Dyax Corp. (NASDAQ:DYAX)
38th Annual dbAccess Health Care Conference Call
May 29, 2013 16:10 ET
George Migausky - Chief Financial Officer
I welcome everyone. It’s my pleasure to introduce, George Migausky, CFO. George?
George Migausky - Chief Financial Officer
Okay, thanks (Hughes). And I am as you said George Migausky, the CFO at Dyax and I am here to speak to you about Dyax, and it’s a really dynamic time at the company both with the product, KALBITOR, our pipeline and our licensees’ pipeline. So, we will talk a lot more about that as this progresses. And first though, I do want to ask you to read all this fine print very carefully. I will be making forward-looking statements during the course of this little talk, and there are a number of uncertainties and inherent risks associated with those and so I do want to call your attention to that.
So, what I would like to do first here is really outline for you the two pillars both the growth opportunity and the value proposition for Dyax. And it’s really based on these two parts of our business, the angioedema portfolio, which is anchored by KALBITOR product for HAE, hereditary angioedema and also our licensing program formerly are sometimes referred to as the LFRP, and that’s based on our proprietary phage display technology and so both are a source of current cash flow and building value.
So, by way of introduction to summarize those two areas a bit more, as I mentioned that angioedema portfolio is anchored by KALBITOR, our product for hereditary angioedema. It does have growing revenue since its launch through a year ago. We have IP through 2023 for that product and the KALBITOR business is profitable with 90% gross margins, so a very attractive business for us. And KALBITOR really is the starting point, because beyond KALBITOR, we have an expanding portfolio in the angioedema space and whether that’s ex-U.S. opportunities, label expansion, or most particularly our next generation product, DX-2930, and that’s a product that I will talk a lot more about in just a few moments.
The second pillar is that licensing program. Here we have 13 products and I guess I should say it’s actually licensees have 13 product candidates that are in the clinic, 3 in Phase 3 trials, 4 in Phase 2 trials, and they generate today in this portfolio revenues and cash flows and really represents a significant upside potential as this portfolio matures and begins generating seals and royalties for our sales for our licensees and royalties for us at Dyax.
So, with that as the introduction, what is the HAE? And so there is a few folks in the room and some maybe very familiar and others less so with hereditary angioedema, and so, I will say that it is a genetic disease. It’s characterized by severe inflammation and swelling, typically presents in the extremities likes the hands and the feet or the abdomen, which is excruciating like painful, also facial and laryngeal attacks. In the case of laryngeal attacks, extremely dangerous since that does close down the airways and obviously then becomes life threatening, but as the old saying goes a picture is worth a thousand words. And there is a picture up here of an HAE patient both in the normal state on a good day and then having an attack in this case a facial attack on a bad day. And so, this is a real impact of the swelling and the pain associated with HAE attacks.
And so HAE patients will experience a wide range of number of attacks and also severity of attacks, but it can average 20 or more attacks a year. So, you can do the math in terms of the untreated attacks in the number of weeks or months of pain in lost time, lost time school, lost time at work that will afflict a patient with HAE. And the impact absences from work of the pain, the uncertainty of when the next attack is going to recur, the uncertainty that the next attack might be a laryngeal attack, which is life threatening. All of that leads to the attendant tissues around depression and it’s depression that you see with patients who have severe asthma or Crohn’s. So, it’s a pretty tough disease.
And so KALBITOR, we use that – that is our drug to treat acutely attacks for hereditary angioedema. We were the first SubQ HAE treatment approved in the U.S., were approved for all attack locations, and that’s important because it includes laryngeal attacks, which are the most serious and life threatening attacks and as demonstrated in our clinical trials and now that the products on the market, this drug resolves the attack and it lasts.
So, one thing that we do to differentiate KALBITOR from the other products and we do have competitors in the space, but to differentiate KALBITOR from the other products that are in the space is really to focus on the level of services that we can provide to the patients. So, we have a very high-touch hub services program, we call it, KALBITOR Access. This is there to provide treatment site coordination, financial assistance, reimbursement assistance, nursing support, whatever the patient may need we want to be there for them.
We also have a program that’s been extremely successful with patients, and it’s our home infusion services program. Here we have teamed up with Walgreens, and Walgreens, this is a specialty pharmacy, not the retail pharmacy. We have teamed up with them. They have nurses around the country and a patient can call a nurse on demand available 24/7 and that nurse is typically showing up within an hour on average, and that nurse will be there to administer the drug for that patient. And this is important for patients who had a time of extremely high anxiety while they are experiencing an angioedema or attack.
