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

Orexigen Therapeutics, Inc. (NASDAQ:OREX)

Q1 2010 Earnings Call Transcript

May 10, 2010 5:00 pm ET

Executives

Heather Turner – VP & General Counsel

Graham Cooper – CFO

Mike Narachi – President and CEO

Preston Klassen – SVP, Global Contrave Team

Analysts

Phil Nadeau – Cowen & Company

Adam Cutler – Canaccord Adams

Bill Tanner – Lazard Capital Markets

Karen Jay [ph] – JP Morgan

Operator

Good day, ladies and gentlemen, and welcome to the first quarter 2010 Orexigen Therapeutics Inc. earnings conference call. My name is Alicia, and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of this conference. (Operator instructions)

I would now like to turn the presentation over to Heather Turner, General Counsel. Please proceed.

Heather Turner

Hello and thank you for joining us to discuss the company's first quarter 2010 financial results. I'm joined on this call by Mike Narachi, President and Chief Executive Officer; Graham Cooper, Chief Financial Officer; and Preston Klassen, Senior Vice President and Global Contrave Team Leader.

This afternoon we issued a press release that provides details of the company's financial results for the first quarter of 2010. Please note that all the information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. I caution listeners that during this call the company’s management will be making forward-looking statements. Actual results could differ materially from those stated or implied by our forward-looking statements due to risks and uncertainties associated with the company’s business.

These forward-looking statements are qualified in their entirety by the cautionary statements contained in today’s press release and the company’s SEC filings including the annual report on Form 10-K that the company filed on March 11, 2010. The contents of this conference call contain time sensitive information that is accurate only as of the date of this live broadcast, May 10, 2010. Orexigen undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

I will now hand the call over to Graham to discuss the Q1 financial results.

Graham Cooper

Thanks, Heather. During today's call, we will cover the key financial results for the first quarter ended March 31, 2010, followed by a discussion of the quarterly highlights from Mike. After that Preston will provide context for a few upcoming regulatory and publication events. Finally Mike will wrap things up prior to opening the call to your questions.

During the course of the discussion we will be referring to today’s press release and the attached statement of operations and balance sheet prepared in accordance with GAAP. I will be rounding numbers for the purpose of this call, please refer to these documents for precise figures. For the three months ended March 31, 2010 Orexigen reported a net loss of $14.1 million, or $0.30 per share attributable to common shareholders as compared to a net loss of $19.3 million or $0.56 per-share attributable to common for the first quarter of 2009.

Total operating expenses for the first quarter of 2010 were $14 million compared to $19.1 million for the first quarter of 2009. The decrease in operating expenses primarily reflects a reduction in R&D expenses of $7.8 million, principally related to the completion of contracts facing clinical trials, and completion of Contrave Phase 3 clinical trial, and completion of the Phase 2 clinical trial for Empatic, offset partly by an increase in G&A costs of $2.7 million due principally to increases in salary and personnel related costs, stock-based compensation and marketing expenses.

We ended the quarter with $17.8 million in cash and equivalents and an additional $57.5 million in marketable securities for total of $75.3 million. We continue to expect that our cash burn for 2010 will be approximately $60 million, consistent with prior guidance and that our cash is sufficient to last at least until mid-2011.

And with that I will turn the call over to Mike.

Mike Narachi

Thanks, Graham. We have been executing on three key priorities this year, submitting our NDA for Contrave, with an eye on review and approval; building an commercial organization with the insight and experience to prepare us for a successful launch of Contrave; and engaging in robust conversations with potential partners; targeting a deal with a highly competent motivated partner that can help us unlock the substantial potential of Contrave for obesity.

By submitting the NDA for Contrave in the first quarter, we are in the position for an FDA action as early as the first quarter of 2011, and meanwhile our solid financial footing and robust commercial propositions have put us in a good position to pursue high-value commercial partnership for Contrave.

As we have stated in the past, we believe that a strong partner in the US will help us maximize the commercial opportunity for Contrave. We are pursuing a preapproval deal which is in the best interest of both Orexigen and any prospective partner, so that we can prepare as soon as possible for a high-quality launch upon approval.

