BioDelivery Sciences International, Inc.
Q1 2015 Earnings Call Transcript

Published: 11 May 2015

[Operator:]

Good day and welcome to the BioDelivery Sciences First Quarter 2015 Earnings Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Al Medwar, Vice President of Marketing and Corporate Development. Please go ahead, sir.

[Al Medwar:]

Good morning. This is Al Medwar, Vice President of Marketing and Corporate Development for BioDelivery Sciences, and welcome the BioDelivery Sciences first quarter 2015 earnings conference call. Leading us through the call today are Dr. Mark Sirgo, President, Chief Executive Officer and Erney De Paolantonio, Chief Financial Officer, David Acheson, VP of Sales and Managed Markets and Andrew Finn, Executive Vice President of Product Development will join us for the question-and-answer session following prepared remarks from Mark and Erney. I will now read the company's safe harbor statement. Certain statements of BDSIs management made during today’s call or in responding to questions and any other public documents of BDSI or statements of its management may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on management’s current believes and assumptions about the future but are not statements of fact and therefore involves and are subject to significant risks and uncertainties. Forward looking statements may include without limitation statements with respect to BDSIs plans, objectives, projections, expectations and intentions and other similar statements about the future. Forward-looking statements are typically identified by words such as projects, may, will, could, would, should, believes, expects, anticipates, estimates, intends, plans, potential or similar expressions. These statements are based upon the current beliefs and expectations of the BDSIs management and are subject to significant risks and uncertainties, including those detailed in today’s conference call as well as BDSIs filings with the Securities and Exchange Commission. Please note that actual results, including without limitation results for the commercial launch of BUNAVAIL and the clinical trials for an FDA review of BDSIs products and development may differ significantly from those set forth in the forward-looking statements. The risks and uncertainties related to forward-looking statements are also subject to change based on various factors, many of which are beyond BDSIs control. BDSI undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise except as required by applicable law. You are advised to review BDSIs SEC filings for Risk Factors that could impact BDSIs ability to achieve these goals described in the forward-looking statements. I will now turn the call over to Mark. Mark?

[Mark Sirgo:]

