Talon Therapeutics Inc. (OTC:TLON) Q3 2012 Earnings Call November 14, 2012 12:00 PM ET
Steven Deitcher - President & CEO
Craig Carlson - SVP & CFO
Good day ladies and gentlemen and welcome to the Talon Therapeutics Third Quarter 2012 Financial Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder this conference maybe recorded.
I would now like to introduce our host for today, President, CEO and Board Member of Talon Therapeutics, Dr. Steven Deitcher. Sir, please go ahead.
Thank you very much. Welcome to the Talon Therapeutics 2012 third quarter earnings call and investor update. On behalf of the company, we appreciate your interest and support of Talon. With me today is Craig Carlson, Talon’s Chief Financial Officer.
Before we get started I would like to remind everyone that Craig and I may make forward-looking statements. Please visit our company website at, www.talontx.com in order to review our most recent SEC filings to understand the risks associated with Talon.
The obvious highlight of Talon’s fiscal third quarter was the FDA accelerated approval of Marqibo. Marqibo is vinCRIStine encapsulated in sphingomyelin and cholesterol liposomes for intravenous administration. Based on the overall response rate in the Phase II RALLY trial and the study population comprised of heavily pretreated patients.
Marqibo is indicated for the treatment of adult patients with Philadelphia chromosome negative, acute lymphoblastic leukemia in second or greater relapse and those with leukemia have progressed following two or more anti-leukemia therapies. This indication includes multiply relapsed patients, patients who relapse following a stem cell transplant, and patients refractory to prior therapy.
This indication includes both B and T cell ALL subtypes and addresses approximately 1,700 patients per year in the United States alone. This number reflects the fact that the majority of adult ALL patients will relapse or be refractory to therapy and will require salvage therapy. We remain convinced that a premium pricing strategy applies to Marqibo in this indication. Marqibo is uniquely poised to address this medical need and serve as a foundation for new combination regimens in the future.
Post approval, Talon has focused its efforts on preparing for a commercial launch of Marqibo in the US. It is imperative that we deliver opportunity to this very needy patient population. We have attracted marketing, sales and medical affair leadership to the company and set our sights on launch in the first quarter of 2013. Our efforts include development of a comprehensive advertising and promotional campaign that will debut in leading medical journals this month. We also anticipate publication of the primary RALLY trial manuscript in a leading medical oncology journal before the end of the year.
Our efforts also include medical science liaison outreach as a means of building Marqibo awareness, supporting investigator sponsored trial requests and cultivating new physician relationships ahead of the upcoming American Society of Hematology Annual Meeting and Exposition in December. The ASH meeting being held in Atlanta, Georgia this year will serve as the cornerstone of Talon’s pre-launch activities for Marqibo.
We will be hosting a reception for our coveted investigators without whom our Marqibo would not gained approval. This is the same group of leukemia experts that we entrust to judiciously administer Marqibo to patients in the future. Marqibo will be the topic of three [aspect] presentations during ASH.
These presentations will highlight interim data from the ongoing pediatric study of Marqibo being conducted by the pediatric branch of the National Cancer Institute as well as important pharmacokinetic, target tissue delivery and neurological data related to our product. We have commercial and separate medical affairs booth activities plans during the exposition as well as a one-hour Marqibo new product theater presentation that I look forward to delivering personally.
One year ago, we were engrossed in intensive and thoughtful preparation for our ODAC meeting. Our attention to every detail and avoidance of distractions was rewarded by a favorable ODAC outcome followed by an accelerated approval. We're applying the identical principals to our ASH and commercialization preparations. We expect similarly rewarding results.
The third quarter was also occupied by significant effort in travel related to the assessment of several varied strategic transaction opportunities. Some may consider these business and corporate development activities to be distinct from internal commercialization efforts, we do not. Our commercial preparation and strategic transaction related efforts are synergistic.
We are assessing transactions that will augment the Marqibo commercial launch and help the Marqibo franchise to reach its full medical and financial potential and optimized effort benefits patients, physicians and all involved with Talon Therapeutics including you.
It is more probable than not that Marqibo will be launched in the US following a strategic transaction. Abundant and serious interest in an asset such as Marqibo stems not only from the fact that it is already approved, [thus] de-risk and ready to take to market but also the fact that registration quality randomize Phase 3 label expansion trials in the front line adult ALL and front line diffuse large B-cell non-Hodgkin's Lymphoma indications are already active and enrolling.
The significant drug development expertise within Talon has positioned Marqibo to be able to address patient needs and generate revenue in the very near future and address even larger patient populations and generate even more revenue in the coming years.