While we are pursuing a global partner, our first priority is the US opportunity for Contrave and as such we are positioning the ex-US opportunity an emphatic or second product as potential options in the deal. In terms of the type of deal we are considering, we do not see big upfront payment as the primary objective of a preapproval deal. We recognize that a key driver of success for any transaction will be having a partner that can help execute a comprehensive launch and life-cycle management strategy, where we can participate substantially in the economics. That points to a back end loaded deal, which is a message that has been received favorably among the companies with whom we are speaking.

We do believe that we can achieve the significant revenue level with a targeted CSO facilitated launch, if no partner agreement is struck and are also preparing for that scenario. To that end we have assembled an experienced commercial team and are actively developing a comprehensive launch plan. We have initiated discussions with several of the contract sales organizations, and are evaluating different scenarios.

In addition, we have recently signed a manufacturing agreement with Patheon to produce a stable commercial supply of Contrave. By developing an independent commercialization plan we are establishing optionality that allows for two ways to win, enabling an independent targeted launch, or a high-value deal where we can retain co-promote rights with a partner.

We have also recently added regulatory and commercial expertise to our board with the additions of Dr. Peter Honig and Dr. Wendy Dixon. Peter brings over 20 years of clinical and regulatory experience from past roles with Merck & Co. and the FDA. Most recently he was senior vice president of worldwide regulatory affairs and product safety at Merck, and co-chair of Merck’s late development review committee overseeing the company's late stage pipeline.

Dr. Dixon brings 30 years of experience developing commercialization strategies and leading new product launches in the cardio-metabolic and primary care markets with Bristol-Myers Squibb, Merck, and Smith, Kline & French. Most recently, she was president of global marketing and chief marketing officer at BMS. We are very pleased to have both of these members join our board.

So we are preparing for what is clearly going to be a critical year from a regulatory and commercial standpoint, and have established a solid foundation from which to succeed. There are a number of important events approaching on the regulatory front, including the potential acceptance of the Contrave NDA filing by the FDA. And the FDA hosted advisory panels on obesity and diabetes products.

I would now like to ask Dr. Preston Klassen, our global Contrave program team lead to provide an overview of some key upcoming events for Orexigen. Preston?

Preston Klassen

Thanks, Mike. I will start with our upcoming presentations and publications. We continue to analyze the efficacy and safety information from the Contrave phase 3 trials, and there are a number of upcoming presentations to highlight. We expect to have 4 publications at the American Diabetes Association meeting in June, including primary and secondary analysis from the core diabetes trial, a body composition sub-study from Core 1, using DEXA and CT scans to evaluate changes in fat mass, and a Phase 2 trial of Contrave in overweight and obese patients with major depression.

In addition, we have seven presentations at the International Conference on Obesity in Stockholm in July, and we have submitted abstracts to the Obesity Society's annual conference. We also have additional plans for other academic venues for the rest of this year, and into early 2011.

We are also moving forward with our intent to have peer-reviewed publication of our Phase 3 trials in high-quality academic journals, and we are pleased with our progress on that front.

Turning to regulatory events, the FDA's division of Metabolism and Endocrinology Products Advisory Committee has announced three days of panel meetings in July, specifically the 13th through the 15th. Vivus [ph] has indicated that their combination product of phentermine and topiramate will be reviewed on the 15th, and we understand that Avandia will occupy one of these other two days of the panel.

We are pleased that the FDA has decided to host an advisory panel for Vivus’ combination products as soon after the NDA was accepted for filing. And while each of these meetings really must be treated as drug specific, we recognize that any outcomes may affect our playing field, and so we are following these developments closely. The introduction of multiple new therapies in this area will undoubtedly lead to market expansion, and so a positive outcome for Vivus is likely to be a positive for the industry from a commercial perspective.

Likewise, if any drug specific issues are identified, we believe that it is important to recognize that broad conclusions cannot necessarily be drawn across products. We are interested to learn how the agency views the use of anticonvulsants for obesity, as our second product in development Empatic uses the anticonvulsant Zonisamide in our proprietary combination with bupropion.

It may also be possible for us to gain prospective on post-marketing requirements, and sort out which of those may be broadly applicable versus drug specific. Obviously, we will be paying extremely close attention to the panel in July, and we expect that it will provide valuable information that could be gleaned for our own regulatory review process for Contrave.

I will now turn the call back over to Mike.

Mike Narachi

Thanks, Preston. This is a defining year in the quest for new therapies to battle obesity. The call to action for new therapeutic approaches has never been greater, and with several drugs in the regulatory pipeline, we anticipate a robust public dialog. Since I joined the company last year, we have made great progress with a strong product candidate in Contrave that has been submitted for regulatory review.

