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NPS Pharmaceuticals, Inc. (NASDAQ:NPSP)

2013 Deutsche Bank BioFEST Conference

December 3, 2013, 1:40 PM ET

Executives

Luke Beshar - Executive Vice President and Chief Financial Officer

Analysts

Alethia Young - Deutsche Bank

Alethia Young - Deutsche Bank

Alethia Young, I'm one of the biotech analysts here at Deutsche Bank. Very happy to have NPS Pharmaceuticals', Luke Beshar, EVP and Chief Financial Officer. And I have to say it's pretty ironic that they are coming right after Aegerion, as the way you guys tend to be very different companies but trade together.

So what I want to do actually is mostly spend a lot of time focusing on Natpara and the bigger picture here and the opportunity, but I can't resist a couple questions on Gattex, since it's such a hot topic. So just in the U.S. with the Gattex, do you feel like there is any seasonality or nuances that you guys are picking up on? And how you think about the fourth quarter number there?

Luke Beshar

Well, first, Alethia, thanks for having us, it's a delight to be here and honor to be presenting today. So thanks for the time. With respect to the Gattex launch, we have guided that the by the end of the year, we expect to have between 275 and 325 patients on therapy. Embedded in that assumption is a healthy degree of seasonality, we expect that per business day the rate of prescriptions, which is just the leading indicator should hold pretty steady maybe slightly decline just because of seasonality, but remain relatively steady based on per business day basis.

However, for the conversions of prescriptions to the patients on drug, we do expect that there will be a seasonal slowdown on that and that really relates to the complexity of the condition and disease that SBS patients suffer and the timing of the holidays. So one of the things the pre-drug administration recommendations is to have a colonoscopy, and among other things, we think that patients are going to probably a little bit are reticent or resistant to doing a scoping immediately before the holidays.

You think about personally, the personal travel the uncertainty about going on a new drug has been really a relative new drug in the marketplace. Our intelligence has indicated that we should expect that patients will temporarily slowdown. We've never been through a holiday season, so this is our best thinking at the current time, but that is our expectations.

So when you look at the fact that we had 235 patients on drug in early November and our guidance for 275 to 300 in a quarter, there have been some people that have suggested that perhaps this is conservative or trying to wonder whether is that number real or are we being unduly conservative. And in our view, it's not. In addition to the seasonality, which I talked about, and again we'll learn over the next six weeks, whether that seasonality is really not.

But also we have a couple of things you need to remember. One is that on average it takes between 90 and 120 days to fill a script, but it's an average. Some of those prescriptions were filled in less than 90, some were filled on over 120, so that it could take beyond the end of the year to fill. We had 452 scripts in hand in early in November in 302, I think it was 305 in early August. The other thing to remember is that not every one of those scripts were filled.

It's too early in the launch to know what percentage will ultimately not fill, but due to complications, changes in patients varies in surgeries, and so it will be a small percentage, but we do expect, we know that a percentage of those will fill. So you put that along to a basket. And then the one last thing I forgot to mention is that discontinuations are increasing, that was as expected.

The product was launched in the first quarter, at that time we guided that we would expect discontinuations to be in the 20% to 30% range it's about 10%, a little less than 10% right now, our actual. So as that creeps up, which is natural, it also creates a little bit of a headwind that when you put all that into a basket and mix it up, it gave us the basis upon which to think that.

By end of the year, like I said between 275 and 325 patients we think we'll have on drug. We do think that the n-Rx number will continue to grow on a per business day relatively on track with where it grew in the third quarter. And then, probably most importantly, as we look out into 2014, all the intelligence we're getting from our field sales force is that it's a class indication, plenty of runway left.

We haven't even really covered all the GI docs for the first time around and the GI, the vast majority of the docs that we have called on who have written scripts for one patient, so the vast majority. And what we're hearing is that the docs are writing a script, if they have more than one patient, they write a script for a patient, because this is a new drug and they want to see how it works before they write the script for additional patients.

And as we get into 2014, it gives us increased confidence that not only calling on new docs, identifying new patients and having those scripts written, ultimately converts on drug. But also the detailing we've done for the existing docs should bear fruit for '14 and beyond. So we feel real good about the launch and just dealing with the seasonality, and in early January we'll know whether we were right or wrong is our best thinking right now in terms of seasonal slowdown.

