Acura Pharmaceuticals' CEO Presents at Return of Product Rights Conference (Transcript)

Apr.11.14 | About: Acura Pharmaceuticals, (ACUR)

Acura Pharmaceuticals, Inc. (NASDAQ:ACUR)

Return of Product Rights Conference Call

April 11, 2014 8:30 AM ET

Executives

Robert B. Jones – President and Chief Executive Officer

Peter A. Clemens – Senior Vice President and Chief Financial Officer

Analysts

Bert C. Hazlett – ROTH Capital Partners LLC

Kevin Kedra – Gabelli & Company, Inc.

James Liberman – Wells Fargo Advisors LLC

Operator

Good morning, ladies and gentlemen, and welcome to the Acura Pharmaceuticals announcing Return of Product Rights Conference Call. Today’s call is being recorded.

I would now like to turn the call over to Mr. Peter Clemens, Senior Vice President and Chief Financial Officer. Please go ahead, sir.

Peter A. Clemens

Thank you and good morning everyone and thank you for joining our call. As usual, before we begin, I’d like to remind you that any discussion that takes place during this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management’s current view of future events and operations, including but not limited to statements pertaining to the company’s expectations regarding Aversion oxycodone or Oxecta.

The commercial potential of Aversion oxycodone or any of the company’s products and plans to maximize our potential, expectations relating to establishing a partnership to relaunch and commercialize Aversion oxycodone, other terms or timing of any such transaction, the availability of sufficient DEA quota for oxycodone raw materials for the supply of Aversion oxycodone, future product sales and financial results and the company’s strategy for long-term growth.

Forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Certain factors may cause actual results to differ materially from the forward-looking statements are discussed in the company’s press release issued yesterday evening and in the Risk Factors section and other sections of the company’s Form 10-K for the year ended December 31, 2013 as filed with the SEC.

I’ll now turn the call over to Bob Jones, our CEO.

Robert B. Jones

Thanks, Pete, and good morning, everyone and thank you for joining us. Certainly, it is a new day for Acura here. Yesterday morning, we announced that we successfully completed negotiation with Pfizer, providing for the termination of their license to our Aversion technology and have reacquired the rights to the Aversion oxycodone product known as Oxecta.

We will pay Pfizer $2 million for an immediate termination of their license to our Aversion technology and Pfizer will have no further interest in our technology going forward. We also will purchase from Pfizer certain raw materials used to manufacture the product. We’re excited to get this FDA approved product back. Operationally, Pfizer will immediately discontinue commercializing Oxecta, that is, they must see some manufacturing and distribution of the product.

The product that remains in the distribution system will be allowed to be sold through at Pfizer’s option. Pfizer also will retain the rights to the Oxecta trade name. We view the Oxecta trade name as having minimal brand equity at this point, since Pfizer has only performed promotion of that trade name since late December 2013. It allows for a clean breakpoint, and Pfizer will remain viable for any and all product it has placed into the distribution system. As such, we will be referring to the product as Aversion oxycodone, until we have a new trade name.

We and Pfizer will immediately start the process of transitioning the product to Acura. We expect this process will take about 90 days. During the transition period, Aversion oxycodone will not be available on the market, for which we apologize to the healthcare providers and the patients that have come to rely on this important medicine. We are committed to reestablishing supply of Aversion oxycodone as quickly as possible.

We will begin assessing appropriate partners to help us commercialize and relaunch Aversion oxycodone. We will be looking for a partner with established commercial infrastructure to appropriately price and promote Aversion oxycodone to the healthcare providers, as well as offering distribution capabilities. Aversion oxycodone remains the only immediate-release oxycodone product on the market with abuse deterrent features that are described in its label.

We are not aware of any regulatory issues with the Aversion oxycodone NDA and believe it can be reintroduced into the market as soon as we have completed a license and commercialization agreement with a strategically focused pharmaceutical partner.

We expect that our licensee will use the same contract manufacturers; Pfizer for its commercial supplies of the product, which will avoid any additional scale-up and validation requirements to reintroduce the product. Also we believe this supplier has sufficient DEA quota for oxycodone raw materials to allow for a relaunch.