During that high anxiety period, a lot of patients will really appreciate and want to feel the comfort of having a healthcare professional available to help with that time and to administer the drug for them. The patients have found it extremely successful or they believe it’s extremely successful. They like it. It’s also very important as a feedback loop for both the physicians and the payers. In the case of the physicians, it gets to disease management they know what’s going on, because there is somebody else involved beyond the patient in the monitoring and administration of the treatment. And in the case of the payers, it relates to proper utilization. This is an expensive biologic drug and diversion is or can be an issue that is dealt with when you have a healthcare professional involved.
So, in addition, we have a number of patient and physician education programs. Again, we have put a lot of focus on that, because it’s all about the support needed for both of those communities, and the number of novel other support mechanisms for families like genetic counseling, which will subsidize and support for diagnostic testing when somebody is suspected of being potentially an HAE patient or a candidate, but is a potential HAE candidate or a patient.
So, we’ve been on the market for about three years. We have had year-over-year growth in sales to about $39 million last year in 2012. We have been adding patients quarter-by-quarter, year-by-year. Those patients have been treating their HAE attacks at a rate of 6 to 9 treatments per year on average. And this business as I mentioned I think right at the top. This business is profitable for Dyax.
So, why is it an attractive business opportunity for us? So, it is a rare disease. It’s an orphan indication. There is a relatively small patient population. It’s estimated to be about 6500 patients by the HAE association, which is the patient association. And while it’s a small patient population, it’s a sizable business opportunity. Half of those and more than half of those 6,500 patients are still not on one of the novel therapies, whether that be KALBITOR or one of our competitors in this space. So, there is a significant number of additional patients really that can be put on one of the novel therapies to help them manage their disease in a better way.
And so how do we take advantage of this opportunity? One is to grow the market that’s finding and adding patients taking the leads we get from newly diagnosed patients and following up aggressively with those. We have seen the success of our home infusion services program. And it’s really to be able to focus on patients who are best served by the home infusion services program. Those who really appreciate and want to have that high touch healthcare professional interaction when they are taking care of their disease. We will also continue the patient peer-to-peer programs. This isn’t Dyax trying to convince patients or trying to convince doctors that this drug is can be good for them. This is patients talking to each other face-to-face in response of these programs and finally to be highly successful. And also the persistency programs, nurses, nursing reach out that we provide to our hub services, to reach out and provide any assistance for the patients, this is the way that we keep and maintain our loyal patients. So, it’s a comprehensive set of support services integrated with healthcare professionals, and that’s how we can address this life threatening disease.
Now, as I mentioned, we are doing more than treating HAE in the U.S. We have an expanding portfolio that includes markets beyond the U.S. So, we are selling here in the U.S. We have some recently signed arrangements in addressing China and Latin America. We also have an arrangement in Japan, which is we think an interesting market opportunity. Plasma-derived products have never been really accepted in Japan. So, there is really an open market opportunity for us there. Our partner, CMIC, has a small open-label study for which they have now two remaining patients to enroll, to complete that study, and that’s the basis for their regulatory submission. So, that should be completed over the next few months with filing later this year. And on that timeline they could have approval in the later part of 2014. And the potential market here in Japan on an equivalent size basis is similar to the U.S. In that, there is about one-third of the population is the U.S., and this is a pan-ethnic disease with prevalence that has equivalent rates, so about one-third the size of the U.S. market. So, it’s a pretty significant opportunity and in the relative near-term for us.
Now, in addition to that, our real focus internally at Dyax is on a product that could be a real game changer for us, a game changer for the HAE market. It’s the opportunity for a true prophylactic product, one that stops HAE attacks before they occur. This 2930 is a fully human monoclonal antibody. It’s an inhibitor of plasma kallikrein. It is for HAE prophylaxis. And the differentiation of this product from the current C1 prophylaxis would really be having better efficacy than current C1 alternatives, a longer half life which would allow for dosing one or two times per month and the SubQ formulation. So, all of these factors we think will be important for really changing the dynamic landscape of the HAE market. Right now, we are planning to file our IND within about a month or so by the end of June. We will be in the clinic then in the third quarter. Our Phase 1 trial should be wrapped up during the course of 2013. And while our full clinical plan is still being assessed, we do anticipate that Phase 1b or Phase 2 trials would be commencing in 2014. So, as a true prophylactic product, we think this really will be a game changer for this market.
We also have underway a biomarker assay program and this is where we have developed and are now in the validation stage of a very sensitive specific assay to detect activated plasma kallikrein. So, when we look at what we are going to do with this particular marker, you can think of the angioedema space. We are trying to identify patients who are having swelling attacks that are not histamine-related. They have normal C1 esterase levels. They are experiencing recurring angioedema or attacks and looking to identify whether activated plasma kallikrein is involved will be important for them determining the appropriate treatment options, and those could involve in the future either an expanded label around KALBITOR, or DX2930.
