Javelin Pharmaceuticals, Inc. Q3 2009 Earnings Call Transcript

Nov.10.09 | About: Javelin Pharmaceuticals, (JAV)

Javelin Pharmaceuticals, Inc. (JAV) Q3 2009 Earnings Call November 10, 2009 8:30 AM ET


Martin J. Driscoll – Chief Executive Officer

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

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


Gary Nachman – Leerink Swann

Greg Kiernan – Sonostar Capital Partners


Welcome to the Javelin Pharmaceuticals Third Quarter 2009 conference call. Today's conference is being recorded. At this time I'd like to turn the conference over to Rick Pierce, Vice President of Investor Relations for Javelin Pharmaceuticals.

Frederick E. Pierce, II

We have with us this morning Mr. Martin Driscoll, CEO of Javelin Pharmaceuticals, and Steve Tulipano Javelin's Chief Financial Officer. It is customary before we begin today and I'd like to remind you all that certain statements made in the course 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, anticipated regulatory filing dates, and clinical trial initiation dates, clinical trial results, our estimates regarding our capital requirements on each of our filings, our estimates for future revenue 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 the 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.

These 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 Chief Financial Officer, will review Javelin's financial results and then Marty Driscoll, our CEO, will comment on the quarter as of September 30, 2009. Marty then will open up the phones for a brief question and answer period from covering analyst and institutional investors.

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

Stephen J. Tulipano

Thank you Rick, good morning everyone. Let me jump right into Javelin's results of the third quarter. At the end of the [inaudible] cash and cash equivalents, additionally as you know we've raised approximately $3.7 million on a net basis through an unsolicited registered direct from new institutional shareholder earlier this month. This largely completes our 2007 shelf. As you may remember, Javelin has a second 2008 shelf where approximately $32.5 million remains available.

Accounts payable in accrued expenses were $7.8 million at September 30, 2009. For the third quarter of 2009, our net loss was $6.8 million or $0.11 per share on weighted average shares of 60.4 million. This represents a 38% decrease compared to the $10.9 million loss or $0.18 per share in the year ago period. And it also represents a 15% decrease for the $7.9 million loss or $0.13 per share in the second quarter of 2009.

Our quarterly losses will continue to decrease as we close out the year and enter the New Year. For the nine-month period, our net loss was $29.5 million or $0.49 per share as compared to $29.7 million or $0.54 in the same period a year ago. For the quarter, total revenues were $1.1 million compared to $366,000 in the same period last year.

In July, as you know, we sold our remaining Dyloject inventory approximately $741,000 to Therabel. Total revenues for the year-to-date period were $3.5 million compared $611,000 in the prior year. Javelin's total operating expenses were approximately $7.5 million in the quarter compared to $11.4 million for the same period a year ago. For the nine-month period, total operating expenses were $32.6 million compared to $31.1 million for the same period a year ago.

Javelin incurred approximately $4.2 million in research and development expenses for the quarter. This compared to $6.9 million for the same period in the prior year. R&D costs were $21.3 million and $17 million respectively for the nine-month period.

SG&A expenses were at $2.4 million in the quarter as opposed to $4.2 million for the same period a year ago. For the nine-month period, SG&A declined from $13.4 million to $8.2 million in the current year. The reduction in SG&A from the comparable period last year is primarily attributable to the out licensing of Dyloject in Europe.

With that, let me now turn the discussion over to Marty Driscoll.

Martin J. Driscoll

Thank you Steve, good morning everyone. Thank you for joining us once again as we discuss the key activities here at Javelin. My comments to you this morning are going to be brief and to the point because as you'll hear we have some very important work to finish very shortly. As you know, the team at Javelin has been intensely focused for months on the completion of our company's first new drug application in the U.S.

We will file very shortly a high quality Dyloject NDA. Let me be specific on the final steps remaining for the submission of this high quality Dyloject NDA. In just a matter of days all the final documents for the NDA submission will have departed Javelin for the final step in our NDA submission process. These documents are forwarded to our vendor who we've been working with who completes the final step, the final work necessary for our electronics submission.

The timing for our actual NDA submission and I'm excited to report can be summed up as it's just a short time away. We're obviously excited about the eminent achievement of this milestone event for our company. I am proud of the efforts of the Javelin employees and our key team of advisors who have prepared a large high quality submission for Dyloject. The Dyloject NDA team includes experienced industry veterans who have collectively filed more than ten NDA's and BLA'a in their careers in this industry.

Let me put into perspective the task that they will complete in the next few days. Although the Dyloject NDA submission will be a 505B2 filing, the size of this NDA is actually more typical of that for an NCE filing. The Dyloject program for the NDA submission was a large one and the size of the filing is impressive. We believe this will strengthen the product once it is approved for marketing.

