Cadence Pharmaceuticals, Inc. Q3 2008 Earnings Call Transcript

Cadence Pharmaceuticals, Inc. (CADX) Q3 2008 Earnings Call Transcript November 6, 2008 4:30 PM ET

Executives

Bill LaRue – SVP, CFO, Treasurer and Secretary
Ted Schroeder – President and CEO
Jim Breitmeyer – EVP of Development and Chief Medical Officer

Analysts

Charles Duncan – JMP Securities
Rachel McMinn – Cowen & Company
Ritu [ph] – Canaccord Adams

Operator

Good afternoon, and welcome to the Cadence Pharmaceuticals Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the management presentation. (Operator instructions)

Our first speaker is Bill LaRue, Senior Vice President and Chief Financial Officer of Cadence Pharmaceuticals. Please go ahead, sir.

Bill LaRue

Thank you. Good afternoon, everyone, and thank you for joining us today to review our third quarter 2008 financial results and ongoing clinical development programs. On the call with me today are Ted Schroeder, Cadence's President and CEO; and Dr. Jim Breitmeyer, our Executive Vice President and Chief Medical Officer.

Before we will get started, I would like to remind everyone that statements included in this conference call that are not description of historical facts are forward-looking statements. These include statements regarding the timeframes in which we anticipate submitting applications for marketing approval of our product candidates and announcing the results of our clinical trials. The inclusion of forward-looking statements should not be regarded as a representation that any of our plans will be achieved and our actual results may differ materially from those discussed during this call due to the risks and uncertainties inherent in our business. These risks include without limitation the following.

The FDA may require us to complete additional clinical, non-clinical or other requirements prior to submitting NDAs for our product candidates. Our clinical trials may produce negative or inconclusive results or may be inconsistent with previously conducted clinical trials. The FDA may not agree with changes we have proposed in the statistical analysis plan for the CLIRS trial. The outcomes and final analysis of data from our clinical trials may vary from the initial analysis and the FDA may not agree with our interpretation of such results.

Our clinical trial data may demonstrate that our product candidates lack sufficient therapeutic efficacy or that adverse side effects are more prevalent or severe than anticipated. We may experience delays in completing important manufacturing development activities and be required to perform additional preclinical or clinical testing prior to submitting or obtaining approval of NDAs.

The performance of third parties on whom we rely to complete important development activities maybe substandard or they may not successfully complete their contractual duties or meet expected deadlines. We may require substantial additional funding to complete our development programs, and if approved, to successfully launch our product candidates, and we may not be able to raise sufficient capital when needed or at all, particularly in light of the recent, unprecedented volatility in the overall capital markets.

These and other risks are detailed in our prior press releases in periodic public filings with the Securities and Exchange Commission and we encourage you to read them. You are cautioned not to place undue reliance on any forward-looking statements, which speak only of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update the information presented today. This caution is made under the Section 21E of the Private Securities Litigation Reform Act of 1995.

If anyone has not seen our press release issued earlier today, you can access it on our Web site, at www.cadencepharm.com. Additionally, this conference call is being webcast through the Company's Web site and will be archived there for future reference.

With that, I will now turn the call over to Ted.

Ted Schroeder

Thank you, Bill. Good afternoon, everyone, and thank you for joining us today. On the call this afternoon, we will walk you through our financial results for the third quarter of 2008 and provide updates on the ongoing clinical development programs for our two hospital focused product candidates, Acetavance and Omigard. After the financial and clinical updates, we'll open the call to your questions.

During the third quarter, we continued to focus our efforts on advancing the clinical development programs for Acetavance, our proprietary intravenous formulation of acetaminophen for the treatment of acute pain and fever and for Omigard, our topical antimicrobial gel for the prevention of catheter related infections.

As you might recall from our announcement in July, the FDA accepted our revised clinical development plan for Acetavance. The agency indicated that two previously completed clinical efficacy trials, the Sinatra Study in moderate-to-severe post-operative pain and Study 302 in adult fever, will be sufficient to meet the pivotal clinical trial requirements for the filing of the Acetavance NDA.

As a result, during the remainder of the third quarter, we focused our efforts on advancing key clinical regulatory and manufacturing activities. These activities remain on track to move us towards our stated goal of filing the Acetavance NDA in the second quarter of 2009. The remaining studies in our clinical development program for Acetavance include three supportive clinical trials. Study 102 evaluating pediatric pharmacokinetics as well as two open label five-day safety studies, Study 351 in adults and Study 352 in pediatric patients.

We are pleased to report that in line with our guidance, during the third quarter, we completed patient enrolment in Studies 102 and 351 and we remain on track to finish enrolling patients in our final required clinical trial, Study 352, which is a pediatric safety study by the end of the year.

In addition, during the third quarter of 2008, we completed enrolment in Study 304, our supportive study of Acetavance in patients undergoing abdominal laparoscopic surgery. Although not required as part of the Acetavance NDA, we still plan to report the top line results from this clinical trial in the fourth quarter of 2008.

