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Executives

Roger Hawley – Chief Executive Officer

Stephen Farr – President, Chief Operating Officer

Ann Rhoads – Executive Vice President, Chief Financial Officer

Catherine O’Connor – Senior Director, Commercial Communications

Analysts

Tim Lugo – William Blair

Annabel Samimy – Stifel Nicolaus

Michael Tong – Wells Fargo Securities

Michael Higgins – Brinson Patrick Securities

Zogenix Inc. (ZGNX) Q4 2012 Earnings Call March 15, 2013 8:30 AM ET

Operator

Good day ladies and gentlemen and welcome to the Q4 2012 Zogenix Incorporated Earnings conference call. My name is Stephanie and I will be your operator for today. At this time, all participants are in a listen-only mode and we will conduct a question and answer session towards the end of this conference. If at any time during the call you require assistance, please key star, zero and an operator will be happy to assist you. As a reminder, this conference call is being recorded for replay purposes.

Now I’d like to turn the conference over to Catherine O’Connor of Zogenix. Please proceed, ma’am.

Catherine O’Connor

Thank you, Operator. Thank you all for joining us this morning. With me on today’s call are Roger Hawley, our Chief Executive Officer; Dr. Stephen Farr, President and Chief Operating Officer; Ann Rhoads, our Executive Vice President and Chief Financial Officer, and Scott Shively, our Executive Vice President and Chief Commercial Officer.

Earlier today, Zogenix issued a news release announcing the company’s financial results for the fourth quarter and full year 2012. We encourage everyone to read today’s news as well as Zogenix’s annual report on Form 10-K which will be available on our website at www.zogenix.com. Roger will open the call with an overview of company progress. Ann will then review our financial results for the fourth quarter and full year 2012, and Steve will follow with an update on our development program. At the end of the prepared remarks, we’ll open up the call for a question and answer session.

Please note that certain of the information discussed on the call today is covered under the Safe Harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, Zogenix management will be making forward-looking statements. Actual results may differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company’s business. These forward-looking statements are qualified by the cautionary statements contained in Zogenix’s news releases and SEC filings included in its annual report on Form 10-K.

The conference call also contains time-sensitive information that is accurate only as of the date of the live broadcast, March 15, 2013. Zogenix undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

Now I’d like to turn the call over to Roger Hawley, Chief Executive Officer of Zogenix.

Roger Hawley

Good morning and thank you, Catherine, and thanks to everyone for joining us today for our fourth quarter and full year 2012 conference call. 2012 was an important year of milestones achieved by the company along with some challenges. In our commercial operations, our sales representatives continued to drive adoption of Sumavel DosePro while we transitioned from one co-promotion partner to another. This required a considerable effort by our team. Our team successfully secured, trained and launched Sumavel with our new co-promotion partner, Mallinckrodt, and we are beginning to see the impact of their efforts with their prescribers.

On the development side of the business, we achieved a significant milestone of submitting our new drug application for Zohydro ER to the FDA and completed an FDA advisory committee meeting. As we reported on February 26, we anticipate receiving an action letter from the FDA for Zohydro ER NDA in the near future after a delay of a few weeks beyond our PDUFA date. In an appropriate and conservative manner, we have continued preparations for a potential commercial launch and should we receive approval, we anticipate bringing the product to market three or four months after the FDA approval.

During 2012, we also advanced our second product candidate, Relday, through its initial Phase I clinical trial. In early January, we reported positive results from this trial which provided proof of concept for our one-monthly subcutaneous formulation of Risperidone. We have also formed a very positive collaboration with Battelle, one of the world’s largest R&D organizations, to market the DosePro technology platform. Steve will have more details about these pipeline products.

Now a review of 2012 highlights for Sumavel DosePro – net product revenue from Sumavel DosePro was $35.9 million, up 18% year-over-year. Total prescriptions for the year were up 16% to more than 83,000 despite the fact that we ended our co-promotion with Astellas on March 31 and that our new co-promotion partner, Mallinckrodt, only just began full product promotion in October. Our refill rate on Sumavel DosePro was 44% in the fourth quarter, up slightly compared to 43% in the third quarter and tracking at a stable level for the year. This is a good sign, so now we need to drive more new prescriptions.

