NuPathe Management Discusses Q1 2013 Results - Earnings Call Transcript

May.14.13 | About: Teva Pharmaceutical (TEVA)

NuPathe (PATH) Q1 2013 Earnings Call May 14, 2013 8:30 AM ET

Executives

John Woolford - Principal

Armando Anido - Chief Executive Officer and Director

Keith A. Goldan - Chief Financial Officer, Principal Accounting Officer and Vice President

Gerald W. McLaughlin - Chief Commercial Officer

Terri B. Sebree - Co-Founder and President

Analysts

Liana Moussatos - Wedbush Securities Inc., Research Division

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

Michael W. Schmidt - Leerink Swann LLC, Research Division

Operator

Good morning, and welcome to the NuPathe First Quarter 2013 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to John Woolford. Please go ahead, sir.

John Woolford

Thank you, operator, and good morning, everyone. With me on today's call are Armando Anido, Chief Executive Officer; and Keith Goldan, Vice President and Chief Financial Officer. Terri Sebree, President; and Jerry McLaughlin, Vice President and Chief Commercial Officer, will also be joining us for the Q&A portion of the call.

We issued a press release detailing first quarter 2013 financial results this morning. For those of you who may not have seen the release, it is available on our website at www.nupathe.com in the Investor Relations section.

The format of today's call is as follows: Armando will begin with an overview of recent corporate highlights; Keith will then provide a summary of our financial results for the quarter; and Armando will end the prepared remarks with a brief closing, followed by a Q&A session.

Before we begin, I'd like to remind you that we will make various remarks during this conference call that constitute forward-looking statements. All remarks that are not historical facts are hereby identified as forward-looking statements and include statements regarding the potential benefit and commercial prospects of Zecuity, our plans regarding the commercial launch of Zecuity, the sufficiency of our existing cash to fund operations and debt service obligations into the fourth quarter of 2013, our ability to obtain commercial partners and additional capital to launch Zecuity and other statements regarding our plans, expectations and beliefs regarding future operations, performance, financial condition and other future events.

Forward-looking statements are based upon our current plans, expectations and beliefs and are subject to numerous risks, uncertainties and assumptions that could cause actual results to differ materially and adversely from those reflected in such statements, including those factors discussed under the heading Risk Factors in our Form 10-K for the year ended December 31, 2012, which is on file with the SEC and available through the Investor Relations section of our corporate website. As a result, you should not rely on any such forward-looking statements. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so. Also, today's call may not be reproduced in any form without our expressed written consent.

I will now turn the call over to Armando Anido, Chief Executive Officer. Armando?

Armando Anido

Right. Thank you, John, and thank you, all, for joining us this morning.

The FDA's approval of Zecuity was obviously the highlight of the quarter. Zecuity is a single-use sumatriptan iontophoretic transdermal system indicated for the acute treatment of migraine with or without aura in adults. The patch is applied to the upper arm or thigh during a migraine and provides relief of both headache pain and migraine-related nausea, with a low rate of triptan sensations, which are adverse events commonly associated with this class of medicines.

Zecuity is the first and only approved patch for the treatment of migraine, an important treatment option for the millions of patients who suffer from migraine-related nausea along with their headache pain. We believe Zecuity will be a game-changing treatment option for many of the estimated 8 million diagnosed migraine patients, who frequently experience both headache pain and migraine-related nausea or MRN.

We remain focused on securing commercial partners and preparing for the launch in the fourth quarter of this year. A U.S. commercial partner will enable us to maximize the commercial opportunity for Zecuity. There is a core target audience of approximately 10,000 neurologists and headache specialists, who account for approximately 1/3 of triptan prescription volume. Additionally, there's a discrete segment of the primary care market in which approximately 30,000 primary care physicians can expand our reach to 2/3 of triptan prescription volume. We also believe there is a significant value outside of the United States, and therefore, intend to seek development and commercialization partners internationally, as well.

I'm not going to provide any additional information regarding the status of our partnering discussions at this time. But I will say that we still intend to have a partnership in place prior to the launch of Zecuity.

