Bill LaRue - Chief Financial Officer
Ami Fadia - UBS
Cadence Pharmaceuticals Inc. (CADX) UBS Global Healthcare Conference Transcript May 21, 2013 2:00 PM ET
Ami Fadia - UBS
Good afternoon everybody. Thanks for joining us. I’m Ami Fadia. I cover mid-cap spec pharma stocks at UBS. And it’s my pleasure to have Bill LaRue, who is the Chief Financial Officer at Cadence Pharmaceuticals. Please come to floor.
All right. Thank you, Ami. Thank you everyone for joining today. I appreciate the opportunity. It’s been some time talking about the Cadence story. Before we start, I mentioned forward-looking statements, there are a number of risks inherent in our industry and our businesses and these risks are outlined in our Risk Factors contained in our periodic filings with the SEC, including our most recent 10-Q.
So for those of you who are new to the story, Cadence Pharmaceuticals is a specialty pharmaceutical company focused on the hospital market. We have a single product, marketed product, OFIRMEV, it is an IV acetaminophen. It is both a non-opioid and non-NSAID product. It is in the class by itself. First in class, given the IV acetaminophen aspect of it and we're really positioning the drug as the foundation of multimodal approach to pain treatment, pain management.
We’ve had extremely strong uptake in terms of the formulary adoption very, very positive physician reception to the product, which is leading to a very strong revenue growth, which we’ll see some slides little later on, increasing customer base, reorder rates increasing as well and really progressing into a variety of different surgical settings within the hospital, very experience management team, really a group of commercial hospital executives from the CEO down through the salesforce who are leading the product efforts.
So it’s an IV acetaminophen product. It's a proprietary formulation. We actually in licensed the product from BMS in 2006. We have the rights for Canada and United States, and the exact same formulation that BMS has marketed in Europe and other parts of the world since 2002.
So really what the real message here is, is using IV acetaminophen or OFIRMEV as the foundation of a multimodal approach towards treating pain, you are reducing the amount of opioids required from anywhere from 33% to 85%. This leads to really significant pain relief reduction in opioid in higher patient satisfaction.
We have 130 person salesforce. This is supported by 12 medical science liaisons. As I had mentioned before, the commercial leadership team in terms of the -- from the sales standpoint, CEO has 25 plus years of experience. A number of those years were at BMS, Dura Pharmaceuticals before he co-founded Cadence in 2004.
Our Chief Commercial Office from Lilly with 15 plus years of experience, same with the VP of Sales, and our salesforce very importantly particularly in the hospital, very experience over 10 years worth of experience in selling product in the hospital setting.
From an economic value standpoint, the product is priced at a little over $12 from a WAC standpoint. So that represents about a $50 per day course of treatment. When you put that in perspective with what you have with your DRGs, anywhere from $13,000 to $30,000 in terms of the typical DRG, the value proposition in terms of the ability to reduce the narcotic and the associated costs associated with narcotic side effects is actually very, very compelling.
So we couldn’t be happy with the label that we have. It’s a very broad label. It’s for the treatment of pain and fever in adults and children two years old and older. And it has a very nice message in terms of what the value proposition is. It's really to significant pain relief, reducing narcotics, improving patient satisfaction and it has a very well-defined well-established, well-known product safety profile.
So this slide really outlines kind of the unmet medical need. Prior to the approval of IV acetaminophen, you really only have two alternatives. One was IV narcotics and the other was IV NSAID. And with the IV narcotics you have a laundry list of side effects, sedation, nausea, vomiting, constipation, headache and a like, both cause annoyance and in some cases life-threatening issues, very hard to manage in terms of the healthcare provider and really leads to less than optimum outcomes for patients. So what that really leads to is prolong recovery, increase length of stay and a higher cost the institution.
Notwithstanding, those issues still 85% of the IV analgesic market was narcotic and that was really because the alternative IV NSAID had their own issues and list of problems particularly the black box, issues with bleeding and renal failure.
So the IV NSAID captured about 15% of the market, which we think is a nice opportunity for IV acetaminophen across both spectrums given the safety profile that we have and the advantages of the drug.
So really what the process here is to go ahead and look at a multimodal approach towards treating pain, a treatment regimen which is a more similar to what goes on in Europe than what was happening in the U.S. prior to the approval of IV acetaminophen.
And really what we have is with mild pain, you often can treat the pain as just monotherapy with the OFIRMEV being the treatment option for the pain that patient was experiencing.
As you went into the moderate area, you could add a small dose of or dose or two of the narcotics, what you're really doing is titrating with narcotics as the pain increases, and then when you get the severe. It's really more in an area where you sit back and have kind of the true combination therapy, where you would have front line IV acetaminophen and have that adjunctive opioids as you continue to tritate the pain.