In the fourth quarter, our sales force made good progress with our growth initiatives and Sumavel net product revenue was up 12% sequentially from the third quarter. During the quarter we also hired a new Chief Commercial Officer, who is on the call with us today – welcome Scott. It’s nice getting up early, isn’t it? Scott joined us from Pfizer and has more than 30 years of experience in building commercial organizations and successful brands, and he’s off to a great start just completing his first 100-day plan with us at Zogenix.

One of Scott’s key responsibilities is to guide commercial strategy for Sumavel DosePro. He’s been working closely with our sales and marketing teams and has developed a tactical and strategic implementation that we believe will benefit Sumavel from 2013 and beyond. In addition to our internal efforts, Scott has coordinated with the Mallinckrodt team to introduce Sumavel DosePro to a focused range of clinicians, including migraine and pain specialists, primary care physicians, and physicians in other specialties that have a high volume of migraine patients. While both teams experienced some setback in the northeast region due to Hurricane Sandy in the fourth quarter, we achieved solid prescription revenue growth in that period. Recently looking at weekly prescription data, we are beginning to see improved prescription trends from the Mallinckrodt called-on physician segments and continued good results from the Zogenix segments.

While we are pleased with the recent progress, I would also like to bring to your attention three additional factors that we expect to impact our first quarter 2013 results. First, consistent with our experience in prior years, the resetting of health insurance copays and coinsurance at the end of the year has slowed patient volumes compared to the fourth quarter. This year, this trend appears to be a little more pronounced that previously. Second, we believe our wholesale distribution customers exited 2012 with approximately four weeks of inventory, up one week from the normal average of approximately three weeks. We expect they’ll work this additional week off during the first quarter.

In addition to these factors, we also believe it is important to note that our tracking of Sumavel prescription trends through our data provider, Source Health Analytics, formerly Wolters Kluwer, and looking at our channel inventory checks indicates that prescription trends reported by the other service, IMS Health, appear to be tracking as much as 10 to 12% above what we believe to be the actual rate. Please note this trend as you review prescription data provided by IMS. We do not fully understand why the two data trends are different but want to make sure that you’re aware of this in case you use the IMS Rx data in your analysis.

So overall, we believe we are well positioned to increase the use of Sumavel DosePro. We look forward to working closely with Mallinckrodt in 2013 and we both strive to educate the healthcare community and patients on the benefits of Sumavel DosePro as part of the migraine treatment toolbox.

Before I turn the call over to Ann, I want to briefly touch on the subject of 2013 financial guidance. Given the FDA’s delay in the delivery of their action letter for Zohydro ER NDA and the significant implications on our operating plans and results for 2013, we have decided to delay providing formal guidance until we know the outcome of the Zohydro ER NDA submission.

And now, I’ll turn the call over to Ann.

Catherine O’Connor

Before we go to Ann Rhoads, Operator, I’d just like to ask, are you able to hear us okay? We just want to make sure the rest of our investors are able to hear.

Operator

Yes, I can hear you clearly.

Catherine O’Connor

Okay, thank you. Ann?

Ann Rhoads

Thank you, Catherine. Thanks, Roger. During the course of our discussion, I’ll be referring to today’s press release and to the attached unaudited statements of operation and the balance sheet. I’ll be rounding numbers for purposes of this call, so please refer to these documents for the precise figures.

Net product revenue on sales of Sumavel DosePro for the fourth quarter of 2012 was $9.5 million. That was up 75% compared to the $5.4 million in the fourth quarter of 2011. We had no contract revenue for the fourth quarter of 2012 compared to contract revenue of $2.5 million in the fourth quarter of 2011. Contract revenue in 2011 reflected the amortization of license and milestone payments received from the Astellas co-promotion agreement. We recognized all of the remaining Astellas license and milestone payments in the first quarter of 2012 in conjunction with the termination of our partnership agreement.

