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Eurand N.V. (NASDAQ:EURX)

Q4 2008 Earnings Call

March 5, 2009; 8:30 am ET

Executives

Gearoid Faherty - Chief Executive Officer

Mario Crovetto - Chief Financial Officer

Bill Newbould - Vice President of Investor Relations

Analysts

Rich Silver - Barclays Capital

David Steinberg - Deutsche Bank

Scott Hirsch - Credit Suisse

Gene Mack - Lazard Capital

Peter Black - Winfield Capital

Operator

Greetings and welcome to the Eurand fourth quarter financial results conference call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions)

It is now my pleasure to introduce your host, Bill Newbould, Vice President of Investor Relations at Eurand. Thank you Mr. Newbould, you may now begin.

Bill Newbould

Thank you and good morning everyone. Joining us on the call today are Gearoid Faherty, Chairman and Chief Executive Officer and Mario Crovetto, Chief Financial Officer.

Before we begin I’d like to remind everybody that his conference call may contain forward-looking statements within the meaning of the Federal Securities Laws. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievement to be materially different from the results, performance or achievements expressed or implied by such forward-looking statements.

Factors that could cause our actual results or actual outcomes to differ materially from those expressed in or implied by such forward-looking statements are discuss in greater detail in our annual report on Form 20-F filed with the SEC in March 2008 as well as in subsequent filings.

Given that forward-looking statements are subject to risks and uncertainties you should not place undue reliance on them. Forward-looking statements are based on various assumptions and represent our estimates and assumptions only as of the date they are made. We assume no obligation to update forward-looking statements.

I’d now like to turn the call over to Gearoid.

Gearoid Faherty

Thanks Bill and good morning everyone. Our call today will follow the format we have used in previous quarterly earnings calls. First I will review our key accomplishments in the fourth quarter and full year 2008 and also update you on our development pipeline. Then Mario will provide a detailed discussion of our financial results for the fourth quarter and full year. Finally I will review our upcoming milestones, followed by the question-and-answer session.

To begin, Eurand had another outstanding quarter. As you noted in today’s press release, we grew revenues by 16% in constant currency, compared with the fourth quarter of 2007. We made significant progress with our development pipeline and we strengthened our management team. This strong quarterly performance is a fitting way to cap off what’s a very good year for us.

In 2008 our full year financial results were strong. We settled long running litigation with UCB for $35 million, $25 million of which we received in September with the balance due in two $5 million anniversary payments, this year and next.

Our late stage pipeline products continue to progress towards commercial launch. We advanced and expanded our development pipeline and we strengthened our management team. We believe the progress we made in 2008, positions us well for continued success in 2009 and beyond.

We are especially pleased by the continuing strength of our business which generated 22% revenue growth in 2008 in constant currency. This excellent performance in a very difficult economic environment reflects the value of our products and services and broad therapeutic and geographic diversity of our business. In particular we benefited from strong growth in revenues from Ultrase by Axcan and Amrix by Cephalon.

Eurand receives royalty revenues in sales of these products in addition to manufacturing revenues. Sales of Ultrase by Axcan reflect the continuing strength of the pancreatic enzyme markets in the United States. Sales of Amrix, the once-daily skeletal muscle relaxant by Cephalon, were $73.6 million in its first full year on the market. Cephalon continues to provide strong support for Amrix and recently realigned an expanded it’s sales force by nearly 50%.

We believe Eurand’s prelisted patent issued by the U.S. Patent and Trademark Office in June 2008, provides coverage for AMRIX of approximately 20/25. We have additional patent applications on filed with the U.S. PTO, that if granted would strengthen the IP space around AMRIX. We and Cephalon intend to continue to strengthen and enforce the IP around this product and currently we have patent infringement actions spending, against three generic companies.

We hold the worldwide rights to cyclobenzaprine’s extended release outside North America. In August 2008, we entered into an exclusive license and supply agreement with Daewoong Pharmaceutical to commercialize this product in Korea and we expect to announce similar deals for this product in other territory soon.

