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

Executives

Bill LaRue – SVP, CFO, Treasurer and Assistant Secretary

Ted Schroeder – President and CEO

Analysts

Eric Schmidt – Cowen and Company

Gary Nachman – Leerink Swan

John Newman – Oppenheimer

Greg Beicher [ph] – Banc of America/Merrill Lynch

Cadence Pharmaceuticals, Inc. (CADX) Q1 2010 Earnings Call Transcript May 6, 2010 4:30 PM ET

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Cadence Pharmaceuticals first quarter 2010 financial results conference call. On the call today is Ted Schroeder, President and CEO; Jim Breitmeyer, Executive Vice President and Chief Medical Officer; and Bill LaRue, Senior Vice President and Chief Financial Officer. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions and answers after the management presentation. (Operator Instructions)

Our first speaker today is Bill LaRue. Go ahead, sir.

Bill LaRue

Thank you. Good afternoon, everyone. Before we get started today, I would like to remind you that statements included in this conference call that are not a description of historical facts are forward-looking statements. Such forward looking statements regarding

our belief that our third party manufacturer will time we resolve FDA's observations with respect to the OFIRMEV manufacturing facility, the timeline from potential for approval of the NDA for OFIRMEV, and our belief that our current cash resources will be sufficient to fund our operations through the approval of the NDA.

All such forward looking statements are based on our current beliefs and expectations, and should not be regarded as a representation that any of our plans will be achieved. Actual results may differ materially from those discussed during this conference call due to the risks and uncertainties inherent in our business, which include

the potential that the FDA may require additional data or information as part of its review of the resubmitted NDA for OFIRMEV, including potential requirements for additional safety and stability batches or other manufacturing data, which may require significant time and expense to produce. Our reliance on our third party manufacturer to respond to the FDA's concern in addressing the manufacturing facility deficiencies.

The risk that further FDA scrutiny of the manufacturing site may raise additional issues and that must be resolved prior to obtaining approval of the NDA, causing us to incur further delays and expense. The risk that we may not regulatory approval for OFIRMEV on a timely basis or at all, are dependent upon the success of OFIRMEV, which is our only product candidate, the potential that we may require substantial additional funding in order to obtain regulatory approval for and commercialize OFIRMEV, and the risk that we may not be able to raise sufficient capital when needed or at all; and the risk of delays in the approval of the NDA for OFIRMEV and its commercial launch will enable competitors to further entrench their existing products or develop and bring new products to market before OFIRMEV.

These and other risks are detailed in our prior press releases and periodic public filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward looking statements, which speak only of the date hereof. All forward looking statements are qualified by this cautionary statement, and we undertake no obligation to revise or update such statements. This caution is made under the Safe Harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995.

If anyone has not seen our press release issued earlier today, you can access it on our website at www.cadencepharm.com. Additionally, this conference call is being webcast through the company's website and will be archived there for future reference.

Ted?

Ted Schroeder

Thanks, Bill; and good afternoon, everyone. Thank you for joining us today. I know it has been quite an awful day in the markets and appreciate you taking the time to join our first quarter 2010 financial results call.

I will start by providing you with a brief summary of the first quarter and more recent events related to our efforts to obtain regulatory approval for OFIRMEV, our intravenous acetaminophen investigational product candidate. Bill will then provide an overview of the first quarter financial results. After the financial results, we will open the call for your questions.

As first announced on February 11, we received a Complete Response letter from the FDA on our OFIRMEV NDA, indicating that approval could not be granted due to deficiencies observed during the FDA's inspection of our third-party manufacturer's facility. The Complete Response letter did not supply any safety or efficacy issues, or require the completion of any additional studies prior to approval. Our third-party manufacturer submitted a timely response to the FDA regarding the inspectional observations, and on April 15, we and representatives from our third-party manufacturer met with the FDA to discuss the deficiencies outlined in the Complete Response letter. During this meeting, the agency did not request any new safety, efficacy, or stability studies.

As a result, on May 4, 2010, we submitted the NDA for OFIRMEV. We expect the agency will inform us within the next several weeks whether our NDA is deemed a Class I or a Class II resubmission. If the agency determines that a re-inspection of our third-party manufacturer is needed, then we anticipate that the NDA will be designated as a Class II re-submission. A Class I designation would result in a two-month review timeline, and a Class II designation would result in a six-month review timeline. In the meantime, we continue to prepare for the launch of OFIRMEV at the earliest possible time following approval.