Total revenues for the full year 2012, which consist of net product revenue and the contract revenue, were $44.3 million. That was up 18% from the $37.6 million we reported in 2011. Net product revenue for the full year 2012 was $35.9 million, up 18% from the $30.4 million in 2011. Contract revenue for the full year 2012 was $8.5 million and included the final amortization of the license and milestone payments received from Astellas, and this compares to contract revenue of $7.2 million in 2011.

Cost of sales for the fourth quarter 2012 was $6 million compared to $5 million in the fourth quarter of 2011. Our gross margin was 37% in the fourth quarter 2012 compared to 9% in the fourth quarter of 2011. Cost of sales for the full year in 2012 were $19.5 million compared to $19.3 million in 2011. That represented a gross margin of 46% for the full year 2012 compared to 37% in 2011.

Royalty expense for the fourth quarter of 2012 was $357,000, reflecting royalties that we paid to Aradigm on the sales of Sumavel DosePro, and this compared to $232,000 in the fourth quarter of 2011. Our royalty expense for the full year was $1.4 million compared to $1.2 million in 2011.

Research and development expenses in the fourth quarter of 2012 were $5.4 million compared to $5.5 million in the fourth quarter of 2011, and research and development expense for the full year 2012 were $21.4 million, a 35% decrease compared to the $33 million in 2011. This decrease was driven by lower clinical costs associated with the company’s Phase III clinical trials for Zohydro which were completed in 2011, and a one-time $2.25 million upfront license payment that we made to Durect in July of 2011 in conjunction with the execution of the Relday development program.

Selling, general and administrative expenses for the fourth quarter 2012 were $11.9 million, a 33% decrease from $17.8 million in the fourth quarter of 2011. The decrease in SG&A was due primarily to the end of the company’s co-promotion agreement with Astellas at the end of the first quarter. This was partially offset by the quarterly service fee to Mallinckrodt for their co-promotion efforts and an increase in product sampling costs and field sales force costs. SG&A expenses for the full year of 2012 were $49.5 million, an 18% decrease compared to the $60.5 million in 2011. The decrease in SG&A expense was primarily the result of a $10.8 million decrease in service fees to Astellas due to the March termination of the co-promotion agreement and a decrease in advertising and promotional expenses. This was partially offset by an increase in our field sales force costs.

Looking forward, I want to reiterate that while we’re moving forward with our pre-commercial planning activities for Zohydro ER, we have strategically decided to wait for approval to begin the high-cost preparations such as building inventory, packaging, et cetera. Accordingly, we anticipate having limited incremental operating spend in 2013 related to Zohydro until potential approval, after which we’ll move forward with the remaining prelaunch activities. If approved, this will put us in a position to launch Zohydro in three to four months post-approval.

Other income for the fourth quarter 2012 was $13.6 million, which includes a $15.4 million non-cash mark-to-market adjustment in the fair value of the company’s outstanding warrants. Also included are non-recurring costs associated with the repayment of the company’s debt obligations and issuance of warrants in its July 2012 public equity offering. Other income for the full year 2012 was not significant on a net basis. We provided a table with a full description of other expenses in our press release issued earlier today.

Our net loss for the fourth quarter 2012 was $643,000 or $0.01 per share compared to a net loss of $23.7 million or $0.36 per share in the fourth quarter of 2011. Non-GAAP net loss for the fourth quarter of 2012 adjusted for certain non-cash or non-recurring items was $0.16 per share. Our net loss for the full year was $47.4 million or $0.59 per share compared to a net loss of $83.9 million or $1.96 per share in 2011. Non-GAAP net loss for the full year 2012 was $0.72 per share, and the non-GAAP financial results are detailed in the table included in our financial results press release issued today.

