Antares Pharma, Inc.
Q2 2015 Earnings Call Transcript

Published: 10 Aug 2015

[Operator:]

Ladies and gentlemen, welcome to the Antares Pharma Second Quarter 2015 Operating and Financial Results Conference Call. Throughout today’s recorded presentation, all participants are in a listen-only mode. After the presentation, there will be an opportunity to ask questions and instructions will be given at that time. I will now hand the conference over to Jack Howarth, Antares’ Vice President of Corporate Affairs. Please go ahead, sir.

[John Howarth:]

Thank you, Lisa, and good morning, everyone. This morning we released our Second 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, I’d like to remind you that some of our states made during this conference call will forward-looking statements within the meaning of the Safe-Harbor provisions of the US Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties and actual results could differ materially from those projective in any forward-looking statements. These forward-looking statements may include, but are not limited to, statements concerning the growth of prescriptions and sales of OTREXUP, the approval by the FDA of VIBEX Epinephrine Pen and revenue from Teva related thereto, the timing of results of the supplemental Phase 3 safety study for QuickShot Testosterone or QST and FDA actions with respect to the QST program, FDA action with respect to the ANDA filed for the exenatide pen. The company’s ability to adequately respond to the complete response letter with respect to its ANDA for VIBEX Sumatriptan and FDA action with respect to the same; the company’s promotion of OTREXUP psoriasis; actions by the company third party partners of suppliers, actions by the FDA regarding the company’s product candidates and those who its third party partners; the timing of results of clinical research and development projects and the timing of launch of products in development and future product revenue. Forward-looking statements provide Antares current expectation or forecast of future events. Factors that could cause actual results to differ or discussed from time-to-time in the company’s filing with the SEC on Form 10-K and in Antares periodic filings on Form 10-Q and 8-K and other filings made with Securities and Exchange Commission. List of these documents are available on the investor information section of our website and we encourage you to review these materials. Antares is providing this information as of the date this release and does not undertake any obligation to update any forward-looking statements contained in this earnings call as a result of any new information, future events or circumstances after the date hereof, except is required by law or otherwise. The company cautions the investors not to place undue reliance on these forward-looking statements. Joining me on today’s call 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. I'm very excited to talk to you about the great results we released earlier today. To get started, let’s review the agenda for today’s call on slide three. I will begin today’s call with an overview of the business. Bob Apple will provide a more detailed update on OTREXUP and Jim Fickenscher will take you through the second quarter financial results. I will then make some closing remarks and then open the lineup for your questions. Please turn to slide number four. As you have seen from our press release we issued earlier today. We had an excellent quarter. Starting with the top-line, we reported revenues for the second quarter of 2015 of $14.4 million. This represents a 128% increase over the second quarter of 2014. Through the first two quarters of 2015 we have booked $22.8 million, which is only $3.7 million short of the revenues earned for the entire year in 2014. In addition to recording record revenues the team at Antares is delivering on our four most important projects. Growing OTREXUP prescriptions, preparing for a possible generic epinephrine pen approval and launch by Teva. Moving forward with the QuickShot Testosterone development program and seeking to obtain approval of our first generic Sumatriptan. Last quarter I explained to you that we were making a number of changes to the OTREXUP commercial tactics that we believe will reinvigorate the prescription trends for our first proprietary product. Three months later it looks like those efforts are paying off, as we saw prescription increase approximately 21% over the first quarter of 2015. Revenues for OTREXUP were $3.3 million in the quarter, which is a 100% growth versus the second quarter of 2014. With respect to pre-launch sales to Teva for their generic Epipen, we shipped $1.8 million in the quarter and our manufacturing partners are running at a pace which should allow us to see even higher revenues in Q3 and the balance of the year. We are confident that we can deliver the launch quantities requested by Teva. On the approval front, Teva has informed us that their application with the FDA remains in an open and active status and they recently communicated to their investor that they continue to feel “fairly good about their chances for approval in the second half of this year”. Moving on to QuickShot Testosterone, I am very encouraged that we have begun enrollment and what we believe will be our final study before filing the NDA approximately 70 patients will be needed to meet the FDA’s request for a safety database of 350 patients. With approximately 200 patients having six months of experience with study drug and approximately 100 patients with 12 months of experience. Initial reports on the first week of enrollment and screening are very positive. Once the study has fully enrolled we will be able to access timing of a potential launch which we believe could still be late 2017 or early 2018. Based upon the success of the data from the 12 week portion of the PK study, we believe this product has the potential to rapidly restore and reliably maintain normal testosterone levels via once weekly subcutaneous dosing and we continue to be very excited about this opportunity. Next, I would like to give you an update on Sumatriptan. First, we have initiated the capital investment required to manufacture the devices at a commercial scale and we are on track to have that equipment operational in early 2016, as we previously communicated. With respect to the interactions with the FDA, you will recall that we received a complete response letter from the FDA earlier this year, which contain minor deficiencies including changes to labeling. We submitted our response to the agency in March and just recently received another complete response letter from the FDA, which included a request for us to conform to the June 2015 changes to the Imitrex label along with some additional minor labeling changes and a minor open DMF item on the active pharmaceutical ingredient. I will now ask Bob to provide you with some details on the progress we’re making with OTREXUP. Bob?