During the first quarter, our primary objectives were to fully support the efforts of our third-party manufacturer to address the manufacturing facility inspectional observation and to ensure that our marketing plans are in place and that our commercial infrastructure is launch-ready. Our sales management team has been focusing their attention on identifying target accounts and solidifying launch plans. We have also identified what I would consider to be the best-in-class hospital sales force of proven sales professionals, with track records of success in launching pharmaceutical products in the hospital, and look forward to bringing them on board upon approval.

At same time, we continue to closely monitor our cash position, and have been making prudent resource decisions. Our cash on hand at March 31 was nearly $68 million, and we continue to believe that this will be sufficient to further our operations through the approval of OFIRMEV.

With that, I will turn the call over to Bill, who will review our financial results. Bill?

Bill LaRue

Thanks, Ted. During the first quarter of 2010, we reported a net loss of $13.9 million, compared to a net loss of $10.4 million for the first quarter of 2009. This was primarily due to a change in our sales and marketing spend, which increased from $500,000 for the first quarter of 2009 to $6.1 million for the first quarter of 2010, as we established our commercial infrastructure in preparation for the potential launch of OFIRMEV. As part of this commercial readiness, we have increased our headcount in sales and marketing from two at the beginning of 2009 to 40 at March 31, 2010.

Partially offsetting the increase in sales and marketing expenses was a decrease in our research and development expenses. For the first quarter of 2010, we reported $4.2 million of R&D expenses compared to $6.1 million for the first quarter of 2009. This decline was primarily due to the discontinuation of our Omiganan development program in the first quarter of last year and the completion of our clinical development program for OFIRMEV in the second quarter of 2009. However, we have incurred additional manufacturing costs during the first quarter of 2010, as compared to the first quarter of 2009, as we continue to prepare our manufacturing operations to the potential commercialization of OFIRMEV.

Our general and administrative costs increased to $3.5 million for the first quarter of 2010 from $2.8 million for the first quarter of 2009. This increase was primarily due to higher salaries and related personnel costs, which is attributed mostly to stock-based compensation charges from additional equity awards issued and outstanding in 2010 as compared to 2009.

As Ted indicated, we continue to believe that we have sufficient capital resources to fund our operations through the approval of our NDA for OFIRMEV, and we will continue to take steps where appropriate to reduce spending and otherwise (inaudible) our cash. We will provide further 2010 financial guidance when appropriate, following further clarity of the FDA's review timeline on our resubmitted NDA.

I will turn the call back over to Ted.

Ted Schroeder

Thanks, Bill. I would like to conclude our prepared remarks by saying again that we remain confident in our NDA and the commercial prospect for OFIRMEV if approved by the FDA, and we are aggressively continuing to prepare for the commercial launch. We will now open the call for your questions. Operator?

Question-and-Answer Session

Operator

Thank you, Mr. Schroeder. The question and answer session will begin at this time. (Operator Instructions) And our first question comes from the line of Eric Schmidt of Cowen and Company.

Eric Schmidt – Cowen and Company

Good afternoon. Ted, since your last conference call in mid-April, are there any other updates regarding your third-party manufacturer and steps they are taking to gain compliance?

Ted Schroeder

You know, there is actually a full response to the FDA regarding the observations, and they are meeting the commitments set forth in the response and are working closely with the FDA to complete the mediations in a timely manner. And that is, you know, all that is up to date and we are pleased with the progress.

Eric Schmidt – Cowen and Company

And have you, Cadence, had additional interactions with the FDA since your last update to us?

Ted Schroeder

Well, we met with them on the 15, and we resubmitted on the 4, so there has been appropriate discussions about the resubmission, less amount of coming, et cetera. So, I think we are where we want to be for our resubmitted NDA.

Eric Schmidt – Cowen and Company

And just one last question about Bristol-Myers. Do you have now the sales data in Europe for 2009?

Ted Schroeder

We don't have that yet. We expect to be getting it soon, although our anticipation is that sales will be relatively flat with 2008. So around the $90 million vial level.

Eric Schmidt – Cowen and Company

Thanks a lot. Good luck with the FDA.

Ted Schroeder

Thanks, Eric.

Operator

Thank you, sir. And our next question is from the line of Gary Nachman of Leerink Swan.