Weighted average shares outstanding for the fourth quarter 2012 and the full year were 100,714,000 shares and 80,558,000 shares respectively. We finished the quarter with cash and cash equivalents of $41.2 million.

I’ll now turn the call over to Steve Farr for an update on our product pipeline. Steve?

Stephen Farr

Thanks Ann, and good morning to all. Today I’ll provide a brief update on our Zohydro ER and Relday investigational programs, as well as developments on the DosePro technology.

As I’m sure you’re all aware, in December we completed an FDA advisory committee meeting on Zohydro ER in advance of the PDUFA date of March 1 this year; and as Roger mentioned, we recently announced that the FDA informed us of a delay in their action letter for the Zohydro ER NDA. The FDA did not provide information as to the specific reason for the delay but indicated that the delay would be brief and may last only several weeks. We also indicated that we had not been informed of any deficiencies in the application during the (inaudible) date, and that is still the case today. Since the NDA continues to be under active review, we’re unable to comment any further about potential action from the FDA or what the FDA may take on the Zohydro NDA.

For Relday, our proprietary once-monthly subcutaneous formulation of Risperidone for the treatment of schizophrenia, we announced positive results in January from the Phase I clinical trial that demonstrated a favorable safety and pharmacokinetic profile with 25 and 50 milligram once-monthly doses administered to patients with schizophrenia. We have now extended the study to include a 100 milligram dose to evaluate dose proportionality across the full dose range that would be anticipated to be used in clinical practice. If the results from the 100 milligram extension arm of the study are positive, we would be positioned to begin a multi-dose clinical trial to evaluate steady state pharmacokinetics and safety prior to considering pivotal Phase III development studies. We expect to complete the extension of the Phase I study during the second quarter this year.

There is already strong interest in Relday from potential partners and one of our goals for 2013 is to find a partner to assist with the remaining development and potential worldwide commercialization of Relday. We recently engaged a consulting firm to help us with the business development process that is currently underway.

Turning to the DosePro technology, we have made great progress with Battelle on our co-marketing collaboration. In particular, we have conducted two important studies that we believe will assist in Battelle’s business development efforts in 2013. First, we conducted a study in 300 patients with rheumatoid arthritis who observed the use of DosePro versus a needle-based auto-injector for self-administration. The study found that a patient’s willingness to accept a prescription requiring self-injection rose significantly from 53% to 70% when offered the needle-free instantaneous administration of DosePro.

Secondly, in a comprehensive laboratory-based study, we demonstrated that the advantage of speed of delivery offered by DosePro compared to a needle-based auto-injector did not result in lost of integrity or increased immunogenic potential of the anti-TNF antibody, Humira. This takes off the table a putative concern that we have heard in our business development discussions around protein integrity and supports the fact that monoclonal antibodies are compatible with the DosePro delivery system. Results of this particular study can be found on DosePro.com.

Both these studies are important steps towards demonstrating positive value of the DosePro technology for the delivery of high value biologics. As I mentioned earlier, these study results will be used jointly by Battelle and Zogenix as we progress our collaboration to license DosePro technology to biopharmaceutical companies.

And with that, I’ll turn the call back to Roger for closing comments.

Roger Hawley

Thanks Steve, and to Ann. It’s been a busy year.

To summarize, we continue to make progress in our efforts to drive adoption of Sumavel by more physicians and patients. We are optimistic about our co-promotion with Mallinckrodt’s pain management sales force, which is really only just beginning to gain traction with Sumavel. Assuming the FDA approves Zohydro ER in the coming weeks, we are poised to launch the product in three to four months post-approval with or without a co-promotion partner. The Relday program is on track and we continue to have positive discussions with potential development and commercialization partners. We have a solid plan, a good process, and a concentrated effort on business development for Relday during 2013.

Together, Zohydro ER and Relday represent significant new opportunities for the company. We have the potential to further leverage our commercial infrastructure and our DosePro technology platform while also providing new partnering opportunities for growth.

Now I’d like to turn the call over to the operator to begin the question and answer session. Operator?

