NuPathe Management Discusses Q3 2013 Results - Earnings Call Transcript

Nov.14.13 | About: Teva Pharmaceutical (TEVA)

NuPathe (PATH) Q3 2013 Earnings Call November 14, 2013 4:30 PM ET

Executives

John Woolford - Principal

Armando Anido - Chief Executive Officer and Director

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

Analysts

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

Liana Moussatos - Wedbush Securities Inc., Research Division

Operator

Good afternoon, ladies and gentlemen, and welcome to the NuPathe Third Quarter 2013 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. It is now my pleasure to turn the call over to Mr. John Woolford. Please go ahead, Mr. Woolford.

John Woolford

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

We issued a press release detailing third quarter 2013 financial results earlier this afternoon. 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 would 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 benefits, market opportunity and commercial prospects of Zecuity; our plans to obtain a commercial partner for Zecuity and the prospects of doing so; the expected manufacture of Zecuity launch supplies by the end of 2013; our commercial plans and timing regarding the launch of Zecuity; the sufficiency of our existing cash to fund operations and debt service obligations through January of 2014; and the transactions being considered to address such capital needs, as well as other statements regarding our plans, expectations and beliefs regarding future operations, performance, financial condition and other 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 our ability to obtain a commercial partner for Zecuity; our ability to complete the validation of the manufacturing process for Zecuity and manufacture commercial supplies; our reliance on third parties to manufacture Zecuity; our ability to establish and effectively manage our supply chain; our ability to obtain additional capital to continue as a going concern and launch Zecuity; the potential consequences of failing to obtain the additional required capital including the default under our 2012 term loan, which could result in the acceleration of our payments, obligations and the ability of the lender to proceed against the collateral securing the loan, including the exercise of control over our cash and investment accounts pursuant to the account control agreements; a default under our office lease which could result in the acceleration of payments; the breach or termination of agreements on which we rely for the manufacture of Zecuity or pursuant to which we obtain valuable rights; and the need to pursue a plan to license or sell our assets and/or seek bankruptcy protection, as well as those other 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

Thank you, John, and thank you all for joining us this afternoon. First and foremost, while I will not comment specifically, we have made substantial progress to securing a partner to maximize the commercial potential of Zecuity. Additionally, we are on track to have Zecuity launch supplies manufactured by year end. We believe that puts us in a good position to secure a commercial partner. And while we have made progress on the partnership and manufacturing fronts, in order to extend our cash runway, we are limiting and delaying certain sales and marketing activities. As a result, we will not commercialize Zecuity by year end, but we intend to launch as expeditiously as possible after securing a partner in funding.

Specific to our Zecuity manufacturing activities, we have entered into a commercial supply and license agreement with LTS, otherwise known as Lohmann Therapy Systems, for the drug product in Zecuity. In addition, we made significant progress regarding several key process validation steps and continue to expect to have launch supplies manufactured by the end of this year.

During the quarter, as part of our post-marketing requirements, we also initiated dosing of patients in a Phase I study of Zecuity in adolescents with a history of migraine attacks. This open-label, single-dose study assesses the safety, pharmacokinetics and tolerability of Zecuity in these patients.

Today, oral tablets are the only route of administration currently approved for the acute treatment of migraine attacks in adolescents. An analysis of the landmark American Migraine Prevalence and Prevention Study, or AMPP, the largest survey of migraine sufferers, showed that 5% of boys and 7.7% of girls aged 12 to 19, that's the criteria for migraine. Adolescents experience the same cardinal symptoms of migraine as do adults: headache pain, migraine-related nausea, photophobia and phonophobia. As reported in a retrospective review of GlaxoSmithKline's clinical trials database of 1,952 adolescent migraineurs, 53% experienced nausea, making Zecuity a potentially important new therapeutic option for these patients. Our ongoing study will enroll up to 36 adolescents aged 12 to 17. There will be a similar number of subjects between 12 to 14 years of age and 15 to 17 years of age, with distribution of both sexes in each age bracket. We expect to announce results of this study in the third quarter of 2014.

And lastly, I also wanted to highlight that the United States Patent and Trademark Office recently issued a notice of allowance for another Zecuity patent. This patent covers Zecuity's 2-stage iontophoretic delivery sequence to transdermally deliver sumatriptan. When issued, this patent will provide additional protection for Zecuity and will be the sixth patent covering Zecuity to be listed in the Food and Drug Administration's Orange Book.

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

Keith A. Goldan

Thank you, and good afternoon, everyone. We issued a press release detailing financial results and recent operational highlights for the third quarter 2013 earlier this afternoon. We plan on filing our 10-Q shortly after this call. NuPathe reported net loss applicable to common shareholders of $7.8 million, or $0.25 per share, for the third quarter of 2013, compared with a net loss applicable to common shareholders of $6.2 million, or $0.42 per share, for the third quarter of 2012.