Thank you, Al. Good morning everyone, and thank you for joining BDSI’s first quarter 2015 corporate update and financial results conference call. Well, this call comes less in two months after our 2014 year end conference call, it’s been an extremely busy period for BDSI and we remain very optimistic about where we are as a company, about the prospects that lie ahead. On today’s call, I'll review our key achievements from the first quarter and reiterate our upcoming plans and milestones for the remainder of 2015. Let me begin by providing you with an update on the status of our launch efforts with BUNAVAIL. Now the key to any product launch is first growing product awareness amongst physicians and secondly gaining access to managed care or payers, as well as availability of pharmacy stocking. So these two areas, awareness and acceptability will be our focus on these calls as we relate to BUNAVAIL. As I discussed in our March call, we are taking a deliberate methodical and step wise approach to this launch. We are a new company, buy new product and it’s based – design custom to anything new. We're in this for the long-term and as such our focus on building a strong foundation for growth. I think we are making steady progress on our way to accomplishing this goal and I'll review that progress with you this morning. I am pleased to report that physician and patient receptivity BUNAVAIL continues to be consistently positive. Feedback we are receiving continues to suggest that the benefits of BUNAVAIL are resonating well with physicians and patients and physicians clearly see the distinct advantage of the BUNAVAIL compared to Suboxone and Zubsolv. We are making important progress in all critical aspects of the launch. You'll recall we laid out five key areas of focus on our last call regarding this launch which included, first, sales, where we are using new prescriber and managed care data to better target physicians with good managed care assess to BUNAVAIL. Second, as it related to managed care, we continue to expand product access through contracting and Medicaid formulary additions. Third, pharmacy stocking, we are assuring better pharmacy stocking of BUNAVAIL particularly in key territories. Fourth, our product marketing is driving increased product awareness and fifth clinical programs and life cycle management is focused on improving physician experience and building upon the competitive profile of BUNAVAIL, all these recent accomplishment to anticipate [ph] they have a pronounced impact on the growth of BUNAVAIL sales in the second half this year. So let me give you a little more color on each of these areas of focus. First one we start with sales. Where we just completed a significant retargeting initiative, aligned sales force activity with high volume prescribers with their best managed market access. We are doing this through the use of new and now continually updated prescription and managed care data. We are also applying more resources in areas of the country where there is a substantial basic commercial insurance reimbursement and Medicaid and managed Medicaid coverage. The state of Tennessee is good example of this and I will discuss it specifically in a minute. Second, as it relates to managed care access. In the last several weeks we have secured managed care access to BUNAVAIL with Express Scripts, OptumRx and CVS/Caremark. Overall BUNAVAIL is now available with Tier 3 unrestricted access and greater than 75% of commercial managed lives. With regard to Medicaid coverage, keeping in mind this makes up about 25% of the prescriptions in this category, given the timing of the cycle of Medicaid formulary reviews, we begin a year without coverage anywhere in the country. However, we now have begun to secure Medicaid coverage in some of the larger Medicaid states with managed care wins in the last six weeks resulting in formulary inclusion in eight states, including Tennessee, Massachusetts, West Virginia, Florida, Maine, Georgia, Nevada and Ohio. In total the addition of these eight states provides BUNAVAIL access to additional 30,000 prescriptions per month. Based on these managed care wins, we've begun expanding or reallocating the sales force selectively and strategically in these high opportunity areas. One such area is the Tennessee where we recently added to the TennCare formulary which happens to be the largest Medicaid formulary in the country for prescriptions of this nature which amounts to about 7000 per month. In addition, we are anticipating being added to a large commercial plant in Tennessee in June which gives us access to another 9000 prescriptions per month. So in Tennessee alone by July 1 we will have access to nearly 16000 prescriptions, which we don’t currently have access to. Another example of growth opportunity came several weeks ago when we were added to the Mass Health which is the Massachusetts Medicaid, as well as Harvard Pilgrim Health, that’s the commercial managed care group in Massachusetts. This is another significant opportunity for us. Now the third area of focus is pharmacy stocking. In order to limiting various access at the pharmacy level, we are working to improve pharmacy stocking through special programs and other initiatives with change and independence. Keep in mind this is a disease where a patient cannot wait a day or two to get the medication. If that occurs there was a risk that will be switched to another product. Pharmacy stocking has been a challenge over the first six months of the launch, but we are now starting to make good headway through continued partnering with change and independent pharmacies. Fourth, in marketing our efforts in the first quarter were focused on driving product awareness and communicating to physician is a key benefit to BUNAVAIL and our efforts are paying off. BUNAVAIL awareness among treaters of opioid dependence jumped over 70% this past quarter, keep in mind that at the time it will launch BUNAVAIL was relatively unknown with awareness of just over 10% of physicians. In late April, we also had a substantial presence at the American Society of Addiction Medicine through sponsorship, our [indiscernible] presence and other activities including a well attended satellite symposium. In addition, our sales force is utilizing key messages to differentiate BUNAVAIL from Suboxone, including our patented buccal, BioErodible MucoAdhesive delivery technology which provides efficient absorption with twice the viability of Suboxone. Reduce treatment and emerging constipating due to less drug reaching the GI track and the ability to allow – talking and swallowing while dosing, which is a significant compliance advantage for patients. Finally, regarding Phase 4 clinical programs life cycle management, we have just initiated a new BUNAVAIL Phase 4 patient experience clinical study. We'll be collecting new clinical data on the use of BUNAVAIL in clinical practice, including additional data and effectiveness, tolerability and patient acceptance of BUNAVAIL. We look to roll up to a 100 sites over the next several weeks. Also in an NDA for BUNAVAIL induction indication is expected to be submitted to FDA by the end of this year with launch upon approval occurring in the second half of 2016. The approval would expand the current indication for BUNAVAIL. This study to support this indication is just being initiated. Based on cumulative efforts for improving product awareness and enhancing product access involving both managed care plans and pharmacy stocking, we expect during the second half this year to begin seeing steady yet greater increase in growth in BUNAVAIL prescriptions month-on-month throughout the remainder of 2015. That said, let's take a look at few key metrics from the past quarter. Nearly 11,000 prescriptions were spent through BUNAVAIL during the first quarter 2015. This represents a 25% average month-over-month growth in prescription sales over the quarter. Also BUNAVAIL prescriber base continues to increase with 2000 physicians now this is out of the 5000 active prescribers. So in summary, our managed care wins along with better products stocking and pharmacies, aligned with our physician targeting initiatives serve as the basis for optimism for steady yet enhanced growth of BUNAVAIL over the second half of this year. With that let me now move to another exciting opportunity for the company in 2015, BELBUCA, formerly known as BEMA buprenorphine. This is the product for the management of chronic pain partnered with Endo Pharmaceuticals. Endo Pharmaceuticals as you know submitted an NDA for this product late last year and that NDA filing was accepted in February which triggered a $10 million milestone payment from Endo to BDSI this quarter. Our PUDF PDUFA date is October 23rd of this year. The potential approval of BELBUCA later this year will trigger up to a $50 million milestone payment from Endo. We are also eligible to receive up to $55 million of potential sales milestones based on achieving certain sales targets. We will also a receive a mid to upper teen royalty based on increasing sales. This is a very attractive financial arrangement for BDSI. As we have said previously, we see a peak sales opportunity for BELBUCA that could be in excess of 500 million in a multi billion dollar market place. Importantly the timing is right for BELBUCA with the rescheduling of Hydrocodone late last year to Schedule II and the increase focused on abuse and addiction to pain killers. Buprenorphine is a Scheduled III control substance, meaning it has been designated, its having lower abuse potential in Schedule II drugs, a category which includes most opioid analgesics including hydrocodone and oxycodone. Importantly, physicians have easier access to Schedule III products because they can call this prescriptions insta [ph] pharmacy by the phone and they can also provide re-sales. Neither of these are allowed with Schedule II products. We were also particularly excited about the presentation of the pivotal data from the two Phase III studies of BELBUCA at the upcoming American Pain Society 2015 Annual Scientific Conference later this week. It will be presented on Thursday, May 14. In addition abstracts have been accepted at the international conference on opiods which occurs in June of this year. Overall the exposure of BELBUCA and the scientific circles and by Endo in general doing its own conference calls is just beginning at the same time, it is extremely positive for both BDSI and BELBUCA. Let me now discuss Clonidine Topical Gel for the treatment of painful diabetic neuropathy. As you know the primary endpoint in the Phase III clinical study reported in March did not meet statistical significance, although certain secondary end points did. We studied at the time that there was a significant placebo response particularly among the cohort of patients, the final cohort of patients. This was compounded by the fact that the capsaicin challenge test did not appear to be a discriminating as predicted from prior work. Keeping in mind this test is the diagnostic to use identify patients with functional nerve receptors who have been determined in prior work to respond most favorably to Clonidine Topical Gel. So in the past six weeks we've been carefully analyzing the data done to the individual subject and site level. We believe this work that include the involvement of numerous consultants including clinicians and biostatistician has allowed us to confirm a reasonable and fact based pathway forward. In general the results of this work provide data that will allow us to better refine the protocol inclusion criteria to capture a more enriched patient population that we believe would be most responsive to Clonidine treatment. Let me be more specific, we have determined that both the placebo responder criteria and the capsaicin challenge test criteria were too liberal, in other words not discriminating enough. As for the placebo response during the one week placebo running, patients with the placebo response of up to20% could be randomized into the efficacy portion of the trial. In retrospect, we believe this was too lenient. Let me give you an example. If a patient entered a placebo running with a pain score of eight, on the zero to 10 scale where zero is no pain intended to more severe pain and had a 20% drop in his pain score during that placebo running this would represent a change of negative 1.6. This is a significant drop in pain particularly and on to these patients would need to drop an additional amount once randomized to active treatment to separate from placebo. Now let’s move to the capsaicin qualification score, we have lot of patients to enter the efficacy phase of the trial if they had capsaicin score of 2 or greater on the same zero to 10 point scale. We subsequently term that patients with capsaicin score around the two to three level had significant placebo responses once randomized to the efficacy basis of study. I've given you two parameters placebo response and capsaicin score with a two critical criteria for qualifying patients for the efficacy base of the study, they have the greatest impact on the study outcome. But when we took only the patients from the data set, we had a one point or less drop on placebo versus allowing up to a 20% drop and the capsaicin score greater or equal to four we saw a difference between Clonidine and placebo of negative 0.74 and was not only clinically meaningful but statistically significant at the PE quota point zero to four level. We believe that making these changes to the placebo running and the capsaicin requirement we are allowed for the optimal chance of determining the efficacy Clonidine Topical Gel. Current data set supports the efficacy of this product. Admittedly this is a noisy patient population that are at various stages of the disease state which banks [ph] for the timing of these key criteria. We also believe that this hypothesis if you will could be confirmed in a smaller scale trial including the potential [indiscernible] and adopted design and may become a Phase III trial or before proceeding to another Phase III study. Now given the product has been designated by FDA as fast track candidate, we may take the opportunity to review our filings with FDA before proceeding, although this is not required. Regardless we would not anticipate starting any additional work before the fourth quarter of this year. Keep in mind we faced with a very similar situation with our first BEMA of buprenorphine Phase III trial for chronic pain. Now when you consider the commercial potential of acquiring Topical Gel, the fact that BDSI owns it and as the IP extends to 2029 putting some reasonable resources behind a trial at the appropriate time that will confirm our hypothesis around our current filings would seem prudent. We will provide further updates as we proceed in the continued development of this program. As it relates to the remainder of our pipeline, we continue to make good progress with formulation studies for our long acting BEMA Buprenorphine depot product for the maintenance treatment of opioid dependence and chronic pain in order to identify the appropriate formulation to advance into this clinic. We anticipate filing an IND for this product candidate by the end of this year. Through their rate we believe injectable formulation of Buprenorphine provides the opportunity to address two of the greatest challenges in opioid dependence treatment. Adherence to treatment and diversion in potential. We also have the option to pursue an indication for the treatment of chronic pain. The key to the development of such a formulation is to create product that can be administered in a small volume with a small gauge needle for comfort up on injection, while controlling the release of the product over a 30 day period in such way to prevent a first effect it is high level of Buprenorphine released at one time. We believe the four new [ph] technology Evonik provides us with opportunities to meet this profile. Beyond this from a business development perspective we continue to look for products that would be complimentary to BUNAVAIL, including marketed products that would be promoted in addiction or physiatry [ph] keeping in mind that many opioid addicted patients suffer from [indiscernible] conditions such as anxiety sleep and depression. We also continue to assess developmental stage products with a treatment of addiction and pain. Finally we continue to consider our options for the commercialization of ONSOLIS in the United States which is intended for the management of break through pain in patients with cancer. We reacquired the North American marketing rights for META earlier this year. Subsequently in March we submitted the product re formulation data that we believe will allow FDA to move this product back into the US market place. This submission falls into a six month review cycle FDA after which it should have be approve we would begin commercial production. Given these timings we believe we have sufficient time to make the right decision on how we commercialize ONSOLIS going forward. However the expectation is we would foresee the product being sold in United States once again during 2016. So before I turn things over to Erney to cover our financials, let me review the key milestones in front of us for the remainder of 2015. First, we anticipate approve of BELBUCA on October 23 and a associated milestone payment from Endo of up to 50 million. Second, completion of the induction study BUNAVAIL and an sNDA submission by the end of this year. Third, the approval of a data package by the end of third quarter 2015 in order to reintroduce ONSOLIS into the US marketplace in 2016. Fourth, the filing of an investigational new drug application or IND for Buprenorphine depot by the end of the year. And finally, the termination of next steps for the development of Clonidine Topical Gel. With that I will now turn the call over to Erney to discuss our financials after which we will come back to answer any questions you may have. Erny?