[Robert Apple:]

Thanks, Eamonn. The graph on slide number five shows Symphony T Rx data since the launch of OTREXUP in 2014. In comparison to the first quarter of 2015, our OTREXUP prescriptions grew 21% in the second quarter from 6,722 to 8,123 and a number of unique prescribers of OTREXUP grew from 1,546 to 1,673. We believe that much of this growth can be attributed to the changes we made earlier this year, including internalizing our sales force expansion of territories, refinement of messaging and initiation of the OTREXUP total care program. Please turn to slide number six. We account for more than two-thirds of the total subcutaneous auto-injector market and approximately 5% of the injectible methotrexate market according to Symphony. To put that in perspective OTREXUP prescriptions build in June were approximately 2,900 compared to over 55,000 prescriptions built for wild needle and syringe of methotrexate. So while we continue to be pleased with the steady progress and growth of OTREXUP, there is still a large untapped market for our product, which we will continue to look to penetrate. To that end we continue to make progress in manage care with several new agreements in place in the second quarter. Managed care weighs heavy on the success of a product and continues to be a challenge for the industry especially when you have a product for competition. We continue to improve on our goal of increasing coverage making it easy for physicians to prescribe and patients to get OTREXUP. Of the roughly 200 million eligible commercial lives, we have secured rebate contracts for approximately 100 million lives. While there are a number of plans where we do not have a contract in place OTERXUP is typically covered in Tier 3 or Tier 4. If a patient has difficulty with insurance coverage we offer assistance through our total care program. There are small number of plans where OTREXUP is not covered. On July 1st, we took a pricing increase of 4.9%, which now takes our wholesale acquisition cost up from $548 to $575. The first price increase we’ve taken since launch. We continue to see a positive response with a co-pays poor program for patients. The number of patients utilizing our co-pay card increases every month and across all prescriptions have filled the average co-pay a patient is responsible for is less than $20. We are planning a number of initiatives for the rest of the year which include attendance at regional and national rheumatology meetings, medical education initiatives and ongoing training. We believe these initiatives will support our long-term growth strategy. Finally, we are rolling out a new OTREXUP website, which we believe will enhance the users’ experience. We expect to launch the website toward the end of third quarter and it will target prescribers, patient and nurses providing three unique user experiences and information pathways. With that I’ll now turn the call over to Jim Fickenscher to take you through the second quarter financial results. Jim?

[Jim Fickenscher:]

