Optimer Pharmaceuticals, Inc. (NASDAQ:OPTR)
Credit Suisse Group AG Healthcare Conference
November 14, 2012 1:00 PM ET
David Walsey – VP, IR and Corporate Communications
Jason Kantor – Credit Suisse
Jason Kantor – Credit Suisse
All right, thank you and welcome this session of Credit Suisse healthcare conference. My name is Jason Kantor biotechnology analyst on the platform and it’s my pleasure to introduce David Walsey from Optimer Pharmaceuticals. Here you go, thanks.
Thanks very much, Jason and good morning to everybody. I would like to thank Jason and Credit Suisse for having us here this morning and providing an opportunity to tell you a little bit about Optimer and our drug DIFICID for C.difficile associated diarrhea. Today I will tell you a little bit about our drug, a little bit about Optimer, I will review our quarterly update from November 1 for the Q3 of this year. I will give you our view of the CDAD market and a little bit about what we are doing to commercialize our drug in that market.
Before doing so, let me remind you, I will be making forward-looking statements. Actual results may differ, so please check our risk factors on file with the SEC.
So DIFICID is the first drug approved by the FDA in more than 25 years for C.difficile associated diarrhea. This is a serious disease often associated with concomitant antibiotic use. It’s a 10-day course of treatment, two pills a day. Our drug has superiority to a standard of care therapy. Vancomycin, in our Phase III trials, we showed superiority in sustained clinical response, 25 days after the end of treatment and this is very important because the challenge in treating this disease has been the issue of recurrence. DIFICID has over 90% initial cure rate as Vancomycin also has a similarly high initial cure rate but Vancomycin and (inaudible) have high recurrence rate as high as perhaps 30%.
So we have what we think is some of the best expertise in C.diff. We do have the largest marketing effort ever in this disease space. We have a 100% sales force that’s dedicated right now solely to DIFICID. We also have critical mass, what we call patient access, medical affairs and health economics and outcome research. We tried to take an innovative approach to our commercialization of DIFICID and part of that was, what we believe, innovative collaboration with Cubist where we are co-promoting the drug with them, taking advantage of their experience as well as their sales force to reach traditional hospitals. And we also, as part of our strategy apply for something called the new technology add-on payment that is awarded by CMS. I will go into little bit more about this later but essentially traditional reimbursement for Medicare patients receiving DIFICID in hospital and we are the first oral therapy ever to be granted the award.
CDAD is a global problem and we are working to make the drug available globally. We market it ourselves in Canada and the U.S. and are working on collaborations for rest of world which I will review for you.
So first year sales we believe we are very good, over $67 million in net sales, we achieved our net sales goal under our collaboration with Cubist, under which they were entitled to a bonus and we had a good growth trajectory in the first several quarters. That growth trajectory has moderated into the third quarter and we are taking action to renew that growth and I will go into some of those initiatives that are taking place, which is first, the third quarter we had $16 million in net sales to wholesalers, there was a significant increase year-over-year same quarter of over 50%. We have good access to our drug over half the hospitals that we target. We aren’t formulary, so approximately 960 hospitals as of -- about November 1. We have very good patient access, approximately 88% of all patient lives recovered. This is consistent with our 95% of commercialized in the U.S. and about 80% in Medicare lives.
We will tell you now a little bit about how we view the market for DIFICID. So this disease, the hospital is the hub for achievement, but essentially where prescribing decisions and achievements originate, then they expand into the retail long-term care market as patients are discharged. So roughly about 30% of treatment days are in the hospital setting. And the way to look at this market, we believe there is treatment days because in the hospital as you could see here, approximately patients receive DIFICID for an average 6.2 days. Most patients have been discharged either to a retail setting when they go home or to a long-term care setting. About 70% of the dischargers go to the retail setting and when they are discharged, they generally get a full script of DIFICID. So they receive about six days in the hospital, then they will get a script for almost 10 days on average outside of the hospital which is a full course of treatment. There are additional initiations in the retail setting, about 150,000. 60,000 of these are community based and the rest are connected in some way we believe to the hospitals.
So those are discharged to long-term care representing about 30% of those discharged from the hospital. In addition to the 130,000 or so dischargers which receive 3.8 days on average, there is 180,000 initiations. A note with that 130,000 number, that patients discharged to long-term care generally complete the 10-day course of treatment, they are not discharged to be seeing a full 10-day course as in the retail setting. So again with the 180,000 or so initiations in this setting, the hospital and long-term care settings roughly have about the same number of days of treatment with the retail setting having the most. So overall, about 30%, as I mentioned, of the prescriptions originate in the hospital.
