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Theravance Inc. (NASDAQ:THRX)

Credit Suisse 2012 Healthcare Conference Call

November 14, 2012, 10:30 am ET

Executives

Mike Aguiar - SVP & CFO

Analysts

Jason Kantor - Credit Suisse

Jason Kantor - Credit Suisse

Welcome to another session here at the Credit Suisse Healthcare Conference. My name Jason Kantor; I am the newest biotechnology analyst on the platform and its my pleasure today to introduce Theravance. This is a company that's got a rich pipeline, a lot of the exciting news flow in terms of new drugs that are coming to market today. Its my pleasure to introduce the CFO of the company, Mike Aguiar. Thank you.

Mike Aguiar

Very well, thank you Jason and before I get started here, I would like to make a couple of quick comments. Number one, just to thank CS for it’s thoughts and again for providing us the opportunity to come and present here. And then also to whoever on the web there's our Safe Harbor statement, we will be making forward-looking statements at the presentation today.

So with that let's go ahead and turn to Theravance. Theravance is a company that was established in 1998. We were established based upon some technology that came out of Harvard Medical School based on the concept of potentially designing small molecules that were multivalent, meaning that they have the ability to attach to more than one binding point on a particular target. The theory at that time was that if you had a multivalent compound you would provide either the dual pharmacology, better selectivity, extended duration, potentially peripheral restriction etcetera.

And in the 14 years that we've been around we have created more than 20 plus development candidates. We have issued over 1,200 patents, have improved medicine by data for the treatment of resistant gram-positive infections and have three respiratory programs that are partnered with GSK and are currently in late stage. We will spend the majority of our time talking about our respiratory programs today.

In addition to that, our partnerships have resulted in over $800 million coming into the company through various upfront, milestones, and purchase of equity, etcetera. So the partnership strategy is quite important to what we do.

The programs we are focused on today really are going to be the three respiratory programs part of the GSK, Relvar or Breo or what we are now calling FF/VI; our LAMA/LABA program which we are now calling UMEC/VI and our MABA program, so the three of those will again constitute the majority of what we are talking about today and then we will spend a little bit of time talking about TD-1211. This is a program for the treatment of opioid induced constipation. And it isn't that again, we do have a relatively diverse pipeline of internally discovered compounds, certainly happy to getting asked any or answer any questions that come up on that during the presentation today, but again the vast majority of the conversation will be focused around the respiratory program.

Here is our pipeline, as you can see we have a very late-stage pipeline. In the respiratory section, the FF/VI for both asthma and COPD. These programs are filed currently. For COPD, we are filed in the US, Europe and Japan. For treatment of asthma, we are filed in Europe and Japan as well as several other countries. These are ongoing at this point in time and we have a PDUFA date in the US for COPD at May 2013.

UMEC/VI has completed the Phase III programs, we will talk about the results of that a little further on in the presentation today and filings are planned to begin late this year and probably roll over the turn of the year into early next year, so I would expect those kind of in the late November or early December timeframe to begin started.

In addition to that again, we have our programs in bacterial infections, I won't spend a lot of time on it today. We have a number of programs in CNS and pain. We will focus on one of those today, again TD-1211 and then a number of other programs.

Turning now to respiratory. I would like to really frame the conversations with two things. Number one, we will talk about the market opportunity and as you look on the slide on the left hand side of the slide, you look at the historical sales of bronchodilators and (inaudible) steroid for the Theravance COPD, this is a very large market. Most recently add to June 2012, suggest this market is over $19 billion on a global basis. It's been growing in the high single digits over the last several years. As you look on the right side of the chart and looking at population, you will see that population of patients particularly with COPD is projected to grow throughout the next decade. So as we look forward, we can expect this market to continue to grow, providing a very substantial opportunity for new product influence.

Recently, ERS Conference happened in Vienna, Austria. This is the major respiratory conference of the year and I think there were a couple key themes that came out of here that are quite important to think about as we begin discussing our respiratory program and we're talking about three of them.

Number one is the importance of managing that exacerbation. Exacerbation is worsening of the symptoms that require some sort of medical intervention. Those data presented at ERS suggested that not only is this an acute (inaudible) but actually has the potential to permanently change along the (inaudible). So the management of exacerbation is quite important going forward, in particular we're focusing on once-a-day compound, which should provide improved compliance for patients, improved compliance has been shown in a number of instances to provide better overall patient outcomes.

The second big thing that’s emerging out there is the importance of LAMAs or Long Acting Muscarinic Antagonist as a potential bronchodilator. We do have our program where we are combining UMEC/VI which is a LAMA with VI or LAMA. We think it's going to be a very substantial improvement to what the current bronchodilators are out there. We will talk about the Phase III results today.