On the launch preparation front, we continue on schedule with our manufacturing activities, including scale up and process qualification initiated in the first quarter. We anticipate producing the validation batches and launch supplies this summer and fall ahead of the expected rollout of Zecuity in the fourth quarter.

We continue to build upon the extensive launch preparations we have completed over the past 2 years. As previously discussed, the organization required to launch Zecuity will depend upon the scope and structure of their commercial partnership that we intend to consummate prior to launch. We plan to build our commercial infrastructure to complement that of our partner. We will provide more details on our commercial plans and timing as we approach the launch. In the meantime, we will continue to prepare internally.

The 2013 International Headache Congress cohosted by the International Headache Society and the American Headache Society, June 27 to 30 in Boston, is the premier headache meeting for 2013. We will have a significant presence at that meeting that includes the presentation of new data for Zecuity. While we cannot disclose the data to be presented in advance of the meeting, they are quite supportive of the value proposition for Zecuity as an important treatment option for the millions of patients who suffer from MRN, along with their headache pain.

Before I turn the call over to Keith, I also wanted to highlight that we recently received 2 notices of allowance from the USPTO for patents related to NP201, our biodegradable ropinirole implant for the treatment of Parkinson's disease. Once issued, we will have patent protection for NP201 into July 2028. While we are presently focusing our resources on Zecuity, these patents will strengthen our IP position around NP201, which is valuable if we seek to secure a partner to further advance this program.

With that, I'll turn the call over to our CFO, Keith Goldan to review our financial results. Keith?

Keith A. Goldan

Thank you, Armando, and good morning, everyone. We issued a press release detailing financial results for the first quarter of 2013 earlier this morning, and our 10-Q for the quarter will be filed shortly.

NuPathe reported a net loss of $17.7 million or $0.68 per share for the first quarter of 2013 compared with a net loss of $6.3 million or $0.43 per share for the first quarter of 2012. The 2013 amounts include the impact of a noncash charge of $12.2 million or $0.47 per share incurred in connection with the reclassification of the warrants that were issued in October 2012 from liability to equity during the quarter. This reclassification occurred because the warrants no longer met the accounting criteria for liability classification once the full ratchet anti-dilution feature of the warrants terminated in February 2013.

First quarter of 2013 operating expenses were $5 million compared with $5.8 million during the 2012 period. Selling, general and administrative expenses rose to $3 million in the first quarter compared with $2.4 million during the same period last year, largely as a the result of higher noncash stock compensation expense, partially offset by lower headcount and reduced commercial operations expense.

Research and development expenses during the first quarter of 2013 were $2 million, down from $3.5 million in the comparable quarter of 2012. This decrease in R&D spending was largely attributable to higher spending in the 2012 period on clinical and manufacturing expenses related to Zecuity, in preparation for the NDA submission, which occurred in July of 2012.

Net cash used in operating activities for the 3 months ended March 31, 2013, were $3.9 million, primarily a result of spending for normal operating activities and continued development of Zecuity. During that same period, we also used $0.5 million of cash and investing activities and $0.1 million in financing activities.

At the end of the first quarter, NuPathe had $18 million in cash and cash equivalents and working capital of $14.2 million compared with $22.6 million in cash and cash equivalents and working capital of $19.8 million at December 31, 2012.

We continue to expect our existing cash and cash equivalents will be sufficient to fund operations and debt service obligations into the fourth quarter 2013. The amount of additional capital required to launch Zecuity and fund our operations and debt service obligations beyond the fourth quarter of 2013 will depend largely upon the timing, scope, terms and structure of a commercial partnership that we're able to enter into for Zecuity.

As Armando mentioned earlier, we intend to build our commercial infrastructure to complement that of our partner. Incremental capital may come from our business development activities, including upfront and milestone payments, equity and/or debt financing. As always, we remain focused on creating shareholder value as we evaluate our options.

I will now turn the call back over to Armando for closing remarks.

Armando Anido

Thank you, Keith. We remain focused on our key objectives of securing commercial partners and preparing for the successful launch of Zecuity and look forward to our participation at the upcoming International Headache Conference. We, again, thank all of our stakeholders for their continued support.

With that, we're now happy to take your questions. Operator, please begin the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] We'll hear first from Liana Moussatos with Wedbush Securities.