Our high quality NDA submission for Dyloject includes information detailing a total exposure to Dyloject in greater than 2,000 subjects. There are 16 studies in the program. We believe Dyloject's safety and efficacy with this NDA has been well characterized in approximately 1,300 patients from two controlled and one large open label study.

In summary, your capital has been invested in a robust program. This impressive program required a large NDA submission package involving greater than 100,000 pages of documents that will actually be filed electronically. The culmination of this impressive effort will come in a very short period of time when we formally file the Dyloject NDA.

While the NDA team will shortly complete its work on a high quality submission, I have continued to focus the bulk of my efforts on the completion of our strategic transaction. Deal making in this market environment is certainly dynamic and that has certainly been the case for us. I would have preferred to of already announced the transformative transaction by this point, but I am convinced that we're going to get this done very soon.

As Steve Tulipano mentioned in his remarks, we took advantage of an unsolicited opportunity and topped off our balance sheet with a small equity sale just a couple of weeks ago. We did not seek to conduct a large financing, did not market such event nor did we even approach our existing shareholders to add to this equity sale. We simply took advantage of an unsolicited opportunity from a good institutional investor at reasonable terms.

There have been a multitude of large financings in biopharma in the recent months, and we could have done the same, but we don't see the need to do so given the stage of our strategic discussion. Once our team completes the filing of the Dyloject NDA in the very near-term, our clinical team will then turn its attention to the completion of our analysis of the Ereska pivotal trial data. Once we have completed our analysis of the Ereska trial, we will meet with the FDA to finalize the path forward for an Ereska NDA submission. We will keep you appraised our progress.

The third quarter of 2009 represented the second full quarter of our partnership with Therabel for

Dyloject's commercialization in the U.K. and the future throughout the major countries of the EU.

Therabel has made good progress in building market uptake for Dyloject in the U.K. since assuming full responsibility for the product in February. We continue to collaborate with Therabel on the additional country filings for Europe.

In summary, our submission of our impressive high quality Dyloject NDA is largely complete. We believe this Dyloject NDA submission will highlight the important value and differentiation that Dyloject will one day bring to the acute care pain setting.

We took advantage of a recent unsolicited equity sale opportunity and we topped off our balance sheet. This small financing solidifies our leverage as we move to close soon our strategic transaction. As Steve indicated, our expenses will continue to decline substantially as we have completed our clinical programs and the NDA filing for Dyloject is almost at hand.

I thank you for listening and we'll now take your questions.

Question-and-Answer Session


(Operator Instructions) Your first question comes from Gary Nachman – Leerink Swann.

Gary Nachman – Leerink Swann

Marty, on the Dyloject filing, what are you including in the NDA in terms of a (rense) program? Could you elaborate a little bit on that? And then have you guys actually had a pre-NDA meeting with the FDA so just to give you more clarity in terms of what you need to file. Its sounds like you're filing everything, but that would be just comforting. Then do you guys think you'll get a priority review just like the Acetavance and Caldolor did.

Martin J. Driscoll

On your three questions, first number one, a (rense) program that's not required for Dyloject. A (rense) program has not been asked for by the agency. There's been no indication and we would not anticipate. Remember, this is an NSAID and all the recent NSAIDs approved by this division over the last two to three years, including of course that diclofenac NDAs which have been approved – I think three have been approved in the last two and a half years, no (rense) is required. So that's not to be required for Dyloject.

Secondly yes, we've had a pre-NDA with the agency sometime ago. We've had a number of meetings with the agency and we feel certain that we're filing in this impressive application all that the agency asked of us. And then your third question in terms of a priority review, we'll have to see. It's hard to predict that. As you know as you mentioned, Caldolor received that because they sought an indication and received an indication in adult fever.

So we think we feel we have a compelling application and we'll file in the next – very shortly, and a priority review we'll have to see and work with the agency on whether we get that.

Gary Nachman – Leerink Swann

In terms of partnership discussions that's been ongoing for a while. It sounds like once again you're pretty close. I mean is there any chance that you would wait to file if you think a partnership is imminent or that's going to happen regardless and then we'll probably see a partnership deal after that.

Martin J. Driscoll

That's dynamic. It certainly and our partner, because the discussions are with high quality groups with good experience, they're adding a lot of value to our NDA submission.

Gary Nachman – Leerink Swann

If you only have enough cash to January and you don't get a partnership done by then, which I guess is possible, what's the strategy in terms of raising cash? Is it going to be a few months at a time or will you need to do something a little bit more robust?

Martin J. Driscoll

The sincere answer, Gary, I haven't even focused on that, haven't had that conversation because we don't think it's necessary. So I don't know what the strategy is because we haven't had a single discussion about it because we're very confident with what I described and where we are with discussions we have going on.

