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Luke Beshar – CFO

Analysts

Olivia Young - Deutsche Bank

NPS Pharmaceuticals, Inc. (NPSP) 2012 Deutsche Bank dbAccess BioFEST December 4, 2012 10:10 AM ET

Olivia Young - Deutsche Bank

It’s Olivia Young here from the Biotech team. Today I have NPS with us with Luke Beshar who is the CFO and actually what I want to do is just kind of start off for people who are not familiar with NPS since the story is completely changing from a royalty story to a pipeline drug development commercial story. Just talk to us about the two drugs that you have, the late stage asset and also NATPARA quickly.

Luke Beshar

Thanks Olivia and great to be here. So the elevator story in NPS is that we have two late stage post phase 3 drugs, one that is within four weeks PDUFA. That’s Gattex for adults with Short Bowel Syndrome and the second is NATPARA which is – we’re in the probably eight inning of preparing that BLA. It’s on track for filing in mid 2013. It was put on trajectory for approval for mid 2014 and NATPARA addresses hypoparathyroidism which is where patients are hypocalcemic because of the usually reception of the parathyroid gland.

In addition to that, we have our royalty portfolios as you indicated, the most significant piece which is Sensipar which is generating about $90 million a year in revenue, of which $60 million comes to the company and $32 million goes to Amgen repaid in advance and that will revert to 100% of those proceeds coming to the company in the beginning or mid 2015. And then we have Calcilytics which is an earlier stage compound which we’re in the final process of tech transfer from GSK and we’ll determine whether we’re going to develop that drug and if so, commence those activities in 2013.

Question-and-Answer Session

Olivia Young - Deutsche Bank

Okay, great. So before I start handling some questions, if you have any questions for Luke here, feel free to email me Olivia.young@dv.com and honestly I’ll ask your question. Or if you have any comments I’ll say those too. So we’ll move on to the PDUFA date, December 30. Just what’s your confidence around that timeline with the FDA and what you present to the agency?

Luke Beshar

Well, we’re reasonably confident that the FDA is going to adhere to the December 30 PDUFA. As you are aware, we had a unanimous 12-0 vote in favor of the advisory committee in October and based on the tone and tenor of those public comments as well as the subsequent conversations we’ve had with the agency and ongoing with respect to labeling and RAMs and registry as well as follow up scientific questions on the application. We have no reason to believe that the 12/30 PDUFA is going to move. But that being said, it’s the FDA. We don’t control that, but at this juncture we have no reason to believe that 12/30 is not going to be a PDUFA.

Olivia Young - Deutsche Bank

So far on track?

Luke Beshar

So far we’re on track.

Olivia Young - Deutsche Bank

Okay. So I know you’ve mentioned before that 350 million in peak and you’re confident that number is going up. So let’s just break apart that number just a little bit and I’m going to start with the probably $1 million question or maybe the $200,000 question or the $100,000 which is pricing and how you guys think about it and why you’re so confident toward the ultra orphan education that you’re talking about here.

Luke Beshar

It’s a great question. So we just completed a very extensive payer analysis and had the benefit of not only our STEPS trial which is the pivotal registration trial, but in additions interim updates from an open label extension trial and thus far one out of seven patients in STEPS and STEPS 2 trials have weaned completely off parenteral nutrition and an average is at least in the STEPS trial is a 50% reduction PN versus baseline for those patients on the active drug.

We saw with that profile the payer research we are very encouraged to learn that the price elasticity was a little less pricy elastic than we had expected and that’s again I think driven because it’s a small population. The payers that we’ve polled were covered 134 million lives. So reasonably confident that that’s representative of the broader payer base. We’re very confident of that. The firm that we used to conduct the pricing research has set pricing for four of the 10 largest orphan drugs in the market today. So we’re confident that they’re credible…

Olivia Young - Deutsche Bank

What were they?

Luke Beshar

I’m not in a position to disclose that because then you’d be able to know who the firm is and we’re under a CDA with them. So we feel real good about the payer research. We think it’s well grounded and I think it’s going to enable us to achieve a pricing range that previously we were a little below. But in the same breath, in the same period of time we’ve been doing a lot of work patient identification and we’ve had our MSLs deployed for over a year now and we’ve increased, we have eight MSLs currently working in the market. We’ve been partnering with patient advocacy and we also have shortbowelsupport.com as potential sources of patient identification and our prevalence top down approach had been pegged at between 10,000 and 15,000 patients in the US.