I would now like to take a few minutes to update you on our development pipeline. Following the close of the quarter, the FDA advised us that the responses that we and our raw material supplier submitted for EUR-1008 are now complete and assigned at the PDUFA action date of late in the second quarter of 2009.

If approved, we anticipate launching this product in the second half of this year, approximately 30 to 60 days following approval. While waiting for approval, we’ve been active with payers to ensure that 1008 is covered by commercial, Medicaid and Medicare reimbursements. We expect based on the current outlook for approval, gaining access to Medicaid in the fourth quarter of 2009 and a decision for patients under Medicare Part D by year end.

We estimate that as many as 40% of DS patients, need government assistance for Medicaid. I would remind you also that under current FDA guidance, non-approved products have under-laid for 2010, before they would need to withdraw from the markets, providing they have NDA’s on file by April of this year.

In recent months, several developments have occurred that we believe could change the competitive dynamic in the pancreatic enzyme market in our favor. As we learnt from the FDA Advisory Committee meeting in early December, Solvay has only submitted day shifts data for patient aged 12 and older for their newly formulated Pancreatic Enzyme Product or PEP. Thus the labeling for patient under 12 is unclear. This is an important segment of the CF market and I would remind everyone that Eurand has submitted clinical data to the FDA for patients 13 months and older.

Most recently, we learned that KV Pharmaceuticals, a potential competitor and one of the major suppliers of low cost pancreatic products in the United States market has withdrawn its low cost product from the market. In addition, another low cost alternative product from Breckenridge exited the market in early 2008. Lastly, Altus has discontinued its development of Trizytek, its synthetic path and transferred the right back to the Cystic Fibrosis Foundation; we’re moving yet another potential competitor.

Moving to out licensing, as disclosed in late December, we continue to have discussions with a number of potential licensing partners for 1008 in Europe. Our goal here is to develop partnerships that have the ability to maximize the long term value of the product for Eurand, even that we will retain responsibilities for the clinical development and registration of the product in Europe.

There is no pressure on Eurand to sign a deal quickly. We will sign a deal, when and if we have found the right partner. We have interest from a number of companies and we’re engaged in discussions with several of them.

Likewise in Asia, the registration of the product can be influenced by approval in the United States. We are engaged in discussions with a number of potential partners; again, focused on generating long term value for the product. We look forward to keeping you apprised of our progress in these areas throughout the year.

Another recent development, the FDA issued a complete response to GSK in late December for EUR-1048, a product that we have co-developed with GSK, for an undisclosed indication. GSK submitted its response immediately and wait the final decision, which is expected soon.

Eurand will earn royalties on GSK’s finished product sales and manufacturing revenues, based on our exclusive supply to GSK of finished products. We look forward to the launch of PEPs products later this year. GSK also informed us that the FDA review of EUR-1000, a generic to Inderal LA, has been extended into 2009.

I would now like to bring you up to-date on recent events with regard to our clinical development activity. We have completed patient enrolment in a Phase III trial of 10008 in patients with chronic pancreatitis and we look forward to the results early in the third quarter. We anticipate that the data from this trial will provide additional information about the product clinical benefits in this condition and in the patient and be supportive of our marketing effort.

I’d now like to turn to EUR-1025, a once a day formulation of the anti-emetic real front or ondansetron. We filed an IND with the FDA in December and recently initiated pivotal PK studies. We expect these results will form the basis of the future 505(b) 2 filing.

In early 2008 we announced positive results of a pilot study designed to compare the PK profile of a once-a-day oral formulation of EUR-1025, to an 8 milligram tablet of Zofran dosed twice per day. The study achieved its goal of confirming that EUR-1025 had the desired extended release PK profile to Zofran. Zofran is dosed three, four times daily to prevent nausea and vomiting in cancer patients undergoing chemotherapy or radiation treatment.