And then the final is the importance of combination therapy or what we call triple therapy this is the potential of having three mechanisms in a single device, so having a longer acting bronchodilator such a LABA and the another one such as LAMA as well as anti-inflammatory such as inhaled corticosteroid and today we have three potential paths towards achieving this because we think this is such an important potential area in the future, we have a very high need to win it here.

Number one is the combination of our LABA compound with an inhaled corticosteroid, the second one is what we call the closed triple which is putting three separate medications into a single device and then the third set is having two separate inhalers one which would be FF/VI and then the second one which would be UMEC and a single device. So by having three pathways towards a triple combination we think there is the highest probability of ultimately bringing one of these to the market.

With that, we will go and turnout to the specific program. So let’s start with the FF/VI. Our FF/VI has completed Phase III as I mentioned. We have submitted our major regulatory filings earlier this year. Again, this is a combination of an inhaled corticosteroid and a Long Acting Beta2 Antagonist data agonist this will be used as a treatment for both asthma and COPD.

Again the regulatory filings for COPD have been submitted in the US and Europe as well as Japan and in asthma outside the US. In the US, we did make an announcement at ERS, we have initiated an additional trial to round out our US asthma filing package. The reason I mentioned that is there has been a level of discourse suggesting that the FDA was not going to be looking at approving additional LABA/ICS containing regimens.

I would just like to note that we believe that we know the pathway to an indication in the United States and we think this final study will round out filing (inaudible). Importantly, we have no cost an obligation related to this program on the development side or on the commercialization side as GSK handles all of that activity. So giving the PDUFA Date and last date is May 12, 2013 and we are looking forward to this review progresses forward.

The next program back where we have historically called LAMA/LABA and now we call it UMEC/VI and UMEC is the Long Acting Muscarinic Antagonist portion VI vilanterol which is the same beta antagonist that is in what it used to be called Relvar™ or Breo™, UMEC/VI is really going after the market it is occupy by tiotropium approximately $5 billion market today, really that is almost entirely dominated by the tiotropium product.

Phase III, consisted of seven separate studies, and the first three bullet points here really highlight the registrational programs, there are five registrational programs. Two, 24 weeks, 18 efficacy studies, two head-to-head actually compared to studies versus tiotropium and 152 week safety study.

On addition of these studies we also ran additional two, 12 weeks across over exercise study. These are non-registrational studies but obviously we will be submitted with the package when we moving our filing later on this year. I go through the data here very briefly, the data from the initial to 24 week safety efficacy studies are positive, we meet all of our primary endpoints and here UMEC/VI substantially approved bronchodilator related to placebo as well as the individual components and both studies are highly statistically significant values and clinically meaningful our responses.

The second two studies were active competitor studies where we are looking at the combination of UMEC/VI versus the current standard of care which is tiotropium as well as versus the various components of the UMEC/VI and study number one. We met all of our endpoints again with highly statistically significant as well as clinically meaningful responses versus the two comparators one of which was the tiotropium, one of which was the single agent vilanterol.

In Study 2, we met the primary end point again by showing a statistically significant improvement versus tiotropium as is seen in the lower left hand side of the chart. So we have positive results coming out of the four critical safety and efficacy studies for the UMEC/VI and then subsequently we announced that the other three studies spread out the results of which all support the overall strategy right now for UMEC/VI.

From a safety perspective, there has been a little bit of conversation at the time of our safety. The safety looked quite good, most comment adverse events cross all the treatment arms including placebo or headache, nasopharyngitis, upper respiratory tract inflections, cough, etcetera. And as you can see right below that we have the incidence of adverse events related to cardiovascular events as well as serious adverse events as you can see the rates were similar across the study with the absolute lowest numeric rates being actually in the combinations of the 125/25 microgram dose as can be seen in the second column from the right.

Turning now to our last program, MABA, this is the program that I mentioned little earlier, it’s a very unique program. We have identified a single molecule that has both muscarinic antagonist as well as beta2 agonist activity. It is so important about this molecule looking forward is the potential to combine this one single molecule with the second molecule which should be an inhaled corticosteroid to deliver three pharmacologies in a single device. This is a program that was discovered by Theravance in the Theravance laboratories and was licensed by GFK in 2004. We have no cost obligations in this program. I call over other respiratory programs as GFK is running and managing the program. We have completed now Phase 2B with very solid results and are now evaluating the next steps to this program.