Third quarter 2013 operating expenses totaled $7.6 million, compared with $5.7 million in the 2012 period. Research and development expenses during the third quarter of 2013 were $3.9 million, up from the $2.2 million in the comparable quarter of 2012. This increase in R&D spending is largely attributable to higher expenses related to commercial manufacturing scale-up. This was partially offset by reduced compensation expenses in the 2013 period due to fewer headcount.

Selling, general and administrative expenses were $3.7 million in the third quarter, in line with $3.5 million during the same period last year. Net cash used in operating activities for the 9 months ended September 30, 2013, totaled $12 million, primarily the result of spending for normal operating activities, including manufacturing scale-up and commercialization expenditures for Zecuity.

During that same period, we also used $2.7 million of cash and investing activities, primarily for the purchase of commercial manufacturing capital equipment for Zecuity, and we generated $2.4 million of financing activities, primarily from the exercise of warrants.

At the end of the third quarter, NuPathe had $10.3 million in cash and cash equivalents and working capital of $2.9 million, compared with $22.6 million in cash and cash equivalents and working capital of $19.8 million at December 31, 2012. We now expect that our existing cash and cash equivalents will be sufficient to fund operations and debt service obligations through January of 2014.

The additional capital that we'll require to fund operations and debt service obligations beyond that point and launch Zecuity will depend largely upon the timing, scope, terms and structure for the commercial partnership for Zecuity. To address our capital needs, we are considering a range of potential transactions, including corporate collaborations, partnerships and other strategic transactions, debt and equity financings and other funding opportunities. However, there's no assurance that we'll be able to complete any such transaction for obtaining the additional capital required.

I'll now turn the call back to Armando for closing remarks.

Armando Anido

Thank you, Keith. We want to thank all of our stakeholders for your continued support. As you can see, it's been a very busy and productive quarter. And with that, I'm now happy to take questions. Operator, please begin the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] We'll go first to Annabel Samimy with Stifel.

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

I just have to ask the obvious, which is, exactly what has been the rate-limiting step for you guys to secure a partnership? Was it lack of interest in the product, lack of product manufacturer? Or if you can just give us some color there? And also, if you're potentially facing a situation where you're even putting bankruptcy issues in your risk statements, do the standards for corporate partnership have to come down? What are the things that you're looking for now versus what you've sort of been looking for before? Or has it stayed the same?

Armando Anido

Yes. Thanks, Annabel, for the questions. And I think that in trying to secure a partner, I think there's a number of things that go into consideration. I don't know that I can sit here and point to one in particular. I think that as you kind of take a look at the full package, we have an approved asset that was approved back in January. We then had to undergo all of the manufacturing qualifications and then now going into the validations, and that does take time. I think that as some potential partners look at it, they want to make sure that we actually will be able to manufacture the product, so I think that's a very positive step for us. And I think at the end of the day, it's also a matter of, do you have -- do they have the right type of structure? And do they have the right interest in really making this a significant product and really helping us in making sure that Zecuity becomes available and becomes available widely to those patients who suffer from migraine-related nausea, and hopefully, make it a success? So these collaborations, having been in a number of them throughout my career, do take time. I think that as everybody's patience gets a little less, it makes it difficult. But at the end of the day, these things do take a lot of patience. And I think that at this point in time, I think that we have made very substantial progress. And I think that with the manufacturing moving onward and being able to ship product at the end of the year, if necessary, I think we're in the best position that we can be in, in order to secure that partner.

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

Okay. Well, I don't know if you can do this, but can you sort of give a little bit more color on what substantial progress means?

Armando Anido

Yes, I think that there are so many steps in this. I think that, for me, the progress that we have made is very substantial to the point I'm not going to specifically give you details around what that -- exactly where we are in the process. But I wouldn't be communicating that we've made substantial progress if I didn't think that we have a pretty good chance of securing this.

Operator

[Operator Instructions] We'll go to Liana Moussatos with Wedbush Securities.

Liana Moussatos - Wedbush Securities Inc., Research Division

Are you talking more than one potential partner now?

Armando Anido

Liana, the specifics, let me rephrase the question. The -- are we talking to more than one partner? I can absolutely tell you that we are. Yes. Well, I can't give you specifics on the numbers.

Operator

And it appears there are no further questions at this time. I'd like to turn the conference back over to Mr. Armando Anido for any additional or closing remarks.

Armando Anido

Right. Thank you all very much for your time this afternoon, and look forward to future conversations. Thank you.

Operator

Thank you. That does conclude our conference. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!