Gary Nachman – Leerink Swan

Good afternoon. Ted, first question, did you add anything material to the NDA package before re-filing, to get the FDA more comfortable with anything. It sounded like, you know, they were pretty comfortable before, but was there anything that you could have supplemented the package with?

Ted Schroeder

No, we did not. The only thing we provided was the safety update as requested by FDA, which was a routine safety update that you would submit periodically to the FDA in an open NDA. All of which was post-marketing data with Bristol-Myers Squibb, because we have no ongoing clinical trials currently.

Gary Nachman – Leerink Swan

Okay. And if it is either a two-month or six-month timeline, would that change in terms of any additional information that you might be able to provide them or it just continued safety updates at different intervals?

Ted Schroeder

At this stage, there is nothing more that the FDA needs. They have essentially completed their review, and we have provided the safety update, and so that would satisfy the two-month and the six-month timeline. There is no additional information requested.

Gary Nachman – Leerink Swan

Okay. And how involved are you with Baxter as they resolve the issues? Do you have any say in terms of what they are submitting to the FDA, do you get to take a look at it or it is really completely in their hands?

Ted Schroeder

Well, it is clearly their interaction with the FDA, and they are in the driver's seat, where they should be. But, you know, we have operated as good partners, we have a close working relationship, and as I stated earlier, the full response to the FDA regarding observations, and we are pleased with their responses.

Gary Nachman – Leerink Swan

Okay. And then, the 40 people that you are at now in sales and marketing, could you just describe quickly their functions and how much that team will ramp up before approval, and then also just elaborate on, you know, how discussions with hospital formularies are going? Thanks.

Ted Schroeder

Sure. So we have, on the sales side, there is a VP of Sales, there are three Regional Sales Directors, and 18 District Sales Managers. There is also a Director of National Accounts working with group purchasing organizations. And then, Scott Byrd, who is our Chief Commercial Officer, and in his team are the – and in the additional team, the marketing folks, as well as folks working on logistics and distribution and kind of back off the sales support as well. So that makes up the 40 people. They are laser-focused on preparing for launch, hard at that preparation. It is focusing on the target accounts and developing profiles for the representatives, so they can begin meeting with formulary decision makers at the earliest possible date.

Gary Nachman – Leerink Swan

And does that team need to ramp up before you actually hire the sales force?

Ted Schroeder

No. They are in place, and the sales force is identified. So the recruiting phase is largely done. As you know, we have made contingent offers to these representatives. We have had very little attrition, and we expect that to be the case as we go forward. So the sales management team, now they will focus really on understanding accounts more fully.

Gary Nachman – Leerink Swan

Okay, great. Thank you.

Ted Schroeder

Thank you.

Operator

Thank you. And our next question is from the line of John Newman of Oppenheimer.

John Newman – Oppenheimer

Thanks for taking the questions. I think you already answered my first one about the potential re-inspection. I was just wondering if you could give us any kind of feeling or color information on the proposed work plan that Baxter has sent to the FDA. Just based on your comments, it seems like you are pretty confident that whatever the FDA is concerned about isn't going to be a problem, but I was just curious as to how Baxter might address that?

Ted Schroeder

Yes, John, we really can't comment on that specifically. That is – you would really have to talk to Baxter to get any more granularity on that. It is really their process to move the ones and need to address that.

John Newman – Oppenheimer

Okay. And you have any sense as to an idea on the timeline for the FDA to get back to Baxter with their reply on what Baxter has given them?

Ted Schroeder

No. I mean, the guidance that is published basically just say they will respond in a timely way. We don't know what the time would be. We believe that the FDA will respond regarding our submission letter to Class I or Class II in the next several weeks, which you know, may become indication of timing, but there is no hard fast typical type deadline.

John Newman – Oppenheimer

Okay, great. Thanks.

Operator

Thank you. (Operator Instructions) And our next question is from the line of Greg Beicher [ph] of Banc of America/Merrill Lynch.

Greg Beicher – Banc of America/Merrill Lynch

Thanks, good afternoon. Quick question on your commercial (inaudible) activities. Can you walk us through what happens and when under the two-month review scenario versus the six-month review scenario?

