Impax Laboratories, Inc. (NASDAQ:IPXL)
Credit Suisse 2012 Healthcare Conference Call
November 14, 2012 1:00 pm ET
Carole S. Ben-Maimon – President-Global Pharmaceuticals
Michael J. Nestor – President-Impax Pharmaceuticals
Good afternoon. We’ll get started with our next presentation. We are very pleased to have with us Impax this afternoon and we are fortunate enough to have heads of multiple parts of the business. We have Carole Ben-Maimon, the Head of the Generics side and Michael Nestor, who runs the branded business. Also with us for Q&A is Bryan Reasons, the Chief Financial Officer.
With that, I’ll hand it off to Carole, and we’ll get started.
Carole S. Ben-Maimon
Good afternoon, everybody. Can you hear me? Yeah. And thanks for coming and, unfortunately we don’t have a full house, but we are happy that those of you who are here are here and we’re hopeful to give some interesting information. So I’m going to start by talking a little bit about Impax and then I’ll spend some time talking about the Generics business and then I’ll turn over to Michael Nestor, who runs our brand business.
Before I begin, our discussion today may include certain forward-looking statements, and actual results may differ from those presented here. The factors that could cause such differences are outlined in our SEC filings and on our website.
Our core competency is our drug delivery technology and encompass formulation expertise. The focus on technology is really what drives our business and our growth at Impax. From these core competencies we have built two businesses, a Generics business where we are targeting high value ANDAs and the brand business, where we can create formulations that lead to improve medical treatment for being for patients with meaningful problems.
In our generic business, our strategy it’s a target end dose that are difficult to develop, which can provide a competitive advantage and bring sustainable profitability to our business. This includes products with the potential for six months exclusivity being first to file or products that have complex formulations and therefore maybe less competitive. We are also focused on expanding through our generic portfolio through partnerships and in licensing or in co-development of alternative dosage form.
Our current pipeline of 45 pending ANDAs at the FDA for a waiting approval as well as 24 products are underdevelopment and are designed to drive our future growth. The brand business is currently focused on the CNS space, where we can deliver important patient benefits and develop strong intellectual property. We believe the successful development of our brand business it’s critical to our future growth as brand products provide longer product life cycles with the potential to have significantly higher margins.
We continue to make strides in achieving our long-term objectives as we are quickly approaching right carries PDUFA date and have an ongoing Phase IIb study in IPX159. The significant investments we continue to make in R&D remain a driving force in growing our business. Previous internal investments have created significant financial flexibility as we ended up the third quarter of 2012 with a strong balance sheet and $340 million in cash and short-term investments and we have no debt. But this provides significant financial leverage, which can be used to strengthen our business, expand our business as we invest in our business. We’ve been very active pursuing business development candidate and an external partnership that are consistent with our stated objectives of high growth, high margin opportunities. Our approach continues to be very diligent as we are searching for assets that are strategically right and financially attractive.
Our Generics business continues to invest in research and development to deliver high-value Adderall that are productive and still our need. We continue to file new Adderalls from both internal development and in licensing co-development efforts. In addition to this effort, we are aggressively looking at opportunities to acquire products, technologies or companies with strategic value. One objective is to expand our business into other dosage form such as injectable, creams and ointments, inhalers or patches.
In June, we announced an agreement with TOLMAR to commercialize up to nine currently approved generic topical prescription drug product. We initiated commercialization on three of these in October and the remaining will be commercialized throughout November. This represented a first opportunity to commercialize alternatives such form from a long side our current solid oral dosage business.
In addition, the agreement included two generic topical products pending at FDA, one of which is a generic form of Solaraze gel and is the first-to-file opportunity. We are also exploring opportunities outside the U.S. to allow us to move into international markets.
In our Generics division, future opportunities, most are currently marketed on portfolio of 48 ANDAs. Our pipeline remains strong with 45 products pending at FDA and 24 more products under development. These 69 products in the pipeline currently have U.S. brand sales approximating $25 billion. This is a clear indication of the potential value we have in our pipeline.
Currently, the outstanding warning letter at Hayward inhibits our ability to obtain approval for a number of our internally developed ANDAs. We expect that upon the resolution of the warning letter, we should begin to see approvals for new products and we look forward to commercializing these opportunities.
We continue to execute our strategy of diversifying our product base by growing our partnership relationship with products in alternative dosage areas. In just over two years we have partnered with four different companies and on numerous alternative dosage products.