The path forward is not without challenges, but we are focused on achieving success by preparing for what we can control.

With that, I will be happy to take your questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of Phil Nadeau from Cowen & Company. Please proceed.

Phil Nadeau – Cowen & Company

Good afternoon. Thanks for taking my questions. My first question, Mike, is on a committee meeting, you noted that Vivus has been scheduled for July 13 to 15, but you didn't say much about your own expectations. Do you expect Contrave to have to appear in front an advisory committee?

Mike Narachi

Yes, we have said in the past that we would expect the obesity products to have an advisory panel hearing. Of course, with our submission date, we haven't heard of a panel meeting at. But if we do of course, we will let you know. But we are preparing for one.

Phil Nadeau – Cowen & Company

And there's – one of your obesity sub-sector colleagues has suggested that maybe there's going to be a panel in September. Is that the one that you think is most likely for Contrave or at this point, is it just up in the air?

Mike Narachi

It is difficult to speculate until we hear from the agency. You are right, there was a tentative panel meeting set for, I believe, late or mid-September.

Phil Nadeau – Cowen & Company

Okay. Then, a question on the partnership, it seems like in this quarter's call versus prior quarter's call – prior quarterly calls, you focused more on the potential for a partnership pre-commercialization versus you launching the drug yourself. Is there any – am I reading too much into your comments? Is there any change where maybe now you are more focused on doing this launch with a partner?

Mike Narachi

No, there shouldn't really be any change. Since coming on board, we have committed to building a commercial team and building out a comprehensive launch plan, so that we can maintain two ways to win. The broader opportunity exists with a partner and expanding into the broader primary care markets in the US and in the ex-US. So as we said today, we're pursuing a preapproval deal with a partnership, but we don't want to be in a position that if an attractive deal hasn’t come our way to have only one option that would be to wait, or to take a less than what we would deem an attractive deal.

So we have always been preparing for both, and so I didn't mean to change the emphasis at all. I think the strategy remains the same.

Phil Nadeau – Cowen & Company

Okay. And just one last question on the partnership, there's been some speculation or rumor on Wall Street that the mistake in the Contrave NDA that was filed, it was actually found by a partner who was doing due diligence on the package. Is that true?

Mike Narachi

What we have said is that in discussions of our data and partner dialog that the lack of double weighting [ph] of an analytical point was noticed, yes. That is true. So it caused us to go back and take a look. But it wasn’t like we gave our data set to someone to find something.

Phil Nadeau – Cowen & Company

Okay. Thank you.

Operator

Your next question comes from the line of Adam Cutler from Canaccord Adams. Please proceed.

Adam Cutler – Canaccord Adams

Hi, thanks for taking the question. I'm wondering if you can give us some sense, as you get closer potentially to an advisory committee meeting of your own, and in the meantime to the advisory committee meeting for Qnexa. What's your sense around the windows of potential timing for partnerships? Because I would imagine that, as you get very close potentially to your own advisory committee meeting, anybody who hasn't decided to sign a deal, at that point, may want to wait. Is there any – have you heard feedback from partners that any of them want to see how the Qnexa advisory committee meeting goes before they proceed further?

Mike Narachi

Yes, thanks for the question Adam. As we said in the call today, obviously it is in both parties interest to do a deal sooner rather than later, so that we can prepare for a high-quality launch as close to approval as possible. So you are right though that there may be some events that could change the risk profile of the regulatory action or the competitive landscape. So some people may want to wait. I think that is largely going to be driven by how competitive the process is. I think everyone is aligned in terms of wanting to get involved with a high-quality launch. The prospects of launching a product, you know, getting started right after approval especially in obesity I think would be daunting.

I'm not sure if that helps. If you need more clarification let me know.

Adam Cutler – Canaccord Adams

No, I think that does help. And then, I guess as a follow up question. I'm wondering here that what will you be listening for, in particular, from the Qnexa advisory meeting, especially as you've noted that the FDA and/or any advisory committee meetings – advisory committee's view on Qnexa may have some bearing, in particular, on Empatic?

Mike Narachi

Yes, I will let Preston handle that one. He covered some of that in the call today, but obviously there are some things that may be generalizable to this space, and then the majority of what we will be watching for, I think will be very specific. And I will let Preston recover those points.