Ted Schroeder

Sure. Well, they are not very different. As soon as we receive approval, we will notify the reps that are on contingent hires and we will ask them to – those that are currently employed, which is most of the representatives, ask them to resign and join Cadence within a couple of weeks. We will then get training materials out, do some remote training, and then come together for our launch. So under that scenario, we are still moving toward what we had guided to in – assuming a February approval that we would launch in the early part of the second quarter. I think it is safe to say that we would just pull that timeline forward. We need to manufacture the product for commercial distribution. We have made the decision to not manufacture product at risk in advance, so we will begin manufacturing, but given the nature of the hospital products, we will be able to manufacture ample to stock the wholesaler channel to have that available for hospitals to order.

Under the six-month scenario, it doesn't really change. We would still need that time lag to actually launch the product, because we still need to accomplish the training. We may be able to maybe advanced to manufacturing timeline by a couple of weeks, but it is not going to be months of savings. And then, you know, you still have to print all the labels and the package inserts and all that stuff before you can ship any product anyway, and those timelines have been squeezed pretty tightly under both scenarios. So they are not materially different, and so, I think under the six-month scenario, we will, you know, have just a more refined marketing message, we will have better intelligence on our accounts and our prioritization of accounts as we go out, but we will be prepared to launch under either scenario.

Greg Beicher – Banc of America/Merrill Lynch

Okay, that is helpful. Can you also remind of the patents that you have that are issued that you expect to be listed in the Orange Book when they expire and whether you expect them to be eligible for patent term extension?

Ted Schroeder

Sure. So the 222 patent is the formulation patent, and that patent expires in 2017 – in I think the third quarter of 2017. We do expect to receive six months of patent term extension for pediatrics. I remind everyone on the call that we do have a pediatric written request and that is our sole post-approval commitment with FDA, to get the six-months, we will need to do some pediatric work to support that six-month extension. So we would expect exclusivity through the first half of 2018 for the formulation patent.

The process patent actually expires in 2021, and that will also be listed, that would also be available for the six-month extension and that may provide additional coverage. It is a tricky process and we are certainly going to make any generic entrant prove to us that they haven’t infringed the process patent, but as we have talked about for several years, we really believe that the key patent is the formulation patent with the first half of 2018 exclusivity period.

Greg Beicher – Banc of America/Merrill Lynch

Is the process patent listable in the Orange Book?

Ted Schroeder

Yes.

Greg Beicher – Banc of America/Merrill Lynch

Okay. And are there any applications that you have on the PTO?

Ted Schroeder

No.

Greg Beicher – Banc of America/Merrill Lynch

Okay, thanks.

Ted Schroeder

Yes.

Operator

Thank you. And we have a follow-up from the line of John Newman of Oppenheimer.

John Newman – Oppenheimer

Thanks for taking the follow-up. You had mentioned that you haven't made a decision to manufacture any product at risk ahead of the launch. I just wonder what you thought about the potential suitability of the batches that you already have – the commercial-scale batches that you have already made for stability, would you assume that those are going to be suitable to use for launch if the product is approved.

Ted Schroeder

Well, it is a shelf-life issue, John, and we are expecting an expiration date of about 12 months on the commercial product. So having the product that has been manufactured for date would be too short to ship to wholesalers. Wholesalers typically don't like to accept products with less than six-months dating on the label. So that would not make it commercially feasible.

John Newman – Oppenheimer

Okay.

Bill LaRue

Ted, let me add something. That 12 months shelf-life would be out-launched, and we would be expecting to extend it in real time as the stability test matured, with a target shelf-life of 24 months.

Ted Schroeder

Yes.

John Newman – Oppenheimer

And the FDA is comfortable with the 12 months? They don't have an issue with that or –?

Ted Schroeder

No, I mean, you get the shelf-life that the data support and the data at this time supports at least 12 months.

John Newman – Oppenheimer

Okay, great. Thank you.

Operator

Thank you, sir. And I see no further questions at this time. So I will return the conference back to Mr. Schroeder.

Ted Schroeder

Thanks, everyone. We appreciate your interest. Just to remind you that we are next week at the JMP Conference and at the Bank of America Conference. So we look forward to seeing many of you at those conferences. And have a good afternoon. Thank you.

Operator

Ladies and gentlemen, this concludes our conference call. All parties may now disconnect. Thank you.

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: Cadence Pharmaceuticals, Inc. Q1 2010 Earnings Call Transcript
This Transcript
All Transcripts