[Ernest De Paolantonio:]

Thank you, Mark. For a more thorough review of our first quarter financial results, please see our 10-Q which we filed later this morning. Good morning, everyone. Before we get into the key financials, let me again explain how we are accounting for BUNAVAIL sales. Since we don’t have a history of BUNAVAIL returns the accounting guidance requires that we defer revenue and use third party prescription data to record sales until we have that history and can more accurately forecast returns. What that means, is that instead of reporting ex-factory sales, we differ those sales and recognize revenue with prescriptions over written. We have accounted for ex-factory sales as deferred revenue on our balance sheet. Additionally expenses associated with those sales have also been deferred until we recognize the sale. Net revenue for the first quarter ended March 31, 2015, was $13.1 million, compared to $20.7 million in the corresponding period of 2014. Revenues in the most recently completed first quarter include BUNAVAIL product revenue of $0.7 million, milestone revenue for the FDA acceptance of BUNAVAIL NDA, product royalty revenue for BREAKYL, our BEMA Fentanyl product in Europe, &D reimbursements revenue FOR the development of BELBUCA. In the fourth quarter of 2014 with the exception of BUNAVAIL revenue, net revenue came from the same sources. Total operating expenses for the first quarter ended March 31, 2015, were $19.7 million, compared to $19.3 million in the corresponding period of 2014, while the total expense was nearly the same for each period the mix of expenses in the current quarter consisted of more commercial expense versus the corresponding period of 2014 that mostly consisted of R&D expense. R&D expenses in the most recently completed first quarter was primarily for the development of Clonidine Topical Gel and BELBUCA. R&D expenses for the corresponding period of 2014 was primarily for BELBUCA versus Clonidine. Selling general and administrative expense for the first quarter included sales, marketing and regulatory expense for the commercialization of BUNAVAIL as well as administrative legal professional fees and other expenses for the rest of the company. For the corresponding period of 2014 while there were selling and marketing expenses, selling, general and administrative expenses consisted mostly of legal professional fees an other expenses. Net loss for the first quarter ended March 31, 2015 was $8.2 million or $0.16 per diluted share compared to $4.6 million or $0.11 per diluted share in the corresponding period of 2014. As of March 31, 2015 we had $63.5 million in cash as compared to $70.5 million at the end of December 31, 2014. Now let me turn it back over to Mark for the Q&A session.

