Luke Beshar – Executive Vice President, Chief Financial Officer
NPS Pharmaceuticals Inc. (NPSP) Company Conference Presentation December 10, 2013 9:10 AM ET
The next company to present is going to be NPS Pharmaceuticals, and it’s my pleasure to introduce Luke Beshar, who is the Executive Vice President and Chief Financial Officer of NPS.
Thanks Boris and good morning everybody on this wintry December day. It’s a pleasure to be presenting on behalf of the NPS management team today. The Safe Harbor statement in front of you will be on the record for the balance of this morning’s presentation.
So let’s talk a little bit about NPS. Our strategy, our goal is to become the world’s premier rare disease company, and we’ll do that by globally developing and commercializing innovative, first-in-class therapeutics, principally for rare diseases with unmet medical needs. 2013 has been a pivotal year towards achieving that goal. It’s really been a transformative year on four fronts. First, we launched our first product, Gattex, in the U.S., and the launch is going exceedingly well and meeting and/or exceeding our expectations. We’re moving into international expansion and are putting the underpinnings in place to launch Revestive. Those undertakings are well underway and we’ll launch that product in 2014 in the E.U. and eventually in other key countries throughout the world. Third, we filed the BLA for our second product, Natpara. We submitted that in October of 2013, which puts us on trajectory for potential approval in Q4 ’14 for the treatment of hypoparathyroidism – we’ll talk a little bit more about that in the presentation this morning. Finally, we’re pursuing a new pipeline and licensing opportunities to continue to drive long-term shareholder growth and shareholder value creation.
Gattex – as I mentioned, we launched it in February. Gattex is a proprietary analog of of GLP2, which is a naturally occurring peptide that stimulates absorption in the gut. Short bowel syndrome, which is the indication for Gattex, is a serious complex disorder usually in connection with vascular disorders, Crohn’s disease, gunshot trauma where more than half of the gut has been removed surgically, so the remaining gut is incapable of transferring sufficient fluid and nutrients in order to sustain life. The patients therefore become chronically dependent on parenteral nutrition. Gattex is really the first and only product approved for long-term treatment of adults with short bowel syndrome who are dependent on parenteral nutrition.
We had an investor day last Friday. We are pleased to report that as of last week, we had already achieved the low end of our guidance for patients on drug at the end of the year – that was 275 is the low end. The balance of our guidance for 2013 for the first year of the launch is that we expect revenues to come in between $28 million and $32 million – that was an increase from our prior guidance. Patients on drug should be between 275 and 325 patients. We expect compliance and adherence in the 70% to 80% range, and the gross to net to be about 10%, 8% to 12% to be exact.
We recently were very happy to present at ACG our results from our two-year open label study. This study, there were three cohorts, the two cohorts participating in the registration trial, the active and the placebo arm, and then also there were a number of patients who were in the stabilization period when the trial fully enrolled and they were directly bypassed and put into the open label extension. Those data support the long-term use of Gattex in short bowel syndrome. It shows quite clearly that the patients on Gattex beyond one year continue to achieve clinically meaningful reductions in parenteral nutrition and actually some achieved the holy grail of completely weaning off parenteral nutrition.
We filed an SNDA with the U.S. FDA and we are on track for a June action date on that filing. Also of note is that these data are going to be very important and very helpful in our pricing negotiations in the E.U. as we begin that process, which I’ll talk about in a few minutes.
Our international expansion, the first product we will introduce internationally is Revestive. We believe that the ex-U.S. opportunity for Revestive, which is the brand name outside the U.S. for Gattex or teduglutide, we actually believe the revenue potential ex-U.S. is greater than that of the U.S., so we’re very bullish on the product in key countries throughout the world. We expect addressable market in the U.S. to be in the 3,000 to 5,000 patients, in the E.U., slightly larger – between 3,000 and 6,000, and rest of world, which is principally Latin America and Japan, between 2,500 and 6,000 patients. So you can see we have substantial ex-U.S. revenue opportunity and patient opportunity. We are principally—until March of this year, we are exclusively a U.S.-centric business, so we’ve begun the process of a clean sheet of paper, building out an international infrastructure that investment and underpinnings will hit full stride in 2014, which will then set the underpinnings in place for late ’14 growth into ’15, ’16 and many years beyond.
With respect to the timing of sales on the commercial side, in E.U. the transfer of the Revestive MAA was completed last month. For those of you who are not familiar with us, we reacquired the rights for Revestive from our prior partner, Takeda, in March of this year, and we went through the regulatory filing in order to officially transfer that with the E.U., and that was effected in last month. The pricing reimbursement discussions, corevalue.ca, is completed and we are beginning the process of customizing that for our key countries, and those discussions will take place between now and the end of the second quarter 2014, which will put us on a trajectory for a ramp and meaningful sales in second half of ’14 on a commercial basis.