In December we filed for orphan drug status in pediatric, Ulcerative Colitis, for our late stage proprietary product EUR-1073. We licensed this product in early 2008 from Chiesi, which market is in Europe under the brand name CLIPPER. 1073 is a corticosteroid, intended for use in the treatment of Ulcerative Colitis, one of the most prevalent forms of Inflammatory Bowel Disease.

Chiesi is nearing completion of a Phase IIIb clinical study in Europe, comparing CLIPPER to the current standard of care in UC or Ulcerative Colitis, as an add on to (Inaudible). The results are expected in the second quarter of 2009 and will provide us with further information as to the product future course of development.

2008 was another strong year for us in terms of our business development efforts. We entered in six co-development agreements exceeding our internal target of five. Over the last two years we have signed 12 such deals, a clear indication of the value that other pharmaceutical companies play on our drug delivery technology and formulation expertise.

Another important event for us in 2008 was the addition of Dr. Ruth Thieroff-Ekerdt to our management team. Ruth joined us on December 1, as Chief Medical Officer, and brings 25 years of pharmaceutical industry experience, but includes successful tenures with bio in Schering. At Eurand she oversees our portfolio development, clinical research and development, medical and reg affairs and drug safety and surveillance activities. We’re very pleased to have Ruth on Board.

To summarize, Eurand had an excellent fourth quarter and full year in 2008 and we made further progress towards commercializing our lien product candidates 1008. In addition, we continue to advance other key products in our pipeline and expanded our early stage portfolio of development product. These achievements provide a solid foundation for growth in 2009 and beyond.

Now, I’ll pass you over to Mario, who will review our financial performance in detail. Mario.

Mario Crovetto

Thank you. As Gearoid mentioned, the last quarter of 2008 was another quarter of significant revenue growth for Eurand. Comparing fourth quarter 2008 with fourth quarter 2007, revenues totaled EUR 26 million or $33 million at a convenient rate of 127 and rose 16% in constant currency. Revenues of Source CF, which we acquired in December of 2007, accounted for approximately two percentage points of this growth; the rest 14% of our quarterly growth came from the existing business.

Looking at revenues by category, product sales were up 5% in constant currency, royalties were up 72%; the most significant contributors to this increase where royalties related to AMRIX of Cephalon and ULTRASE of Axcan. Development fees increased 72% in constant currency. Keep in mind that our development fees can fluctuate significantly from quarter-to-quarter; it closed the PEPs milestone, our book one development milestones.

Gross margin on product sales was 26%, which is within our typical historical range, compared to 21% in last quarter 2007, which was unusually low. Research and development expenses were up 34% in constant currency, mainly because of increased clinical activity.

Selling, general and administrative, SG&A expenses were up 7%. This increase was lower than in previous quarter, when we were expanding our sales and marketing infrastructure in anticipation of the launch of EUR-1008. Now we are closing these expenses, waiting for FDA approval.

The net loss in this quarter was EUR 3 million or $4 million, which is $0.08. A year ago, our quarterly loss was EUR 5 million or $6 million. At the end of the year we had essentially no debt and a positive cash balance of EUR 23 million or $29 million, including marketable securities.

I will move now to full year 2008, compared with full year 2007. Revenues totaled EUR 99 million or $125 million in 2008; this represented an increase of 22% in constant currency. Excluding revenues from Source CF, which was acquired in December 2007, revenues increased 18% and this growth can be attributed primarily to product sales and royalties from AMRIX of Cephalon and ULTRASE of Axcan.

All revenue streams increased compared to previous year. Product sales, royalties and developments fees grew 18%, 96% and 17% respectively. Gross margin on product sales was 33% in 2008, this was better than gross margin of 30% in 2007. Research and development expenses increased 21% in constant currency and this reflects our commitment to pipeline development.

As planned and as expected, selling, general and administrative expenses were up 60% in constant currency. We expanded our commercial infrastructure through the acquisition of Source CF and additional hires and we also had higher general and administrative expenses, primarily reflecting the increase from of being a public company.