Question and Answer Session

Operator

Thank you, sir. [Operator instructions]

The first question comes from the line of Tim Lugo from William Blair. Please go ahead, sir. Your line is open.

Tim Lugo – William Blair

Good morning guys and thanks for holding the call. If you did receive a CRL for Zohydro based specifically on concerns over abuse of the product, do you have any updated plans on how you would go forward with the product and how you would even begin to address those concerns, given some of the recent approvals of other generic ER formulations by the Agency?

Roger Hawley

Tim, this is Roger. Very good question. Specifics of that would really be hard to fairly address without knowing what’s in the complete response letter, so I really think it’s premature for us to speculate what actions we might take if that happened. Every piece of detail that would come back from the FDA would be important on how we address that issue, so I’m really not sure that it’d be appropriate for us to speculate on that right now.

Tim Lugo – William Blair

I understand. In your past discussions with the Agency, have they mentioned the abuse of IR formulations much in your discussions? I’m always surprised that that doesn’t seem to get as much press.

Roger Hawley

Yeah Tim, good question. No – I mean, we haven’t had in depth discussions with the FDA about any competing products. Obviously we’re aware of what happens in the market and we, as a company, do understand that the IR, particularly high dosage strength immediate release forms, are also the source of misuse and abuse, and yet much of the attention is on ER long-acting opioids.

In our case, we intentionally held back higher doses. We tried to make that point at the advisory committee that our top dose of 50 milligram per capsule is significantly lower than all of the other ER formulations, so we’re trying to be responsible and aware of what the risks are in the market. I don’t really have any detailed insights about how the FDA considers the IR market as far as risk exposure, and if they’re evaluating any other controls that need to be implemented for safe use in the IR market.

Tim Lugo – William Blair

All right, thanks for answering the questions. I’ll jump back in the queue.

Operator

Thank you. The next question comes from Annabel Samimy from Stifel. Please go ahead. Your line is open.

Annabel Samimy – Stifel Nicolaus

Hi. Thanks for taking my question. So I guess I’ll just continue on the same lines. Clearly the FDA has bigger issues on its hands with the review of Zohydro than just the drug itself, and there are some major forces at play. Did you ever get a sense of how they might navigate some of these pushes and pulls on the issue of tamper resistance in light of your application? Can you shed some light on your suspicions as to the delay as opposed to just three weeks for I don’t know what reason?

Roger Hawley

Annabel, great question, and a complex one. We’ve had three advisory committees over a three-month period of time on a whole host of topics, and of course abuse deterrent is one of those topics. I don’t really have, and I think it would be inappropriate for us to comment or speculate about how the FDA sees the whole situation right now. They’ve obviously been given a lot of information, a lot of data, and have a lot of people commenting about what’s appropriate to do, so we haven’t changed our view. We think—and you all know that we are working on abuse deterrent formulation of our product. It’s something that we can’t launch now. It’s ongoing R&D that’s needed to continue to advance abuse deterrent, and also the guidance document was just recently issued, which we are supportive of. But beyond that, I really don’t know what else to say that could help you because I just don’t know how the FDA is viewing the overall situation right now.

Annabel Samimy – Stifel Nicolaus

Okay. If you do get a CRL at this time, maybe in anticipation of potentially a tamper-resistant formulation coming out, is there any recourse that you have? Because it seems like from a regulatory perspective, you did everything that you needed to do to et an approvable drug.

Roger Hawley

Yeah, again similar to Tim (?), it would depend on what the specific requirements were, so it’d be hard for me to comment about what we might do if they required abuse deterrent. Right now that hasn’t been the direction that’s publicly stated in their documents. They haven’t indicated that they’re going to require abuse deterrent for an NDA, but we’ll have to see. As I said, we don’t know the exact outcome.

