Santarus, Inc. (NASDAQ:SNTS)
Lazard Capital Markets 9th Annual Healthcare Conference
November 13, 2012 9:00 a.m. ET
Gerald Proehl - President and Chief Executive Officer
Bill Tanner - Lazard Capital Markets
Bill Tanner - Lazard Capital Markets
Bill Tanner, I am one of the biopharma analysts here at Lazard Capital Markets. I would like to thank everybody for coming to our Ninth Annual Healthcare Conference. We hope that you find it valuable. I am very pleased to introduce Santarus, a special biopharmaceutical company, several products on the market, and we see some very exciting news for going forward. Gerry Proehl is the CEO. Gerry, thanks very much for coming. We appreciate your attendance here and your participation here. So Gerry will tell you the Santarus story.
Thanks, Bill. I will be making some forward-looking statements. I refer you to our SEC filings. Santarus is a biopharmaceutical company. We have both small molecule and biologic products. Four products that are currently on the market and four products in development, three of them late stage products and one early stage product. In the first nine months of the year we had just under $150 million in revenue. We are a profitable company and we expect to be more profitable going forward based on our recent appellate court win on Zegerid, which I will talk a little bit more about.
As I mentioned, we have four products on the market. You can see here, three of the products are metabolic products, two for type 2 diabetes, one for cholesterol. Glumetza and Cycloset for the diabetes and Fenoglide for cholesterol and triglycerides. We have estimated peak sales of those three products between $300 million to $400 million. And then Zegerid, we haven’t promoted that for two years since we genericized in 2010. We did win the appellate court decision and we do expect to start promoting that product in 2013, post the approval of Uceris, which you can see in the late stage development. We have a January 16, 2013 PDUFA date. Assuming approval of Uceris, we would plan on hiring about 85 reps and launching that product in late February, early March timeframe.
Ruconest is a recombinant C1 Esterase inhibitor for Hereditary Angioedema. We just reported out the third Phase 3 study results, positive results. We plan on moving forward with putting together the BLA, submitting that product in first half of 2013. And then Rifamycin is a broad spectrum, non-systemic antibiotic for travelers’ diarrhea and we have one positive Phase 3 study completed and one about half way through. We have peak sales of those products of about $500 million. And then we have an early stage biologic program. It’s an antibody program that’s just completing phase I.
Currently we have 150 sales reps. They call on endocrinologists and primary care physicians that are high prescribers of type 2 diabetes products. And they sell all three products. With the approval of Uceris we plan on adding about 85 reps to the 150. What those reps will do is then promote all of our products. When they are calling on the gastroenterologists, they will promote Uceris and Zegerid. When they are calling on the endocrinologists, they will promote Glumetza and Cycloset. And when they are calling on primary care physicians, they will do a combination of Glumetza, Zegerid, Cycloset and Fenoglide, dependent on the value of the physician for those particular products.
With the approval of Ruconest later on hopefully in early 2014, we would look at about 25 reps to call on allergists and immunologists. If you want to think about our company and how we are trying to manage this company, it’s really to move more from what typically were more primary care products to more specialty based products. In doing that we can become more efficient with our sales organization. You need less sales reps to generate more sales dollars. Ultimately our goal and if you look at us over the next three years, we expect that SG&A as a percentage of revenue will continue to go down.
We expect to maintain our R&D as a percentage of revenue. What that will allow us to do is invest in our current portfolio. When I talk about our development products what you will see is, our products have the opportunity to actually be used in a variety of different disease states and we plan on expanding the use of these products as we move forward.
Let me talk briefly about Zegerid. The product actually went generic in 2010. We lost a lower court decision. We appealed that decision and we just recently won the appellate court ruling. Par has appealed back to the appellate court. They have appealed both to the three judge panel that rendered the ruling and they appealed (inaudible) to the entire appellate court. We expect within the couple of months for the appellate court to make a decision. Typically they only rehear about 2% of their cases so we will wait for that final decision.
If the appellate court does turn down Par’s appeal, they will send it back to the lower court and we will go to a jury trial for damages, assuming that we are not able to come to some type of an agreement with Par. Zegerid’s patent does expire in July 2016, so we have just under four years to continue to drive sales of Zegerid.