[Mark Sirgo:]

Thank you, Erny. Operator we'd be pleased to take our first caller.

[Operator:]

Thank you. [Operator Instructions] And we'll go first to Tim Lugo with William Blair.

[Tim Lugo:]

Thanks for taking my question. Mark it sounds like you are making good headwind in certain regions, although most of us on the call have been watching the scripted [ph] and it looks like its been flattening recently. You mentioned second half of the year, what kind of ramping should we expect once these regions come on, is it going to be a double-digit growth, should we see significant growth, it sounds like there is plenty of opportunity?

[Mark Sirgo:]

Yes. Hi, Tim. I don’t think we're going to try to forecast exactly what type or how much growth we're going to see but we do believe that with the addition of the Medicaid business in particular that we're going to see a second half increase from where we are currently. I think its too early to understand exactly what that’s going to look like, but I think the number of prescription we're going to have access to in the second half of the year compared to what we had access to in the first half would allow for that that type of growth. So I think its too early to specifically answer you question. But I think as we get further into the second half of the year that become an easier question to potentially answer.

[Tim Lugo:]

Okay. And maybe a higher level, you have a lot of assets for company of your size with ONSOLIS, Buprenorphine Depot, Clonidine Gel, but BUNAVAIL has obviously been a bit for [indiscernible] us have expected have you thought about maybe paring some of the company down to just focus on BUNAVAIL or maybe through partnering with other assets or maybe just solely focusing on BUNAVAIL in the near term?

[Mark Sirgo:]

Well, I think other than BUNAVAIL we're an R&D company and that’s where our focus is outside of BUNAVAIL, so I don’t think we're distracted from a commercial sense, outside of BUNAVAIL and that’s where we're putting all of our commercial effort otherwise this is an R&D effort. So I don know that we need to change anything that we're doing currently. I think with ONSOLIS we are looking to partner that asset and I think there will opportunities in which to do that later this year. So I think to answer your question, all of our products outside of BUNAVAIL are really R&D products, BELBUCA is going to controlled by Endo so we have no involvement in that, so ever than we sit on a couple of committees with them. ONSOLIS we look finally a new commercial partner for. So again, our focus, commercial focus is on BUNAVAIL, that’s where we're putting all of our commercial efforts otherwise our R&D is focused on our other pipeline products.

[Tim Lugo:]

Okay. And can you – one last question, could you just remind me the ex-US rights for BELBUCA, who hold those and I guess the strategy ex-US?

[Mark Sirgo:]

Yes, Endo has worldwide rights to BELBUCA.

[Tim Lugo:]

And do you if they are going to file in Europe or…

[Mark Sirgo:]

Yes, they've got a plan that they are working on currently, I think its probably better question reserve them than us here at BDSI but yes they do plan to take for advantage of the current data set in other markets around the world.

[Tim Lugo:]

All right. Thank you.

[Mark Sirgo:]

You're welcome.

[Operator:]

We'll go next to Traver Davis with Piper Jaffray.

[Traver Davis:]

Hey, guys. Thanks for taking the questions. Just first with the recent managed care win extending the patient for BUNAVAIL, I guess optimizing your sales this accordingly, what are you latest thoughts in the size of the sales force in terms of rep count and are there any plans to add a rep, additional reps later this year. And just second, you mentioned some challenges in pharmacy stocking over the last six months, can you just provide a little bit more color on these challenges and how you are planning to attack these going forward? Thank you.

[Mark Sirgo:]

Yes, I am going to let David Acheson answer your two questions for you.

[David Acheson:]

Hey, good morning. How are you?

[Traver Davis:]

Good. How are you?

[David Acheson:]

Good, thanks. So lets start with the conversation about the sales force size, currently we're still running at the same size that we've been in that roughly about 60% range, but what we've done is a couple of things, where we've had optimal opportunities come to life or as on the managed care side, we've shifted some of our resources around to focus on those managed care wins. Then other spots where we haven’t had, that we've optimized territories out, but we still remain the same size and live those resources around. I would anticipate I don’t think that in this Mark can comment on this two, but I would not anticipate that you will see a major jump in a very quick move to increase the sales force size. What we will do is continue to look all the time at where we have managed care access where we have stocking in the right place aligned that image [ph] care access and we'll add headcount where needed in some of these areas that Mark has talked about we are currently in a process of putting together additional plans right now to add headcount where we need to and you'll see it grow slowing. It won’t be something that we'll do quickly over our short period of time. So hopefully that answers that question for you.

[Traver Davis:]

Yes, definitely. Thank you.

[David Acheson:]

Okay. The second question is around the pharmacy stocking, so we do entered into some issues with this across country and its no different than other launches especially when you are getting into a market place that’s been largely owned by somebody from a single product perspective for quite some time. But one of the things that we are doing and we have done is put out a number of steps with key independence in particular where we've done a stocking, additional stocking program where we actually have people that will have product on our sales force. We're in the process of rolling a number of additional plans out with some very targeted marketing in areas where we've additional care access and we're going after the pharmacy access in those areas as well. We're actually working on in that couple of details that will fall in, we're working on the number of areas where we hope to have to some guaranteed stocking programs based off the work we're doing with but we'll change doors in independence, so it’s a major focus for aligned to the additional areas were we have managed care access at the level that we do now.