Annabel Samimy – Stifel Nicolaus

Okay, maybe I can just switch topics here for a minute. So with regard to the Sumavel DosePro, clearly your prescriptions are growing year over year, as are your sales. Gross margins, however, were down about 10% sequentially, and I was wondering if you can help us understand given that obviously prescription revenues are up. And can you just help us work out the rebates reserves, discounts, returns – whatever may be playing into that gross margin impact? And also can you help us understand what contribution Mallinckrodt might have had this quarter versus what your sales force would have had?

Roger Hawley

Yeah, I’ll make some general comments, and then Ann you may want to provide some additional detail. You’re right – our scripts were growing year-over-year, but as I also indicated we had Astellas on board for the first quarter. We had the brand two quarters with our own somewhat small team compared to the size of the effort that we lost, and then in Q4 we did have some return to growth. So it has been a challenging year for us, candidly, on maintaining growth year-over-year for the brand, and we did have some different performances quarter-over-quarter. Some of that has obviously impacted the gross margin as well, but gross margin changes aren’t just directly relevant to the sales volume itself. There are other things that have happened and do happen from time to time in that process, so Ann, if you want to shed any specific light on the gross margin change?

Ann Rhoads

Sure, thanks Roger. Hi Annabel. We did have some excess capacity charges in the fourth quarter related to one of our CMO partners that was about $900,000 for the quarter. We’ve been managing gross margin really well, I think, throughout the year. We were looking forward to finishing strong in Q4 and then this issue occurred during December, which interrupted our manufacturing and we didn’t have enough time with the CMO partner at the end of the year to make adjustments given the holiday schedule. So it was definitely a disappointment for us at the end of the year, but we feel that that situation looks better going into 2013, and we’re feeling more optimistic about it.

Annabel Samimy – Stifel Nicolaus

Okay. In terms of the Mallinckrodt contribution, was there any this quarter?

Ann Rhoads

There was a small contribution, but nothing that I would say is material as they were really just getting going in the field. One other piece that I would mention that might be helpful to you – our NSP ended kind of Q4 at about 65.20 per unit, if that’s helpful just in terms of thinking through our gross margin and our top line as well.

Annabel Samimy – Stifel Nicolaus

Yeah, that’s great. Thank you.

Operator

Thank you. The next question comes from Michael Tong from Wells Fargo Securities. Please go ahead, sir. Your line is open.

Michael Tong – Wells Fargo Securities

Yeah, good morning. Maybe one on Sumavel DosePro and one on Zohydro. With respect to Sumavel DosePro, given what you’ve seen so far with the Mallinckrodt co-promote, would you guys like to comment on what your expectations for unit growth would be in 2013? And just as a follow-up to the previous question, about 50% gross margin is probably not a bad area to start thinking about gross margin for ’13, understanding there may be some quarterly variations?

And then secondly on Zohydro, can you remind us where you are with the tamper-resistant form so we get a better idea as to what the time lag might be, should that be required? And then finally on burn, knowing that the Zohydro PDUFA is an uncertainty, if you do get approval versus if you get a complete response letter, how should we think about the burn and the need for financing?

Roger Hawley

Okay Michael, I’ll start with the first on Mallinckrodt expectations and for growth in 2014. As we mentioned, the impact in Q4 was modest. On the weekly data, we are starting to see some traction which is encouraging. We do know that they’ve made some important operational, tactical and targeting changes which Scott Shively has been in discussions with them about that, and we are encouraged by the changes there. I think it’s just too difficult for us to forecast at this stage and give you some definition of growth. We do know there is significant opportunity there and that the targets that they’re calling on have potential, and we’re hopeful that we see continued progress and continued growth from them. We believe they are making a serious, concerted effort on the brand and it’s still a little too premature for me to comment on their expected growth or progress for the year right now.

And then Steve, would you want to address the other question, and then Ann on the burn?

Stephen Farr

Hi Michael, this is Steve. I’ll address the question you had about Zohydro and our development of an abuse deterrent formulation. As you might recall from the advisory committee, we did address a question about this there, indicated that indeed we were working on research and development for tamper resistant formulations. We’re actually looking at a variety of different approaches, one which is earlier in development than the other.

