Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

POZEN Inc. (NASDAQ:POZN)

Q1 2010 Earnings Call Transcript

April 29, 2010 11:00 am ET

Executives

Stephanie Bonestell – IR

John Plachetka – Chairman, President and CEO

Bill Hodges – SVP, Finance & Administration and CFO

Analysts

Jonathan Aschoff – Brean Murray

Ian Sanderson – Cowen & Company

Eun Yang – Jefferies & Company

Operator

Good morning. My name is Amanda, and I will be your conference operator today. At this time, I would like to welcome everyone to POZEN first quarter earnings conference call. All lines have been placed mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator instructions) Thank you. I would now like to turn the call over to Stephanie Bonestell with Investor Relations. Please go ahead.

Stephanie Bonestell

Thank you, Amanda, and good morning. On behalf of POZEN, I would like to welcome everyone to today's first quarter conference call. By now, you should have received a copy of the company's press release. If you do not have it, you can access it on the homepage of our website at www.pozen.com where you can also access a replay of this conference call.

Before we begin, I need to remind you that various remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.

Such statements, including any observations that we may make about the expected timing and amounts of royalty payments from GlaxoSmithKline and other revenue expected from our collaboration partners; the prospects for approval or timing of approval of any of our drug candidates, including VIMOVO; or the way in which the FDA may consider our new drug applications or any particular trial results, future trial plans and the likelihood of results of any future trials, and our potential commercialization plans for our product candidates.

The adequacy of financial resources to accomplish our goals or future revenues are based on our current expectations and are subject to a number of risks and uncertainties, including our inability to know with certainty what standards the FDA will use to evaluate drug candidates and how that may change or evolve over time; how the FDA evaluates data; what the results of future trials may be, whether those trials will cost much more than we have estimated that they will cost, or that they may have historically cost; how the FDA weighs risks of drugs, including risks of drugs that have been used for many years; the decisions of our collaboration partners; our dependence on our collaboration partners for the sales and marketing of our products once approved, including our dependence on GlaxoSmithKline for the sales and marketing of Treximet; and whether our resources will be depleted by events other than clinical trials and efforts to obtain regulatory approval such as the expenses relating to the lawsuits we have filed against generic companies seeking to market generic versions Treximet prior to the expiration of our patent.

Additional factors that affect our forward-looking statements are discussed in our most recent Annual Report on Form 10-K, which is on file with the SEC. In addition, these forward-looking statements represent only the company's expectations as of today. While the company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statement should not be relied upon as representing the company's estimates or views as of any date subsequent to today.

With us today from management we have Dr. John Plachetka, Chairman, President and Chief Executive Officer; and Bill Hodges, Chief Financial Officer, Senior Vice President of Finance and Administration.

At this point, I’d like to turn the call over to Dr. Plachetka.

John Plachetka

Thank you, Stephanie, and good morning to everybody. I’m going to apologize in advance for my voice. I’ve got a little bit of a cold today. This call may be a bit shorter than usual because we don’t have much to tell you about VIMOVO other than our PDUFA date is tomorrow. So first, I want to offer my thanks again to the VIMOVO team members of POZEN and AstraZeneca and to the hundreds of other scientists, doctors, nurses, and patients who are involved in the development of this innovative product. This is the first new oral arthritis product introduced in quite some time if it gets approved.

Now just a reminder, this NDA program was completed very quickly, and the integration between POZEN and AstraZeneca should become, in my opinion, a model for how large and small companies can work together to develop new products. So as we talk this morning, we don’t have much longer to wait.

Let me turn to another subject with respect to VIMOVO before I talk about the rest of our business, and that is the commercialization of VIMOVO. Many people have asked us for market projections for this product and when this product will launch, what would be its selling price and a host of other commercial questions.

And unfortunately, I cannot answer these questions. But I will direct you to our partner AstraZeneca, who has control over the commercialization of this product. And I’m very proud and happy that AstraZeneca is our partner for VIMOVO, not just in the United States but worldwide. And I’m confident that they understand today’s global marketplace and how to succeed in it.