Alethia Young - Deutsche Bank

That's interesting. Actually this color brought a couple more questions for me. One, just being have you guys disclosed the percent of people not being filled or are you ready to give that kind of clarity?

Luke Beshar

The answer is we have not disclosed it. And frankly, it's way premature, because it's too early to know. Some time the approval process and reimbursement has been extremely good. We've had actually only one, of all the prescriptions written, we had only one last check rejected for reimbursement for non-label prescription, but we need to let that sort of settle in a little bit more and before we get a normalized read on that, and long-term what percentages of those prescriptions ultimately don't fill for whatever reason, we need more data. We know it's not 100%, but what percentages we don't know.

Alethia Young - Deutsche Bank

I mean do you feel like it's kind of like south of 50%, it's like a low number.

Luke Beshar

Well, I certainly think it would be well south of 50% of the ultimate prescriptions that don't fill, well south of that, whether that's where it is between zero and 50%, obviously it's going to be way, way, below 50%, but it would be really inappropriate for me to say anything other than right now we don't know, because any number I'd give you would be a guess.

Alethia Young - Deutsche Bank

And then on the one script, how many people actually like as you think further out in the launch could go on from a GI doc on to the drug, like its kind of reminds me a little bit of programs, but do they feel comfortable at some point possibly having four or five patients, but how do we think about that expansion over the next couple of years in U.S.?

Luke Beshar

What we're hearing from a field sales force is that the prescribing docs, they have more than one patient are very open and amenable to putting the additional patients on drug. They just want to see how it goes with the first one. And anecdotally, we're hearing real good feedback in terms of the fact that the discontinuation is less than 10%. Again, it's early, but it bodes well.

And the feedback from the docs and the patients has been that the patients are responding and we hear anecdotal evidence of patients weaning off. We don't gather date on a formal basis and we hear anecdotal evidence of patients significantly reducing their parenteral nutrition. If you just monitor the blogs, the social blogs, all the other social media, that the patient and advocacy community appears to be quite happy with the early results of the drug.

Alethia Young - Deutsche Bank

And your longer-term data should help too there?

Luke Beshar

It's a great point. We just released our STEPS 2 long-term data, a month or so ago and that showed that after two-and-a-half years of on therapy that there was incremental effect consistently, incremental overtime, so we know that at least, say, for two-and-a-half year at least the drug has incremental effect, and its therapeutic effect is not plateaued, which is huge and we also know that 100% of the patients had a greater than 20% reduction in parenteral nutrition that went on the drug, which is also huge. And that also will be very helpful in our European reimbursement positioning because that long-term data -- long-term data will be very helpful in reimbursement.

Alethia Young - Deutsche Bank

You out-segued me, I was getting ready to ask about Europe. I guess for me I just want to kind of understand like a little bit more, I know the ramp will be slower, and you're starting with Germany, I believe correct? And roughly the addressable population is about the same as the U.S. when we talk about addressable, but like kind of how do we think about putting on the sales, what are the real new nuances in the trenches of those markets like Germany or the U.K. and how it's different from the U.S?

Luke Beshar

Well, the first hurdle is reimbursement. It's the obvious hurdle. It's in each country is different. As you indicated, our strategy is to start for rest of in Germany and in U.K. We are in the final phases of completing the core value dossier and are now actually customizing that or beginning customizing that for the two countries to begin negotiations with reimbursement authorities.

We expect that will be completed in the first half of 2014. We will reference the effect of the U.S. pricing very narrow, very tightly aligned to the U.S. pricing and we know that there will likely be reductions from the U.S. pricing. We have a set a floor below, which we will not introduce the product into the market.

We haven't publicly disclosed that, but we're quite optimistic we will gain and we have acceptable reimbursement in Germany and U.K. But it's going to take probably to the middle of the next year to be get that done, sometime in the first half to be exact. And then we launched the product and that that will be in the second half of the year.

And while we're doing that, we'll be teeing up the next countries behind that, for example, probably Denmark will be the third country, although that's still little bit in flux right now, but we will tee up the third and fourth countries in the EU, while we are also building up and looking at South America and also doing the long-term planning for Japan, which also could be a substantial and robust market. So unlike the U.S. when you get approval for 50 states, we're going have to go state-by-state or country-by-country, so it takes times and it takes a lot of effort and investment up front.