But based upon what we see today from the recently issued guidance and the types of study that the FDA are requiring a sponsor to do to essentially get label claims for abuse deterrents, we actually think it’s great guidance and I think it gives a lot of information for us. But we see really probably several Phase I-type studies that would need to be done that could allow us to bridge to the (inaudible) efficacy and safety of the Zohydro product today, so we’re anticipating sort of a couple of year development program for that.

Michael Tong – Wells Fargo Securities

Okay.

Ann Rhoads

And Michael, I’ll just follow up on a couple of other things. One of the questions that you were asking was about kind of expectations for unit growth in 2013. I think as Roger mentioned, it’s a little tough for us right now to be able to kind of give you any guidance on that. We do know that Sumavel DosePro is a promotionally sensitive product and our team’s been doing a great job in terms of driving increased sales. I think with approval, if we choose not to partner, part of our team’s effort will be spent on Zohydro, and if we don’t get approval then 100% of their efforts are going to remain on Sumavel DosePro. So with those factors in mind, we’ve got a number of scenarios internally about what growth could look like for the brand. So again, our apologies for not being able to give you more specifics at this time.

I do think your thinking relative to gross margin is generally in the right direction. Again, except for those excess capacity charges we took in the fourth quarter, you saw margins that were trending in the high 40, 50% range last year and we were feeling good about that.

And then lastly in terms of our cash burn, you’ll notice in the 10-K that’s now on file that we state that we have cash into the fourth quarter this year. That’s assuming that we don’t get approval on Zohydro. To the extent that we did get approval on Zohydro and we chose not to partner, which is two if’s, if those were to happen, then you would see the company needing some additional capital – we don’t think it’s a lot – but some additional capital to help fund part of those launch expenses for the product.

Roger Hawley

And Michael, this is Roger again. I’ll just add one closing comment. If we learn that we have a situation where we can’t expect to launch Zohydro, then we would immediately seek out another product for the bag of our sales force. So we have active discussions underway. We would try to add another product to our bag, so it’s very—and that’s another one of the reasons it’s very difficult for us to talk about these what-if situations because there are a number of possible outcomes. But we obviously desire to leverage our current sales force with the launch of Zohydro, and so if we don’t have an opportunity for Zohydro, we have a very experienced, qualified team that has a solid track record established, and we would be seeking a co-promotion opportunity or even a small product acquisition, or some other way to effectively utilize our sales force.

Michael Tong – Wells Fargo Securities

Thanks, that’s helpful.

Operator

Thank you. Ladies and gentlemen, if you wish to ask a question, please key star then one on your telephone.

The next question that we have comes from the line of Michael Higgins from Brinson Patrick Securities. Please go ahead. Your line is open.

Michael Higgins – Brinson Patrick Securities

Thanks, Operator. Good morning guys. Thanks for taking my questions. First would be, without getting into great detail, can you let us know if you’ve had any communication with the FDA since February 26?

Roger Hawley

No, we’re under NDA review with the FDA. We have normal communication with them but there hasn’t been anything that we’d want to specifically comment on.

Michael Higgins – Brinson Patrick Securities

Okay, we can appreciate that. A lot of good questions have been asked. Two additional ones, if I may. Should we look for any data presentations coming out this spring, this spring round of conferences on your pipeline?

Roger Hawley

Steve, you want to take that one?

Stephen Farr

Yeah, hi Michael, it’s Steve. Yeah, we have several presentations, posters coming up at conferences. Nothing planned on Relday right now, but we’ll be certainly working towards that when we get the final data in the second quarter on our Phase I trial. But we will be presenting at MTS (ph) as well as APM some data from our Zohydro ER Phase III program as well as some Phase I studies, and we also intend to be at some drug delivery conferences, in particular the National Biotech Meeting coming up in late spring. We’ll be presenting several posters on the delivery of protein therapeutics, including monoclonal antibodies with DosePro technology.