Compared to year 2007, financial expenses turned into financial income, because in June 2007, we retained essentially old debt with proceeds from our IPO. As far as 2008 practice are concerned, we were able to utilize our NOLs, Net Operating Loss, to largely offset taxable income derived from the gain on the UCB settlement.

Moving to a separate 2008 Drug Master, during the annual closing process and year end review, we concluded that a liability of approximately EUR 1.4 million due to withholding factors had a reason during the year. We believe that this liability maybe recovered in the future, but for the time being our history of operating losses makes recoverability uncertain. As a consequence, the amount has been expensed in income taxes for the year.

Even that reliability is attributable to third quarter rather than fourth quarter. We corrected our third quarter results as explained in a specific section of our press release. The impact was relatively modest and our previous third quarter net income of EUR 21.6 million was modified to EUR 20.2 million.

Excluding the impact of the gain on the litigation settlement and estimated taxes related to this settlement of less than $1 million, our net loss in 2008 would have been approximately EUR 11 million or $13 million. Our net per share basis represented a loss of $0.36. Including the gain from the settlement, we had net income of EUR 14 million or $17 million.

Now, I will turn the call back to Gearoid.

Gearoid Faherty

Thank you, Mario. Before we take your questions, I’d like to review for you some upcoming milestones and projects we are working on, and what we foresee as a very exciting year for us. In 2009, we look forward to the anticipated approval of three products, 1008, 1048 and 1000.

We expect AMRIX sales to continue to grow based on continued market acceptance and Cephalon’s recent sales force expansion. Early in the third quarter, we expect to have the results of the Phase III trial for 1008 in chronic pancreatitis. We are also expecting the results of clinical studies this year for 1025 and 1073. The outcome of these studies will provide us with greater visibility as to our future development plans for these products.

We anticipate finalizing distribution agreements in Europe and Asia for 1008. We will continue to pursue new collaborations with other pharmaceutical companies to further expand our pipelines and complement our own internal formulation initiative and in closing, with three product approvals expected in 2009, we are very optimistic about our growth prospects, our healthy cash balance, late-stage pipeline and diversified business I mean, we’re well positioned to face the current economic downturn, while continuing to grow our business.

That concludes our formal remarks this morning. I will now ask the operator to open the call for your questions. Thank you.

Question-and-Answer Session

Operator

Thank you, sir (Operator Instructions). Our first question is from the line of Rich Silver with Barclays Capital. Please go ahead with your question.

Rich Silver - Barclays Capital

Mario?

Mario Crovetto

Hi, Rich.

Rich Silver - Barclays Capital

Hey, how are you? I’m wondering if you could just shed a little light on the R&D spending line, which seemed to have increased substantially on a sequential basis and certainly it seem to be higher than what we’ve seen in any quarter; what was in the spending and what should we be using as a quarterly, run rate going forward?

Mario Crovetto

Rich, I think we had made a comment in the past. Essentially, we expected R&D to increase, because we are very committed to our internal development pipeline. So, we are not really surprised by this. Essentially the answer is, we are conducting more clinical activities on several products and this will continue.

Rich Silver - Barclays Capital

So, is this the $7 million plus level that we should expect and it wouldn’t be a lot of fluctuations?

Mario Crovetto

Well obviously there are going to be fluctuations, but overall these levels are now our levels, with our current pipeline moving forward and several product moving on there as Gearoid mentioned, two or three of them specifically, but there are really several products we moving ahead in clinical activities.

Rich Silver - Barclays Capital

So, on a full year basis we really shouldn’t expect spending to be less than roughly $28 million, which would just, be essentially $7 million annualized?

Mario Crovetto

Well, as you know we are not providing specific numerical guidance, but I confirm what I said.