Gary Nachman – Leerink Swann

Steve, why was COG so high in the quarter, cost of goods. There was some adjustment in there?

Stephen J. Tulipano

There was no adjustment in there. COG is largely based. Inventory cost there were some – excuse me, raw materials that we did write-off during the period that are also included in there.


(Operator Instructions) Your next question comes from Greg Kiernan – Sonostar.

Greg Kiernan – Sonostar Capital Partners

I'm, as you know, the managing partner of Sonostar Capital. I've got two questions for you today both of which are designed to clarify some of the comments you've made already on this call. As you know, I and my firm have been longtime shareholders of Javelin and I think we participated in I think every single one. We might have missed one of your capital raises since Javelin was a private company.

We've done private placement. We've done pipes. We've done secondaries with you guys and in each instance we were contacted by the company in advance of whatever raise up you were doing or at the time of the raise up to see if we were interested in participating.

You just did close this deal which you netted 3.7 million on and we didn't get the call and none of the other large shareholders that I'm aware of to my knowledge received a call to participate. And you explain that you guys made the decision because it was unique. You were being contacted by a new investor and it was all you thought you needed.

I'd like if you could to explain a little bit more about that. In view of the question you were just asked about raising additional funds if the deal isn't done. Is it safe to assume that you and your board made a determination that you weren't going to seek more than the 3.9 million because you think that's enough to get you through the closing of a transaction? That's question one.

Question two, with some specificity, I guess, I know you can't disclose details of a proposed transaction that you might be working on, but we've heard a lot of discussion of partnership and then potentially something bigger. Can you give a little bit more clarity as to whether you're leaning more now towards the sale or merger of the company as distinguished from a partnership, A.

And B, have you received any signs or definitive term sheets, letters of intent or other formal indication of interest in Javelin from one or more parties at this point who are interested in merging with, acquiring, or partnering with Javelin? And if so, what if anything can you tell us about the status and timing of those negotiations. A lot of there but if you could help clarify a little bit that would be great.

Martin J. Driscoll

I'll acknowledge you've been a great supporter of the company. I thank you for that. First in terms of the financing, as I said a moment ago, this was an unsolicited opportunity. It came from a high quality institutional investor and it was at reasonable terms. We had not initiated an effort to conduct the financing. We didn't feel the need based on the status of our strategic discussions. You are correct, in my discussions with my board we weren't seeking to do this. We simply wanted to take advantage of this opportunity.

I think we have been consistent in saying we wanted to focus on completing a strategic transaction for this company, limit the dilution on our shareholders, and do the best transaction that's in the interest of our shareholders. An unsolicited opportunity presented itself to us. The terms of this small equity sale were reasonable and we took advantage of that opportunity.

It gave us a chance to top off our balance sheet, to retain if not strengthen some of our leverage in these strategic discussions, and therefore, we didn't see the need to go to our shareholders and ask if they wanted to join. Again, we wanted to focus on taking advantage of this immediate opportunity and top off the balance sheet and focus on the strategic transactions. So you're correct. We did not go out to our major shareholders or others to build on this including yourself.

In terms of the strategic transaction, I think the best signal I can give you is that the board and myself we choose just to take advantage of this small equity sale. We're not planning to do a financing. I think that's the best indication of the stage that we're at.

In terms of term sheets and the like, I'd rather not get into details. I don't want to be negotiating in the public domain. And I think it's the best signal that I can give is that we chose only to do the small equity sale that was unsolicited to top off the balance sheet. I think that's the message that I can deliver. Certainly our deal discussions have taken longer than I had hoped. It's been dynamic but feel good about where we are and the best signal I can give is we've only done the small equity sale.

Greg Kiernan – Sonostar Capital Partners

One last question on the partnership versus sale or merger, has there been any change in our focus on one versus the other? Are you leaning more towards one? What clarification, if any, can you give us on that?

Martin J. Driscoll

Greg, the sincere answer, which I have said before, is we're going to do what's in the best interest for our shareholders. That's the sincerest answer I can give. Our discussions involve both types of transactions as they have been, and at the end of the day the judgment will be when the board feels this is the best for the shareholders. That's the clearest and most sincere answer I can give you on that topic.


(Operator Instructions) We have no further questions. I'd like to turn the conference back over to Martin Driscoll for any additional or closing remarks.

Martin J. Driscoll

Thank you everyone for your attention. I'm very excited about the soon to be disclosed news about our NDA filing and we'll keep you apprised, of course, of our other major events, in particular the completion of our strategic transactions. Thank you for your continued support and we look forward to working with you in the future. All the best.


That does conclude today's conference. Again, we appreciate your participation today.

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