with the symptomatic control of severe recalcitrant psoriasis in adult. While we are disappointed in the psoriasis market penetration to date, we believe there is still an opportunity to establish OTREXUP as an important treatment option for patients with psoriasis, and we will evaluate all of our options, including looking for a new partner to market OTREXUP to dermatologist. We also have good news to report on our human growth hormone product in the United States. In December 2014, Ferring reacquired the rights to Tev-Tropin and the needle-free injector we supplied for them, Tjet. You may remember that last year Teva recalled all of their Tev-Tropin product in the United States due to a quality issue with the drug product. As a result, we have not sold any devices or consumables and have not received any royalties from Teva in the U.S. for Tev-Tropin since the last April. Last month we were notified by Ferring that the FDA has approved to change in the name of the product to ZOMACTON and the device to ZOMAJET. The FDA also approved the 10 milligram ZOMAJET device. According to Symphony Health, the 10 milligram dose accounts for approximately 25% of the total hGH sales in the U.S. Ferring has indicated that ZOMACTON is expected to be available in the U.S. in the second quarter of 2015 as both a 5 milligram and 10 milligram option. The ZOMAJET needle-free administration device is supplied by Antares are expected to be available later this year. Finally, on the VIBEX Epinephrine front, we began shipping VIBEX Epi devices to Teva on April 1. We have a significant purchase order from Teva and we expect to continue to fulfill the purchase order throughout 2015. I’ll now ask Bob to provide you with some details on the progress we’re making with OTREXUP. Bob?

[Robert Apple:]

Thanks, Eamonn. Let’s turn to slide number five. OTREXUP continues to be well accepted by patients and physicians who like. Patients tell us that the appreciate the lack of GI and tolerance, ease of use associated with our VIBEX injected device and the virtually pain-free injection, while physicians who use methotrexate in monotherapy working commonly with the biologic, appreciate the bio availability advantages of the product. The primary issue that we have faced so far is a difficult that physicians have encountered in getting the product reimbursed. This issue is not an OTREXUP issue alone, it’s an issue that most of the drugs face in today’s reimbursement environment. You recalled it on our last operating results conference call, you spoke about integrating the existing contract sales force of Quintiles. We capped 19 high performing OTREXUP representatives and brought that in-house January. By the end of February we hired 13 new representatives to fill out our expanded field force to 32 territories. We believe that overtime these new representatives will become as productive as our existing representatives and lead to increase prescription growth. At the end of February, we also introduced OTREXUP total care which is designed to make it easier for physicians and patients to get access to OTREXUP. Our Total Care program provides the rheumatology offers, the opportunity you have benefits investigations and prior authorizations related to OTREXUP managed by an outside service, allowing the physician and staff that folks on patients and not paper work. Of those still at an early stage, we believe that Total Care program has been well received thus far. In vision, we get also supply of patient starter-kit which we believe can significantly reduce the amount of time and energy that physician needs to spend to get his/her patients started on OTREXUP. On the patient side, our co-pay support program continues to see strong utilization. We provide as well as zero co-pay and up to $125 of support. We have seen over 5,000 [indiscernible] to date and the percentage of patients using the benefits has increased in 2015. The first quarter 2015 also mark the first time in OTREXUP has been specifically contracted with managed care organizations. Well, OTREXUP is covered under the majority of all plans, our goal is to remove some of the prior authorizations and step that is required for use of OTREXUP. We have several plans which instituted coverage late in the first quarter and other plans that will begin coverage over the balance of the year. Generally speaking, we are looking for [indiscernible] with Rasuvo, although we do have some plans of where we are in advantage position and others where we are disadvantage versus Rasuvo. As you can see on slide number six, [indiscernible] fact of internalizing our sales force, and a Rasuvo launch in Q4 of 2014 which included significant sampling by Medac. We have seen – we have been seeing prescriptions grow again since January. According to Symphony Health, March total prescriptions reach an all-time high in 2,372 representing 7% growth over February. Just last week we had our highest weekly prescriptions filled since launch. We are also increasing a number of unique prescribers at OTREXUP setup, approximately 1,546 unique physicians have prescribed through the end of the first quarter as compared to approximately 1,400 physicians at the end of fourth quarter 2014. With the recent adjustments for our sales team and with steady growth being made on the reimbursement front, we believe the prescription should continue to grow in 2015. I’ll now turn the call over to Jim Fickenscher to take you through the first quarter financial results.

[Jim Fickenscher:]

Thanks, Bob and good morning everyone. Let’s get started on slide number seven. Total revenue for the first quarter of 2015 was $8.3 million, a 60% increase over the $5.2 million recorded in 2014. Product sales which represent sales of our proprietary products, devices and device components through our customers were $4.6 million compared to $1.8 million last year. The increase in product sales was primarily driven by higher sales of OTREXUP. Development revenues represent amounts earned under arrangements with partners in which we develop new products on their behalf. Frequently, we received payments from our partners that are initially differed and recognized as revenue over a development period or upon completion of fine deliverables. 2015 development revenue was $2.4 million compared to $1.4 million in 2014 representing a 68% growth. Licensing revenues represent the amounts recognized from upfront or milestone payments received from partners that are initially differed and then recognized over the life of the agreement. Licensing revenue $900,000 for both 2015 and 2014. Royalty revenue is recognized from the in-market sales of products sold by our partners. 2015 royalty revenues was $500,000 compared to $1 million in 2014. The decrease of royalties is primarily due to the decision taken by Teva in April 2014 to recall the drug product Tev-Tropin and, hence, temporarily eliminated all revenues related to Tev-Tropin in the U.S. Let’s now move to slide eight and have a look at the income statements. Total gross profit increased in 2015 to $4.7 million compared to $4 million in 2014. The gross margin rate for 2015 was lower than 2014 because of an increasing cost associated with supply of hGH devices and disposables to Ferring and a decrease in high margin royalties. 2015 total operating expenses were $11.4 million versus $12.8 million in 2014. The decrease in operating expenses was primarily driven by costs associated with the launch of OTREXUP in the first quarter of 2014. Net loss was $6.8 million for 2015 versus $8.8 million in 2014. This translates into net loss per share of $0.05 and $0.07 for the first quarters of 2015 and 2014, respectively. With that, I’ll turn the call back over to Eamonn.

