William K. Heiden - President and Chief Executive Officer
Michael Olson - JPMorgan
AMAG Pharmaceuticals, Inc. (AMAG) 32nd Annual J.P. Morgan Healthcare Conference January 15, 2014 11:00 AM ET
Michael Olson - JPMorgan
All right. Good morning and welcome to the day three of the 32nd Annual JPMorgan Healthcare Conference. I am Mike Olson, of the Biotech team here at JPMorgan and it’s my pleasure to introduce Bill Heiden, CEO of AMAG Pharmaceuticals. Bill?
William K. Heiden
Thank you very much, Michael. I would like to thank Geoff Meacham and the team at JPMorgan for inviting us here to the 2014 Healthcare Conference. I am jointed today by my colleagues, Frank Thomas, Chief Operating Officer; Chris White, Chief Business Officer; and Amy Sullivan, who is our Head of IR. We will be meeting in our Yorkshire Room after this presentation for Q&A.
Today I’ll be providing a preliminary fourth quarter and full year 2013 update on our financials as well as a business update, including an announcement of a new five year strategic plan.
I will be making forward-looking statements and I call your attention to the important disclaimers listed here as well as those included in our SEC documents.
At AMAG we are building a profitable multi-product specialty pharmaceutical company. We’re building off a strong base of a commercial team of approximately 60 professionals, and our commercial team focusing on oncology, hematology and hospital customers. We have a strong balance sheet, over $2 million in cash, an experienced and results oriented leadership team and that strong base supports Feraheme and there are four unique commercial opportunities for Feraheme. I will be covering those this morning.
We are adding products in a very active business development effort. MuGard is our first add. We added that in June of 2013 and I’ll be providing an update on that product, which is unique product for the management of oral mucositis and our plan is to continue to add additional products to the mix through an ongoing business development effort.
And so let’s jump right in and talk about 2013 and a review of our performance. In summary 2013 was an outstanding year at AMAG. U.S. Feraheme revenue jumped 28%. This is for a product that was launched five years ago. Operating expenses came down again in 2013 and this was the second quarter in a row in our 30 year history, the second quarter where we generated positive cash flow from operations.
Record breaking Feraheme revenue was driven by physician demand which increased 20% volume wise, IMS data versus 2012. We achieved an Evolution Index of 113 and what that means is we grew 13% faster than the market, gaining share from our competitors. The market did grow and since we were basically the only promoting IV iron I think we drove a lot of that market growth, almost 8% in 2013. I think part of the excitement behind Feraheme was many of the publications that came out for Feraheme in 2013.
We also, as I mentioned, closed our first business development transaction with a license for the product, MuGard. We hired several new key executive leaders to the team, strengthening our leadership team and we developed a five year strategic plan which includes long-term financial metrics in which we can continue to measure our progress.
So first, let’s talk about the numbers. Well, a picture is worth a thousand words and this slide really speaks loudly to our performance of 2013. Beginning in the middle of 2012, when I joined, we reinvigorated volume growth and also started to correct a historical pricing issue that we had with Feraheme. And you can see that in 2012 while we generated nice volume growth, 17% volume growth, we gave 5% of that back on pricing, so finished the year at 12% growth versus 2011.
2013 is a different story, 28% overall growth driven by 22% volume growth and 6% price appreciation. It’s great to see in the fourth quarter -- third quarter growth actually was accelerating as we went through the year. And it’s unique to see quarter-on-quarter growth fourth quarter versus third quarter as fourth quarter is traditionally a fairly slow quarter overall in the IV iron market so we’re pleased to see quarter-on-quarter growth in Q4 and that leaves us in a very strong position as we head into 2014. In fact in fourth quarter we generated 32% growth versus fourth quarter 2012, so really an impressive finish to the year and we’re excited as we head into the New Year.
And so let’s look at where that growth is coming from across our key customer segments. In green is the oncology/hematology segment where we traditionally have had a very strong presence, continued to see nice 15% volume growth in that segment. The hospital segment is an important large segment and we really rededicated our efforts in the hospital in 2013 and that paid big dividends, seeing 27% growth in the hospital segment.
It’s important to note that these are the sites of care, oncology/hematology clinics and hospital, both in-patient and out-patient. This is where IV iron is given in the United States outside of dialysis. I mention this because in the oncology/hematology segment many of these patients are not oncology/hematology patients. These are patients that are being referred in from the community, from a gastroenterology clinic and they are being referred into a site-of-care that administers IV iron and in the United States that happens to be oncology/hematology clinics and hospitals.