Michael Higgins – Brinson Patrick Securities

Any data at the Human Factors (ph) conference?

Stephen Farr

I believe we are not going to be presenting there.

Michael Higgins – Brinson Patrick Securities

Okay. And then one last one – any ongoing or expected trials that you may be running or planning to run for Zohydro?

Stephen Farr

Could you repeat that?

Roger Hawley

Any ongoing or additional trials to run on Zohydro? I mentioned the carc study—

Stephen Farr

Yeah, we are running a carcinogenicity study as one of our commitments that we made to the FDA that needed to be started prior to submitting the NDA. That’s a two-year program and we’re about to go into that. But other than that, there’s nothing else ongoing.

Michael Higgins – Brinson Patrick Securities

Okay. All right, appreciate it, guys. Thank you.

Roger Hawley

You bet. Thanks.

Operator

Thank you. The next question comes from the line of Tim Lugo from William Blair. Please go ahead, sir. Your line is open.

Tim Lugo – William Blair

Thanks for taking the follow-up. I just wanted a bit of clarification, Roger – in your thoughts in bringing in a consulting firm to handle the Relday partnering discussions, will this group be proactively reaching out to additional partners or are they balancing kind of several interested parties to date?

Roger Hawley

Well, first let me back up and talk about the reason why we chose to work with a firm to focus exclusively on Relday. As you can imagine with where we’re at with the uncertainties around the outcome of our Zohydro ER NDA, internally we have business development discussions that have been going on with a number of interested parties in the Zohydro ER opportunity. We’ve also been looking at product co-promotion opportunities in case of a back-up plan. We’ve also had opportunities to look at other ways to grow our business which we’ve been engaged with. So we have one individual who’s responsible for corporate and business development. He’s been fully engaged on other things like the Alkermes supply agreement for Zohydro and other things that we’ve had in front of us.

So we felt that we could give both our company and the partners, the potential partners who were interested in Relday, much more consistent response and a process that could be properly orchestrated by using an outside firm, so that’s what we chose to do. They also have some specifically relevant experience in this field, not just in business development but in this therapeutic area, so they know the field well and they know the potential interested parties pretty well from some previous transactions that they’ve been involved with. So we just felt it was an ideal match for us given the amount of work and business development activity that we’ve had underway in 2013 that will certainly carry forward into 2014.

Many of these things are really kind of codependent upon Zohydro, so I think you can all appreciate how important the final resolution of the Zohydro NDA is to our company.

Tim Lugo – William Blair

That makes sense. Thanks for taking the follow-up.

Roger Hawley

Yeah, you bet. Thank you.

Operator

Thank you. The next question comes from the line of Annabel Samimy. Please go ahead. Your line is open.

Annabel Samimy – Stifel Nicolaus

Hi, just one quick follow-up again. On Zohydro, you mentioned that you were in normal discussions for the review process for the NDA. Given the advanced stage of the review process, can you tell us if you were in any label negotiations before they gave you that letter?

Roger Hawley

Yeah, Annabel, I don’t think it would be appropriate for us to get into the specific aspects of our ongoing review. I think people read too much into those details, and given the overall situation we consider that just part of a normal review process and we’d rather not give specific comments right now.

Annabel Samimy – Stifel Nicolaus

Okay, thank you.

Operator

Thank you. There are no more questions, and I would like to hand the call back over to Roger.

Roger Hawley

All right, thanks for joining us everyone. Obviously a very interesting time. We’ve had a lot of activities going on. It was an action-packed 2013. We’ve very excited about continuing to move forward in the company to grow Sumavel and to launch Zohydro ER, if approved by the FDA. We’re working hard to sort out where we’re at with our business development opportunities, and that will all pivot around getting the outcome of our NDA review. So again, we’ll keep you posted in a timely manner as we move forward, and thanks for joining the call today.

Operator

Thank you. Ladies and gentlemen, that concludes today’s conference. You may now disconnect. Thank you for joining and have a good day.

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