Our second product Glumetza is delayed or extended release metformin product. We have had this product since 2008. It’s growing very nicely. If you look at the red graph you can see recently we started driving new prescription growth. Anybody that knows anything about looking at prescription trends is -- you want to see new prescription growth really accelerating. That’s going to be a pretty good predictor of what total prescriptions are going to do in the future.
This is a really nice product. It’s very differentiated from the generic metformin products. And it’s very simple for the doctor to understand. We extend the release of metformin over a six to eight hour period. The result is that patients have less GI side effects and for the doctor, they are able to titrate the patient all the way up to closer to 2000 milligrams and relay optimize metformin before they have to go to a second or third product.
We also put in, in September of last year, an e-voucher program where we cover the difference in copays to get the copay down to $10 for a patient. And that covers all commercial patients. What that means is when the doctor is thinking about do I use a generic metformin or do I use Glumetza, the impediment won't be price for the physician. We think that in that situation many of the doctors will go to Glumetza. The real opportunity, and these are prescriptions for our called-on doctors, and you can see on the left they generated 300,000 Glumetza prescriptions. Those same doctors wrote just under 8 million metformin prescriptions. So the metformin marketplace is huge. We represent less than 1%. We just need to get a little bit more of that generic metformin marketplace to continue to grow Glumetza over the next few years.
Our second product is Cycloset. It’s bromocriptine mesylate. It’s a centrally acting product that resets the hypothalamus. You take the product within two hours of waking and what it does it improves insulin sensitivity thereby lowering HbA1C. Similar to what you might expect from a product like Januvia. The most interesting thing about this product, it was the first product approved in type 2 diabetes under the new FDA guidelines that require you to do a large cardiovascular safety study. And really what you are trying to do is demonstrate that your product doesn’t negatively affect any cardiovascular event.
The reason they put this in place was after the issues that went on with Avandia in the marketplace. Not only did we show that it didn’t negatively affect cardiovascular events, we actually showed that there was a 52%, or a 55% reduction in MACE, a composite endpoint of stroke, MI and cardiovascular death. And this is over a 12-month period. So this product not only lowers HbA1C, but has a very nice cardiovascular profile.
You can see prescriptions are continuing to growth nicely. We have been working with the American Association of Clinical Endocrinologists. They plan on bringing out new guidelines early in 2013 and we expect that Cycloset will now be included in those guidelines, from what we understand talking with the physicians that are involved with those guidelines. What it will say is that Cycloset should be considered in those patients that have type 2 diabetes that have multiple cardiovascular risk factors. That would probably define most of those patients with type 2 diabetes. So again we think this will be kind of a stamp of approval from Clinical Endocrinologists.
Our third product is Fenoglide. It’s a fenofibrate product. We licensed this product from Cowen Royalty. They had -- actually the product had been with Sciele. When they got purchased by Shionogi, the product went back to Cowen Royalty and we licensed it from them. It was very complementary to our other two products. It’s a third product detail for us. It did just under $2 million in the quarter. We don’t expect this to be a huge product but it’s an accretive product and it allows the reps a third product detail when they are calling on their physicians.
As I mentioned on the development pipeline, Uceris is a late stage product. It’s at the FDA. We have a January 16, 2013 PDUFA date. That PDUFA date was extended by three months to allow the FDA time to review some of our clinical sites in Europe and India. We are very excited about this product. We have two positive Phase III results. Very good safety profile. And there is a clear market opportunity for Uceris in ulcerative colitis. We also have a Phase IIIb program ongoing in combination with 5-ASA or mesalamine products. And the patent is going till 2020.
Here is the marketplace for inflammatory bowel disease, which is a combination of UC and Crohn's disease. You can see the majority of the products are mesalamine products starting Asacol, Lialda, Pentasa, Canasa and Apriso. The only non-5-ASA product is Entocort, which is budesonide in a delivery system to the small intestine for Crohn’s disease. While Entocort certainly is on much lower sales than where it was at peak, when it was at peak sales of about $375 million selling again for Crohn’s disease.
