Javelin Pharmaceuticals, Inc. Q2 2009 Earnings Call Transcript

Javelin Pharmaceuticals, Inc. (JAV)

Q2 2009 Earnings Call

August 11, 2009 8:30 am ET

Executives

Martin J. Driscoll - Chief Executive Officer

Stephen J. Tulipano, CPA, MBA - Chief Financial Officer

Daniel B. Carr, MD - Chief Medical Officer & President

Frederick E. Pierce, II - Vice President, Investor Relations

Analysts

Gary Nachman - Leerink Swann

Juan Sanchez - Ladenburg Thalmann & Co.

Presentation

Operator

Good day and welcome to the Javelin Pharmaceuticals second quarter 2009 financials conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to the Vice President of Investor Relations, Mr. Rick Pierce.

Frederick E. Pierce, II

Good morning everyone. We have with us this morning, Mr. Martin Driscoll, CEO of Javelin Pharmaceuticals; Steve Tulipano, Javelin’s CFO; and Dr. Daniel Carr, Javelin’s President and Chief Medical Officer.

As is customary, before we begin today, I’d like to remind you that certain statements made in the chorus of this presentation may be forward-looking and involve a number of risks and uncertainties.

These forward-looking statements include statements about the following: Our product development efforts, anticipated operating losses and capital, anticipatory regulatory filing dates, and clinical trial initiation dates, clinical trial results including today’s, our estimates regarding our capital requirements on each of our filings, our estimates for future revenues and profitability, our selection and licensing of product candidates, our ability to track partners with acceptable development, regulatory and commercialization expertise, the benefits to be derived from our corporate collaborations, license agreements and other collaborative efforts including those relating to the development and commercialization of our product candidates and sources of revenue and anticipated revenue including contributions from corporate collaborations, license agreements and other collaborative efforts for the development and commercialization of our product candidates and the continued viability and duration of these agreements and efforts.

The matters discussed in our forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements or industry results to materially be different from the results, performance, or achievements expressed or implied by our forward-looking statements.

Now, Steve Tulipano our CFO will review Javelin’s financial results and then Marty Driscoll will comment on the quarter ended June 30, 2009, including our rest of the results announced just a few short minutes ago for those of you who may not have been able to read them. Marty then will open up the phones for a brief question and answer period from covering analysts and institutional investors.

Now, I’d like to introduce Steve Tulipano, Chief Financial Officer, who will provide Javelin’s financial results for the second quarter.

Stephen J. Tulipano

Good morning everyone. At the end of the period, we had approximately $7.2 million in cash and cash equivalents. Additionally, we had approximately $1.6 million in long-term marketable securities. Dyloject inventory was 741,000. This inventory was sold to our partner Therabel in July and is not included in our cash number for the period ending in June.

Accounts payable and crude expenses were $8 million at June 30, 2009. We believe that our existing cash and the cash that will be generated from our inventory sales will be sufficient to fund our operations through the end of the year.

For the second quarter of 2009, our net loss was $7.9 million or $0.13 per share on weighted average shares of $60.4 million. This compares favorably to the $9.1 million loss in the year ago period and the $14.8 million loss in the first quarter of 2009. Our quarterly losses will continue to dramatically decrease as we move through the year.

For the six-month period, our net loss was $22.7 million or $0.38 per share as compared to $18.8 million or $0.36 per share on the same period a year ago. For the quarter, total revenues were $300,000 compared to $180,000 last year. Total revenues for the year-to-date period were $2.4 million compared to $245,000 in the prior year.

Javelin’s total operating expenses were approximately $8.2 million in the quarter. This compares with $9.5 million for the same period a year ago. For the 6 months ended June 30, 2009, total operating expenses were approximately $25.1 million compared to $19.7 million for the same period a year ago. Again, we expect operating expenses to substantially decrease as we go through the remainder of the year. As an example of this, our total operating expenses in Q1 209 were $16.9 million compared to $8.2 million in the second quarter.

Javelin incurred approximately $5.3 million in research and development expenses in the quarter compared to $4.5 million for the same period of the prior year. R&D costs were $17.2 million and $10.2 million respectively for the 6-month periods.