Gearoid Faherty

Rich I’d like to add a comment to that. Obviously if you’ve heard, we have a phase III study running at the moment which is finishing recruitment now. We have just started the PK studies on ondansetron. We expect to start work in CLIPPER. So, obviously as the pipeline expands, as we add more products and we will obviously incur more clinical cost, but we have to see how the products evolves and vast additional studies if any that these products need as we go forward.

Rich Silver - Barclays Capital

Okay. With KV out in the market, are you seeing a meaningful pickup in orders from Axcan on Ultrase?

Gearoid Faherty

Well, as we said, it’s shown out in the press release; we’re definitely seeing an improvement in business with Axcan.

Rich Silver - Barclays Capital

Okay and does this potentially have any influence on the FDAs review of Zentase as far as potential shortages relative to demand for that product?

Gearoid Faherty

I can’t answer that Rich, because you are asking me what does the FDA thinks. I honestly don’t know.

Rich Silver - Barclays Capital

Okay and in terms of collaborations this year, you said that last year your goal was five co-development agreements and you obviously exceeded that by one, what goal do you have this year?

Gearoid Faherty

We’d like to keep the level around five that pretty much saturates us as a business. So, our target would be to do about five deals in the year and as we said in the commentary Rich we did five, we did six deals last year and the year before, so we have in total of 12 deals signed, but we do have another five; this is obviously building a very significant partnership program.

Rich Silver - Barclays Capital

And can you give us specific date other than just late second quarter for the PDUFA on Zentase?

Gearoid Faherty

The problem with the FDA is we’ve seen and many of you have commented about, the FDA can come back and advise people of changes today. So, we think it will be towards the end of the second quarter.

Rich Silver - Barclays Capital

Okay, I’ll step back. Thank you.

Operator

Thank you. Our next question is coming from the line of David Steinberg. Please go ahead with your question.

David Steinberg - Deutsche Bank

Thanks. Regarding the FDA panel on pancreatic enzymes that is held in the fourth quarter, specifically revolving around Solvay’s product, do you expect any broad statements from the FDA about viral testing as it relates to all the new pancreatic enzymes, do you expect any statements or if you can just comments on the Solvay product individually?

Gearoid Faherty

I think David what we feel was that the FDA’s primary question to the panel was whether they want the testing of the product for release for viruses and the conclusion of the panel was, the recommendation of the panel to the FDA was that this was not necessary. Now since the panel we’ve had no guidance from the FDA and I don’t believe there are any rule that define when and if the FDA might react to what the panel has told us. So, it’s very hard to say.

David Steinberg – Deutsche Bank

Do you think your PDUFA date could be held up or rather the companies PDUFA dates held up until the FDA actually comes out with some sort of statement or will be no impact there?

Gearoid Faherty

I have no reason to expect that David, because the FDA has provided no guidance.

David Steinberg – Deutsche Bank

Okay and then just following upon Rich’s question about KV and other generic players exiting the market; are you seeing any price increases from anybody and if not do you expect that will happen sometime in 2009 as they all exit the market?

Gearoid Faherty

Yes, I think what we’ve seen over the last three or four years David is that this has not been a very price sensitive market and the primary brand, players have continued to increase price year-on-year and we haven’t seen any change recently. I think the value of the market is obviously going to expand this year as a result of such KV no longer supplying and they’ve stopped supplying and that product has picked up by the branded players, but then obviously the size of this market is going to grow.

David Steinberg - Deutsche Bank

Okay, thanks Gearoid.

Operator

Thank you. Our next question is from the line of Scott Hirsch with Credit Suisse. Go ahead with question, sir.

Scott Hirsch - Credit Suisse

Good morning, guys. Just first, how long past the April ’09 NDA deadline do you think the FDA will start looking at, pulling some of the generics out the market?

Gearoid Faherty

It’s not only the generics that it could be pulled in April 2009, it’s anyone who has not filed an NDA and has the NDA on review. So, this is not limited to the generic players, this is across the board. (Inaudible) or low cost the rules state you must have an NDA on reviewed by April of this year.