One last item. I want to remind you that AstraZeneca is continuing to make regulatory filings in selected countries around the world and that POZEN will earn a $25 million milestone if VIMOVO receives approval in a major ex-US market, including pricing and reimbursement approval. Now this would be in addition to the $20 million milestone we earn if VIMOVO earns regulatory approval in the United States from the Food and Drug Administration.

And then lastly, I want to remind everyone that AstraZeneca is in charge of all ex-US filings and also responsible for responding to any inquiries from a foreign regulatory body. So again, any question about the timing of these approvals should be directed to AstraZeneca.

In summary then, the financial impact of VIMOVO’s approval, both here in the United States and abroad, from the receipt of milestone payments alone will be significant for POZEN and of course the opposite is also true.

I spoke last time about GlaxoSmithKline’s new plan to improve the sales of Treximet. And although it appears there has been some progress with an over 16% increase in new and total prescriptions in March over February’s total, we think the results of the second quarter will really tell the story for this new strategy.

Having said that, we are pleased that the income from Treximet has increased substantially from last quarter, mainly due to the increase in our early rate to 18%. We continue to stay in close contact with GSK concerning this product, and we are happy to report that they appear to remain committed doing things to continue to improve sales. Bill Hodges will have more to say about Treximet shortly.

Our PA32540 program continues – continues to enroll patients, and we now estimate that we will reach our current target enrollment for the one year safety study sometime in May. And we continue to add additional sites to the two pivotal trials, mostly as replacements for unproductive sites previously activated. And we are planning to continue the enrollment through at least the end of this year in those trials.

So there is a lot happening at POZEN. And let me turn the call over to Bill Hodges who will review the financial aspects of this first quarter.

Bill Hodges

Thank you, John. We ended the first quarter of 2010 with $36.7 million in cash and short-term investments and $3.8 million in accounts receivable. And we recorded a net loss of $3 million or $0.10 per share on a diluted basis compared to a net loss of $3.5 million or $0.12 a share on a diluted basis in 2009.

Treximet sales totaled $21 million for the first quarter of 2010. Therefore POZEN earned royalty revenue of $3.8 million at the new royalty at 18%, which is a significant increase from the 2009 first quarter royalty payment of $1 million. Total migraine triptan prescriptions were down 5.3% versus the fourth quarter of 2009 according to the IMS monthly data, and Treximet total prescriptions were down in line with the market at 5.1%.

Anecdotally, we have heard that increased co-pay starting January 1st affected patients still in prescriptions in many categories, not just migraine medicines. More samples were available and used in migraine category, and people have held off filling prescriptions waiting to understand changes coming with Healthcare Reform. According to IMS, total prescriptions in the US market were down 1.3% in the first quarter compared to the fourth quarter, which indicates that the entire prescription market experienced the decline.

When looking at Treximet net sales compared to the first quarter of 2009, net sales were up 3% and total Treximet prescriptions were up 7.9% compared to the first quarter in 2009 according to IMS monthly data. As John mentioned, the second quarter will be an important indicator of the success of GSK’s efforts to grow prescription volume of Treximet.

Looking at our financial statements for the first quarter of 2010, revenue totaled $6.9 million as compared to $8.8 million in the same period for 2009. The first quarter revenue included $3.1 million of amortization of upfront licensing fees and $3.8 million of royalty. The 2009 fourth quarter revenue included $4.7 million for development work performed under the AstraZeneca agreement, $3.1 million for amortization of upfront licensing fee, and $1 million for Treximet royalty.

Total operating expenses were $9.9 million in the first quarter of 2010 as compared to $12.5 million for the same period in 2009. The lower operating expenses in the first quarter of 2010 resulted from primarily from a decrease in the development cost for our PN 400 development program. And that was partially offset by higher development cost for our PA32540 product that’s in Phase III and higher patent litigation cost, which totaled $2.2 million in the first quarter.