Looking at the results, the most recent Phase 2B data we were comparing both once a day and twice a day dosing regimens of compound O81 to lead MABA compound. On the top half you will see the once a day dosing, on the lower half you will see twice a day dosing regimens, in the middle it’s a comparator which is the currently marketing dose of (inaudible) which is the single Beta Agonist that is in as are today, GSK’s our largest selling product.

As you can see all doses of O81 produced statistically significant improvements in overall bronchial dilation and the study support advancing 0814 forward as either a once a day or a twice a day medication. From an efficacy perspective, I would say we were extremely pleased from a safety perspective the medicine was generally well tolerated and (inaudible) events are similar across all treatment arms, nothing really to write home about from the safety perspective. So what we are today is we are evaluating the next steps for this program. We will provide an update here before the end of the year in terms of if and how we plan to progress this into Phase 3. So to say stay tuned on that program.

In terms of our over economics related to the respiratory program we have with GSK, there are several different components you need to look at for the LABA collaboration. We will look at first of all FF/VI, this is again our Relvar and Breo program. Each year we had 15% royalties and our first $3 billion of annual revenue. Everything above and beyond $3 billion they are relatively to reduce (inaudible) to 5% for everything above that or UMEC/VI, our royalty rates are upward tier. It starts at 6.5%. They go up several steps and top out at 10% for all sales above and beyond $2.5 million a tier. And then for our MABA collaboration. This represents again our upward tiering that at 10%. So up to 20% and the for all sales above and beyond $3.5 million a year. They drop back to 7.5% on an annual basis.

For MABA dose, the single agent royalties if it returned, we were to market a combination products; so again a MABA ICS. You would multiply all those royalty rates by 70%.

Turning now to our last program and I'll talk very briefly about the TD-1211. This is another internally discovered program. Theravance is for the treatment of opiod-induced constipation. The goal here was to develop a best-of-class, once a day, orally administered medicine that was a Peripheral Mu Opioid Antagonist for the treatment of opioid-induced constipation which is a very debilitative disease, affecting folks who are on chronic opioid therapy.

Thinking about these market here, we think there are more than 500 million treatment days on an annual basis for patients who are suffering from this disease today. As you will see, as we get to a little bit of a data here, these patients are in fairly tough shape and certainly are very uncomfortable condition to be in. So we finished the Phase 2b program, however, the goal is to access the safety and tolerability of TD-1211 in patients with OIC. We look to just over 200 patients in study 0084 which was the main Phase 2b study in the program, in addition to 0084 we had two other studies, which were assessing safety and tolerability as well as an open label evaluating other dosing regimen. The data that came out of these programs is you will see the difference of course moving this program forward in to Phase 3.

So I am just going to focus on a little bit of data here. This was the primary efficacy endpoint of study 84. We are looking at improvements in CSBM. You will notice it’s a slightly different than what some other competitors are and then we are just looking at SBM we think CSBM is a much better indicator of returning a patient to normal bowel function.

Baseline patients came into the study having between 0.1 and 0.3 CSBM per week. So these patients are extremely constipated, after treatment you saw that for the 10 and 15 microgram dose, we move patients from the 0.3 up to approximately 3 CSBMs per week or what is considered by most doctors to be approaching normal bowel function. These values are highly statistically significant.

From a safety perspective, really there was not a whole lot of things to ride home about, the most common adverse events were abdominal pain, upper diarrhea, the sort of things you would exasperate as you were restoring a patient’s bowel function from point in time where they really were extremely constipated back to normal.

Just sort of in summary on Phase 2B study achieved its primary as well as key secondary endpoints. More than 66% of the patients in the 50 milligram dose reported their complication was better or much better on a seven point global impression of change scale, over 90% of the patients on 15 milligram reported that they would use again if it was offered by physicians, and as a result we are feeling quite confident right now that this medicine has a potential to potentially help patients and they are contemplating how to move this into Phase 3 at this point.

Finally, from a financial position cash in the banks as of September 30, was [$352 million], so we are in a very good financial position. We have projected 2012 expenses of between $120 million and $130 million. As I mentioned in the last couple of calls, we will probably be at the upper end of that range.

How we get access to substantial additional funding as again GSK’s for all the major cost associated with our development programs for UMEC/VI, FF/VI as well as the MABA programs. So with that as summary, we are feeling quite good about where we are today relative to our programs. The reviews of our major respiratory programs and the correction of the pipeline as a whole. If y you will join me, I will be having breakout session here, just down the hallway to the right. So thank you very much.

Question-and-Answer Session

[No Question-and-Answer Session for this event]

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