[Traver Davis:]

Great. I just have one on, one of the strong questions on W Care [ph] what is your intelligence timing on how Endo is thinking about point of attack in terms of marketing its product, I know you – they own the marketing rights and I am not sure how much indication there is regarding what the claims, but I think probably you can share there would be helpful? Thank you.

[Mark Sirgo:]

Yes, this is Mark. Obviously that’s really the details of that have to be answered by Endo. We feel like we're close to the situation because we're in a joint commercial committee, I am going to ask to Al actually try to answer your question from a very, very high level, but we can't get into any of the details. Al you want to?

[Al Medwar:]

Yes. Sure. From a high very level and I can tell you especially from some of the work that we did early on and I think what we saw early on has continued in the work that Endo has done, is that the place of BELBUCA team just fit best in the minds of physicians is in individuals who were on say for example and Ern said and needed to step up to the next level, either because of lack of efficacy or tolerability issues and the BELBUCA fits in very well into that next step before an individual needs to consider going to something like a schedule to product. So that’s what we've heard that from physicians and I think Endo has heard the same thing and from a high level stand point I think it makes sense as to that maybe part of how the product is positioned when it enters the market, but again like Mark said that’s more of a question for the details around with Endo itself.

[Traver Davis:]

Okay. Thanks guys. That’s very helpful.

[Al Medwar:]

Yes.

[Operator:]

We'll go next to Scott Henry with Roth Capital.

[Scott Henry:]

Thank you and good morning. I guess Erney starting on with Erney in a couple of the detail questions, on the SG&A approximately how much of it – of that you believe was selling expenses or marketing efforts however you want to think of that?

[Ernest De Paolantonio:]

I would say roughly a little more than two thirds.

[Scott Henry:]

Okay. And then I don’t believe that 10-Q is been filed yet, could you just give me some clarity on some of the revenue items, I believe you said BUNAVAIL was $0.7 million, I assume that the milestone was $10 million, I don’t know if you can just give me the specifics of how the revenues break up prior to the 10-Q?

[Ernest De Paolantonio:]

We had some product royalty revenues of about $200,000, research and development reimbursements of about $800,000 and contract revenue which includes the $10 million milestone as well as the acceleration of some amortization that we had from [indiscernible] of about $11.4 million…

[Scott Henry:]

That is helpful. Thank you. And then Mark on BUNAVAIL this induction study to get a broader label, how do you expect that’s going to change the landscape having that additional label?

[Mark Sirgo:]

Well, physicians currently use these products for induction regardless of whether there is a claim or not we know that, so but obviously we can't promote it is to be used as such. So I think for us its more of a matter having a complete label and that be put a competitive disadvantage where or some could kind of detail against us with such a claim so we will enhance the commercial opportunity for us, I assume we'll do a small degree but it could be or negatively impact us if we don’t have it because of the ability for others to kind of detail us around it.

[Scott Henry:]

Okay. Thanks for that color. And then the final question I just want to make sure our interpreted this correctly, on the Clonidine Gel program, are you looking to do a pilot study first before going into Phase III, is that what I should understand, when I see that smaller scale study?

[Mark Sirgo:]

I guess you call it a parameter or or smaller scale study, we haven’t really definitely determined exactly how we're going to proceed yet, as I mentioned, but we wouldn’t expect to jump back into a Phase III. There might be an opportunity with an adoptive design that we could turn into such a thing, if the data supports it. But right now we're just kind of working through the rest of those details and don’t having the right to formalized anything yet, but it would be on a smaller scale than a Phase III.

[Scott Henry:]

Okay. Great. Thank you for taking the questions.

[Mark Sirgo:]

You're welcome.

[Operator:]

We'll go next to Irina Koffler with Cantor Fitzgerald.

[Irina Koffler:]

Hi. Thanks for taking the questions. On Buprenorphine depot, can you talk us through how you're program is different from the ones by [indiscernible] and maybe just walk us through landscape of these periods and how yours compares that the first question?

[Mark Sirgo:]

Yes Irina, this is Mark. Without giving a way too much competitive information, I think from an injectable product perspective and the competition the things I outlined in my formal remarks aware everybody should focus, one is the volume administered and the gauge of the needle, the comfort upon injection is obviously important and there is products out there now that are very, very painful to administer so much of the patients compliance becomes an issue, the thing you're trying to avoid or improve becomes an actual problem. So either administration is critical. The second piece is the worst effect where you get this rapid release of Buprenorphine truly after its been injected which becomes a safety issue, tolerance issue. So you want to be able to control for that every one of these injectable platforms in our view can do that. So that’s probably the most important thing around these products and of course this is not a surgical implanted product either so you don’t have to go through that type of a procedure which is another decision point for a patient.

[Irina Koffler:]

Okay. Got it. And then just going back to quantity in study, so previously we had thought that trial conduct was an issue because you had mentioned on your prior calls, that some of the patients that were recruit towards the end of this study were different but have we sort of rejected that hypothesis and now we're just saying that inclusion score was 2 lakhs and you know the capsaicin score greater than 4, that’s pretty severe or pretty high degree of sensitivity, so does that imply some kind of very narrow patient population? Thanks.

[Mark Sirgo:]

Yes. So we certainly have not ruled out the second cohort, the second cohort was a problem in the study, it was more enhanced than the first cohort, as it relates to placebo responsiveness. So the tightening could improve things overall in the study, not just in the second cohort but the second cohort clearly remained a problem for us. And particularly among one of the euthenics groups that participated in the trial. So I didn’t get into that degree of clarity I guess in more formal remarks but no, the second cohort was still a major problem. It was amplified in regards to placebo responsiveness and the response to the capsaicin test. Now in terms of narrowing on the cap – narrowing the population because of an increase capsaicin score, we don’t think it will have that great of an impact but its clear that you need to find patients that have function on nerve receptors. I think its well documented the quantity [ph] will work in patients that meet that criteria, its was what we saw on this trial was that patients that were less than 4 clearly had a high placebo response rate and I'll ask to Finn to add to my comments as well? Drew?