On the mean patient program, we’re advancing in two key countries in 2014, or two key areas: Turkey and Latin America. In Turkey, there’s a well defined patient sales process which is managed centrally by a pharmacist association, and we are on track to begin named patient sales in first half of ’14. In Latin America, we’re underway on a market development and patient identification and expect named patient sales to begin in mid to late 2014. Finally Japan, which we believe is a substantial market opportunity for Revestive, although a little longer cultivation period, we are preparing the orphan drug status filing and the product development strategy, so stay tuned on that.
As I mentioned, we filed the BLA for Natpara on October 23 of this year. That is for the use of PTH in hypoparathyroidism. Hypoparathyroidism has a significant burden of illness which is frankly not well understood. Hypoparathyroidism is a rare endocrine disorder in which the body produces insufficient levels of PTH. PTH in your body controls your—regulates your calcium and phosphate levels, and it’s essential to the systems of muscle, bone and neurological.
Paradox, which is our burden of disease study, was conducted in conjunction with the Mayo Clinic and the Hypoparathyroid Association. It was the largest ever study, at least to our knowledge. It’s a 374 cohort patient and the findings were quite interesting to us in that nearly 40—patients reported nearly 40 physical, cognitive and emotional symptoms related to hypoparathyroidism. Nearly 100% - actually 99% - of the patients reported experiencing symptoms despite taking calcium and Vitamin D. The symptoms last on average 12 hours a day and 85% of the patients reported that hypoparathyroidism prevents them from going about their normal daily activities, so clearly the burden of illness is quite significant.
There’s also significant co-morbidities associated with the current standard of care in hypoparathyroidism. Sixty-nine percent of the patients reported co-morbidities with 66% of the patients reporting heart arrhythmias and 36% of the patients reporting experienced kidney stones, and nearly 80% reporting hospital stays or emergency room visits.
The market opportunity for hypoparathyroidism is large globally. Our estimate among the 30 countries in the world that we intend to introduce this product to, there’s about 180,000 patients and these patients have long-term physiological need for PTH replacement therapy. We also expect this market to grow about 4% to 5% a year.
The way we think about the market is really two global segments. While you think about from a symptom perspective, this is a highly symptomatic disease and mild, moderate and severe symptoms are the way that people have reported their symptoms from the disease. We actually think about it as controlled or uncontrolled, so typically more of the mild patients have a limited number of symptoms because of the current standard of care, and it’s a little bit more controlled in terms of the symptomatic aspect of it. But the moderate and severe have uncontrolled symptoms and are therefore highly symptomatic, so as we think about the Natpara opportunity, we think both of those segments – the controlled and uncontrolled – are meaningful segments for us, but initially the uncontrolled will be where we will focus our attention. These patients are highly symptomatic and current standard of care is just not appropriately dealing with their symptoms, but importantly even the patients who don’t have the day-to-day symptoms, we believe PTH is an opportunity for them because they really do physiologically need PTH long-term in order to reduce the co-morbidities.
In the U.S., we estimate there’s about 53,000 patients in prevalence. That was based on seven studies over four years, including chart reviews, claims analysis, and primary market research by physicians. As I mentioned, we expect this market to grow between 4% to 5% a year, which by 2025 should have the U.S. patient population north of 80,000 people. We filed the U.S. BLA in October of 2013. Hypoparathyroidism is the last classic endocrine disorder with no approved replacement therapy. We’re fortunate that our product is an identical duplicate, bioengineered duplicate to the native hormone, so the mechanism of action obviously makes sense – it’s a no-brainer. As with any hormone therapy, we anticipate offering in customized doses or multiple doses, actually four to be exact. We expect U.S. market exclusivity until 2026. We are moving forward and expect to have filing in the E.U. in first half of 2014, and our commercial readiness activities in the U.S. will ramp up in 2014 as we get ready for an advisory committee we expect sometime in the middle of the year, and a hopeful approval by the end of the year.
The Natpara BLA is supported by a very robust clinical program, the largest ever conducted in hypoparathyroidism. The landmark Replace study, as you can see the chart on your right there, it was a triple endpoint. The patients needed to have a 50% or greater reduction in calcium, Vitamin D and be normal calcemic. As you can see, 53% of the patients hit that endpoint with a highly statistical P-value of 0.0000001, where essentially the placebo group had just one responder at 2%. Also 43% of the patients—so 53% hit the endpoint, 43% were completely weaned off daily supplementation of Vitamin D and calcium, so we’re optimistic in terms of the clinical profile. We also recently have data from the Replace study that was presented at SBMR that shows the potential beneficial effect on the bone, and then there’s an eight-year ongoing study at Columbia University that recently had four-year data presented that supports that increased bone turnover markers are associated with the administration of PTH and therefore suggest a normalized bone metabolism.