On the left hand side you can see the summary, 20% Feraheme provider growth, 13% growth faster than the market, grabbing share from our competitors on top of an 8% or approximately 8% market growth.
So let’s look at the overall 2013 results for the company. I’ll start here. You may recall on the left hand side of this column that we gave original guidance for Feraheme of $63 million to $67 million. We would have finished the year with approximately $206 million to $211 million. In Q3 we increased our guidance to $69 million to $71 million, up to our cash guidance $209 million to $213 million.
And I am pleased to tell you that we finished the year at the high end of the revenue range, $71 million to $71.5 million in our preliminary results for Feraheme sales in the United States. On the cash side we ended above our guidance, close to $217 million in cash. It’s important to point out that, that cash balance also includes over $3 million that we paid at the licensing of MuGard. And so in effect a $220 million cash balance versus an original guidance of $206 million to $211 million.
So really an outstanding financial result for 2013 and I want to thank all of the hardworking folks at AMAG who delivered these results. It was an amazing year of great planning and great execution and we owe them a great debt of gratitude.
I mentioned in our financial results that we've had nice top line growth but also increasing net revenue per gram or increasing price per unit and this graph really demonstrates the trajectory that our net revenue per gram was on. You can see on the left hand side in 2011 heading into 2012 that we were headed on the downward trend. Mid-2012 we reversed this trend and you can see now that we've had nice price appreciation through the end of 2012 and into 2013.
It's important to point out that this is hard to predict because net revenue program is a mix of our customer base, it’s also a mix of contracting and net price increasing. But I think this particular challenge has been managed very, very well at AMAG and I am optimistic as we look forward that we can continue to see and we will optimize our price opportunity with Feraheme.
It’s also important to point out that physicians are reimbursed on a retrospective basis, the ASP plus model and because of now an increasing net revenue per gram physicians are also seeing an increase in their reimbursement levels and that's a nice trend that we like to see for our customers.
So let's put all of this 2013 into a historical context. On the left hand side the blue bars are our revenues from 2011, 2012, 2013. In dark blue are Feraheme revenues and you can see a nice upward trajectory. In light blue are basically our other income, primarily milestone revenues. That tends to be a little bit lumpier. We received the large $33 million milestone from our partner Takeda Pharmaceuticals in 2012. Worth noting that we are anticipating a potential approval in Europe for a broader label in the middle of 2014 and it would also generate a fairly significant milestone.
On the right hand side are the operating expenses and you can see again a nice downward trend, over $130 million in 2011 and 2013 levels are now much more inline and right-sized with the revenue opportunity that we have and this rightsizing has led us to and has been part of the formula for being cash flow positive for both Q3 and Q4.
So with the base business in better shape than it’s ever been in 2013 we stepped back to think about our future and developed a long-term strategic plan for AMAG. Our new strategic plan is a fairly comprehensive plan with detailed operational and financial goals over the next five years. In summary this plan has three core avenues that we will be focusing on over the next five years.
The first is growing and growing really captures our plan to maximize the next, the opportunities that we have for Feraheme over the next few years, and this includes our near-term focus of growing our share and growing the market and our current indication of IDA, iron deficiency anemia associated with CKD, chronic kidney disease.
The second is focusing on our many expansion opportunities. So let's start with where we are today with Feraheme. Feraheme is an IV iron that's approved for the treatment of iron deficiency anemia in patients associated with chronic kidney disease. How is Feraheme different? Well I like to say that it’s as easy one-two-three; one gram of iron which is administered in two brief injections separated by three days, easy as one-two-three. And this is in comparison to some of the older IV irons which have to be given in longer IV infusions over many days. And so the benefits of Feraheme both to the physicians, the nurses and patients is obvious.
And here is some new information, in 2013, actually December 23, 2013 we had an addition to our label. The product is approved for a rapid IV injection and we had added to our label the option that physicians can give Feraheme also as a 15 minute IV infusion. Some IV infusion clinics in the United States are really set up to give IV infusions rather than IV injections. And so this is now a nice new option which is included in our label for physicians and nurses when they administer Feraheme.