If we look back to what happened last year and two or three players left the market in April of last year voluntarily, because they didn’t achieve the requirement of the FDA at that time. Last year the requirement was that you were obliged to have an IND on active stages by April 2008 and as I said two people left the market then.

We have to wait until April of this year to find out, which of the players have or have not filed an NDA in time and then obviously if they haven’t, they need to leave the market then.

Scott Hirsch - Credit Suisse

So, do you think the FDA will take active force to do it?

Gearoid Faherty

I can’t comment on that and what we saw last year with the IND situation was. The people and its teams voluntarily withdrew from the market in April, because the guidance provided by the FDA was pretty aggressive that warns people of actions that might take in the event that people did not meet the requirements. So, we’ve no precedent to go on as to what the FDA will do in April of this year and if people do not file NDA.

Scott Hirsch - Credit Suisse

Regarding your recent citizens petition, is there any indication from Creon what their side of the legal piece would be, what their take would be regarding having both the new and the old products out there under the Creon name?

Gearoid Faherty

No.

Scott Hirsch - Credit Suisse

Not yet. Okay.

Gearoid Faherty

Not yet.

Scott Hirsch - Credit Suisse

And then regarding your plan for hiring sales reps, where do we stand?

Gearoid Faherty

What we would do is we will wait until approval to hire the additional sales people we need. Obviously, we already have people on Board as a result of the Source CF acquisition; that leaves us with a certain number of sales people.

We have our VP’s of sales, we have our VP of marketing, we have our medical science liaison officers and we have our EVP of marketing and sales. We have a range of people already on Board. We need to hire some additional sales representatives, when we get approval, but we will wait until approval to hire these people; because once we get approval, it will take us between 30 and 60 days to get product into distribution and we’ll obviously use that period of time to train the people and be ready for launch once the product is in distribution.

Scott Hirsch - Credit Suisse

Okay and then just out of curiosity, can you break out Source CF revenues for us or you’re not breaking them out?

Gearoid Faherty

I think Mario gave guidance to the effect that it contributed 2% of revenues.

Scott Hirsch - Credit Suisse

Okay, fair enough and then just lastly, what product in your pipeline, whether it’s the once we know about or potentially some of the undisclosed development in projects, that you can tell us just about one of them, what are you most excited about in the pipeline?

Gearoid Faherty

I think in our pipeline the thing that we’re most excited in the near term would be 1008 and 1048. I think those are two very important products for us. In the earlier stage of development, also the 1008 and 1048 are both at the FDA, both under review and both with PDUFA dates that are quite soon. As we look then to the earlier stage pipeline, the products that we can talk about today and that we would be excited about today would obviously be on ondansetron and CLIPPER.

As we’ve talked about in this call and as we talked about before, we have signed 12 partnership deals over the last two years and obviously before that we had a number of active products in development. Unfortunately because of the obligations of confidentiality that we have with the people, we will not be in the position to talk about them, until such time that the partners want us to do.

As people who have been following our story for some time now, would have been the same thing happen with Amrix and cyclobenzaprine. Very few people were aware of that’s until that such time the deal was done with Cephalon and the product was ready to launch and I think that will be the trend with us.

Scott Hirsch - Credit Suisse

Great thank you.

Operator

Thank you our next question is from the line Gene Mack of Lazard Capital, please go ahead with your question sir.

Gene Mack – Lazard Capital

Thanks for taking the question. First on Zentase, sorry if you addressed this, I joined the call a little late, is there any change to the timing for any new submission in the second half of 2010?

Gearoid Faherty

No nothing as this time. The only thing I can say Gene is, as we told people on previous call, the EMEA have issued rough guidance around May or June of last year, I don’t remember exactly. This is a document as to how they saw these products being filed in the future and this document was issued for industry review and we have not seen a distinctive version of that guidance yet.