The last of our four key points today is that Gattex and Natpara are not the endgame for us. It’s the beginning, and we’re pursuing and in-licensing opportunities to drive long-term sustainable shareholder value creation. On the Gattex side, we’ve begun life cycle management with the approval of Gattex just about 11 months ago. We’ve geared up our life cycle management and the first program we’re initiating is pediatric short bowel syndrome patients, which is highly traumatizing, and amazingly the patient community has been very vocal in its interest and support of us developing it for pediatrics. Significant costs for pediatric SBS – it can as much as $1.5 million a year, 146 days in the hospital, and we have begun that global registration study that will begin actually next month in December—or this month, I should say. We’ll give updates on that in 2014.
Our second development compound is NPSP795. It’s a calcilytic compound, a small molecule antagonist of the calcium receptor. We expect to initiate a Phase IIA proof of concept study with this compound in mid-2014. The target indication is autosomnal dominant hypocalcemia, or ADH, an ultra-ultra rare disorder – we think probably 1,000, maybe 1,000 patients in the U.S. The disorder is caused by a mutation of the calcium sensor receptor, and there is no approved therapy and the symptoms are quite significant.
Finally in terms of this growth, we are building a corporate development function and have begun Invigor, evaluating new in-licensing opportunities for new compounds to put into the clinic. The must-haves in the evaluation criteria are rare disease and unmet medical need. The like-to-haves are GI or endocrine disorders. From a therapeutic area, we are agnostic with respect to areas that we will consider, with one exception – don’t expect us to go into oncology.
We’re very proud of the current financial position of the company. It’s the strongest its been and the outlook is the best its been in the company’s 26 years of history. We have $178 million of cash in the bank as of September 30. We have essentially no recourse debt, a small $17 million in a convert that at $5 strike price is certainly going to convert in the next year. As I mentioned on the guidance side, we’ve guided we expect to report between $28 million and $32 million in revenue in Gattex this year, ending the year with between 275 and 325 patients on drug, and probably equally as important, with the trajectory to continue to see that Gattex revenue grow through 2014 and beyond.
So for 2014, we think we’re well equipped to deliver key milestones as NPS continues to transition itself to be a premier global orphan drug business. On Gattex and Revestive, we’ll obviously complete the launch for Gattex, the first year launch, and work to ensure that that trajectory continues to grow through 2014. We will launch Revestive in the E.U., both on a commercial and main patient basis, and Natpara we will defend the filing with the FDA and have a trajectory for hopeful approval by the second half, fourth quarter of next year. We’ll file for Natpara in the E.U. and we’ll initiative both the Gattex pediatric registration study as well as initiate the Phase IIA study for NPSP795 in ADH.
So that concludes my prepared remarks, so we have about 10 minutes left, which is right on track, so I’ll open it up to questions and answers.
Question and Answer Session
Hi. On the Natpara results, the 53%, so what happened to the other people that did not respond? Did they not respond to the calcium and Vitamin D as well, that other group? I mean, I’m trying to understand what happened to—
You mean the 47% that—
Yes, the 47, were they well controlled on—my question is were they well controlled on the calcium and Vitamin D, and could not switch to Natpara, or were they also poorly controlled? I’m trying to understand what—
Well, the endpoint was not control versus uncontrolled. It was calcium and Vitamin D supplementation and the 47% who did not respond, that meant that they were unable to titrate the calcium and Vitamin D below the 50% endpoint and/or maintain normal calcemia. It was a triple endpoint, very difficult – you had to hit all three, so it wasn’t or and and. You had to be 50% reduction calcium and 50% reduction of Vitamin D, and normal calcemic at the end of the trial. So for various reasons, those 53% didn’t hit or more than one of those. Doesn’t necessarily deal with the symptoms. Even some of the patients who—it was really not symptom-based. The endpoints were a reduction in calcium and Vitamin D while maintaining normal calcemia.
Even if they titrate down, what was their—were any of them improved with the Natpara and (indiscernible) how they were (indiscernible)?
We did not. We did not.
Thank you. Could you comment on the current read on compliance on Gattex and to the extent to which there is lack of optimal compliance, what’s the thinking on the reasons therefore?
So the question was could we please comment on the current Gattex compliance. So the last update was 86% was compliance. We’ve guided long-term we expect that compliance to be more in the 70%, 80% range. It’s a self-injected, so just by definition there tends to be a base non-compliance associated with that administration of the drug, but we know that if you skip a dose, it probably doesn’t matter. We also know that if patients—based on the first trial when patients who were on Gattex, they suspend treatment, the gut does return to its normal state and the parenteral nutrition increases back to where it was before.