Thanks, Bob and good morning, everyone. Let’s get started on slide number seven. Please note that all my comments will be limited to the second quarter of 2015 in comparison to the second quarter of 2014. If you have any questions on year-to-date results, I’ll be happy to address them during our Q&A session at the end of the call. Total revenue for the quarter was $14.4 million, a 128% increase over the $6.3 million recorded in 2014. Product sales which represent sales of our proprietary products, devices and device components to our customers were $5.8 million compared to $3.4 million last year. The increase in product sales was primarily driven by OTREXUP, which increased $1.7 million or 100% versus the same period last year and the shipment of $1.8 million of auto-injectors to Teva for use with their generic epinephrine product in anticipation of a possible approval and launch. Development revenues represent amounts earned under arrangements with partners in which we developed new products on our behalf. Frequently, we received payments from our partners that are initially deferred and recognized as revenue over a development period or upon completion of the fine deliverables. Development revenue was $3 million compared to $1.8 million in 2014 representing a 69% growth. Development revenue was primarily related to the Teva auto-injector and pen injector programs. Licensing revenues represent the amounts recognized from upfront or milestone payments received from partners that are initially deferred and recognized over the life of our agreements. Licensing revenue was $5.2 million in 2015, compared to $928,000 in 2014. The increase was primarily attributable to our license and promotion agreement with LEO Pharma, which began in November of 2013. The upfront and milestone payments received from LEO totaling $10 million were being recognized into revenue over a 35 months period. On June 23, 2015, we regained these commercialization rights, and as a result, we accelerated the remaining unamortized balance of the deferred revenue in the second quarter of 2015. No additional revenue related to this arrangement will be recognized in future periods. In total, we recognized $5.1 million from this agreement in the second quarter of 2015, which is approximately $4.3 million more than the amount recorded in the second quarter of 2014. Royalty revenue is recognized from the in-market sales of product sold by our partners, royalty revenue was $0.4 million compared to $0.3 million in 2014. Let’s move now to slide eight and have a look at the income statement. Total gross profit increased in 2015 to $9.7 million compared to $4.2 million during the same period in 2014. The gross margin rate for 2015 was slightly higher than 2014, due to the incremental revenue recognized in connection with the termination of the agreement with LEO, along with an increase in OTREXUP revenues, offset by higher sales of lower margin device sales to Teva and an increase to lower margin development revenues. 2015 total operating expenses were $11.2 million versus $13.3 million in 2014. The decrease in operating expenses was primarily driven by decrease in cost associated with launch of the OTREXUP in 2014 and a reduction in cost associated with patent litigation in comparison to 2014. Net loss was $1.5 million for 2015 versus $9.1 million in 2014, which translates into a net loss per share of $0.01 and $0.07 for the second quarters of 2015 and 2014 respectively. At June 30, 2015, our cash, cash equivalents and investments totaled $58.1 million. With that I’ll turn the call back to Eamonn.

[Eamonn Hobbs:]

Thanks Jim. Let’s wrap up by turning to slide number nine. This was an excellent quarter for us, in a pivotal year where we now that it is important for us to demonstrate to our shareholders our ability to achieve our communicated goals. We made decisions and tactical changes to the OTREXUP sales and marketing plan and we are pleased that the product has seen renewed growth. We said we would ship pre-launch epinephrine [ph] devices to support Teva’s launch of AB rated generic to the Epi Pen assuming FDA approval and we shipped $1.8 million, with the devices in the second quarter and we expect to manufacture and ship more devices through the balance of the year to fulfill their binding purchase order. We previously stated we will begin the additional supplementary safety study for QST early in the third quarter and we accomplished this goal by initiating enrollment in the study last week. We told you we would invest in tooling to manufacture our inventory for the potential Sumatriptan launch next year and we are on track to have that capacity available. We believe that we are firing on all cylinders on our four most important projects and we believe this quarter’s impressive tangible results bode very well for continued execution. Operator, we finished our prepared remarks for today, could you now open the lines for the question-and-answer session.

[Operator:]

Thank you. [Operator Instructions] We will take our first question from Anthony Petrone from Jefferies.

[Anthony Petrone:]

Great, thanks and congratulations on the quarter gentlemen. Couple on OTREXUP and then we’ll jump into Epi with Teva. Just wondering how the landscape shifts a little bit here where 90 days post or maybe perhaps a little bit more this settlement with Medac. So I’m just wondering how the landscape shifts maybe from the marketing standpoint between OTREXUP and Rasuvo? And then you did regain psoriasis indication, I believe last quarter so I’m wondering if there was any contribution from that end in the June quarter? And then a couple of follow ups. Thanks.

[Robert Apple:]

Thanks, Anthony, I’ll take these questions, it’s Bob. As far as the dynamics between Medac and Antares relative to marketing the two products both Rasuvo and OTREXUP, I don’t think settlement has any impact on what we were doing and what we’re going to do in the future. So we’re out there detailing the value of OTREXUP to our physicians increasing the third pay our coverage, making easy for patients to get and we are assuming that Medac is doing the same with Rasuvo. So we have a competitor in the market and it hasn’t changed since they launched in October and the good news is that the market is growing and that OTREXUP is maintaining a large percentage of that market. As far as your question on psoriasis and LEO, there was a small percentage of the scripts that were related to psoriasis less than 3% and we believe that we are going to continue to look at detailing those derm physicians who wrote OTREXUP previously. So our current sales force will go to some of those physicians to try to maintain and grow that the dermatology aspect of OTREXUP and in the future what we are doing right now is looking to potentially get another marketing partner for the psoriasis indication and as we get any kind of updates on that we’ll provide that to the market.