Addressable patients for orphan indications are almost always less than top down prevalence and in this situation we have concluded that that is also the case which is to say that when we look at the patients and their actual not taking a statistical sample and extrapolating that over 350 million lives, but actually going out and trying to find specific patients with names, social security number and rank, it appears that it will be less than 10,000. How much less day two will give more color on the call following the hopeful approval for Gattex. But when you factor in our revised downward look on addressable patients and our revised enhanced pricing, previously we viewed the peak revenue potential of Gattex at about $350 million. Our view now is that the revenue is in excess of $350 million, actually well in excess. So the net value of the Gattex asset is actually enhanced today over what we thought it was six or nine months ago.

Olivia Young - Deutsche Bank

So I know obviously you won’t give us a lot of color on pricing, but just is that – are we talking orders of magnitude that is 50%, 100%? Give us a sense of how much more leverage you have in the pricing model than you originally once thought.

Luke Beshar

That’s a complex question because if you look at the Street analysts, they have pretty consistently been up until our last call in the 70,000 to 85,000 per year cost of care and we have for over the last year been providing feedback for that. Our view was that that 70,000, 80,000 was low. But the Street also had much higher penetration into the addressable market we’re comfortable with. So if you looked at our internal model, we had a higher price in the 70, 80, but we also had lower penetration and we actually got the 3 to 350 but through a different route than the street did. Our pricing which was higher in the 70, 80 before is now even higher. If you’ll bear with us and hopefully in four weeks or thereabouts when we get the approval, shortly after we’ll have a call that will give a lot more insight into specifically what the pricing will be per year for the drug and we’ll give a lot more insight in terms of our commercial strategy, commercial deployment and we’ll also provide metrics that we’ll be updating the Street on for 2013 to be able to assist the Street to measure how well we’re penetrating the market. So you have to bear a little bit. I can’t give you too much color beyond that. But hopefully that gives you a sense that there is significant pricing upside, particularly given the Street’s current consensus.

Olivia Young - Deutsche Bank

Maybe you can just back check my math for me. So I did a quick run on it. If you had $350 million, $84,000 which is the current consensus right now, you get about 4,400 units sold or if you doubled the price, you would get 2100 units. So is that a fair characterization of the range of outcome?

Luke Beshar

To be honest with you, I didn’t follow that math. That was a little bit too quick.

Olivia Young - Deutsche Bank

It was 350 divided by 84,000. $350 million divided by $84,000 and then 350 divided by 160,000.

Luke Beshar

Yeah, sure. Absolutely. That math would absolutely make it work. If you double the price, you actually have half the units in order to get the same way, absolutely. Yeah, the math works.

Olivia Young - Deutsche Bank

Okay, that’s good. I was in math division and missed that grade, got some work done. You can thank Robin for helping me learn my math skills. So talk about volumes here, just kind of are there about – tell us how many prescribers there are versus like institutions in that?

Luke Beshar

Okay. So what we know now is that there are about 1,000 locations in the US that care for short bowel syndrome patients. And in those locations and that could be one physical location, it could be two or three in a particular city, but we have locations or accounts in those, 1000 accounts. There’s about 6,000 doctors and we know that a fraction of those 6,000 are actually caring for SBS patients. But not until we get approval on our sales force can start calling them as far as the locations to be able to understand who are the prescribing docs, who are caring for the SBS patients and get to them so we can begin the marketing process. So the short answer is there’s about 1,000 locations, 6,000 docs is the broad population but we know that at those 1,000 locations there are SBS patients but there’s going to be a fraction of those 6,000 docs that are actually caring for the SBS patients.

Olivia Young - Deutsche Bank

And can you talk a little bit about how you are detailing and building out your sales force to leverage this population.