POZEN will earn a $20 million milestone payment upon the US FDA approval of VIMOVO and begin to earn royalties when AstraZeneca begins selling the product. Until we confirm these important milestone dates, we cannot provide financial guidance. However, you can be assured that we will continue to manage our cash with the diligence we have previously exhibited.

Those are our financial results for the first quarter of 2010. Now let me turn the call back over to Dr. Plachetka.

John Plachetka

Thanks, Bill. Operator, we can turn the call over now to some questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question is from Jonathan Aschoff with Brean Murray.

Jonathan Aschoff – Brean Murray

Hi, John and Bill, good morning.

John Plachetka

Good morning, Jonathan.

Jonathan Aschoff – Brean Murray

I was wondering – could you give us any color on how Treximet is doing in April? And the second question I had is, don't you guys have a co-pay that is good for at least some fraction if not 100% of the difference between the Tier 1 and the Tier 2 co-pay for Treximet?

Bill Hodges

The April prescriptions have – there has been some movement, but still we haven’t seen a significant uptick in the weekly prescriptions yet. And there are coupons available – our understanding is there are coupons available now at the pharmacy to help offset the co-pays that patients might have to pay Tier 3 versus Tier 2.

John Plachetka

I think –

Jonathan Aschoff – Brean Murray

(inaudible) fraction of the offset that is, Bill?

Bill Hodges

Sorry, Jon, but I spoke over your comment. I was going to add that we’ve been told by GSK that they are now pretty much on a par with the other branded triptans in terms of the co-pays and the tier status. What was your question?

Jonathan Aschoff – Brean Murray

No. That definitely helps. I guess the other thing was, can you tell us what countries Astra has been filing in?

John Plachetka

Again, I’m going to direct you to them, but it would be – the total count now is over 25. And it would be the usual suspects I would guess.

Jonathan Aschoff – Brean Murray

Okay. How many outside of Europe do you think?

John Plachetka

I’m going to ask you to talk to AZ about that.

Jonathan Aschoff – Brean Murray

Okay, thanks a lot.

John Plachetka

Okay, thanks.

Operator

Next question is from Ian Sanderson with Cowen & Company.

Ian Sanderson – Cowen & Company

Good morning, John and Bill.

John Plachetka

Good morning, Ian.

Ian Sanderson – Cowen & Company

And thanks for taking my question. I had a – first, couple of financial ones. One is the R&D spending in Q1, and did I hear correctly that that included – well, actually the $2.2 million of patent litigation costs were in the SG&A number, is that correct?

John Plachetka

That’s correct.

Ian Sanderson – Cowen & Company

Okay. And so the R&D spending for the quarter, is that representative of the quarterly R&D spend we should look for going forward on the PA program?

John Plachetka

That’s a pretty good estimate at this time, although I think, Bill is just motioning, it’s going to probably pick up in the second half of the year just because the types of procedures involved in the studies get more cost intensive. Remember that the endoscopy has come in the second parts of these trials. And so that’s really where the big bills start piling up.

Ian Sanderson – Cowen & Company

And will you – I know you are considering looking at PA in other indications. Might that be some of those trials be added on this year or would that probably wait?

John Plachetka

Well, it depends on what happens tomorrow. But yes, I mean, we have a game plan if VIMOVO is approved of what things we are going to be doing with some of this new income that we are going to have. And certainly expanding our PA pipeline activities is on the top of our list. We do have, as we’ve said in the past, some very, very promising information about the higher dose aspirin and our ability to prevent ulcers with that PA product that we call 65020. So that looks like an excellent candidate to accelerate development on, but we’re going to wait and see what happens tomorrow.

Ian Sanderson – Cowen & Company

Okay. In terms of the SG&A spending, have you made any conclusions on what your commercial plan will look like for 32540 and how that’s going to influence the SG&A spending through the balance of this year?

John Plachetka

It’s not going to have a big influence in the rest of this calendar year and maybe even not a lot next year. We’re still in the planning evaluative phase. Since Liz Cermak was hired, we’ve not added any other commercial people. We are looking to add two or three slots this year in market research and also head of marketing, but we have not done so yet. And we do also expect to spend money on marketing and research. But I think the total spend for this year that we have is going to be in the $3 million range in terms of commercial expenses. Is that right, Bill? Non-personnel related?