SG&A expenses were $2.7 million in the quarter as opposed to $4.8 million for the same period a year ago. For the 6-month period, SG&A declined from $9.2 million to $5.8 million in the current year. The reduction in SG&A from the comparable quarter last year is attributable to the out licensing of Dyloject in Europe resulting in a significant reduction obviously in sales and marketing expense.

Let me now turn the discussion over to our CEO, Marty Driscoll.

Martin J. Driscoll

Good morning everyone. Thank you for joining us again this morning. I’m going to focus my comments this morning on our progress during the second quarter, particularly our progress with the completion, our efforts towards completing the Dyloject new drug application for the US that we plan to file this fall as well as the key value drivers that we’re focused on at this company for the remainder of 2009 and beyond. I will also briefly discuss the just-announced results of the first Ereska phase III trial and ask Dan Carr our Chief Medical Officer and President to provide some additional comments on this trial as well.

Just as a reminder, I want to focus and remind you of the key value drivers for the remainder of 2009 for your company. Our focus is on filing a high quality NDA for Dyloject this fall and we’re on track to do that. We’re focused also on contemplating a major strategic transaction. We’re focused on examining these initial results of the Ereska phase III trial and advancing the next steps of the Ereska development program towards an NDA filing. We’re focused on removing the financial overhang from our balance sheet through a strategic transaction, and our continued progress with our partner with Dyloject in Europe.

First Dyloject: During the second quarter, we announced the successful completion of our large observational open-label safety study. This safety study as we told you was the key gaining item in our timeline to file Dyloject’s NDA. With the completion, we are now poised to bring this study to successful completion ahead of our original schedule which we have done and therefore on schedule to file our NDA here in the fall.

We also announced during the quarter important results from a PK trial for Dyloject in mild-to-moderate renal impaired and mild hepatic-impaired subjects. These data as we disclosed demonstrate a key differentiator for Dyloject from the current standard of care and IV NSAIDs.

We have now completed the clinical programs for Dyloject and your company is on track to file the first Javelin NDA in just a few weeks later this fall. My colleagues and I are excited about the construct of this NDA as we compile the data for the submission. We are working overtime to complete a high quality NDA submission for Dyloject this fall.

A few comments on Dyloject in Europe and an update on our strong partnership with Therabel for Europe: As many of you who are listening today know, during the second quarter of 2009, this marked the first full quarter in our partnership with Therabel for Dyloject’s commercialization in UK and then throughout Europe in the coming months and years. Therabel continues to make excellent progress in its efforts to accelerate the market uptake for Dyloject in the UK and later throughout Europe.

During the quarter, we worked closely with Therabel on the development of new country filings to introduce Dyloject in a broader number of countries across Europe at a hastened pace. At this point, we believe Therabel will move to make multiple EU country filings before the end of this year. Also, Baxter Health Care is now manufacturing Dyloject for our European distribution. This will enable Therabel to distribute lower cost Baxter produced material and introduce that into the EU supply chain sooner than we had originally anticipated.

After the quarter end, as Steve indicated, Therabel purchased additional inventories of Dyloject and related ATI. My colleagues and I remain very pleased with the collaboration with Therabel and the progress of this partnership thus far.

Let me comment on our cash position: In January, as you know, we raised non-diluted funding for the business through the upfront partnering dollars achieved in the out-licensing of Dyloject commercialization rights in the UK and for Europe. This should be evidence to you of our focus and our efforts to bolster our brands in the marketplace, but also raise non-diluted capital for our shareholders. We will continue to have such a focus with our business.

As Steve mentioned previously, we finished the second quarter with over $8 million in cash and long-term marketable securities and we expect this sum to sufficiently fund our operations through the end of the year. In addition, as I just stated, we have sold additional Dyloject inventory and related ATI to Therabel raising almost an additional $1 million.

But most importantly, based on strategic activities and the pace of these activities during this past quarter and today, I can assure you that there are a number of potential alternatives near-hand to us to bolster Javelin’s financial resources. As stewards of Javelin’s and your balance sheet and our resources, my fellow directors and I are pursuing a number near-term initiatives which we believe are in the best interest of shareholders.