Now I just want to review the burden of CDIs, very costly disease, about $8.2 billion a year in the U.S. Our healthcare acquired infections generally have been declining in the U.S., conditions such as MRSA and pneumonia have declined but that’s not the case with CDAD, rates of CDAD have remained at historic highs and in fact, a community hospital setting has to pass first CDAD cases represented at 1% of our hospital of our phase, hospital linked to a significant number of deaths about 4.5 times more likely to die if you have CDAD.
Just taking another quick look at the instances of the disease. We estimate there is roughly 700,000 cases a year although this estimate maybe wrong, our estimate is high as 3 million, while the disease is generally considered to be under diagnosed and under reported. Of these cases, about 50% are originated in the hospital, about 250,000 in the long-term care and the remainder in the outpatient setting.
CDAD can be a very serious disease, it can cause (inaudible) to diarrhea today up to a dozen or more. It is a spore forming bacteria, so it’s transferred by contact with someone that has it or with the surface that has an active spore. The spores are extremely are hardy, they can live on surfaces for months and remain active and they are resistant to normal cleaning methods. As I said, recurrence is the challenge in treating that disease and some risk factors associated with recurrence or age, so being elderly, 65 or older, being on concomitant antibiotics and being immune suppressed, such as patient undergoing chemo.
So we don’t maintain DIFICID as the appropriate first line treatment for all patients. We do believe that it may be an appropriate first line treatment to many patients including those at higher risk of recurrence. So some of the things we have been doing to better understand the disease burden and the patient populations where the disease will be most appropriate is we have a focus on allocation. One of the things we talked about recently is an analysis we commissioned from (inaudible) Medicare data. And what we have found through this data which is being prepared for publication, so I can only share limited amount of information today. What we found that CDI extends the length of stay in Medicare patients, generally by about 82% on average to an increase of 3.8 to 7 days. In ICU, we found that there is an increase of 166% from an increase of about 0.4 to a full day and this is very significant because ICU stays are very expensive.
We also have learned that Medicare patients do cost more and the incremental cost is roughly 16% for a patient with CDAD versus a patient without, but the hospital gets an incremental increase of about 5%. So the increase in cost is about $2200, the hospital gets an additional $600, leaving a $1600 hole which represents cost of the hospital on that patient.
So this data we have at the national level, these figures as well as many other important data points. So we also have them for the 1200 largest hospitals we are targeting. So we will have that information by the end of this month. So we have started and we will be able to continue to go to these hospitals and talk specifically about these recurrence rates, the costs, the burden and the patients that the burden is associated with in their specific hospitals.
As I mentioned earlier, the new technology add-on payment or NTAP is something we applied for last year, it was granted by CMS to us this year. It essentially provides for up to $868 in additional reimbursement to the hospital for Medicare patients that receive DIFICID. The NTAP started on October 1 and I think one interesting statement for the CMS rule which we think helps validate and emphasize the importance of DIFICID as new innovative way of therapy is up here, I like to just read it. It says we believe that DIFICID represents a treatment option with the potential to decrease hospitalization and physician office visits and reduce the recurrence of CDAD as well as to improve the quality of life for patients who have been diagnosed with CDAD.
So as we continue our commercialization of DIFICID, we would of course like to increase patient access to the drug including expanding our reach further into long-term care. As I mentioned, we are support (ph) robust publication efforts and always understand and educate on the burden of the disease, also to pursue lifecycle management of DIFICID and expand into new geographies. So I will touch on each of these during the rest of the presentation.
So, first as I mentioned, to commercialize the drug, we need to understand how the drug is perceived. And as you can see here from our market research, we have very high brand awareness for DIFICID, 100% than IDs infectious disease doctors. There is also generally a consensus that DIFICID is a superior therapy to Vancomycin which we studied in our Phase III trial. However we have also discovered that there is price resistance that physicians in hospitals believe that the drug is too expensive. The WAC or wholesale acquisition cost for DIFICID is $280 per day.
So with this discovery or understanding of the resistance to the cost of DIFICID, what we have done is we have implemented a discount of 25% to the WAC for DIFICID in the hospital setting. So the cost per day in the hospital is now $210, this discount became available on October 1. We think this support patient access to the drug but it should be noted and emphasized that this is only available in the hospital setting, this discount does not apply in the retail or long-term care setting. That means that the overall impact to our net sales is between 7% and 8%, not 25%.
Continuity of care is also clinical to patient care as well as the success of DIFICID. Patients that are discharged from the hospital setting to the retail setting generally receive as you saw full 10-day script for the drug. However we have discovered that we have a relatively high abandonment rate of about 40%. Typically we believe this type of specialty drug, the abandonment rate is closer to 30%. A lot of this abandonment is due to thyroids and other restrictions as well as the fact that many Medicare patients have high co-insurance payments about $1000 or more.