Preston Klassen

So, I think the first comment to make is it will be important to understand again just from a general perspective the risk benefit for obesity and novel therapeutics. And so we will be paying close attention to the general dialogue from that committee because they believe that may provide some helpful preparation for us as we prepare for what we believe will be an advisory committee in the future.

And then in terms of specifics, understanding the benefit and risk to a competitive product will help us. And as I mentioned earlier, specifically around the issue of anticonvulsants in treating (inaudible) in treating obesity. We think that that will provide us some valuable information as we design our Phase 3 program for our second product Empatic.

Adam Cutler – Canaccord Adams

Okay, thanks a lot.

Operator

Your next question comes from the line of Bill Tanner from Lazard Capital Markets. Please proceed.

Bill Tanner – Lazard Capital Markets

Thanks for taking the questions, Mike, a couple for you. Number one, I guess, on some boxes would have had, presumably, been checked by partners as it relates potentially to IP and maybe data, as it relates to satisfying the FDA expectations, as we know now. How far down the road or how many – to what extent have certain boxes been checked to where, at this point in time, it is more waiting to see the outcome of the Qnexa panel? If you could just sort of help us, qualitatively, I guess.

Mike Narachi

Yes, I mean obviously we can't comment on the specific detail of what stage of diligence we are in with which particular partners. Maybe your question is more, what can a partner hope to learn vis-à-vis the panel coming up to review this product. I think Preston said it well, I think there is a general – we will get a general read on the unmet need landscape, and the risk benefit landscape just generally. There may be specific things that come out of that panel that are very specific to that product or may be generalizable for anticonvulsants. And that will help potential partners understand the option value for Empatic.

I think most people are sophisticated enough to know that there are many, many things that will not be generalizable from that panel. I think a positive outcome in general as positive for this space, but if there are negative things that are drug specific, they may be very specific to the drug combination, or potentially generalizable to anticonvulsants.

Bill Tanner – Lazard Capital Markets

But presumably, there would be potential partners that are quite comfortable, I guess, with the IP as it relates to Contrave.

Mike Narachi

Yes, again, I can't comment specifically on the stages, but certainly intellectual property is often gating to even go to the next step for partners. So, you know that is a relatively easy box to check.

Bill Tanner – Lazard Capital Markets

And then, just how do you convey the competitiveness of the situation? That, obviously, you'd like for people to be motivated to get to an answer sooner than later? So, I'm just curious how the company is in dealing with the partners? Is it – what kind of timelines are being communicated to the companies to try to get people to – to try to get the competitive juices flowing a bit?

Mike Narachi

Well, I think the main question, the main way to address that is that is a question of how soon do you want to be involved in order to launch.

Bill Tanner – Lazard Capital Markets

Yes.

Mike Narachi

So, when we ask that question we get an answer.

Bill Tanner – Lazard Capital Markets

Yes, okay, all right. Thanks.

Operator

Your next question comes from the line of Cory Kasimov from JP Morgan. Please proceed.

Karen Jay – JP Morgan

Hi, this is Karen Jay [ph] for Cory. Thanks for taking the question. I just have one that has to do with the impact of the restated core data. Is there a potential that might affect the filing, in terms of a large amendment or a potential delay in the review process?

Mike Narachi

Yes, I will let Preston handle that.

Preston Klassen

We really have no reason to believe that this will impact the timing of the review or the approvality in any way, shape or form in terms of the Contrave program and package.

Karen Jay – JP Morgan

Great, thank you.

Operator

There are no further audio questions at this time. This concludes the question-and-answer portion of the call. I will now turn the call back over to Mike Narachi for closing remarks.

Mike Narachi

Thank you. I will conclude by summarizing as follows, we have been taking deliberate steps to help achieve our objectives for 2010, managing the review and approval process for Contrave, preparing for launch and commercialization of Contrave, and identifying a strong partner who can extend our commercial reach across the broader US primary care markets and abroad.

We made great progress on all three fronts today, and expect to report positive progress as the year unfolds. And again thank you for joining the call today and we look forward to sharing with you what looks to be a very defining here in obesity.

Operator

Ladies and gentlemen, this concludes the presentation. Thank you for your participation in today's conference. You may now disconnect. Have a great day.

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!

This Transcript
All Transcripts