[Andrew Finn:]

Just to elaborate expand on what Mark said, we think that the sensitivity to the capsaicin testing in our trial was higher than we anticipate so patients that we would not wanted in the study were actually responding to the capsaicin at the cut off level for entry on review comparing that with the prior study we feel that the capsaicin 4 is more now I guess to the population that we saw to evaluate the start with capsaicin scores to a greater. So and lot of that has to do with standardization of broader level of site participation and the rigor with which we did the monitoring of the program and the quality of investigators that we use. So we think that that it doesn’t really narrow the population, we just had a more sensitive testing and it gave us a little bit different population that were seen previously. Did I answer your question?

[Irina Koffler:]

Yes. I mean, when you say that these patients were more sensitive than expected is that with the narrow pain or I mean, wouldn’t patients in the next study be just a sensitive and maybe give erroneous readings on that?

[Andrew Finn:]

I didn’t mean exactly that, it was really the capsaicin scoring that we had a lot of patients responding to a capsaicin which was a little bit different than in the previous study and we think it’s the way w were doing it, we standardized it completely across all sites and across all subjects and so there was uniformity in testing and we believe that that contributed to some differences in the outcome in our study versus the prior study. So I am not implying that there was any differences on Neuropen it really was all around the capsaicin scoring and just a way we did it versus the way it was done in the prior study now that we have standardized it within our hands we will use that method going forward the learning’s from this study ought to be directly applicable.

[Irina Koffler:]

Okay. Thanks.

[Mark Sirgo:]

Irina, I would add one other thing, patients in this study that had a capsaicin score varying with a 4 represented about60% so when I gave you that p value in my formal remarks it really represented about 160 patients out of the 260 that were in the total population that got randomized. So it was a significant number that were in the trial.

[Irina Koffler:]

Okay. And they included the last cohort right people even though that the last cohort it worked on them as well even though that they were different?

[Mark Sirgo:]

That’s correct. That data includes the last cohort.

[Irina Koffler:]

Thank you.

[Mark Sirgo:]

You're welcome.

[Operator:]

We'll go next to Matt Kaplan with Ladenburg Thalmann.

[Matt Kaplan:]

Hey, guys. Good morning.

[Mark Sirgo:]

Good morning.

[Matt Kaplan:]

Just a follow up on the [indiscernible] move to the other products, in terms of the variability that you saw in response when they – when you did the analysis in terms of the patients who now reach the entry criteria that you are planning to use in the next study, could you comment on the variability in their response what you are seeing there and how consistent it was the quantity and once they have those criteria?

[Andrew Finn:]

Okay. Matt, this is Drew. The response was across the study was pretty consistent, it was little bit lower in the last group, last group of studies that were entered after the interim analysis but across the study as Mark said earlier that the response was currently [ph] significant and statistically significant in the range of what has been reported for other products and treatment of painful diabetic neuropathy.

[Matt Kaplan:]

Okay. Thanks for the detail. And then just going to back BUNAVAIL and your progress there in terms of getting access to managed care and coverage. In terms of the2000 docs that have written scripts when you when you look at that out of the 5000 that you are targeting overall, in terms of the 3000 that haven’t written, what is the primary there, is it because their patients don’t have access or don’t have coverage is that a gating factor or is it just lack of awareness of the product it seems like you've grown awareness substantially over the last quarter, why aren’t those folks writing now? A - David Acheson Hey Matt, its David Acheson. Thanks for the question. So its like anything else when you got a small team that’s focused in with key doctors and key officers, we've moved our way in through processes where we know we can have opportunity to get product written and in some cases we’ve had to work really hard to get managed care coverage in those same areas as well I think the overall awareness according to what we talked about earlier has gone up above 70%. What we’re focused down is making sure we can get offices and clinics where they have a lot more access to managed care, which means as we expand our managed care coverage the more you’ll see these other 3,000 or so physicians come on that are in our target list. So that’s really the focus approach that we’ve taken so that we can get consistent prescribing from writers that are onboard with us.

[Matt Kaplan:]

Great and then in 2,000 guys that are writing how do you see and being use in the practice is it and are they converting a large segment of their practice as new patients join are they converting guys from Suboxone over how is it being used and how can you grow that kind of in that practice?

[Al Medwar:]

Matt this is Al I’ll answer that question it’s actually been a variety of all I think our expectation early on we tend to be more new patients, but what we’re finding is that we’re getting a lot of your number of switch patients in naturally and switch patients were those who are previously on Suboxone film. So I don’t know that I could narrow it to any one group but I’d say personal this has been switch patients coming from Suboxone we’ve had some decent number of switches over from Zubsolv, but also some new patients, but the new patients tend to come at a little bit more slowly.

[Matt Kaplan:]

And individual practices do you see guys converting totally to BUNAVAIL or is how is that occurring?

[Al Medwar:]

No we do have a number of practices that we know have told us they converted the vast majority of their patient over to BUNAVAIL so we’re seeing not in some practices.

[Matt Kaplan:]

Great and I guess in terms of the managed care access in terms of the express scripts – the wins that you’ve gotten recently how have you been able to drive those wins and do you anticipate driving others has it been through discounts and that kind of things or how have you been able to drive that access this conversion?