Turning briefly to our clinical program for Omigard, you will recall that we have completed enrolment in the CLIRS trial, our pivotal Phase III clinical trial of this product candidate for the prevention of catheter related infections. As previously announced, we are currently engaged in discussions with the FDA regarding the statistical analysis plan for the trial.

Since these discussions are being conducted under a special protocol assessment, they must be completed prior to unblinding the data from the trial. Assuming the trial has a successful outcome, we still plan to submit an NDA for Omigard in the second quarter of 2009.

With that, I'll turn the call back to Bill for an overview of our third quarter financial results.

Bill LaRue

Thanks, Ted. For the third quarter of 2008, we reported a net loss of $13.7 million or $0.36 per share compared to a net loss of $13 million or $0.45 per share for the third quarter of 2007. For the nine months ended September 30, 2008, we reported a net loss of $43.1 million or $1.18 per share compared to a net loss of $37.5 million or $1.31 per share for the comparable period in 2007.

Total operating expenses for the third quarter of 2008 were $13.7 million compared to $13.6 million for the third quarter of 2007. The increase was due primarily to personnel-related costs from additional headcount to support our clinical development programs and other costs incurred in preparing for the Acetavance NDA filing, offset by a decrease in spending under our Omigard development program following the completion of patient enrolment in the CLIRS trial.

As of September 30, 2008, we held cash and cash equivalents of $61.1 million. The cash equivalent portion consists of money market funds invested solely in US government agency securities and US treasuries.

To briefly recap our financial guidance for 2008, we expect our total operating expenses will be between $54 million and $59 million, including an estimated $4 million to $6 million in non-cash stock-based compensation expenses. We also expect that our cash and cash equivalents at year-end 2008 will be between $41 million and $46 million.

I'll turn the call back over to Ted.

Ted Schroeder

Thanks, Bill. For the remainder of 2008, we will remain focused on completing our development programs for Acetavance and Omigard and preparing to file NDAs for both of our product candidates in the second quarter of 2009.

With that I would like to turn the call back to the operator and open the lines for questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator instructions) Our first question will come from Charles Duncan with JMP Securities.

Charles Duncan – JMP Securities

Hi, guys. Good afternoon and congratulations on a good quarter of progress.

Ted Schroeder

Thanks, Charles.

Charles Duncan – JMP Securities

I had a question regarding commercialization efforts. Could you provide us a little bit of color given the positive news out of the FDA? What kind of activities you are involved in, in getting prepared to sell Acetavance and what do you think about potential pricing?

Ted Schroeder

Sure. So I answer the last question first. Our price assumption has been between $8 and $10 per dose. So that's a one gram dose of Acetavance. That's consistent with the price of Toradol when it was branded 11 years ago. That was $7 a dose or – which was also dosed four times a day. And also consistent with the price that BMS is charging in Northern Europe where they are also in the $8 to $10 price range throughout the Scandinavian countries. So we feel comfortable with that price in those Northern European markets. Bristol shows market shares above 20%, in fact, above 30% in some countries. So it seems that – seems like an appropriate price at this point. As we get closer to launch, we will conduct more formal pricing studies, particularly looking at the profit maximizing price.

As far as commercialization, at this point we're involved in pre-commercial activities, market research, getting the messaging correct, the positioning of the product, et cetera. As we move into 2009, we expect to bring on a senior commercial person to lead the commercialization efforts. As we get past the NDA filing in the second quarter of next year, we'll begin hiring a sales management team. That team will then as we move into the end of the year, beginning of 2010, begin identifying the sales representatives with a goal to have those reps on board just after approval of the product in mid-2010. So lot of activities around building the sales force, the appropriate size and structure and the accounts within those territories. We're still planning that we – we envision a sales force between 150 sales reps and 200 sales reps that will allow us to penetrate the top 2,000 hospitals, which represent 80% of the opportunity for IV analgesics in the U.S.

Charles Duncan – JMP Securities

Okay. And in building that sales force, would you consider or do you think you'll be adequately challenged to focus on Acetavance or would you consider perhaps picking up a product that is also hospitalized or hospital focused product to help you optimize, call it the performance of that sales force or is that too much?

Ted Schroeder

No. We absolutely would be interested in adding other products to the sales force. I certainly don't think that's critical at launch, there'll be plenty to do to get Acetavance sold and adopted on the hospital formularies. But certainly, as we move into 2011, having another product in the bag would certainly make the sales force effort more efficient and is part of our strategy.

Charles Duncan – JMP Securities

Okay. And then, one quick question on the CMC section of the NDA. I imagine some of the activities that you turned your attention to in the quarter after the FDA communication was CMC. Can you bring us up to speed on where you are at in terms of manufacturing?