Luke Beshar

Well, we’ve publicly announced that we can do this in a pretty compact way, at least we think so. Initially we’re going to field 30 sales reps. We’re going to leverage patient advocacy. The work our MSLs have been doing using scientific publications and symposiums as a way to create – increase awareness of the brand among the proscribing community. So we’re using 30 direct sales force as well as an important aspect of the strategy’s home infusion. So let me talk a little bit about home infusion, how that’s important to access the market. Not a majority, well less than then majority of the SPS patients are currently under the care of one of the national home infusion companies. But while it’s not the majority, it’s a pretty substantial pool of patients for us and it’s a pretty efficient way to quickly get access to a subset of the total US patients. So those SPS patients are currently having in home nursing care on a daily basis. Nutritionists are coming in on a weekly or monthly basis and they’re actually compounding and distributing the parenteral nutrition to these patients.

So there’s a very personal, intimate relationship with them. We are in the final phases of building out a network of the top home infusion companies and we will announce in the not too distant future some more details on that. But the net of which is that we will have alliances with the top home health providers, home infusion providers and those will give us the ability, they’ll help us in a number of fronts. One, they’ll give us insight into the prescribing patterns of the doctors prescribing PN right now. It will give us more insight into the reimbursement arena and the marketplace and then finally and most importantly it will give us direct access to a subset but a pool of patients where we can quickly identify and hopefully accelerate the ramp.

Olivia Young - Deutsche Bank

So how strong is the patient advocacy groups and which ones are key here?

Luke Beshar

Short bowel support doesn’t have its own patient advocacy. Only is probably the largest patient advocacy and only is for parenteral nutrition. It’s not just restricted to or limited to just short bowel syndrome patients. It’s any patient that has to rely on parenteral nutrition for sustenance. That’s probably the most, but there are others. There are other patient advocacies, but O is probably the most significant. You have no others if you have this.

Olivia Young - Deutsche Bank

And so talking a little bit about what happens to the reimbursement payers. What are some of the risks or hurdles that make it put in place on the other side of that even though there’s a lot of support?

Luke Beshar

There will be reimbursement hurdles in every, the higher you price the drug it’s intuitive the higher the hurdles are going to be. So it’s bought here, they put Gattex on, what the pre-admission, what requirements are going to be. Are they going only to restrict the use to the label or to the sub class? Will there be ongoing recertification requirements once the patients are on drug? They would potentially tie it to another – the doctor writing a new script or it could even limited to see whether there’s been a reduction in parenteral nutrition and whether the drug is going to be re approved for another year or two of use. We do expect that there will be significant reimbursement hurdles. The good news is that all the payers, public and private we talk to, every one of them will cover the drug. So it’s not a matter of if the patients are going to get access to the drug.

It’s really a matter of when and one of the many things we’re going to assist them that front is we have a patient – we have a care coordinator function which is as of two days ago actually up and running. We have care coordinators on staff. We have the systems up and running. We have the form banks in place. They’re currently in training right now and the care coordinators are going to serve a really critical role and that is to afford burden free access of Gattex to patients. So a little over simplified, but once the doc writes the script, he or the attending nurse needs to call in the script or just call 1-855-Gattex and we’ll take it from there.

Olivia Young - Deutsche Bank

So just dig a little bit deeper into the, for lack for a better word, hand holding that has to happen with this products from the sales force, just walk us through end to end how you’re – it seems like relationships are important and all that kind of jazz.

Luke Beshar

Well, sure, relationships are important in anything except life.

Olivia Young - Deutsche Bank

But maybe more direct personal relationships with these infusion companies.

Luke Beshar

Well, actually the short bowel syndrome patients have multiple touch points. You have the GI surgeon, you have the local attending GI doctor, you have your local PCP, you have your nutritionists and you have your home infusion folks. So there’s really a half dozen folks, touch points that are touching our patients. These are very sick patients so for us we are going to build a personal relationship, MPS to short bowel syndrome patients and those care coordinators are going to be conduit. That’s going to be the glue that sticks MPS in the patients direct together. So what will happen is those patients will have open access to the care coordinators and we’ll assist them not only with getting through the reimbursement hurdles, but as they begin administration of the drug, we’ll be there for them to walk them through if there’s any mild side effects to what to expect and how to deal with that, how to deal with the weaning of parenteral nutrition and to coach them, help them through that. If they have any post drug administration questions or concerns, we’ll be there for them. We’ll be monitoring because it’s a small group we’ll be able to know when their prescriptions have been refilled and not and prescription has not been refilled and we can make an outbound phone call and find out what’s happening and if somebody can help. We’re going to use special distribution. So we’ll know where each box is going.