We think our product fits very well in the treatment paradigm. Many patients will be started on a 5-ASA or mesalamine product. It’s been around for a long time. Doctors are very comfortable with 5-ASA. But the problem is that these patients will continue to flare. Typically they flare about two to four times a year. When they flare, the doctor has to try to bring the flare under control. There only options right now are really to use either systemic steroids or an immunosuppressant product like Azathioprine or 6-mercaptopurine. Those products all are very nasty products. Bad side effects. They don’t like using them long periods of time. Patients become steroid dependent and it’s very difficult for doctors to take them off the steroids.
While Uceris is budesonide which is a steroid, it’s a minimally absorbed steroid. You get less than 10% absorption of the steroid therefore you avoid all those steroid type side effects. So it’s a very easy product for doctors to understand. When we go out and survey doctors and ask them how they are going to use the product, they said it’s really kind of two groups of patients. You have got the newly diagnosed patients that aren’t on anything. And you have the patients that we have diagnosed but they are in remission and they may not be on any product. In those patients, they are more typically going to put them on a 5-ASA and use Uceris at the same time. And the reason they will do that is because the steroid actually induces remission faster than 5-ASA. But ultimately once the patient goes into remission, they will titrate them off of the steroid and then they will keep them on the 5-ASA. So that’s how we think they will use Uceris in either naïve patients or the patients that aren’t being treated.
The other group of patients are patients that are maintained on a 5-ASA, typically 2.4 grams a day. In those patients, they are more typically just going to put the Uceris on top of the 5-ASA, bringing the patient into remission and then again titrate them off. Here is the clinical data. On the left is the data from the U.S., on the right is the data from the European study. You can see very consistent results, about 17% to 18% remission rates for Uceris 9 milligram. In the U.S. study we had as a reference arm Asacol. It was not statistically different from placebo, obviously it was numerically higher, 12%. And in Entocort -- in the European study we had Entocort. It was statistically superior are 0.5 level from placebo, numerically below budesonide, Uceris.
The adverse events as you might expect with a minimally absorbed steroid, look very good. Not really that different from the reference arms or from placebo. When we go into the specific side effects and you look for steroid related side effects, typically things like moon face, weight gain, acne, problems with sleeping, we see no difference from placebo. So we don’t get any of the steroid typically side effects that you might see.
We are doing an add-on therapy Phase III study. When we went to physicians and we said, okay, here is all of our data, when else would you like to see? They said we would love to see some more data with Uceris used on top of a 5-ASA, because so many of our patients are maintained on 5-ASA. So we initiated this study. It will be a placebo-controlled study with 500 patients. We have just about 140 patients enrolled to date and we expect that study to complete enrollment in 2013.
Our second product in development is Ruconest. Ruconest is a recombinant human c1 esterase inhibitor. Currently being studied for acute hereditary angioedema attack. The product is currently approved in Europe and sold by Swedish Orphan Biovitrum. We have a couple of patents that expire in 2022 and ’24. But we also expect to get 12-years of data exclusivity based on it being a biologic.
We just reported out Phase III results from a third Phase III study. You can see p-value of 0.031, statistically significant. Very good safety profile of this product. It’s a replacement therapy and so the therapy will be very well with very little side effects. It is the first recombinant c1 esterase inhibitor. There are two plasma derived esterase c1 inhibitors on the market place. One is Cinryze for prophylactic treatment of HAE. And Berinert for acute treatment. And then there are two other products that are on the marketplace, Kalbitor and Firazyr.
Where do we think Ruconest fits in the treatment paradigm? We think that there is a real advantage of being a recombinant product. There are safety advantages of being a recombinant product versus a plasma derived product. Anytime you are using a plasma derived product, you run some risk that something is going to get through in the ultra-filtration process. Particularly, when you are filtrating a protein anything that’s the same size or smaller could get through. So we think there is some real advantage there.
We think the product works very well. It’s very effective. We get virtually no rebound. Part of that reason is we put a lot of product into patients. Our product is 50 units per kilogram to give you a comparison, Berinert is 20 units per kilogram. So we are really getting full saturation that we need. In addition, we haven’t seen any thromboembolic events. If you look at the plasma derived products, both Cinryze and Berinert, they have seen thromboembolic events and they do have that in their label.