So it’s a fine balance. We have care coordinators at NPS strategically we’ve put in place where each of our patients have a direct relationship with an NPS care coordinator, and if a patient doesn’t reorder their drug after the 30 days, they’ll get a call from us to make sure we understand what’s happening and make sure everything is okay. But the reality, just by the nature of the drug, we really never expected 100% compliance. Frankly at 86%, it’s a little better than we expected, but we’ve been careful to warn people these are still early days, so we don’t really know where that’s going to settle in, whether it’s 75 or 85. We just don’t know, so what we continue to caution people is model 70, 80 and we’ll see how it plays out.
Can you comment on whether or not you’ve reached the point at which some people have self better, gone off their treatment, and then come back?
Well for sure we know, anecdotally but we know that we’re hearing very consistent feedback from patients that the drug is working, that parenteral nutrition is being reduced. We know patients have weaned off parenteral nutrition since they began the drug commercially available, so we have all that. We’re not in a formal basis gathering that data; it’s just not the nature of the distribution chain, but we know from the feedback we’re getting from patients that the experience has generally been very good. Like I said, patients are being weaned off, and again these are early days.
We know from the extension trial, the drug has incremental efficacy at least 2.5 years out, so most of these patients have been only on the drug for three to six months, so we’re very optimistic.
The endpoint of the trial was increases in Vitamin D and calcium?
Decreases in the daily supplementation of Vitamin D and calcium, yes. That’s for the Natpara trial, yes.
Do you have a secondary endpoint of one of the other decreases of supplemental vitamins?
No, we didn’t. It was a triple endpoint. You had to hit all three.
Yes, I know – that was the primary. But did you keep track of whether people were able to decrease one or the other, or—
Yes, we did, but they were not considered responders. But yes, we do have that data. That’s in the trial results if you’re so inclined.
Any other questions? Yes?
In terms of commercialization in Europe, you mentioned that you guys are going to be building your commercial infrastructure from scratch. Have you considered maybe just buying somebody there that had a small product already and kind of leverage the expertise and experience and do that route?
We’re actually looking at all kinds of corp-dev opportunities, including both M&A as well as in-licensing of compounds. Boris, we haven’t seen anybody out there that meets that profile, which is a small company that has an infrastructure that’s focused on orphan and rare diseases where we can leverage that. We constantly look for that but we have not seen anybody like that out there that’s commercially available, so we’ve decided to build our own. But while we’re building our own, we’re continuing to monitor and evaluate other strategic opportunities to perhaps benefit from leverage that right now doesn’t exist.
The rare disease space in Europe is slim pickings, and unfortunately we’re not the only ones out there that are moving into Europe so there’s a very high level of competition for talent. We’re seeing that pretty consistently, so not only is there few people but the folks that are qualified and know the space, they don’t come cheap. So it’s a highly competitive market and it’s something I think as the rare disease space probably mature and grows, I would expect that more talent would be attracted to that so hopefully it will stabilize. But right now, there’s a fair shortage of qualified people.
The orphan—just like in the U.S., or frankly probably even more so in the E.U., the orphan commercial model is just totally different than primary.
Do we have any more questions from the audience?
I recall you were awaiting a manufacturing inspection from the FDA for Natpara. Has that taken place?
So we weren’t actually awaiting a manufacturing inspection. We did have a manufacturing problem with—actually one of our CMOs had a manufacturing problem where there was a formation of atypical particles in the reconstituted product. Natpara is shipped or sold in a dual-chamber vial. The active drug is lyophilized on one half and it has sterile water on the other half with preservative. That gets reconstituted and then dropped into a pen, and that represents 14 days of doses – two weeks, which gets refrigerated between each daily dose. Obviously as part of our batch release, and not surprisingly, we reconstitute that and then observe that for 14 days to see whether the product is stable, and I guess probably two years ago – I forget exactly when – certain batches began to fail, and they failed because there was formation of atypical particles after it was reconstituted.
In 2013, we ran scores of (indiscernible) experiments. We identified a number of contributing causes to that. We fixed those, we put manufacturing controls—we didn’t change the process, we improved controls around or actually worked with our CMO to put improved controls around the process and eliminate the root cause, and we were able to run three consecutive batches that were support for the BLA, which we filed last month. We’ve also run a number of successful batches after those three, so we feel very good about the controls around our manufacturing process. It’s robust and very well controlled, so we don’t expect there to be a problem with respect to the FDA in terms of the process.
In terms of the FDA inspections, as part of any PAI or any BLA or NDA, the Agency usually does—they can and usually do inspect the manufacturing facilities as part of the approval process. I expect that will take place sometime between now and the approval, but we have not been advised of that yet.
Thank you very much.
Thank you for your presentation.
Thank you very much. Have a good day.
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