[David Acheson:]

I got yeah thanks Matt it’s David so couple things first of all I remember on all of these large PBMs typically it’s negotiable opportunity for us to get into third tier coverage perspective without having a contract in place with ESI Caremark or Optim which we were able to do early on with the product what we’ve done here is we’ve been able to secure contract, which helps us lock in our spot on the formulary and now negotiate for a second tier position or to put ourselves into an opportunity to drive downstream account access or availability to contract with PBM. So in it what it also does is it opens up access to managed Medicaid which as you know is a major portion of the business or area of focus for these types of products so those wins are helping us drive the downstream accounts and the managed Medicaid piece and then lock in continue to access on a third tier perspective so we can negotiate for second tier.

[Matt Kaplan:]

Okay very good thank you and then in terms of pharmacy stocking how much of curious has that been and have you seen any processes that you’re working true to improve it have they been having affect basically?

[David Acheson:]

Yeah so there there’s multiple things that are focused there part of that’s a corporate focus to work with the corporate offices with the large change towards like a Walgreens or CVS part of that work in progress that continues to fall in the line with some of our major wholesalers like ABC that has a large contingency of independent towards they deal with along with Walgreens. And we’ve done some additional stocking programs to be able to put product on the shelf and lot of that work also happened at the field level, because of some of the constraints on filling prescriptions that our scheduled products and some of the work that the DEA has done to limit that by pharmacy stores our field team has to work of the opposite to get a lot of the correct pharmacy stock that aligns to physicians that want to write the product. So you can see where we had the impact, because you can see where prescriptions are getting filled there’s still work to be done there, but we’re to continue into be in process and some of the stocking work that we’ve done recently and continue next couple of weeks I think will certainly help us.

[Matt Kaplan:]

Great. Thanks and then just shifting gears a little bit to BELBUCA in terms of your thinking of the products potential has it changed at all given the landscape of the movement for the hydrocodone Schedule II and Buprenorphine in Schedule III?

[Mark Sirgo:]

Hey Matt this is Mark up I think I’ll answer that clearly that the movement of the hydrocodone see the medicine combination products back to Schedule II creates another opportunity for this product it’s not been quantified and certainly going forward that will be left in Endo’s hands to do that. But I think we remain focused on our current forecast, which is in excess of $500 million and that doesn’t necessarily include that recent shift of those products back to Schedule II.

[Matt Kaplan:]

And then the May 14, data some of the key back we’ve heard previously for some doctors has been that the strength of the Analgesic effect with Buprenorphine might not be as strong as some other opioids May 14 data what should we expect to see and some of the data that’s coming out?

[Drew Finn:]

Matt this is Drew, it’s a little bit puzzling what that response is due to, because the data certainly don’t support that I mean we had patients in our 307 study that were up to 160 milligrams morphine sulfate equivalent those data been presented as Mark said at the APS meeting later this week. And I think all the investigators that have seen this data as well as the key opinion leaders are quite impressed by it so on perplex by where that information is coming from I mean and why they why what’s the basis for it, because and certainly we feel that the dose range has been selected and the response is or both appropriate.

[Mark Sirgo:]

And Matt I would add.

[Matt Kaplan:]

Okay, great. I guess the question was it’s a follow-up does that mean there’s some kind of educational philosophy has to go on as the product is launched effort full?

[Drew Finn:]

Yes I think so, because I mean individuals have a bias already built in to this product when they look at the only other available product or treatment of chronic pain. And so the perception is one thing, but the realities with our product I think are considerably different. And as I said those data being presented at the APS.

[Mark Sirgo:]

Matt yeah I’d add a few other things Drew kind of mentioned dose range I mean we’ve – there’ll be seven dosage strength available with FDA approves this product so we cover a very broad dose range soon it goes well beyond what BUTRANS is able to provide patients currently. So we know BUTRANS does have certain limitation just because of the dose strengths that they have available, but we won’t that we can find by that like the other thing to keep in mind to the fact that probably 30% of these opioid patients that might be on product like BUNAVAIL or Suboxone suffer from chronic pain. So then these are people that went way up the opioid the morphine sulfate equivalent or opioid dose response curve. So I think it’s a fallacy and I’m not sure what it’s based on I think it I often times hear that, because it’s not a pure mu agonist that people think it might not have the potency of some of the other opioids, but there is no data that supports that.

[Matt Kaplan:]

All right hope that’s in a progress guys thanks for taking the questions.

[Mark Sirgo:]

Thank you.

[Operator:]

We’ll go next to [indiscernible]

[Unidentified Analyst:]

Hey guys thanks for taking my question my apologies this is or even asked I hopped on the call little late. Now did you I know on the last call you gave us November so actual sales of BUNAVAIL and I think we’re looking maybe for December, January, February actual that you gave this quarter is that the number you gave out or when will you actually give the product sales for BUNAVAIL do you anticipate?

[Ernie Paolantonio:]

Hi it’s Ernie we did release those sales on the call it’s $0.7 million.

[Unidentified Analyst:]

Great, thank you then on the launch of BUNAVAIL how many of your reps would you say are currently profitable and how many do you expect will get the profitability in 2015?

[Mark Sirgo:]

Jim this is Mark yeah we’re not going to answer that question. In terms of product profitability as you well know it usually takes a couple of years to take to that point so I think we’re going to limit our comments to that.

[Unidentified Analyst:]

All right the has it been any anecdotal feedback on the buckle type design one of the questions talking with investors is gosh maybe it’s putting those thing on the cheek that’s holding back sales so any anecdotal comments on the feedback on the buckle design and that application. And how could that potentially apply to BELBUCA which obviously using the same buckle delivery?

[Mark Sirgo:]

Yeah Jim quite the opposite the receptivity the acceptability, tolerability of this BUNAVAIL product the BEMA film has been outstanding. So we haven’t had any major negative feedback in terms of it’s adherence it’s tolerability nothing that we could point to in anyway. So again I think we pointed out why the sales will add what we think will be significant turn and then second half it’s more due to managed care access pharmacy stocking as we continue to increase physician awareness run the product. But certainly it’s tolerance has been quite good.