Our third product is Rifamycin SV MMX. It’s a broad spectrum non-systemic antibiotic. This product has been around for a long time in Europe in IV and IM form. It will be a new chemical entity in the U.S. since it’s never been approved in the U.S. and you can see the patents expire in 2020 and 2025. We have reported positive Phase III results which I will go over in a second. A second Phase III program is being done by Dr. Falk Pharma in India. It’s a non-inferiority study so they are enrolling just over 1000 patients and they do expect to complete enrollment about middle of next year. Results second half of 2013.
For us, Phase 3 results. You can see the p-value 0.0008, highly statistically significant. This product is very effective in patients with traveler’s diarrhea.
Our last product in development is SAN-300. It’s a anti-VLA-1 antibody that was licensed out of Biogen Idec. This product had very good preclinical data. Biogen had done a lot of work with animal models in inflammatory bower disease, in RA, in psoriasis, in organ transplant, with very good results. They had actually manufactured about 5 kilograms of IV formulation. We initiated a Phase I with the IV formulation while we developed a subcu formulation. That formulation was completed earlier this year and we are now enrolling patients in the subcu formulation. We expect to have the Phase I done in the end of this year and initiate a Phase II proof of concept study middle of next year in RA patients.
As far as our finances, you can see nice continued growth in top line revenue. We expect that will accelerate with the addition of the Zegerid revenue, we will start to see starting in the fourth quarter into 2013. And then with the approval of Uceris in January of 2013 we expect to accelerate that even faster. On the bottom line, again with winning the appeal on Zegerid we expect to start to see the bottom line grow substantially in 2013 and then 2014 and beyond.
You can see our third quarter numbers and also our nine months numbers continuing to drive our bottom line profitability. Our goals really are very simple. Keep growing our prescriptions of our marketed products, get approval of Uceris successfully, launch that product for ulcerative colitis and move our development products forward. In addition, I mentioned that we think our products have other opportunities for use in other indications. Certainly we are looking at that in a number of areas. With Ruconest, we think there is an opportunity in acute pancreatitis. We are working with some thought leaders right now and expect that we will initiate a proof of concept study in acute pancreatitis in 2013.
There are about 250,000 in the U.S. that get acute pancreatitis. About 20% of them will become severe and there is a 20% to 30% mortality rate among those severe patients. There is currently nothing approved for acute pancreatitis. We think it’s a real blockbuster opportunity and it’s something that we can pursue because we have recombinant product that we can scale up our manufacturing without a problem. That’s much more an issue with the plasma derived products.
So in closing I would say, if you want to think about Santarus, we have a nice balance of marketed products and development products. So we are going to continue to grow our marketed products but as we launch our development products, Uceris in ’13, Ruconest in ’14, and Rifamycin in ’15. We will continue to look to bringing additional products right now. Our business development team is looking for products in the metabolic space and in the GI space. And then we will continue to broaden the overall indications of our current development products.
We are very excited about the future. We think we are just hitting our stride as far as driving revenue and profit. And I think you will see over the next couple of years, we become a much more profitable company. Thank you. If you have any questions, I am happy to answer them.
Bill Tanner - Lazard Capital Markets
Thanks, Gerry. We probably have time for one or two questions. Go ahead.
Yes, they are all in the U.S., throughout the entire U.S.
Bill Tanner - Lazard Capital Markets
I am sure you mentioned the FDA looking at some of the sites on Uceris. Could you give a little more detail in terms of the number of patients that were enrolled in those sites and what's the....?
See, I don’t know that I can tell you the number of patients, but they typically go to the sites that are higher enrolling sites. So there were two sites in the U.S., one in India, and three in Eastern Europe. Part of the reason that they delay the approval of the products is we kind of fell right within that August vacation timeframe. So they couldn’t actually get some of the site inspections set up until the second half of September, and with an October 16 PDUFA date that didn’t give the FDA enough time to complete the inspections, give their reports over to the GI review division. So they pushed us off by the three months.
Bill Tanner - Lazard Capital Markets
Got it. Okay. All right, thanks very much, Gerry.
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