First, a few comments on the just-announced Ereska pivotal trial results: Last week I asked Dan Carr our Chief Medical Officer and our President to be prepared to join us on this call in the event we were able to have the initial results of the Ereska phase II trial while as we just announced those results, we do have the initial trial results.

Before I ask Dan to speak, let me comment on these Ereska trial results. Although we are disappointed that the initial results from the trial show that we just missed on the primary endpoint in terms of statistical significance with the P-value for the primary endpoint of 0.053. As you know, the standard for statistical significance is 0.05. Even though we just missed with this borderline result, we are quite encouraged by the initial data that demonstrates that Ereska worked and was generally well tolerated.

With such a borderline P-value for the primary endpoint, it is a commitment upon me and our company to examine all aspects of this trial. We have begun this effort. As a result, there is the potential that the outcome could change in the future.

In addition, I want to mention that the FDA has stated to us that they will review these trial results and told us that before the trial results were available to us just now. Importantly, these initial results demonstrate already to us that the NDA filing for Ereska can be pursued.

Let me now ask Dan to give a brief summary of these initial trial results for the Ereska phase III trial.

Daniel B. Carr

As some of you may have read in our press release prior to joining this morning’s call, we just released our initial review of top-line results from our phase III study of Ereska, Javelin’s intranasal ketamine 30 mg product candidate. This randomized multi-center double-blind one-to-one placebo controlled study assessed the safety and analgesic efficacy of repeated doses of Ereska over 6 hours in 269 patients with acute moderate-to-severe pain following orthopedic surgery.

The pre-defined primary outcome measure for this trial was a summary of pain intensity differences over a 6-hour period after initial drug dosing called SPID-6. The baseline and site-adjusted means plus or minus standard hours for SPID-6 were 78.2 plus or minus 12.4 for the Ereska group and 47.9 plus or minus 12.3 for the placebo group yielding a borderline P-value of 0.053. As many of you know, the standard for statistical significance in pivotal clinical trials is the P-value of 0.05 or less. A high degree of intra-subject variability likely impacted the P value of the primary endpoint. Our initial review of certain other clinically relevant secondary endpoints including patient global evaluations shows they were statistically significant in favor of Ereska. Ereska was generally well tolerated. Of particular note, the incidences of psychological side effects were equal to or less than 3% in subjects given Ereska and were typically mild and transient. The company is thoroughly examining all aspects of this trial. In a recent interaction with the FDA prior to the availability of this trial’s initial data, the division offered to review the results of this study. As is our practice, we look forward to presenting the final results of this trial in a scientific meeting and in published form.

I will now turn it back to Marty.

Martin J. Driscoll

I would like to offer a few comments on our strategic transactions efforts at the company and then I’ll summarize, and we can open up the floor for Q&A. While our team is focused on filing a high-quality NDA for Dyloject this fall and further examining these initial Ereska trial results, my primary focus continues to be on the consummation of a major strategic transaction for your company. Like our Therabel commercialization agreement for Europe, our strategic initiatives for the US have been on raising additional non-diluted capital, further reducing our commercialization risk, but importantly accelerating market uptake for the Javelin products upon approval in the US by leveraging a potential partner’s commercial capability.

We’re fortunate in that we have an approved product in Europe. We will soon file an NDA here in the US and we have three Phase II products. As a result of these attributes of the company, we have several opportunities near end that I am managing. It is a robust effort. I would like to leave you with a few thoughts about Javelin before we open up the phones to Q&A.

Our company as I mentioned has three Phase III products in the US. One is already approved in Europe, with significant potential in the US for future growth, as well as future growth across Europe. With respect to this US product development, we are on track to file a high-quality NDA this fall for Dyloject. Further out, marketed products and our product candidates are positioned for use in the acute care pain setting. This is a true specialty market with a relatively lower cost of commercial entry. We believe this differentiates Javelin from its peers and represents a franchise opportunity for those parties interested in entering the pain care and the hospital markets.