So what we have done to address this is to implement what we call as DIFICID Rx Assist. This is a program that is run by a division of Omnicare and several other drug use this as well and it’s an informational program that supports benefit investigations, prior authorization management, product distribution, coverage determinations, it also could help locate alternative funding and direct people to Optimer patient assistance.
The early results of this program have been very favorable in the first six weeks in a limited rollout of the program. We saw the refill rate go from 29% to 75%. So based upon this we think we will be able to have a very significant impact on the abandonment rate going forward.
So long-term care setting is a growing segment for us. It’s an important segment as I mentioned, roughly similar in size to the hospital setting. It’s also a setting we believe DIFICID can be used as an appropriate therapy because of the nature of the disease in this setting which has a higher recurrence rate, higher hospital (ph) mortality and morbidity at higher rates of transmission. There is also cost burden issues in this setting with respect to the nursing care and separate rooms, potential loss of hospital bed, revenues that the long-term care setting space that we believe make this an attractive opportunity for DIFICID.
Another area of growth for DIFICID is our strategy for lifecycle management. We are planning to do, of course, commitments and obligations we have to the FDA, which includes a pediatric program but also includes a multiple recurrence trial. In addition to Prophylaxis trial, which we started recently that I will go over in a little bit more detail in a moment and we will also be considering of trial studying superiority cure of key patient population. What we discovered in sub analysis of our post (inaudible) sub analysis of our Phase III data is that in certain patient population such as patients with concomitant antibiotic and oncology patients, not only retain the superiority in sustained clinical response that we saw in the general population but also have superiority in initial rates of cure. So this is something we may want to study further and potentially pursue in addition to our label with the FDA.
So we are a pursuing trial that we started recently, we addressed our first patient on Prophylaxis treatment of patients undergoing bone marrow transplant. There are almost 20,000 bone marrow transplants in the U.S. each year, done roughly in 100 centers, our trial is in about 43 of these centers as well as a couple in Canada. The incidence rate of CDAD in this population is about 9%, although it could be higher based upon some anecdotal evidence but the cost of this disease including signs of clinical implications which could be significant as well went to additional 130,000 or so for patients with CDAD versus one without.
The trial we are looking at is intended to roll about 340 patients, it will dose patients with one pill a day, 200 milligrams for up to 40 days which is during the aggressive period but the total length of treatment maybe something about maybe averaging around 30 days.
If we are successful in this trial and obtain approval for prophylaxis indication from the FDA, we would then pursue an additional indicate studying prophylaxis and if we are successful there, we may be entitled to request from the FDA that they give us a broad prophylaxis indication for DIFICID. As I said, this trial was recently initiated we announced on November 1.
We are looking at the opportunity globally. CDAD is a global problem that occurs across the globe throughout all territories. We market ourselves in the U.S. and through our wholly-owned subsidiary in Canada. We are partnering with Astellas Pharmaceuticals Europe, in Europe, Russia or the Commonwealth of Independent of States, the Middle East and North Africa and South Africa. We are partnering with STA in Australia and New Zealand and we intend execute additional collaborations for other territories across the globe including Latin America.
So in our balance sheet, as of September 30, we had approximately $98 million in cash. This does not include $60 million from the sale of our stock in a subsidiary company. That transaction will complete either in the fourth quarter or first quarter at which time we would show the cash in our balance sheet.
To wrap up on our view of DIFICID, this is not guidance, this gives you an idea what we think of the potential for DIFICID. Today in 2012, we see a potential market of $2 billion, roughly a quarter of that in the hospital including a discount, a quarter in long-term and a half in the retail. We see the market as expanding to increased incidence of CDI, perhaps the reason (inaudible) to increased diagnosis with the introduction of PCR tests that are increasingly being adopted in hospitals. We find that the rate of diagnosis goes up, also the maybe price increases in the future annual in the range of 4% to 6%. Our long-term objectives are through achieved penetration rates from 20% to 28% in these segments as listed here. Again, this is not guidance.
So focusing on sources of DIFICID growth, we are highly committed to DIFICID and making it a success and driving value for our shareholders. We are committed to understanding what’s happening in the market and addressing those issues such as understanding the pushback on price and understanding the challenge of abandonment and addressing it, understanding the need to better understand the burden of disease and publish, and also taking an elevated approach, doing things like the Cubist agreement as well as applying for NTAP last year which was awarded this year to do whatever we can to drive value and benefit patients with CDAD.
Thank you very much for your time today.
[No Q&A session for this event]
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