[Anthony Petrone:]

Alright, that’s helpful. So maybe just one more on OTREXUP which would be managed care contracts on last quarter, I’m wondering if 2Q felt any impact from that as well and just as you look ahead into the remainder of 2015 how substantial that can be as a driver for OTREXUP? And then maybe the follow up on Epi would be just to recap the inventories that have been shipped to Teva those are non-recourse in other words if they don’t get approval there is no sort of recourse on the auto injectors that have been sent to them. Thanks again.

[Jim Fickenscher:]

Sure Anthony, it’s Jim, I’ll take those. So just very quickly on the second part of your question with respect to the devices sold to Teva, you are correct there is no recourse. So once sold there is no right of return on that and that’s why we are able to book those as revenues. With respect to the managed care contract, I think what’s fair to say is that we have seen slight decrease in our net realized selling price as a greater percentage of our prescriptions of OTREXUP are being covered by managed care contracts. But obviously, we also believe that those are responsible for driving some of the volume increases that we’ve seen. So one balance, I think we’re still in a very good position we’ve tried hard to participate in managed care contracts, where the financial returns is reasonable for us. We have walked away from a couple of plans Bob mentioned there are couple of plans that we are not covered by. And frankly the economic just didn't work in our favor. And so we're happy to lead our friends that Medac take those contracts. So I think that will we don’t give forward guidance specifically on the revenues, but I think that it’s fair to say that we're still at a point where we’re gaining more and more market share in managed care contracts. So I expect to see the gross to net discount growing in the future quarters, but some of that will be helped by the price increase that we took as well. So I think we’ve got it under good control.

[Anthony Petrone:]

Thank you.

[Operator:]

[Operator Instructions]. And we’ll now take a question from Akiva Felt from Oppenheimer.

[Akiva Felt:]

Hey, good morning gentlemen it’s Akiva. Hey first question for Jim or Bob, the breakdown between sales and marketing and G&A kind of been the same since when you guys reported separately. And then wanted to ask also about the timeline for QST, what that looks like following the safety data readout? Thank you.

[Jim Fickenscher:]

Yeah so on your first question we’ve decided that we’re going to basically just give selling, general and administrative. So we’re not going to be breaking out specifically what amount is selling versus G&A. Actually I think that if we were to look into it without giving specific numbers what I can tell you is that both areas have seen reductions versus in the last year. With respect to G&A that is primarily because we don’t have the cost associated with the patent litigation that we had last year. With respect to sales and marketing, we had the launch expenses of OTREXUP in 2014. We also had an infrastructure associated with the commercialization that was larger than what we thought was warranted. And so we made some moves specifically around medical science liaisons, on reducing those numbers and some all the things like that. And I think Bob and his team are doing a great job managing and investing the appropriate amount of dollars and the opportunity for us.

[Akiva Felt:]

That’s helpful, thank you.

[Robert Apple:]

I’m sorry there was one other question that Akiva had. As far as the timeline for QST, nothing changed into our last guidance which is we expect to and we initiated the safety study. That’s a six month study and we expect to have a read from that sometime next year. And we’re going to look to file the NDA in 2016 timeframe. So ‘16 and again the launch timeframe is still in that - late 2017 early 2018.

[Akiva Felt:]

Great, thank you.

[Operator:]

And ladies and gentlemen we currently have no additional questions in the queue this morning. I would like to turn the conference back over to Jack Howarth for closing and additional remarks.

[Eamonn Hobbs:]

Thanks, Lisa we have one question from the interactive portion of today’s call. And the question is when do you broadly think breakeven levels for OTREXUP can be achieve?

[Jim Fickenscher:]

So I’ll take that Jack. So what we’ve both talked about is given the investment that we are making today. We need to get to a run-rate in the low $20 million range. So obviously we’re not quite there at this quarter, but we’re making continued progress towards that and I certainly believe that that is going to happen at some point in the near future, but we’re not quite there at this point in time.

[Eamonn Hobbs:]

Thanks, Jim. Thanks again for joining us in today’s conference call. If you have any follow-up questions, I would encourage you to call me at 609-359-3016. That completes today’s call.

[Operator:]

And ladies and gentlemen once again this does conclude today’s conference. And we do thank you for participation. Have a great rest of your day.