So, obviously any guidance we would give, as to when we will file will be cautioned or conditions by what is issued in the final document, but for now, for what we know, no, but obviously we have to wait for this guidance to issue in final form.

Gene Mack – Lizard Capital

Okay, I can understand that and then as far as a partner for EU, let me ask it this way, what do you think moves things along with the partner faster, clear guidance on the timing of a filing and the actual EU guidance or completion of the current ongoing Phase III trial that you’re running?

Gearoid Faherty

No, I don’t think that partners are waiting for the current Phase III study and nor do I think that they are particularly worried at the movement about the EMEA guidance. They’ve already seen the drop and obviously they can make judgments on the basis of that, I’m sure they’re not expecting to change radically, but course non one knows that.

I think the issue with the partnership discussions and the people were talking to, a number of things that happened over the last year which has change the markets in the eyes of many people and in our own. I think what I tried to say during the call today is, we as a company still under no pressure to sign a deal in Europe. We wanted to do the clinical work ourselves. We want to file the product ourselves and we want to own the registration.

Many smaller pharma companies are obligated to license fees type of product size, because they need the money to take clinical programs ahead or they feel that the partner is the best for us to do the clinical work and do the registration; that is not our case. We think it is in our interest to do the clinical and own the registration; the primary benefit being, it is our registration and if our partner does not perform, we will have rights to take the product back.

So, we’ll do a deal as I said, when we’ve found the right partner and the right deal term; we’re not working to maximize upfront payments, we’re working to maximize our returns from the product when it’s in the market and finding a partner or partners that are best positioned to maximize the opportunity in the market. So, we’ve had lots of companies approach us. We’re in discussions with several companies and we’ll keep you posted as the year progresses.

Gene Mack - Lazard Capital

Okay, that’s fair. As far as KV and Breckenridge go, is there anyway to quantify what percent of the market they contributed while still present?

Gearoid Faherty

I’m going from memories, so work with me here. I think that certainly KV would have had over 30% of the scripts in this space of their peak. I think Breckenridge would be a much minor player.

Gene Mack – Lazard Capital

Okay and then on the citizen petition, I’m just curious as to when you think you might get a reaction from the FDA on that. I don’t know what’s going on with Solvay’s PDUFA date, but it seems as though it should be anytime now, and I’m just curious as to if there’s a confluent of things going on FDA with respect to that particular response. Anyway they need to I guess make a decision and also now and decide on the citizen’s petition, do you think they would do that concurrently?

Gearoid Faherty

I don’t know Gene. I know that the FDA normally reply to citizen’s petitions within 180 days of the petition being filed. I have no experience of whether they typically respond and before that or not. I know that the standard is 180 days from filing.

Gene Mack - Lazard Capital

Any comment on Solvay’s PDUFA date?

Gearoid Faherty

No.

Gene Mack - Lazard Capital

Okay and then just lastly, I know you sort of updated the cash available and you don’t really want to give financial guidance going into next year. Well first directionally with R&D spending, just directionally, I guess we should look up rather than down from 2008 levels, can you at least give us the clarity on that?

Gearoid Faherty

I think our sense is that we have adequate financial power of cash to take it through this year and finance all the clinical programs that we currently have in progress or planning. As you’ve heard we have a trial running on 1025 and we a trial running on 1008 and we are going to do some developments work on 1073 CLIPPER, but our sense for now is that we have adequate cash to take us through the year.

Gene Mack - Lazard Capital

Okay and reach profitability?

Gearoid Faherty

Obviously, we don’t give guidance on profitability. Right now, we have three files under review at the agency; two of these are very important products, the 1008 and 1048 and obviously when those products are approved and when those products are launched as a big influence or not on our cash flow and revenue base.

Gene Mack - Lazard Capital

Okay, but there is no expectation that you need to go to capital markets?

Gearoid Faherty

No expectation.

Gene Mack - Lazard Capital

Okay, great. Thanks.

Operator

Thank you. (Operator Instructions) Our next question is a follow-up from the line of Rich Silver of Barclays Capital. Please go ahead with your question sir.