So one of things about IV acetaminophen is, in terms of introducing that as a treatment regimen you really weren’t changing the way that surgeons and physicians were treating their patients, because the most prescribed narcotic -- most prescribed drug I should say is a combination narcotic and acetaminophen is the drugs like Vicodin and Percocet.
So these drugs in terms of the post-operative and outpatient setting have been prescribed for years. So the good news for us is that doctors are very familiar with this procedure or method of providing pain relief and control. We were just giving them the opportunity that they can introduce it into the acute setting.
So you can see like 74% of outpatient the pain drugs are a combination of acetaminophen and opioid and a much smaller amount in terms of just the opioids alone. So, again, nice segue into their practice and being able to prescribe.
So this chart kind of goes through some of the steps that you need to be involve in when you move through the process post-approval in terms of the drug. And so the next big step after approval is in the hospital is formulary access. And this is where we spent a considerable amount of time in the launch year 2011 and really giving us a very broad exposure access within the hospital.
And as you get that and develop that and that’s why we really launched the product with the size of the salesforce that that we launched it with, which was 145 at the time is we wanted to get on as many formularies as quickly as we possibly could. So we could get the drug in the hands of the prescribers and get more and more patients actually utilizing the drug.
So as we move through formulary access really towards the physician access, we are continuing to penetrate in the perioperative setting. And as we move forward over time, we’ll start moving into the non-operative setting also.
So the adoption process is we’ve pretty much talked about many of these keys. We are squarely in the stage 2 to at this point in terms of broadening the physician utilization that is a key area and also increasing the number of doses.
We’re very proud of the fact that we started 2012 at about 2.4 doses, end of the year closer to 2.6 doses. And we estimate now that we’re in the kind of 2.8 doses per patient as of the end of the first quarter. So nice progression and development from the utilization of the product.
This -- here is a map of the United States and it really shows if we had Hawaii and Alaska, you would see a dot in all 50 states. So this is really the representation of the formularies that we have approvals. Over 2,200 formularies have -- hospital formularies have approved the product.
We have sold over 8 million vials since the launch and that really translates into somewhere between 3.2 million and 4 million patients being treated during this period of time. And so with that large footprint, it really does generate a significant momentum in terms of a product and in the sales of that product. So we’re very pleased in terms of how the drug has been adopted within the hospital setting.
In addition to having your access, it’s also important in terms of how broadly your drug can be used. And in our case, most formularies, most hospitals have approved the drug with really minimal restrictions in terms of where you can and can't use the drug, and where we have had some restrictions, most of those restrictions are in around where the patient can't take medications by mouth.
So we feel very good in terms of the fact that there aren’t significant restrictions. Without those restrictions and the more that the surgeons utilize the product or the physicians utilize the product, the more enthusiasm builds and the greater the market opportunity is for us. And you can see on that the bottom point where we actually have had tremendous acceptance by the physician of that community in terms of the drug and their satisfaction with the drug.
This chart here really goes through and looks at what kind of the drivers are. It’s almost for the effective growth in terms of how you continue to grow the size of the market opportunity for OFIRMEV and really it's increasing your customer base, getting your customer base to order more product and increasing the volume of product that they order on a more frequent basis, more customers, more frequent ordering, ordering more and higher volumes of the product.
Here we’re looking at our formulary approvals. You can see the significant uptake in terms of formulary penetration in the 2011. At the end of 2011, we started to shift to sales pull through in terms of the focus of the salesforce plus getting access more -- on getting more product being actually prescribed by the physician. So you can see how it started to flatten out. There are our target audience in terms of hospitals but 80% of the market opportunity is represented by the top 1875 hospitals. We’re currently on 2200 formularies.
So there are some obviously other hospitals in addition to our target. So we feel pretty good. So we will continue to grow formularies but for the most part it's -- we will start to level out as we have had the penetration that we have.
Here is a chart that we’re very pleased with. This is the monthly sales. You can see there's a nice progression, nice momentum, strong trajectory, very solid growth. This is monthly sales. The last month that was reported by Symphony Health (inaudible). The WAC sales were a little over 8.3 million. So a very nice run rate in terms of where we are in sales.
That was a little over 600 and close to 670 units. So continuing to see very nice momentum on a monthly basis in terms of the sales growth. Also it is important is how your customers are ordering. This chart looks at the multiple orders. The dark shaded area is the institutions, the hospitals that have ordered multiple times.