Olivia Young - Deutsche Bank

Okay. So how many care coordinators are there? It seems very important.

Luke Beshar

Today we have three and we’ll scale back. The three are really, those are the seeds and they’re the ones that are going through the detailed training and they’ll be going through training for the next six to eight weeks. But as we start to enroll patients and scale, we’ve actually – we’ve already begun the process of identifying the next wave and we’ll just continue to fill those banks as the patients – as the enrolment of the patients come onto the drug.

Olivia Young - Deutsche Bank

One last question on Gattex unless anyone else in the audience has questions, just how long does it take to do the training process for these care coordinators? Is it like a week basis?

Luke Beshar

No, it’s – well, let me think. I think our care coordinators started – they came on the payer I’m going to guess, what is this, December 1? Probably about two weeks ago, three weeks ago and they’ll be fully trained on January 1.

Olivia Young - Deutsche Bank

Well, a month. Okay, so I’m going to switch to one of my favorite topics which is NATPARA and for hypoparathyroidism and I know you talked a lot about it the R&D day and I think it’s underappreciated, the story here. So just can you give us a broad sketch of what disease is and why you find it so exciting too?

Luke Beshar

Yeah. Hypoparathyroidism is connected with usually re section of your parathyroid gland, generally in connection with thyroidectomy or neck surgeries and when you’re no longer have your parathyroid glands, the body locks the parathyroid hormone and the parathyroid hormone controls calcium levels. So the patients become hypocalcemic and when that happens, there’s about 65,000 in the US that suffer from Hypoparathyroidism. About 20% of them are severe. 40% are moderate and 40% are mild. Those are by symptoms and the symptoms range, particularly for the severe and the moderate symptoms are quite profound. There are neuromuscular issues. The patients, the cognitive skills are impacted in many of these patients. Lose the ability to think. They call it brain fog. They really lose their ability to think. They’re highly symptomatic. They suffer from tetany which is shaking, almost seizure like symptoms and it’s highly symptomatic.

So what these patients currently do is they ingest oral amounts of calcium and vitamin D, very substantial. In some situations as many as 40 or 50 pills, 1000mg pills of calcium a day and they pop them. So as they’re going through the day to day activities as they start – the symptoms start to reemerge they lose their ability to think and they start to shake. People think they’re having epileptic seizures. They’ll pop the calcium pill and that does deal with the symptom short term. But it only deals with it a for a certain amount of time and then obviously the calcium moves through the body. The problem with that is two things. One, it’s only dealing with the symptom, it’s not curing the underlying disease and secondly, these patients are ingesting massive amounts of calcium that ends up someplace in the body and it’s typically either in kidney stones or in the brain. So long term core morbidities for these patients is quite substantial.

We’ve just concluded our paradox which is a burden of disease study, the most comprehensive hypoparathyroidism burden of disease study that really reinforce to us the need, the unmet medical need that hypoparathyroidism represents and if you look at the clinical trial it was highly effective. The P value was six or seven zeroes. So it clearly hit the endpoint which was a 50% reduction in calcium in light of the supplementation. But and we had 54% of the patients hit that endpoint, but equally or more important, 43% of patients completely weaned off, completely came off supplemental calcium and Vitamin D.

So that’s a big part of the patient population that can completely come off that supplementation. So clearly the drug works. For an orphan indication we have an incredibly robust safety database. This product is currently on the market in Europe for osteoporosis. It has been in the market for five or six years. So we have a very robust safety database and there’s also studies for osteoporosis in the US. I think we have 3,000 patient adds in the US from those data. So the drug works and it’s safe and it’s on medically highly symptomatic. So with the patients crave the drug.

Olivia Young - Deutsche Bank

Let me ask you one question though. On the primary endpoint, how vetted is that with the agency?