In addition to the angioedema space specifically, there is also other opportunities in inflammatory conditions, and things that are listed here on the slide, things like lupus and Crohn’s disease, we are using the biomarker assay as a way to identify the activity in that plasma kallikrein pathway could be very important. So, the two DX2930 and secondly the biomarker assay program, very important ways for us to expand this angioedema portfolio.
So summing all this up on the angioedema side, we have our KALBITOR sales, growing sales. We think the growth opportunities enhanced by both the number of available patients in that market space ,as well as the shift toward on-demand therapies, some potential for ex-U.S. sales particularly around Japan, but then most importantly for us, the opportunities in the prophylactic space to develop 2930 is a real game changing product.
So, shifting gears a bit, moving on to our licensing program. In this program, we have 13 clinical stage assets. They do generate current cash flow for Dyax, and it’s really here all about a shots-on-goal strategy. We have a large number of candidates and those candidates we look to see success from a certain number of those. We have a long way to IP through 2024 and probably equally importantly our commercial contracts are written such that we would receive royalties for 10 years from the first commercial sale regardless of when the underlying IP may expire.
The most advanced candidate in our licensing program is our partner Eli Lilly’s candidate ramucirumab, and I’ll talk more about that in just a minute. Really, the proof is in the pipeline, and here is a snapshot of the pipeline as it stands today with the 13 clinical stage candidates. It’s important to note that this portfolio matures really in two ways. One, there is the candidates that aren’t even in the clinic yet, which we know of 13 identified programs that are preclinical in nature, which will make this portfolio evergreen in a sense, and then also as this portfolio matures left to right advancing through the clinic Phase 1, 2, and 3. So, for us, it generates $10 million or $15 million a year currently, but the significant future cash flow really comes from the royalties, where we collect a 2% to 3% royalty on the product sales from our licensees’ product sales.
At Dyax, there is no cost associated with this program, the costs are carried on by our licensees. And these are all addressing pretty large commercial opportunities in the oncology space and MS. So, pretty significant opportunities and a good example of that is ramucirumab. It’s in the VEGFR space. That’s a very larger opportunity, a multi-billion market opportunity, and so it’s a real source of significant upside for us.
And so focusing on ramucirumab if for no other reason than the fact that it’s the most advanced in the pipeline, it’s also a good example of the depth of the portfolio is this one candidate has six different trials going on for five different oncology indications ranging from gastric to breast to non-small-cell lung hepatocellular colorectal. So, that’s just this one compound. So, that we expect a significant amount of news flow coming from ramucirumab. Already, they have announced positive data on the gastric indication as a monotherapy. They have a rolling BLA submission going on. The completion of that submission is expected before year end.
But on top of that, the breast trial has completed enrollment and top line data was expected sometime in the middle of this year with the full data set out sometime in the latter part of 2013. And then there is other trial completions in those these other indications in the latter part of ‘13 and ‘14 as well. So, a significant amount of news flow just from ramucirumab alone, but in addition to ramu, there is also necitumumab, Lilly’s candidate for non-small-cell lung, which would be completing its enrollment later this year; Amgen’s Trebananib, for which data on Phase 3 is expected out this year. So, quite a bit of news flow coming from this portfolio in the relative near-term, so if nothing else, I think it’s important to really point out that it’s really the robust and deep nature of LFRP portfolio. And it is all about shots-on-goal. A lot of candidates and a lot of indications, we know they won’t all work, but there is a good likelihood that some of them will and we stand to collect some pretty significant royalties from them.
So, shifting gears once again looking at a few financial highlights, our cash position at March 31 and on a pro forma basis since we raised some money post March 31, so, on a pro forma basis that’s about $52 million, and those cash resources do allow us to really aggressively fund the development of DX-2930 without worrying about any kind of resource constraints. Our revenue guidance for 2013 is top line revenue of $53 million to $58 million, and that includes KALBITOR sales of $40 million to $44 million. And really we have a disciplined financial management approach, controlled and managed cash burn. KALBITOR itself is profitable. It generates cash flow. And so we can manage a focused investment in developing 2930 and manage a burn that for the second half of this year 2013 would be approximately $5 million.
So, the key drivers for this year for us at Dyax, one is clearly to continue to grow KALBITOR sales, also expanding the angioedema portfolio, and that’s both beyond the U.S. market, but also really the focus around DX-2930 as a game changing product candidate. And then the LFRP pipeline news flow, which I just summarized, a significant amount of news flow that would be coming over the coming weeks, quarters, and next year or so. So, it’s a pretty dynamic time at Dyax, and we have become a successful commercial company. We have got the technology. We have got the products. We have got the partners. And perhaps most importantly, we have got the people to carry this out. So, it’s been a year of execution. It will be a year of execution and really look forward to keeping you up-to-date. So, that concludes the formal part of the presentation.
We will open the floor to any questions. Okay, great thank you so much.
George Migausky - Chief Financial Officer
Okay, great. Thank you.
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