Alethia Young - Deutsche Bank

But do you feel, let's say, for your state-by-state analogy, do you feel that once there is reimbursement in place that the uptake can be a similar rate as the U.S. or are there like nuances in particular as far as like how the treatment paradigm is there, the sensitivity for doctors?

Luke Beshar

I think that the uptake within the countries should be comparable to the national take here in the U.S. A little early for us to be able to pinpoint it exactly, but there is a view that there is a expectation or a knowledge on our part that, the SBS patients in EU do tend to be more concentrated than they are here in the U.S., which would obviously argue that the commercial call pattern could be more focused and perhaps result in a bit quicker than uptake, but that's still is yet to be tested.

Alethia Young - Deutsche Bank

So the conservatism just mostly remains around kind of the battle for reimbursement country-by-country. And then as far as floor pricing, I know you're not ready to kind of tell us what that number is, but is it kind of conceptually how we should think about other like, orphan drug companies and what discounts have been given, or is there something different to be more conservative?

Luke Beshar

Well, I don't know when you say conservative or not, but I think that the pricing expectations, the short answer is view us as being materially different than what the pricing that other orphan companies have realized in the countries, which we're targeting. There's only 30 countries in the world that have a reimbursement scheme that is supportive for the Gattex product. And one-by-one over the next year or two we will build and execute on plans to address those markets.

Alethia Young - Deutsche Bank

And then Latin America, you're going after that?

Luke Beshar

Initially at EU. We'll also be looking at Brazil, certain key South American countries. We haven't disclosed exactly the timing of that is. But once we get the EU up and the reimbursement activity is initiated in the first half, we'll give more color in terms of what next phase of the playbook is. And then also Japan, which again, that's the longest probably term opportunity, but it represents a very substantial market opportunity, because the pricing environment there is quite supportive.

Alethia Young - Deutsche Bank

And what's the prevalence in Japan in comparison to the U.S.?

Luke Beshar

The prevalence worldwide is basically it syncs up to population. The current best assessment is that it really are there non-geographic nuances as typically tied to the prevalence of that -- prevalence is tied to the population, relative population.

Alethia Young - Deutsche Bank

Maybe we'll just flip to Natpara then. I guess, one, I just want you to kind of for everybody in the room give a flavor of the manufacturing. Let us know if you feel comfortable that the issue is resolved and that you're moving forward and ready to produce the drug?

Luke Beshar

Well, the short answer is we're not ready. We are producing the drug and we're very comfortable with the manufacturing problems have been resolved. The problem surfaced a-year-and-a-half or so ago, maybe a little bit more now, and it related to the formation of atypical particles in the reformulated products. We were a bit encumbered in the beginning in the investigations, because our CMO was fully booked. So our ability to be able to run production runs and try to identify the root cause was hampered, because we couldn't get time in the suite.

However, in 2013, those suites were made available and we were able to run scores of the experiments and ultimately identified a number of primary contributors to the formation of those atypical particles. We have improved manufacturing controls. Successfully we ran three consecutive inspect batches, which was supported for the BLA. We've run many more of since then. So the net of it is we are very comfortable, we have a well-controlled process. The CMC section of the BLA filing that we filed in October reflects that we're very confident that manufacturing issues with respect to that problem are behind us.

Alethia Young - Deutsche Bank

So talking a little bit about, one, do you think that panel will be necessary? And are you prepping for it now?

Luke Beshar

Well, the answer to the second part of your question is, yes. We are prepping. The answer to your first question is, we don't know. We don't know whether we're going to get an [indiscernible] or not. We filed BLA on October 23. The 74 day letter will come-in in January. In that letter we'll learn whether there will be an advisory committee, we'll learn what our PDUFA date is and we'll learn whether we were granted priority review. We do not expect for early view and we do expect an advisory committee, but we'll see what the FDA says in January.

Alethia Young - Deutsche Bank

And then, so what are some of the things that you've been doing or kind of how are you proactively thinking about, if you were to have a panel, what the concerns will probably be by the agency based on the current standard of care? And entrenched in that also is just go back, take a step back and give us some color on disease itself, hypoparathyroidism and the standard of care used right now?