[Unidentified Analyst:]

Well I think BELBUCA question that in itself I guess if there’s no negative feedback it will certainly seem easier than taking a tab under your tongue?

[Mark Sirgo:]

Yeah and I think the other thing is we’ve got not only the commercial experience of BUNAVAIL, but we’ve got a long-term safety study with BELBUCA that looks at oral tolerability and so on that again nothing remarkable there either. So I think the film is an advantage and I think it’s going to prove out that way with BUNAVAIL as well as BELBUCA.

[Unidentified Analyst:]

All right great then the last question and then I’ll hop back in a queue. Any thoughts on bringing a new products that what products make sense will be a good fit or are you seeing opportunities out there to bring in or you’re remaining just focused on BUNAVAIL launch in your current pipeline?

[Mark Sirgo:]

We’ll we’ve got some of the lot work in front of us what we currently have, but we continue to selectively look at other opportunities that would fit into the pain and addiction space. So as I mentioned in my formal comments. We’re looking at some marketed products in that in the addiction space just that might be complementary to BUNAVAIL otherwise we’re looking at developmental stage products that would fit with our lesion pain and addiction.

[Unidentified Analyst:]

Great thank you for taking the questions.

[Operator:]

We’ll go next to [indiscernible]

[Unidentified Analyst:]

Hey guys thanks for taking my question now I’ll be quick I guess my first question is assuming a positive PUDFA date on October 23 how quickly should we expect Endo to launch BELBUCA and do you know if they’ll launching it with sort of the full force of their sales force?

[Mark Sirgo:]

Yeah so we’re going to be very, very limited in terms of what we can information we can provide Endo is going to be responsible for answering these types of questions. So unfortunately we’ve to keep it at a very high level. The likelihood is that it would be first quarter 2016 launch just because of the nature of approval in late October and then faced with holidays and so on through the end of the year. So and in terms of their sales force size scaling all that type of thing we’re going to leave that answer to them.

[Unidentified Analyst:]

Okay, great thanks. So my second question I was kind of surprised base of the marketing awareness jumped 70% over the last quarter. Before you guys launched BUNAVAIL I thought you guys put a nice sort of full core process making phone calls and just sort of getting the name out there why do you think sort of the message you didn’t stick with that and what do you attribute to that sort of big marketing 70% awareness thus?

[Al Medwar:]

Hi Tera, it’s Al I’ll answer that question so if you think before the time that we had the product approved we were focused on key opinion leaders so it’s a smaller segment of physician population and we have of course had our medical sales leads on out talking to a real select group of physicians. We couldn’t talk about the product itself so we really focused our efforts on talking about the BEMA technology the physician awareness of the BEMA technology out there, but no talk specific of the product until we launched. So if you think of the small subset of physicians that we were getting though our MS sales it’s probably not surprising that we had about 10% awareness and then it wasn’t a 70% jump it actually jumped from 10% of physicians up to 70%. So right after we launched the awareness jumped really significantly.

[Unidentified Analyst:]

Okay, and that’s just attributed to the fact that you’re not going to talk about the product versus the technology?

[Al Medwar:]

Sure so we’ve got our sales force out there we have all our marketing initiatives our advertising are peer dinner it’s just the broad base of our marketing and sales effort that’s brought it from the 10% up to 70%.

[Unidentified Analyst:]

Okay all right and this is my last question is just from housekeeping in terms of R&D and SG&A going forward for the year should we expect these levels to be relatively stable?

[Mark Sirgo:]

Hey Tera it’s Mark I think on the R&D side it will come down to a certain degree because of the – program we’re set to start second pivotal trial but that’s not going to happen anything we do in that regard would probably be sometime fourth quarter as I mentioned in my formal remarks and Ernie did you have anything SG&A one.

[Ernie Paolantonio:]

No that’s what the only change we see in SG&A for the rest of the year.

[Unidentified Analyst:]

Okay that sounds good great thank you guys so much.

[Ernie Paolantonio:]

You’re welcome.

[Operator:]

We’ll go next to [indiscernible]

[Unidentified Analyst:]

Hi guys good morning most of my questions were asked but I just have question on BUNAVAIL the switching from Suboxone is can you attribute that to the BEMA technology that’s what the doctors like better or does it is there component in it on the couponing and covering the patients copays for the first prescriptions. And then also just circling back on the R&D question I was just asked as far as the size of the [indiscernible] study obviously it’s going to be significantly slower than the Phase III that you’re planning, but how much is that going to cost and how should we be modeling for that study?

[Ernie Paolantonio:]

We’ll I’ll start with the first question regarding the patients who are switching I believe it’s really from what we’re hearing is that the switch is really not it’s not driven by copay program it’s really driven by the attributes of the product. It’s the patients you find out there that have an issue possibly with things such as constipation they may not like the discretion or find sublingual more difficult to use those have tended to be the patients who might move over to something like BUNAVAIL. With regards to the copay program for commercially in short most of the copay cards take it down to zero that’s not really different where we do have a little bit of an advantage is on the cash pay side. But again it really seems from what we’re hearing to be more driven by patient preference and wanting the buckle formulation over using the sublingual.

[Mark Sirgo:]

Okay yeah this is Mark I’ll answer the question on quantity yeah given the size of trial that we’re anticipating and none of this has been confirmed yet. But it probably somewhere less than $5 million and if anything started in fourth quarter you can anticipate that most of that spend would come in 2016.

[Unidentified Analyst:]

Okay. Great, thank you.

[Mark Sirgo:]

You're welcome

[Operator:]

And this does concludes the question-and-answer session. I will turn the conference back over to Mr. Sirgo for closing remarks.

[Mark Sirgo:]

Thank you again everyone for participating this first quarter 2015 earnings call. We're obviously excited about our future prospects and we look forward to keeping you updated on our progress throughout the year. Enjoy the rest of your week. Thank you very much.

[Operator:]

That concludes today’s conference. Thank you for your participation.