You can see a fairly stable lighter bar down at the bottom. These typically are two types of hospitals, one who -- the new ones who are just come on and are ordering for the first time and others are very, very small hospitals who have ordered the product once and just haven’t ordered again.
But the real key here is to our multiple orders is the time that the hospital has been on formulary. The lot they are on formulary, the more orders and the more multiplicity of orders that you will see.
Order frequency is another key measure that we look at. Since launch, we've really doubled the order frequency. This is a chart that there were about four orders per quarter. That’s about right typically. Most hospitals don’t order every week. They will order every other week. So we would expect us to continue to grow but kind of grow at a flattening rate but it has a nice trajectory also in terms of where we are and where we’ve been over the last two years.
This is average order size. It’s really grown nicely nice, a nice linear growth from the standpoint of vials per order. You can see we’re just a little under 100 vials per order and that continues to increase again on a nice trajectory.
Shifting a little bit, this is what is the -- our share of market share and this data comes from a source from premier. There are 400 hospitals, represents about 15% of surgical patients. So the data is lagged. We update this couple of times a year. It’s usually about six months delay but we’re close to 10% in terms of in-patient surgery. So that is just one out of 10 people are getting at least one dose OFIRMEV.
From an outpatient standpoint, as you'd expect, it's lest oftentimes, it's just they dose about 5%. So we feel very good in terms of the market and for those of you who have some experience with marketing as my marketing team says, is that once you get that 10% share, it really kind of creates the momentum of it own in terms of the product lags in the ability to be positioned for future growth.
This is the patient utilization. You can see again it’s the Premier database. So it's backward looking in terms of discharge data that we can look at and see how we are progressing in terms of the unit filed utilization per patients. About 2.5% at this time ended the year, our estimate was about 2.6% and I did mention before during the first quarter, we think we are closer to 2.8%. We would expect that overtime that we will be north of 4% in terms of the vials per patient. So we think between 4% and 5% is reasonable in terms of vials per patient.
This is a chart. It’s actually vials sales. This compresses to other hospital launches in the last five years. It is vials. We’re very proud of this because we’re 10 times the average of the other five products. We also added Cubicin because it’s been considered by many to be a poster child in terms of successful hospital launches but again you can just see the really solid performance in terms of the OFIRMEV launch.
So, you might ask about the okay fine vials is one thing what about sales, this chart here sales. And again, we are currently second in terms of sales and what’s impressive is, is we’re probably one-tenth of the price of the second least expensive products. So we’re selling a lot of product but the holding our own in terms of revenues and in sales dollar. So again, we are off to a great start and we continue to feel very, very positive about the ability to continue the momentum of the sales rep.
Here, just briefly a little bit of market research. We conduct this research on a periodic basis. It's really longitudinal data that we are looking at. We conducted the first study, research study before launch, six months after launch and this is the third. And what’s really important with this as you can see the improving patient satisfaction from a doctor standpoint -- excuse me -- doctor satisfaction with the efficacy of the OFIRMEV product.
And over 90%, you’ll see that matter exceeded their expectations and what that does is it really leads you to this chart where they are in a position, when they are pleased with it, they are willing to recommend it to their peers and that is a very good endorsements and really helps us in terms of expanding the overall footprint of the drug. So here you see that their likelihood to recommend continues to grow in terms of what we've seen from market research.
And then finally from a market research standpoint, it's their ability -- what they have set back and said they intend to use and if you look at surgeons, it’s up in that 70% range in terms of what they are talking about in terms of prescribing.
I mean, even if we achieved half of that it’s in extremely large opportunity for the drug in terms of sales opportunity. My marketing people say that they rarely see this type of intent to use in terms of drugs. So, again, the satisfaction leading to the recommendation leading to what they plan to use in terms of their practice.
Here, just a minute on business devolvement. We are at this point very interested in bringing additional products into the salesforce's bag. We feel that they have the capacity to have several more products. Near-term we are really focused on marketed products or approved products without looking to take development or regulatory risk. We are interested in really getting something into the bag that can make immediate contribution to margins and topline revenues.
And as just finally in closing from a cash standpoint, we have $65 million, approximately $65 million in cash at the end of the first quarter of this year, that is ample cash to very comfortably get to cash flow break-even without any additional financing. So we feel very good in terms of the capitalization of company at this point in time.
I thank you for your attention.
Yeah. The trial commence yesterday, so obviously there is not a lot that I can say. These trials typically run at least ours we believe is going to run around seven days. There is no calendar. It is judge. It’s bench trial, so trial by judge. There is no specific calendar often three to nine months in terms of the ruling. We feel extremely confident with our IP and we are ready for trials.
We can talk about that in the breakout session.
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