[Eamonn Hobbs:]

Thanks, Jim. Let’s wrap up our prepared remarks by discussing near term potential catalysts on slide nine. Under the new leadership at Teva, our partnership has taken on an elevated importance. The shipments of VIBEX Epinephrine devices have begun. Teva has initiated side inspections and we are working in concert toward a potential product launch sometime later this year. The top line results in the Phase 3 QuickShot Testosterone study point to a product that we believe could have a best in class PK profile and could potentially be the first at-home auto injector product for a subcutaneous self-administration of testosterone. In March, we’ve responded to the FDA’s January 2015 letter which we believe effectively requires us to expose 70 more patients for six months. We are currently waiting for the FDA’s response to our reply before we finalize our plans and begin the next study. With respect to driving OTREXUP prescription growth, we believe that the ongoing work will pay off with higher prescription trends. We’ve seen that our end launches tend to be slow and steady, due to a variety of reasons including third-party reimbursement and the chronic nature of disease which causes patients to visit their rheumatologist only a few times a year. The feedback from patients and physicians has been very positive. So we will continue to deliver the OTREXUP messages and to work to make access easier for patients and physicians alike. We are waiting for the FDA to provide us with the decision on the approval of our Sumatriptan ANDA. In early March, we responded to the complete response letter received in January and we have begun commercial scale tooling in mold fabrication in anticipation of potential approval and launch. In summary, we have a number of very interesting short-term catalysts for 2015 and we believe that we are poised for success. Thank you for your attention. Operator, could you now open the lines for the Q&A session?

[Operator:]

Thank you. [Operator Instructions] We’ll go first to Akiva Felt of Oppenheimer.

[Akiva Felt:]

Hey, good morning and thanks for taking the questions. Just have a couple here, first, maybe what do you think is, has been the ravel earnings step on the managed care front and especially given at the biologic alternatives are so much more expensive. Can you give us a little bit of color on kind of what the little stuff that looks like? And then maybe some color on where the breakeven level for OTREXUP is and kind of how far along you are towards achieving that? And then just a housekeeping question, what were the litigation expenses for either Q1 or Q4 last year? Thanks.

[Robert Apple:]

Okay, I’ll start off with a couple of those questions. On the reimbursement end, the type of step that we’re seeing are really going through oral methotrexate first which is we expected to have that typical paradigm when a patient goes through when you’re being treated for RAs or [indiscernible] methotrexate and everyone. The things that have been the real obstacles have been the prior authorizations and that is typically a format of physician when the office has to fill out and they typically ask for additional information, again if they been at methotrexate but more importantly what other issues are they seeing that why can’t stay on a oral methotrexate, and usually that things like hand dexterity, GI and tolerance and things like that. But the issue is that that every plan has a different prior auth and a different type of things that a patient have to go through. So it’s cumbersome for their physicians and the office staff. So what we’re doing, like I said in our prepared statements is through our total care program we’re taking that prior authorization, if your office wants us to do it we’re taking that off their hands and having the independent company go through the benefits investigation as well as actually completing the prior auth for them with obviously the doctor signature and things like that. So we’re a little surprised with the amount of paper work that our office has to go through and that’s what we’re working on and I think we’re addressing in annual start to see some positive results from that. As far as the color, generally it’s a good cut room, good position and what we’re trying to do is just position OTREXUP as a really good alternative for patients before they go on to a biologic, also if they’re having GI and tolerance or methotrexate, so we continue to work on that and again we think that the physician education is high now and the awareness of our product is high and we now start going through the administration functions that most companies have to do to – deal with when they have a product launch like this.

[Jim Fickenscher:]

Well, with respect to the question that you asked on OTREXUP, this is Jim Fickenscher, Akiva. So, breakeven is kind of in the low $20 million range for OTREXUP, that’s pretty much the number that we are looking at. So we do think that eventually this will be a product that will have a nice contribution to our bottom line. With respect to your question on litigation expenses, we haven’t broken out specifically the amounts by quarter or year, what I can do to kind of help you a little bit Akiva is that in 2014 we capitalized about $1.8 million of litigation expense. This is where – we were defending our patterns and actually suing Medac. There were other costs that are not eligible with the capitalize, so we are spending several million dollars a year, last year. In the first quarter there was some spend as we were in the process of looking at the settlement, we are also preparing for depositions as part of the litigation which of course is relatively expensive. So if you think that we’ll see an easing of our admin costs for the balance of this year, now that litigation is behind us but again, multiple millions of dollars were spent last year and that’s certainly something we’re happy to have behind us at this point.

[Akiva Felt:]

All right, thanks. That’s helpful.

[Operator:]

[Operator Instructions] And at this time we have no further questions in the queue. I’ll turn the conference back over to management for any closing remarks.

[Eamonn Hobbs:]

Thank you, [ph] Ardrey, 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 completes today’s call.

[Operator:]

And again that does conclude today’s conference. Thank you for your participation.