Feraheme competes in the U.S. non-dialysis IV iron market. That market is listed here, is about 860,000 grams on an annual basis. As I mentioned we saw almost 8% growth in this market in 2013. Feraheme was launched in 2009 and you can see here we have just now over 15% market share in the IV iron market. Just to mention Venofer on the left hand side, it has a fairly long and established presence in the hospital segment. They also compete in the dialysis segment and are fairly aggressive on pricing and discounting.
On the right hand side you can see that the older iron Dextran and they intend to have a stronger presence in the oncology/hematology segment where the broader label allows them to capture patients who are non-CKD related.
There is a new entrant worth mentioning, a product called Injectafer, they’ve been on the market about six months and a fairly slow start, only about 3,000 grams sold in 2013 for a variety of reasons. I think that slow start will continue as we look forward, some reimbursement challenges they do not have a permanent J code and that means slow reimbursement for the physicians who purchase that drug. So we are continuing to gain share and are optimistic as we look forward to our opportunities for our growth in 2014.
As I mentioned we compete in the IDA-CKD market and that’s about half this market. And so as I mentioned the larger market which includes iron deficiency anemia and the part we compete in is the iron deficiency anemia associated with chronic kidney disease, about 270,000 patients 430,000 grams, $250 million revenue opportunity for Feraheme.
This is the opportunity that we have today. As I mentioned we have a 15% overall market share. So that translates into about a 30% share of our indicated patient population. And as I like to say to our commercial team we don’t have two-thirds of this market. So plenty of room to grow as we look forward into 2014 and beyond.
Should we get approval for the broader label that would double the market opportunity to 540,000 patients on an annual basis, 860,000 grams and a total market opportunity of $500 million. The good news is that this market is served by the very same physicians who we call on today; U.S. oncologists, hematologists and hospital infusion centers. And so as we think about the broader label and the potential for approval it wouldn’t require much in terms of additional commercial infrastructure to attack that market. We could attack it fairly quickly with the current sales force that we have.
Just to step back and give you little history on the broad label and the application, we conducted two large well-controlled clinical trials in iron deficiency anemia. We submitted that supplemental new drug application with the FDA in December of 2012. We announced last year in September that we have received a letter citing certain deficiencies and that the FDA was not ready to enter labeling discussions thirty days prior to the approval.
In October we announced that the FDA had extended the PDUFA date due to some information that we had submitted to the agency which they considered a major amendment and so our new PDUFA date was January 21st. That letter also indicated that we might begin labeling discussions as early as December 23rd.
And on January 7th very recently we issued an 8-K where in a conversation, a telephone conversation after the holidays we spoke with the FDA who at that time said that the sNDA continued to be under active review but they were not prepared to enter labeling discussions. We thought that it was a relevant data point and so released that in an 8-K.
As I just covered the current non-dialysis current IV iron market is about 900,000 grams. But we really think that’s just the tip of the iceberg when we think about the potential in the IV iron market. We believe that there is a tremendous opportunity for growth, approximately 4 million patients on an annual basis who are diagnosed with iron deficiency anemia and are placed on oral iron.
Oral iron works for some patients but many patients can’t tolerate oral iron. They simply don’t receive the therapeutic benefit that was intended. And these patients continue to live with all of the signs and symptoms of chronic anemia. And it's interesting to note that of these 4 million patients, approximately 40 some odd percent are iron deficiency anemia associated with chronic kidney disease and that’s identified here in orange.
In yellow you have the iron deficiency anemia patients who are non-CKD. So even in our current indication there is an opportunity to continue to grow this market. I think some of the 8% growth that we saw in 2013 is a byproduct of many of the efforts of our field force to continue to encourage the physicians that we call on to treat and treat anemia aggressively. So that continues to be a nice opportunity as we look forward.
Where are those patients? So those patients are spread across every single physician specialty that you can think about. We've identified some of the larger pools of patients here on the left hand side; woman’s health, woman with abnormal uterine bleeding; rheumatology patients with inflammatory conditions tend to have difficulty absorbing oral iron; oncology patients and we are calling on those physicians today and I think again part of the growth we are seeing with the oncology and nephrology community is treating more aggressively; and gastroenterology.
Many of the inflammatory conditions that -- inflammatory bowel disease is an example, suffering in these patients that there is an opportunity in gastroenterology. We've done a tremendous amount of market research across these physician groups and really believe for a number of reasons that gastroenterology is probably the most interesting area for us to think about expanding the IV iron market by going out with an educational message to these physicians to see that patients who are failing oral iron are treated with IV iron and in particular with Feraheme.