Rich Silver - Barclays Capital

Gearoid, just back on 1048, obviously it was December 24 that Glaxo filed their response. It takes 60 days to review the response; the action date should have been February 24 and now you’re just saying you’re waiting approval is there. Is there any reason why or have you been told maybe why the FDA sort of failed to respond by that action date?

Gearoid Faherty

Obviously Rich, because this is a GSK product, we’re not in a position to comment. I think people should obviously have noticed that GSK replies incredibly quickly and to the question that they were asked and so that should be helpful to people in terms of understanding what was asked, but beyond that we can’t comment right now. The guidance we’ve given during the call is the guidance we’ve been allowed to give by GSK.

Rich Silver - Barclays Capital

Okay and then just you talked about Solvay, obviously Axcan in terms of NDAs. Just remind us, is your understanding that J&J has filed an NDA or has not filed an NDA for their pancreatic enzyme product?

Gearoid Faherty

We are not aware that they have filed.

Rich Silver - Barclays Capital

Okay. So you don’t think that they have.

Gearoid Faherty

The last we heard, they were still doing clinical work. We have not heard anything to say that they have filed.

Rich Silver - Barclays Capital

Okay so conceivably they couldn’t actually exit the market in April.

Gearoid Faherty

Anybody who doesn’t file an NDA by April, according to the FDA guidance should be leaving the market.

Rich Silver - Barclays Capital

If they were not required to leave, to exit the market, could you see yourselves filing a citizen petitioned to try to make that occur?

Gearoid Faherty

I certainly wouldn’t rule it out.

Rich Silver - Barclays Capital

Okay and then I know since Axcan has gone private, you’ve been reluctant to discuss anything with regard to their NDA, but is there anything there, any updated all that you can provide us?

Gearoid Faherty

I’m afraid not Rich. As you said, a private company we have to be very careful and we are careful and if they want to provide guidance they will, but we can’t.

Rich Silver - Barclays Capital

And is your understanding that with the guidance, the requirement is to just exit the market and therefore no further shipping or whatever is on the market also has to be removed from the market, in other words to recall?

Gearoid Faherty

My understanding and obviously not to lower; my understanding is that we’re not allowed to put product into interstate commerce after the date. I don’t believe there is any requirement to withdraw product that is already in the market. That’s my interpretation, Rich.

Rich Silver - Barclays Capital

So, considerably ahead of actually exiting the market, they could certainly increase the production and distribution?

Gearoid Faherty

Theoretically yes, but you must remember that this product has a very short shelf life and it’s two year, typically three or four months are lost from when the product is manufactured to get an inch distribution and in North America most distributors won’t take product with a shelf life less than 13 months, which means that the packing of the pipe would be extremely limited.

Rich Silver - Barclays Capital

Okay. Alright, thank you.

Operator

Thank you. Our next question is coming from the line of Peter Black of Winfield Capital. Please go ahead with your questions.

Peter Black - Winfield Capital

Good morning Gerry, Mario. Just a quick question regarding AMRIX; when you take about Cephalon reporting AMRIX sales of $73.6 million for the full year, are those final and sales at the pharmacy level or are those sales of the product from Cephalon to wholesalers?

Mario Crovetto

These are numbers reported by Cephalon.

Peter Black - Winfield Capital

Numbers reported by Cephalon, okay.

Mario Crovetto

Yes

Peter Black - Winfield Capital

So those are their product sales?

Mario Crovetto

Yes

Peter Black - Winfield Capital

Okay, great.

Mario Crovetto

Thanks.

Operator

Thank you. There are no further questions at this time. I would like to turn the floor back over to management for closing comments.

Gearoid Faherty

Fine, thank you everyone for your attention this morning and your questions. We look forward to updating you on company progress in the next call. Thank you.

Operator

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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Source: Eurand N.V. Q4 2008 Earnings Call Transcript
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