Ted Schroeder

Yes, so, we've had an ongoing robust program to transfer manufacturing from Bristol-Myers Squibb to Baxter's facility in Cleveland, Mississippi. Those activities are ongoing and we expect that we'll have adequate stability data to submit the NDA and to launch with the commercially reasonable shelf life on the commercial product.

Charles Duncan – JMP Securities

At launch you have that test?

Ted Schroeder

Yes, we expect at launch that we'll have at least 12 months of shelf life on the commercial product.

Charles Duncan – JMP Securities

Okay. Good deal. Thanks for the added color.

Ted Schroeder

Hey, you bet. Thanks, Charles.

Operator

Our next question will come from Rachel McMinn with Cowen & Company.

Rachel McMinn – Cowen & Company

Thanks very much. So, can you talk a little bit about how long your cash will last and what kind of changes you may or may not have to make, given the current economic environment?

Bill LaRue

Hi, Rachel, this is Bill. Our cash in terms of what we indicated in the Q that we filed today is that we have 12 months cash as of September 30. We're obviously very mindful in terms of the expenditure of cash in these times. Our guidance has always been is that the cash that we raised in February would get us to the filing of the NDAs and beyond, we're still operating within that – within those timeframes and we are just continuing to look at various different strategies in terms of the continuing financing of the company.

Rachel McMinn – Cowen & Company

And what strategies are those?

Bill LaRue

Well, we haven't been specific in terms of exactly what timing and structures would be, but what I was indicating is, is that we continuously monitor the markets and we look at a variety of different opportunities that would make sense from a capitalization standpoint.

Rachel McMinn – Cowen & Company

And then just on the pediatric safety, can you give us a sense of how much data you have from previous studies to leverage to get a sense of, what – can you just walk through the design of the study, what the doses are, how much coverage you have in confidence in terms of the safety profile of those doses?

Jim Breitmeyer

Sure, Rachel. This is Jim. And the amount that's known about safety in pediatrics subject is quite substantial, both from the marketed experience of Bristol-Myers in Europe and in particular, there were two substantial publications regarding pediatric pharmacokinetics and safety that were published in the last year, one from Australia, one from Belgium. And so, the overall indication is that acetaminophen is handled similarly in children to the way that is, is in adults. And in fact, children tend to have a more favorable metabolic profile in their liver in terms of metabolizing acetaminophen in a manner that would make it less likely to be toxic. So there is a lot of precedent data to suggest that acetaminophen is safe in children. Our own Study 352 was one that we discussed in detail with the FDA and agreed on the design. And the core was that they wanted multiple day, multiple dose, repeated dose experience in children up to at least five days. And we dosed with what pediatricians would consider a very familiar dosing regimen, and that is 10 milligrams to 15 milligrams per kilogram, given four times to six times a day, up to maximum doses that pediatricians usually use. And we did detailed observation on liver function test in the children, which is the most important safety signal coming out of our safety trials.

Rachel McMinn – Cowen & Company

So, overall, I guess, out of the trials that are ongoing right now – or do you see – does any one have more risk than the other or are there any particular risks that you can identify, or is this just very straightforward and its really just kind of logistics at this point to pull everything into the NDA?

Jim Breitmeyer

We consider that we're in a pure execution mode right now and that the risk profile is acceptable and on the moderate side.

Rachel McMinn – Cowen & Company

Okay. Thanks very much.

Ted Schroeder

You're welcome.

Operator

Our next question will come from Adam Cutler with Canaccord.

Ritu – Canaccord Adams

Hi, guys. It's actually Ritu [ph] for Adam. I was hoping you could review for us the changes that you guys made to the Omigard CLIRS trial that sort of prompted the negotiations with the FDA on the SPA and any additional color you could give on what the topics – talks might be?

Jim Breitmeyer

Ritu, it's Jim. We haven't provided guidance on the specifics, and we think that since it's an ongoing negotiation with the FDA under a special protocol assessment, that it's not appropriate to go into granular detail on the topics that are under discussion. We have made a commitment that if anything comes out of these discussions that would have a material bearing on the trials or the company that we will make appropriate announcement.

Ritu – Canaccord Adams

Okay. Could you review just the changes that you made to the CLIRS trials based on the reanalysis of historical data?

Jim Breitmeyer

Much earlier in the year, we upsized the CLIRS trial from 1,200 subjects to 1,850 subjects and that was based on a more accurate assessment becoming available for the projected treatment effect. And that was the major change that was made to go to 1,850 subjects. And as you know, those 1,850 subjects are now enrolled in the trial and enrollment has closed.

Ritu – Canaccord Adams

Great. Thanks, guys.

Ted Schroeder

Thanks, Ritu.

Operator

We have no other questions at this time.

Ted Schroeder

Okay. Well, if there are no other questions, then thank you all for participating in the call today. And we look forward to updating you in the future.

Operator

Thank you. This does conclude our call. You may now disconnect.