I am looking forward to expedite the achievement of the key value drivers that I mentioned at the beginning of my comments. Again, we’re well on track to filing a high-quality NDA for Dyloject during the fall. We have made excellent progress with our partnership for Dyloject in Europe. Our expenses are markedly declining as we complete our current clinical programs. We will strongly examine these initial trial results from the Ereska initial Phase III trial and work the path towards an NDA filing. We continue to make strong progress with respect to a major strategic transaction as we managed several opportunities. Please be assure, every day we’re thinking and acting like the shareholders that we are. We have the shareholders’ best interest at hand as we contemplate our actions to realize lasting value.

Thank you for listening to our comments and I’ll now open it up to Q&A.

Question-and-Answer Session

Operator

(Operator Instructions). We’ll take our first question from Gary Nachman - Leerink Swann.

Gary Nachman - Leerink Swann

First question on the Ereska data; Marty, what did you mean that the outcome could change in the future after you examine all aspects of the data, that maybe you could achieve statistical significance in certain subgroups; could you elaborate on that?

Martin J. Driscoll

These are the initial results. Obviously, with a P-value so close to statistical significance, I think, it’s incumbent upon me and this organization to examine all aspects of the trial. We’ve begun to do that, we’ll look at everything, and I just think that it’s appropriate to state that the future outcome could change or could not change.

Gary Nachman - Leerink Swann

Dan, could just elaborate a little bit more on the intra-subject variability, you know the patient population that was included and how that may have contributed to that.

Dr. Daniel B. Carr

I just wanted to reiterate that these are initial results and we’re in the process of examining all the aspects of the trial including the very one that you bring up so that in the future we can present full results in the appropriate forums.

Gary Nachman - Leerink Swann

How long will the process be for evaluating all the data you think; I guess we’ll have an update on that?

Martin J. Driscoll

Gary, I think, I’ve always been straight up with you and with everyone else; we’ll take the necessary time to examine all of this. With the P-value so close to borderline we want to make sure we do all the proper work.

Gary Nachman - Leerink Swann

Just switching gears; how do you think Cumberland’s IV ibuprofen will compete with your Dyloject, and I guess just having another injectable NSAID out there before you guys, how are your chances in terms of formulary acceptance?

Martin J. Driscoll

Certainly we think the approval of the IV ibuprofen is very positive for Dyloject. First, let me state that it demonstrates further the divisions interest in injectable NSAIDs, and if you look at the comments attributed to the FDA with the approval of the product, we think that it boards well for the continued review and development of IV NSAIDs like Dyloject. Secondly, very importantly, Dyloject is quite distinguished from IV ibuprofen. We have two successful pivotal efficacy trials with P-values of 0.0001. If you look at the IV ibuprofen product, they had three pivotal trials, two in pain and one in fever, and one of the pain trails failed and did not reach statistical significance, and the other trial only achieved significance when used in combination with opiates. In addition to that, their label specifically states that it is only indicated for mild to moderate. Finally, their own data reveals that the relative opiates sparing effect of the IV ibuprofen is only 9%, and as Dr. Carr always tells me, that does not rise to the level of clinical significance. So, I think at the end of the day, it’s important to us because it heightens the interest in IV NSAIDs in the marketplace, both in the regulatory authorities in the market, but I think IV ibuprofen like IV acetaminophen because of its relative weak analgesic effects will be utilized in mild to the lower moderate pain whereas our indication will be in moderate to severe pain as we’ve always indicated, and we think that the market will quickly realize the relative opiates sparing benefits of Dyloject as evidenced in our pivotal trials and we’ll be an important entry for the multi-modal therapy. Finally Gary, I would point out that IV ibuprofen must be infused, I believe, over a 30- to 40-minute period, and as you know, Dyloject is a rapid-acting bolus injection, which we think is a very important distinction for the continued growth in the outpatient or day surgery setting where they need rapid-acting potent IV NSAIDs versus something that has to be infused that has a mild analgesic effect.

Gary Nachman - Leerink Swann

You have about $9 million in cash and previously, I guess, you thought your cash was going to go till early ’10, now it’s going to go till the end of the year, but you have a bunch of alternatives for additional financing; just elaborate on that and of course how partnership discussions are progressing on Dyloject.