Luke Beshar

It was vetted. We met with – at the end of our phase two we sat down with the agency and collaborated with them on that endpoint and there’s agreement that is an incline point.

Olivia Young - Deutsche Bank

Okay. So maybe just we talk about some of the…

Luke Beshar

And excuse me, even if -- there is buying or agreement on it, but it’s hard to argue that 40 something percent complete elimination of supplemental calcium is not meaningful as well. I’m sorry.

Olivia Young - Deutsche Bank

That’s fine. And just maybe give us a quick rundown of the side effects of the drug. Are there any meaningful side effects that…?

Luke Beshar

Of the drug, no. It’s an identical duplicate of the native hormone. So the other beauty of the drug is we offer it, it will be offered in four doses. So like any hormone therapy it will really be customized to the individual in question. So in the study we study 2550, 7500 micrograms in that we currently expect to market that. Very few people are on 25micrograms. Most of them are on 75, but we’ll offer all four.

Olivia Young - Deutsche Bank

You’ll offer all four? So maybe we just talk a little bit about identifying the patients and like what role the patient comes and plays in this illness.

Luke Beshar

Well, in the hypoparathyroidism, there is a more established hypoparathyroidism specific patient advocacy group. So we’re working with that patient advocacy group as well as NORD. We will shortly after the launch of Gattex we’ll begin to build the MSL team that will begin to seed the hypoparathyroidism market for NATPARA. It’s a little early to do that now. We’ll do that like I said early 2013 because we’ll file the BOA in mid ’13, then that will support a mid ’14 launch. So somewhere between 12 and 15 months before the launch is when we’ll start to begin to actually see the market with MSLs and then we’ll do just what we did with Gattex which is to identify the key opinion leaders, where are the centers of excellence, where is it happening in the Us so that when we field the sales force they’ll have a playbook.

Just get back to Gattex, the field sales force will have a playbook. Each of the 30 reps that we hire will have a playbook that will have all the research that’s been accomplished to date in terms of who is in the market, where are those centers of excellence, who is believed to be the key opinion leader in that practice so that when he or she makes that first sales call we have the benefit of all our competitive knowledge. We’ll do it all over again with NATPARA.

Olivia Young - Deutsche Bank

So maybe we’ll just go back to Gattex quickly. You did bring up one question I have is between the key opinion leaders and community railroad, what’s the mix of that like doctor population like?

Luke Beshar

I’m not sure what you mean by…

Olivia Young - Deutsche Bank

Is it more just like you’d have the KLL world who know a lot about this and then they would be the people dosing the drug? Or are there other people that we need to worry about?

Luke Beshar

No. There is -- the key opinion leaders do have a strong influence in the market. However, it’s a pretty fragmented market. So there are a lot of individual GI or local attending doctors who will actually control the pen on the script.

Olivia Young - Deutsche Bank

Okay. Let me see how much time we have left. I think we have one minute left. I’m going to ask you a big picture question. So just over the next year and a half you guys have two drugs that could be on the market. How do you prioritize that internally versus like period of time where you’ve mostly been like a royalty stream company and development company and you’re going to meaningfully ramp your sales force and potentially continue to grow your R&D? So just help us think about that.

Luke Beshar

We don’t think of ourselves and never have thought of ourselves as a royalty company, at least not for the last five years since we restructured the company. So what we think of ourselves is a development company that’s about to add commercialization to our toolbox and as we think about the big picture we view the goal – the vision for this company is really to deliver therapeutic solutions to unmet medical needs for rare disease. If it’s orphan, it’s orphan if not. Rare disease is what we’re all about. So NATPARA will not be our last development program. As we commercialize Gattex and we bring that part closer, we have already begun. We have Calcilytics through other activities that we have to identify early stage candidates to bring in. We have a world class drug development function that frankly is a strategic strength of the company and we intend to and we’ll leverage that in the months and years to come.

Olivia Young - Deutsche Bank

All right, great. Thanks Luke.

Luke Beshar

Thank you. Appreciate the questions. Thanks for inviting us.

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Source: NPS Pharmaceuticals' Management Present at the 2012 Deutsche Bank dbAccess BioFEST Conference (Transcript)
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