We also have expansion opportunities for Feraheme outside the United States. Feraheme was approved for the IDA-CKD indication in Europe and Canada. Launches began in late 2012 and through 2013 with our partner Takeda Pharmaceuticals. In June of 2013 Takeda filed for the broad label. Our expectation is that there would be an action some time in mid-2014 with the European Medicines Agency. The deal terms are listed here. We have royalties, sales milestones and regulatory milestones. Importantly as I mentioned in 2014 should we receive approval in Europe for the broad label there is a significant milestone that would come to AMAG.
I am going to jump now to our next product, the newest product in our portfolio, MuGard which was launched by AMAG in late 2013, Q3. We brought the product in, in June, did a lot of work over the first couple of months and really launched the product ourselves in late Q3. We armed our field force with new promotional tools and are now out speaking with Feraheme customers, nurses and physicians and discussing the benefits of MuGard in the management of oral mucositis. It’s really been great to see the enthusiasm, the excitement in our sales force.
It’s turned out that MuGard has been a real nice door opener for some offices where we had difficulty getting in to talk about IV iron but there seems to be interest to discuss treatments for oral mucositis. There is a nice overlap between the physician audience, physicians treating patients with IV iron and physicians who have a need in patients who are candidates for therapy with MuGard.
We conducted a significant market research also as part of our preparations for the launch of MuGard. It’s nice to see that physicians report very high satisfaction levels with MuGard. Once they try MuGard, they like it and want to use it in more of their patients. And also the representatives who promote MuGard are highly valued by the physician and nurse providers.
We did see a nice little jump in demand in fourth quarter, about a 22% growth in fourth quarter. I think it’s early going. So I think my expectations are that 2014 should really be an interesting year and our first full year promoting MuGard.
Here are some of the elements to our success as we look to 2014 to capture some of the opportunity that we see with MuGard and this is a large market. Important to point out that there are approximately 400,000 patients a year who are at risk for developing oral mucositis in the United States. A prescription of MuGard generates approximately $1,000 in revenue for AMAG. So this is a $400 million market opportunity. We have less than 1% share. Another way to say that is every market share point is worth about $4 million. So really a significant market opportunity for us and we are going to be putting our shoulder behind this in 2014.
So stay tuned, there is a lot of nice synergies between Feraheme and MuGard and I am confident that our commercial team will deliver results on MuGard just as they have behind Feraheme. That’s the build strategy of our -- excuse me the growing strategy of our strategic plan. The next leg of that strategic plan is the build arm and this is really all about building the portfolio of additional products through business development.
There are four key elements that I’ll talk about under the build. The first is expanding the product portfolio and I think MuGard is a nice example of the initiatives that we have underway to add additional products to the portfolio.
Our initial focus is on commercial stage products and I’ll give you here a couple of examples of products that we have or are looking at, for example our gastroenterology product that comes with a small specialty sales force; that’s an area of strategic interest for us, as I just mentioned for Feraheme. So that would be an interesting business development candidate. Or also the product, a commercial product, which is a U.S. hospital product of a company, is headquartered outside the United States, now providing an additional product for us, potentially an inversion strategy providing a unique tax structure.
We also have been opportunistically evaluating late stage development assets. I give you an example here of a hematology product which is a commercial asset. It's approved but also has an interesting label expansion opportunity.
And our goal over the next few years, the strategic plan goes from 2013 to 2018, our goal is to add additional products and we’ve set financial metrics that we are measuring our progress against with the goal of reducing our dependence on Feraheme revenues so that Feraheme revenues account for less than 50% of our overall sales by adding additional products to the mix and achieving the diversified product portfolio.
I’ve presented this slide before but just to review would like to overview the targeted business development initiatives that we are following; bullseye oncology/hematology products such MuGard; strategic opportunities, I mentioned gastroenterology which is an area of strategic interest and financial transactions such as MOEs or inversions.
The last leg of our strategic plan is that together we are just working to enhance our employee development and training as well as adding new capabilities as we go forward.
And I’ll finish on my last slide which is our 2014 goals as we look to start the New Year. And with that I think we’ll be moving into the Yorkshire Room where I’ll be talking question-and-answer. Thank you very much.
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