Martin J. Driscoll

I think since my tenure as CEO I’ve always been straight up with you and our investors. Certainly, financing is an option. As we’ve demonstrated with our history, it’s not our preferred option. Rather our focus has been on partnerships and all the benefits of a strategic partnership including raising non-diluted capital. I will mention that we have many opportunities and some of those, certain of those, partnership discussions have advanced into broader opportunities, and we’re pursuing those as well.

Gary Nachman - Leerink Swann

When you see broader opportunities you mean that it’s not just for Dyloject, it might be for other assets as well?

Martin J. Driscoll

That’s correct. It means that certain discussions have moved beyond just the Dyloject partnership discussion to broader transactions for the company.

Gary Nachman - Leerink Swann

Do you think it’s likely that you’ll have a partner for Dyloject before you file or it sounds like probably not?

Martin J. Driscoll

As I said earlier in my comments, there is much near end.

Operator

Our next question comes from Juan Sanchez - Ladenburg Thalmann & Co.

Juan Sanchez - Ladenburg Thalmann & Co.

When is the FDA going to be in a position to review the Ereska data, and the second question is, when it comes to business, what are we talking about, licensing Dyloject or are we talking about the initial sale of the company, and if the decision is to license Dyloject, what will be long-term plan for the company?

Martin J. Driscoll

Juan, in terms of timing for the data to be reviewed by the FDA, as we said earlier, the FDA in advance to these results, did state that they would review these results. So, we’re going to avail ourselves of that opportunity. When we provide those data to the FDA for the review would be dependant on our examination of all the data. So, I can’t give you a specific time on it. You can be sure we’ll move as quickly as is appropriate and we’ll do it right, but as we mentioned several times, the FDA has stated that they will review the data, which we’re encouraged by. In terms of your second question, as I just mentioned in response to Gary’s questions, we have Dyloject partnership discussions taking place, but certain of those have advanced to broader discussions and I will leave it at that. I think it’s very clear that we’re looking at all opportunities that would be in the best interest of our shareholders, and you can be certain that it will be that. If the situation evolves to a Dyloject partnership as we’ve said consistently, we would then have a partner that would be commercializing Dyloject and we would use the non-diluted capital raised from that to continue the Ereska program, but we’re looking at all aspects, all opportunities, and certain of these discussions have broadened beyond just the Dyloject discussion.

Juan Sanchez - Ladenburg Thalmann & Co.

Can you give us some update on how well Dyloject is selling in the UK? I know you only reported inventory sales, but in terms of units being sold and how Therabel is doing?

Stephen J. Tulipano

Certain metrics that I would point out is that the formulary acceptance level remains at greater than 95%. The number of hospital formularies that has declined to add it is in the single digits. In terms of the sales, I believe, the sales have grown; the last I saw, this was as reported, I believe, was in May, we are on pace to double versus the first quarter of this year. So, we’re very encouraged. All the indications are that formulary presentations have increased, the number of formulary acceptances remain very high, and most importantly the number of rejections are in the low single digits, and the sales seem to be ramping at a level that we expected when we engaged in the partnership. So, we’re very encouraged and we’re very pleased with the manner in which Therabel is thinking about markets, they’re thinking about additional markets to file for beyond what we’d initially thought about, and we just think it is evidence of why this partnership was important. They have a very good knowledge of Europe, they’ve brought that knowledge to this collaboration, and I think what we’re going to find is that more countries will be filed for sooner than perhaps we had even anticipated.

Juan Sanchez - Ladenburg Thalmann & Co.

Do you receive some payments from them if they file this year?

Stephen J. Tulipano

No, the transaction, Juan, is for the regulatory milestones upon approvals and we’ve disclosed before that we’re not forecasting any regulatory milestones for Europe for this year.

Operator

We have no further questions. I would like to turn it back over to our presenters for any additional or closing remarks.

Martin J. Driscoll

Thank you again everyone for your attention and your continued support, and on the priorities that I articulated, you can be certain we’re focused on those and we’ll work very hard to maximize the value for all of your shareholders. All the best and have a good day. I look forward to working with you in the near future.

Operator

That does conclude today’s call. Thank you for your participation.

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