We look forward to making a decision regarding the ultimate commercial path forward in the coming months. The tenacity that secured an approval is determined to propel the company forward.
Before I turn the call over to Craig, let me provide a brief update on Menadione Topical Lotion. The need for a product that will mediate the skin toxicity associated with the use of the growing class of epidermal growth factor receptor inhibitors is amounting. Menadione Topical Lotion is intended to meet these needs in a targeted easy to use and scientifically based manner.
Menadione Topical Lotion is currently in a randomized multi-center Phase 2 study sponsored by the Mayo Clinic. Enrollment has recently accelerated and no significant toxicity issues have been encountered. We expect data in the first half of 2013, and we look to efficiently hold end of Phase 2 meeting with the FDA and transition into a registration of Phase 3 program, this remains an exciting and valuable opportunity.
I will now turn the call over to Craig.
Thank you, Steven and thanks to all of you who are participating in the call. I will begin with a high level review of the balance sheet. At the end of September 2012, we had cash and cash equivalents of $5.6 million. During the quarter, $9 million was raised through the purchase of the Series A3 preferred shares.
There are two major liabilities as of the end of September 2012, the first is the notes payable with a value of $24.6 million net of discount, by the way the face value of the debt is $27.5 million and comes due in June 2015. The second major liability is the investors’ right to purchase future shares of Series A3 preferred stock and that totals $29.1 million.
These line items will likely change each recording period as a primary driver of the potential fluctuation of this value in stock price. So as stock price increases the liability increases and vice versa. The line item redeemable convertible preferred stock has a value of $44.9 million, and we ended the period with a total stockholder deficit of $96.3 million.
Next I will discuss the statements of operations for the quarter ended September 30, 2012. Talon reported net income of $40.5 million and deemed dividend attributable to preferred stock of $10.7 million, which when combined resulted in a net income applicable to common stockholders of $29.8 million or $1.35 and $0.18 basic and diluted earnings per share respectively. The EPS calculation for basic had a weighted average shares of $21.968 million and a EPS calculation for diluted had weighted average shares of $161.8 million.
Having a positive net income is not a scenario most people would have anticipated for Talon. The reason for the positive net income was the $48 million value attributed to the change in fair market value of the rights to purchase shares of Series A3 preferred stock and this is largely a function of changing stock price.
Total operating expenses for the three months ended September 30, 2012 were $7.4 million compared to $3.3 million for the three months ended September 30, 2011. The primary reason for the increase in expenses is a $3.5 million milestone payment the company owed upon approval of Marqibo and that's included as part of R&D expenses.
Now projecting expenses for 2013 is uncertain. As Steven mentioned, we are currently evaluating different possible commercial paths for Talon and Marqibo for merger and acquisitions to licensing agreements to Talon launching Marqibo alone. Also as Steven indicated the probability is greater that there will be a strategic transaction than the probability that Talon will launch Marqibo alone.
So we are forecasting 2013 expenses to be between $20 million to $24 million excluding commercial related expenses and potential Marqibo revenue. Once the commercialization strategy has been finalized, we will update forecast as appropriate. Now as of September 30, 2012 $51 million remained outstanding for the Series A3 Preferred Stock which is a potential source of future funding for the company.
So this concludes the financial update for the quarter ended September 30, 2012 and Steven I will turn the call back over to you.
Thank you Craig. We will now entertain questions if there are any.
(Operator Instructions) And we do have a question now from the line of Bob (inaudible), a Private Investor.
Quick question; you didn’t mention much about the European launch. Could you expand upon that a little bit?
Thanks, Bob. The plan with Marqibo is to submit a marketing authorization application to the European regulatory authorities in 2013. So we're planning for a US commercial launch. We have yet to gain regulatory approval in Europe.
Will that also entail potential partnership. Are you looking (inaudible).
The submission of our application for approval will not require a partnership per se, but for commercialization outside of the US, we again would be looking for a commercial partnership or that would be an element of the other strategic transaction that we're considering.
Thank you. I have no further questions at this time. Do you have any concluding remark?
Again, I wish to thank everyone for their participation in the call today, and we are extremely invigorated and excited for exciting fourth quarter as we near the ASH Meeting, the commercial launch, and as stated, we will continue our efforts to find the best strategic transaction that will again augment the commercial success of Marqibo. I thank you for your participation.
Ladies and gentlemen thank you for your participation in today’s conference. This does conclude the program and you may now disconnect. Everyone have a good day.
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