Luke Beshar

So on the advisory committee, the short-answer is, we're not really sure, what the hot buttons are going to be. One of the positive outcomes or changes from PDUFA V is a mid-cycle review with the FDA. So a mid-cycle, the FDA is now obligated to sit down with us and give us feedback on the filing, the application. And that will be obviously invaluable, because the normal sequencing that we probably have there. If it's a 12 month review then we'd have that in April, kind of a sit-down, and again the normal cycle would call for the advisory committee in July, if they were able to schedule one then.

So that will be an invaluable checkpoint to be able to give us insight. But before then, we'll wait to make sure we have the advisory committee in January and then we'll begin strategizing a bit deeper. But right now, we're a little perplexed, the drug clearly works, safety profile is terrific. So we'll prepare for that between then and now.

Back to your broader question about hypoparathyroidism, the condition and the current standard of care, so hypoparathyroidism is when the individual lacks level of parathyroid, the normal level of parathyroid hormone in the body. So the parathyroid hormone or PTH controls or regulates calcium levels and it regulates phosphate levels. It converts native vitamin D to active vitamin D, which is of course essential for their conversion of calcium in the gut, and then finally it is an essential component to normal bone turnover.

So when the body lacks the necessary level of parathyroid hormone, usually in connection with removal of the parathyroid glands, because of neck surgery or thyroidectomies, the individual suffers from low levels of calcium, heightened elevated levels of phosphorus and the kidney is excreting excess levels of calcium and not enough levels of phosphate.

And unlike other hormone replacement therapies, there are no replacement therapies available to doctors. So they have no choice, but to put their patients on oral supplementation of active vitamin D and calcium, so when the patients take those supplementations, it partially deals with the symptoms, but it doesn't deal at all or address the underlying disease.

And what happens is that because the phosphate levels are elevated in the body, when you take the calcium supplementation orally, and also exacerbated by where you taking the active vitamin D orally that increases the absorption of calcium in the gut, and that calcium then binds with the phosphate levels and creates phosphate calcium deposits in the body.

They end up somewhere in the soft issue, typically in the kidneys, in the heart or in the brain, so long-term the comorbidities are quite significant. So a PTH, our product is a bioengineered identical duplicate to the native hormone. It's a classic hormone replacement therapy and when administered subcu once a day, it largely eliminates, it deals with the lung disease and therefore significantly reduces the symptoms.

Alethia Young - Deutsche Bank

It seems like this may be the only endocrine disorder that doesn't have a kind of hormone replacement therapy?

Luke Beshar

I think that's right. I believe this is the last hormone replacement therapy available.

Alethia Young - Deutsche Bank

And I assume most of the hormone replacement therapies have required panels, if I go through some of the memory of some of those.

Luke Beshar

I don't know that, I think so.

Alethia Young - Deutsche Bank

And then, so I guess, what's the most like -- the safety look relatively mild, benign but what's kind of is the biggest thing that might jump out in your head, if you were sitting in the FDA shoes and trying to think about the profile of the drug and kind of the homeostasis balance that you have to maintain like, what's your view there.

Luke Beshar

For orphan drug, we have a extremely robust safety database, dating back to PTH's repurpose, there was as you know study in osteoporosis by NPS starting about 10 years ago to about six years ago, and we ran a Phase 3 trials with 3,000 patients and have a very robust database from those trials, but we also have the commercial database, the commercial safety database from PTH that was marketed commercially for osteoporosis in Europe, until middle of 2012. So the combination of those two databases give a unusually deep safety database for the filing, and the fact of the matter is the side effects very modest, the adverse events profile was quite pristine and really nothing popped out. It's basically replacement for the hormone. So the body seems to tolerate it quite well.

Alethia Young - Deutsche Bank

And for everybody on webcast, if there are any questions feel free to email me, alethea.young@db.com. Also we'll take a second and see if there are any questions in the room. I'm going to ask you one more Natpara question, unless there are any, and then we'll move on to like the big picture. So when you think about, how do you plan on marketing Natpara, and then like what are kind of early activities can you do to kind of set the landscape there, and also talk a little bit about the disconnect between patients and doctors perhaps and how you can bridge that?

Luke Beshar

Sure. Well, on the marketing, we anticipate we'll market it ourselves. We'll start in the U.S., the BLA was filed last month, we'll file the MA in Europe in first half of 2014 and that will put us on a trajectory to launch it in the first half of '15. So let me just start with the U.S. we were gearing up on our MSLs and they're increasing the staffing and they're beginning or have begun the process of kind of mapping out the hypo market opportunity, identifying who the KOLs are, identifying how many doctors you really will need to call on.