Bill Hodges

Yes.

John Plachetka

Yes.

Bill Hodges

I think (inaudible) in that range.

John Plachetka

Okay. So it would probably be less than $2.5 million for non-personnel related expense.

Ian Sanderson – Cowen & Company

Okay. And then third, have you had any labeling discussions – well, presumably you have, but can you comment on labeling discussions on VIMOVO?

John Plachetka

No, we will not comment today.

Ian Sanderson – Cowen & Company

Okay. And then finally, I noticed in the 10-K that the PA program is covered by the same patents as the PN program. My question was, are there any additional issued patents that cover the PA program?

John Plachetka

There is nothing issued. There is other thing that we have planned and we’ll talk about that at a later date.

Ian Sanderson – Cowen & Company

Okay. Thank you very much.

John Plachetka

Sure. Thanks, Ian.

Operator

(Operator instructions) Your next question is from Eun Yang with Jefferies & Company.

John Plachetka

Operator?

Operator

Your line is open.

Eun Yang – Jefferies & Company

Okay, thank you. Regarding the patent litigation for Treximet, my understanding is that we are expecting some sort of outcome by first quarter next year. Hypothetically, in the event that the outcome is negative for Treximet, then how does that impact at the royalty rate on Treximet sales?

John Plachetka

There is a provision in the contract for the royalty rate to be adjusted if generics achieved certain percent of market share. But just losing the patent situation or the first trial would not necessarily trigger anything. Of course, we’re very confident that our intellectual property on Treximet is robust. We feel really good about our position. I think it’s noticed in a press release we had that Teva has withdrawn from the suit. We’ve let them out of the suit. And the thing continues on. I think our trial is in October of this year. And we look forward to getting this matter resolved so that we can get on with the future life of Treximet post litigation.

Eun Yang – Jefferies & Company

Okay. And the second question is on PA program. AstraZeneca has a very similar product currently under FDA review. So my question to you is, is there anything you can point out to regarding your drug when it comes into the market that you can actually differentiate from AstraZeneca (inaudible)?

John Plachetka

Well, when you say it’s a similar drug, I don’t agree with you. I don’t think that it is. We have the only product that utilizes immediate release, proton pump inhibitor technology, which gives you within 30 minutes peak blood levels the protective agent. And then a delayed release, special core around the aspirin component. This dual mechanism of action is unique to the POZEN product. No one else has such an item. As to what AstraZeneca is doing with their product, I haven’t heard. It’s not on the market. It’s not been approved. I do not know the status of it.

Eun Yang – Jefferies & Company

Okay, thanks.

Operator

At this time, there are no further questions. I would like to turn the call back over to Dr. Plachetka for closing remarks.

John Plachetka

Thank you, operator. I wanted to thank all of you for joining us today, and I think you are all, like we are, interested in what’s going to happen at the FDA. We’ve got a couple of conferences coming up that I want to mention first. The Brean Murray Healthcare Conference in New York City is on May 17 and is at the Grand Hyatt. And we look forward to seeing some of you there. Then the Citi Global Healthcare Conference is also in New York City. That’s at the New York Hilton, May 26. I think that’s Eighth Avenue, New York Hilton. Then the Jefferies Global Life Sciences Conferences in New York City is June 8th through 11th, also at the Grand Hyatt. And then the Intercontinental Hotel is hosting the Wells Fargo Healthcare Conference is Boston at the Boston Intercontinental on June 23rd, which is a special day. So we are grateful for all the interest in the company, and this is a game changing event coming up for us. And we are grateful for the interest. And again, let me thank the people at AstraZeneca and POZEN for all the efforts that they have put into this development program.

And with that, we’re going to say, good-bye.

Operator

Thanks for participating in today’s conference call. This concludes the call. 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!

Source: POZEN Inc. Q1 2010 Earnings Call Transcript
This Transcript
All Transcripts