In the short time we now have a partnership portfolio consisting of nine approved generic products, six products pending at FDA and nine products in the development stage. These 15 products have brand and generic sales of approximately $3 billion, with a number of them being first-to-file or first-to-market opportunities. Even more important is that many of these alternative dosage form products are expected to have good market sustainability, and therefore, provide long-term growth for our business.
With the recent additional competition on fenofibrate capsules and generic Adderall XR it’s expected to impact our base business. We currently expect to remain competitive and continue to pursue these markets aggressively.
Our ANDA internal and external portfolio of 45 products pending at FDA contains a number of state certain launches, in addition to numerous and undisclosed product opportunities. As is typically the case, eventual product launch will depend on receiving FDA approval and the market dynamics at the time of the approval.
One product already approved is our formulation of the original Opana ER. Prior our settlement agreement, we can begin marketing that product on January 1, 2013 till next year. Because we were first to file, we expect to have six months exclusivity. However, marketing of the original Opana ER is hard to predict at this time and depends on a number of factors that we are closely monitoring.
In addition, we expect to see a boost to our cash levels with the first quarter of 2013 we have a payment of $110 million from Endo under our settlement agreement. Some of the potential launch opportunities over the next three years that we have focused, that we have disclosed and are focusing on include Opana ER in January 2013, CONCERTA in July 2013, TRILIPIX in January2014, RENVELA in March 2014, which is the first to file opportunity and should have six months of exclusivity and Velcro in January 2015 where we have settled for three months of exclusivity.
Between our internally developed ANDAs and the addition of numerous alternative dosage, dosage borne products through partnership. We have a pipeline of opportunities in the years ahead.
I will now turn this over to Michael Nestor and he’ll talk to you a little bit about the brand business.
Michael J. Nestor
Thanks Carloe. Good afternoon everyone. Our brand business is focused on improving health and extending lives through advancing knowledge of treatments to neurological disorder. We believe the successful development of our brand business is critical to our future growth as brand products provide longer product lifecycles with the potential for significantly higher profits.
Our brand business growth strategy is similar to that of our generic business in that we will continue to focus our efforts on our internal research and development program while searching for additional external growth opportunity. Now in the center of this chart, our internal initiatives near-term, our team is focused on NDA approval, pre-launch preparation and launch planning of Rytary and to bring IPX159 through development.
Our neurology focused sales force is promoting and sampling Zomig here in the U.S. But earlier this year, we were pleased to obtain a licensing agreement for Zomig consistent with our goal to increase the revenue and financial contribution of our brand business to Impax. The transaction was immediately aggregative and we expect Zomig will contribute meaningfully to our total company revenues and earnings this year and next.
To complement our internal drivers we have a set of external initiatives as well. These include the acquisition of marketed products, the acquisition of companies, the in-licensing of products and collaborations in pipeline development and commercialization.
Rytary is our extended release capsule formulation of carbidopa-levodopa intended to maintain consistent plasma concentration of levodopa for a longer duration. Rytary has undergone extensive clinical development including multiple studies in both early and advanced Parkinson’s disease patients both in the U.S. and Europe. The NDA included data from three controlled Phase III studies and two open label extensions in both early and advanced Parkinson’s disease. Rytary has been investigated in more than a 1,000 subjects.
In October, we announced that the FDA extended the Rytary PDUFA date by three months in order to review our September submission of requested information. The new PDUFA date is now January 21 of 2013, no new clinical trials or studies have been requested by the FDA to-date. This delay is not related to the warning letter in Hayward and while we are disappointed in the delay, we continue to have dialog with the agency and remain excited about this product and its market potential.
Now Rytary was filed as a 505(b)(2) application with the FDA, which entitles us for three years of exclusivity. Now in addition, we have one formulation patent that expires in May 2022 and other patents pending, which will expire in December of 2028.
We continue to make progress in our pre-launch planning for Rytary, as we prepare for our first quarter 2013 launch. Throughout this year we’ve been analyzing product positioning and managed care research with more than 1 million U.S. Parkinson’s patients. We believe there is a significant commercial opportunity for Rytary. We’ve also been analyzing product forecasts, preparing our marketing approach and programs as well as our sampling program, all in anticipation of a successful launch upon approval.
Now, our next CNS brand project is IPX159 for Restless Legs Syndrome, a significant neurological disorder with few treatment options. IPX159 is an ex-U.S. molecule that has not been approved in the United States and is approved in other regions for a different indication. This compound has an established pharmacologic profile that has been an asset in our development efforts to-date. As an ex-U.S. compound, IPX159 maybe filed as a new chemical entity in the U.S. and is expected to be eligible for five years of regulatory exclusivity. We have not disclosed the compound as we continue to develop our intellectual property position around this asset.