Liana Moussatos - Wedbush Securities Inc., Research Division

You mentioned that for manufacturing preparation for launch, that you had validation -- that you expect to have validation batches in the summer and fall. Are there any preparations that you require a partner for before you get to being launch ready? Or can you do everything yourself?

Armando Anido

Yes. Liana, great question. We are moving forward on our own on that, and there is no need to wait for a commercial partner in order to execute on that.

Liana Moussatos - Wedbush Securities Inc., Research Division

Okay. And then are you in any negotiations for early-stage programs licensing, on NP201?

Armando Anido

We don't disclose kind of status of where we are on discussions with anything. But I can tell you, we are very interested in partnering NP201 and NP202.

Operator

We'll hear next from Annabel Samimy with Stifel, Nicolaus.

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

Can you just outline to us what you have been able to do thus far to prepare for launch? And what kind of structure of partnership are you looking for?

Armando Anido

Okay. Maybe when it comes to the preparation, I'll let Jerry McLaughlin, our Chief Commercial Officer, kind of touch on that. And then I can touch base on the partner.

Gerald W. McLaughlin

Great. We've done extensive market research conducted among physicians, payors and patients, over 700 physicians, 700 patients and payors that cover more than 130 million lives in the United States. And our research has really led us to our value proposition and our product positioning that Zecuity is well positioned for migraine auras who experience both the headache pain and nausea that can accompany a migraine attack. And when you look at the overall diagnosed and treated market, that's about 8 million patients in the broader set. So we think we're well positioned there. We continue to engage the key opinion leaders. We continue to build upon our data sets in the public domain with publications. We were excited last fall with the publication of our pivotal Phase III data, and we'll continue to roll those out as we advance towards launch. We've built our internal sales and marketing commercial operations infrastructure plan. We've identified distribution partners. And that all continues to roll forward.

Armando Anido

In terms of the partnership, we actually aren't going to comment on kind of where we are. We believe that having a partner is something that's important that will help to add incremental value to the overall size of this opportunity, and we anticipate being able to secure that partner ahead of commercialization.

Annabel Samimy - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And have you had any additional trials ongoing during this time since you completed the Phase III trials?

Armando Anido

No. We have not had any trials that have initiated at this particular point. We are in preparations for getting the pediatric trial that we committed to the FDA up and running, and that will probably occur in the -- later on in -- by the end of this quarter, beginning of the following quarter, so sometime this summer.

Operator

[Operator Instructions] We'll hear next from Michael Schmidt with Leerink Swann.

Michael W. Schmidt - Leerink Swann LLC, Research Division

Just the one on the headache conference presentations. Can you just provide some more information on that? Are those poster presentations, or do you have an oral presentation as well? And a housekeeping question on finances. The first quarter R&D and SG&A expenses, is that a good run rate for the rest of the year?

Armando Anido

Regarding the International Headache Congress, maybe Terri can touch base. We won't -- we're not able to actually disclose exactly what will be presented, but maybe she can give a little flavor for...

Terri B. Sebree

At this point, we have 3 presentations. They will all be poster presentations.

Michael W. Schmidt - Leerink Swann LLC, Research Division

Are there any excerpts going to be released at some point ahead of the conference?

Terri B. Sebree

Yes, there will be. They will be released right at the time the conference starts.

Armando Anido

It's usually the day before, Michael, when -- before the congress starts, where they will actually release it.

Keith A. Goldan

And, Michael, to address your question on operating expenses. We're right at $5 million to the quarter. There was a lot of noncash stock compensation charges in that number. And going forward, it's really going depend on the structure, timing and scope of the partnership. The primary activity going on right now within the company, as Armando mentioned earlier, are really the preparation for launch focused on manufacturing CMC, then Jerry's area, commercially. So that's really the focus of the company, as well as ramping up to do a pediatric study.

Operator

At this time, I'm showing that we have no further questions. I'd like to turn the call back over to Armando Anido for closing remarks.

Armando Anido

Very good. Thank you, all, for your participation this morning. And we look forward to updating you again in the coming months. Have a good day. take care.

Operator

Ladies and gentlemen, this concludes today's conference. We thank you for your participation. You may now disconnect.

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