The endocrinologist, there is only 5,000 or 6,000 in the U.S., our expectations is there is probably going to be 2,000 or 3,000 that are probably the primary call points, but we need confirm that. So right now, the market preparedness activities are revolving more around MSLs education and mapping out the market and then as we get further down the BLA approval process.

And while we're moving down the down the approval process we'll be mapping doing the final field force mapping and then sizing that field sales force and then beginning to populate it. We will be able to leverage the existing marketing, market access and commercial infrastructure, so incrementally the spend is going to be on sort of detailing the market and then actually hiring and training the sales force.

What was the second, you asked another part of the questions, the disconnect from docs. Yes, I think that because there is no approved therapy for hyperparathyroidism, it's not unusual for doctors to underestimate the severity of the disease. And that's what our view, is the situation here. We ran study called PARADOX. We conducted in conjunction with the Mayo Clinic and Hypoparathyroid Association, and that was a cohort of 374 hypoparathyroidism patients, and it was quite interesting what we learned.

Some of the main takeaways were that virtually, actually 99% of those patients reported suffering from symptoms, and on average they suffered those symptoms 13 hours a day. 63% of those patients suffered heart arrhythmias and 36% of those patients suffered from kidney stones. We also learned that about 30% of those patients reported symptoms is severe, about 48% were moderate and about 20% were mild in terms of symptoms.

And the more severe patients and the more acute hypoparathyroidism patients actually were hospitalized and included ER visits and IV infusions of calcium in order to deal with the symptoms. The symptoms are quite profound. If you have suffered from hypocalcemia, it not only does it affect your absorption of calcium into the body, but it also end and results an abnormal bone turnover, your bones becomes very, very dense, almost like a bowling ball.

But you also have physical symptoms, tetany, seizure-like muscle spasms, brain fog, inability to cognitively think straight. So these patients have a very, very high burdened disease. And what we're learning is the doctors don't appreciate it and they are just choosing to underestimate it principally, because they have no solution for the patients.

Alethia Young - Deutsche Bank

So a couple final questions. One, what can we expect at your Analyst Day on Friday, anything exciting?

Luke Beshar

Well, I can't tell you everything, because then we'd have to kill you. But we're really excited about that part of day. It will be a day where we're going to begin the show a little bit more in terms of our assessment, the basis for our optimism. We can believe Natpara will be. We believe Gattex is going to be every bit of successful as we expect it. We actually think that part is going to be a bigger revenue product for us at peak revenue, globally and in U.S. for that matter.

And so we'll give some more insights into the addressable market. We're not going to give pricing, we don't know pricing, we'll help people frame out a little bit better what our peer research is telling us, and where we're thinking a broad definition of where we think we're pricing. We'll give a great deal of insight into the burdened disease, and give a better insight into the commercial strategy and the execution.

I will also spend some time kind of bringing people up in our international expansion. That international expansion initially is focused on Revestive, but all the infrastructure we're putting in place for Revestive will obviously will leverage to the benefit of Natpara as well.

Alethia Young - Deutsche Bank

And maybe in the last 30 seconds or so, I think you stopped me on going to the Analyst Day after that little overview there. But maybe, and last, just what's next in the pipeline, like how do we think about NPS on Gattex and Natpara?

Luke Beshar

You should think of this as this is the first inning of a nine inning game. We are committed to building NPS to be the premier rare disease company globally. And two products are not going to do that, so will have initiated the development work and have in the clinic our next product NPSP795. That's for ultra, ultra-rare disorder known as ADH. That's a Phase 2A study. So that's obviously early on.

And we're also gearing up on our corporate development activities and are beginning to actively monitor the market for licensing opportunities. Those opportunities will likely be development stage compounds. The must haves for any candidate will be, it needs to be rare disease, it needs to be an unmet medical need. The nice two haves would be GI and endocrine disorders.

Therapeutically, we're agnostic with the exception of doubt, we would not go into oncology, but other than that it's a light open field. So for us the mission is to be the global leader in rare diseases and the licensing activities are going to track to that.

Alethia Young - Deutsche Bank

Well, Luke, it's always a pleasure talking to you.

Luke Beshar

Appreciate it, have a good day. Thanks for your time.

Question-and-Answer Session

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