The ILS market, we think is a large and unsatisfied market, with approximately 25 million Americans experiencing RLS symptoms in the U.S. and an estimated market size, about $800 million. Physicians have few treatment options available to them with dopamine agonists being the dominant therapy. There is, we believe, significant need for alternatives to existing therapies to give physicians and their patient’s additional options for treatment.
In December of 2011, we advanced IPX159 to a Phase IIb study, which will help establish its clinical profile in moderate to severe RLS patients. We are looking forward to completing the Phase IIb clinical trial by the end of this year and we expect to be able to report top line results no later than first quarter next year.
Now, before closing, what I would like to do is update you on the progress in the expansion of our Taiwan facility. This facility would be the primary manufacturing site for Rytary as well as many of our immediate release generic products, which are being transferred from our Hayward facility.
In July, the FDA completed the pre-approval inspection of Rytary and an undisclosed generic drug at our Taiwan facility and there were no Form 483 observation. The company has committed significant resources to improving the operation of all of our production facility and to strengthening our company-wide quality systems.
The expansion project with Taiwan is expected to be completed in mid-2013. As we ramp up manufacturing within this facility, we expect to begin to achieve some additional manufacturing cost benefits.
In closing, we have a strong platform for growth and the right strategy without dual strategic focus. We continue to make significant progress towards our long-term goals. The objectives that we set for the company will position us well to continue to face competition effectively in the future and is intended to provide the basis or above average returns for our investors.
With the current cash that we have on hand and absence of debt we have a significant resources to continue to invest in our business, which we plan to do both internally with the expansion and improvement of our facilities and externally through partnerships or even selected strategic M&A opportunity. We’ve remain diligent by making smart investments with accretive returns such as the Zomig and TOLMAR transactions and while we look externally for development opportunities, our internal research and development remains the driving force for our future growth. Thank you.
Thanks Michael and Carole. We have a minute or two for questions before we move to the breakout room, if anybody would like to ask a question please raise your hand and we’ll get a microphone over to you.
Maybe I’ll start one of just kind of picking up on Michael’s presentation on Rytary. Could you talk a little bit about how you view the commercial opportunity for this drought? How large in opportunity do you think it could be and what are some of the key attribute to the product that you think will how do you reach that opportunity?
Michael J. Nestor
So as we’ve looked at this marketplace, we believe that the market potential for Rytary within the United States is somewhere between $200 million and $400 million in peak sales. From the standpoint of attributes of the products that we think will certainly resonate with patients and hopefully with physicians as well. Are those of the results that we saw with the Phase III clinical trials that is a highly statistically significant increase in the amount of on-time that patients will be able to experience relative to immediate release carbidopa-levodopa that is prescribed in this category as well as carbidopa-levodopa, entacapone. I think the fact that patients will have this degree of control without having to take their medication if you will 6, 7, 8 times a day. So patients will be more consistently maintained on a therapeutic level for a longer period of time to give a more consistent response. And we believe ultimately that that will lead to a much better quality of life to Parkinson’s disease patients.
Okay. Any questions from the audience?
What’s the difference between the 200 and the 400 in your calculation?
Michael J. Nestor
I think part of it depends on pricing, part of it depends on we’ve looked at different ramp rates for the product. So those would be the key variables there, do you have any update on the Hayward facility?
Michael J. Nestor
Update on Hayward.
Carole S. Ben-Maimon
Yeah. So, as we’ve told you, we will, as soon as we know anything that’s material we’ll let you know. We’ve told you that we’ve completed most of what we’ve been asked to do. We are still pursuing all the opportunities to improve that we possibly can and looking to continue to get ready for that introduction and FDA will come when FDA comes. So, but soon as we have something that’s material and we know what the outcome will be we will let you know.
Correct me if I’m wrong on this, but is the Hayward facility also listed on the application for Rytary, and if so, will that cause any kind of delay as that paper works were to get, it’s primarily going to be manufactured in Taiwan. How does that work as far as getting all that cleaned up if Hayward is not approved?
Michael J. Nestor
Hayward is listed as an alternate manufacturing site on the NDA for Rytary. And our view relative to that is as we get closer to the PDUFA date, if we have not had the FDA re-inspect, Hayward will evaluate withdrawing the Hayward site as a alternate manufacturing site from the NDA. The process is pretty straightforward in that regard. The key thing for us, however, is the fact that we had the pre-approval inspection in Taiwan where Rytary will be that if you were the center of manufacture and there were no 483 observations relative to that pre-approval inspection. Yeah, I think we will wrap up there and head to the breakout room we’ll be in the Canyon room.
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