The Aversion oxycodone product was licensed to King Pharmaceuticals in 2007. we jointly developed the product with King through its new drug application in December 2010. The NDA was approved in June 2011 under Pfizer who had acquired King during the FDA’s review cycle. we’ve recognized the effort of King and Pfizer and getting the product approved. unfortunately, the Pfizer commercial organization never provided much support to the product, after Pfizer deprioritize its immediate-release opioid portfolio, commencing in 2012.

We believe with the appropriate promotional strategy and support, Aversion oxycodone can achieve meaningful sales. therefore, this is an important milestone for Acura and our shareholders. we have brought this key Acura asset home and look forward to making up a more productive asset for our company.

We’ll now open up the call for questions. operator, you may now begin the Q&A session.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And we’ll take our first question from Bert Hazlett with ROTH Capital.

Bert C. Hazlett – ROTH Capital Partners LLC

Thank you. And I want to congratulate you on reacquiring that asset. I think that’s extremely important from your – from a strategic standpoint, not only for Aversion oxycodone, but for the entire portfolio. And along those lines, would you consider the partnering of the Aversion oxycodone by itself or would you be considering the Aversion technologies as a whole as a portfolio, as you consider – or repartnering, or as you consider the context with the reacquisition of the asset?

Robert B. Jones

Yes. Thanks, Bert. We’ve been out speaking to potential partners for our Aversion hydrocodone/acetaminophen product for sometime. so we have had discussions with people. we do need to license the broader Aversion portfolio. we think the Aversion oxycodone product will be a great catalyst, because it’s already an approved product that can go to market immediately, which has we think substantial value to the potential partners.

Our intent is to solicit offers from a broad array of companies, and see what those offers look like and determine whether it makes sense to move forward solely with an Oxecta, licensing deal at this point in time, or whether it makes sense to do a broader – a broader deal that we include the other Aversion opioid assets.

Just as a point of reference, we do point out when we did the deal with King back in 2007. it was very important to King to get our license to the entire portfolio products. they didn’t want the technology to be spilt and parched amongst multiple companies. and so that certainly might be of importance to any potential partners going forward. so we’re going to remain flexible on that front.

Bert C. Hazlett – ROTH Capital Partners LLC

That’s great. I have a quick follow-up. on the King structure, the King deal, that deal one did have a royalty rate that was applied to the entire portfolio. Would you expect the royalty rate, if you do license either Aversion oxycodone or the entire portfolio, since this is an approved product, would you expect the royalty rates to be different or structured differently than they are, than they were with the King deal?

Robert B. Jones

Yes. We would expect the higher royalty rates than what we had with, in the King deal. now we had pretty attractive royalty rates in the King arrangements. They went up with highest 25% of sales. but that was based upon a very broad portfolio of products. And we also, generally believe that the royalty rates tend to be lower when the partner has to embrace some risk in the transaction. And of course, the big risk in our business is the clinical and development risk.

So by lieu of the fact, the Aversion oxycodone product has been completely derisking as an approved FDA asset with a known label. Our anticipation is that we would get certainly, the higher – the much higher royalty rate than the 5% to maybe 10% that we are expecting under the Pfizer deal.

Bert C. Hazlett – ROTH Capital Partners LLC

Thank you. That sounds great and I congratulate you again, on the success. So I think that’s important for the company and the technology. Congratulations, gentlemen.

Robert B. Jones

Thank you, Bert.

Peter A. Clemens

Thanks, Bert.

Operator:

We’ll take our next question from Graig Suvannavejh with MLV & Co.

Graig C. Suvannavejh – MLV & Co. LLC

Great, good morning and I want to add my congratulations to you as well on reacquiring the rights to Aversion oxycodone. I just wanted to really focus more on the transaction price and could you just help us explain or help me understand how you felt that $2 million was the appropriate amount for this transaction?

Robert B. Jones

Sure. We’ve looked at the $2 million from a multiple angle. And Graig, we did see piece we put out yesterday and noted that the sales of Oxecta in 2013 were really de minimis. They did, mostly from the fact that there was no promotion at all behind the product until very, very late in 2013.

So the actual sales were in the range of about $200,000 to $250,000. So the $2 million, generally speaking with what’s rather rich from that perspective, we didn’t look at it from that perspective. we looked at it, first and foremost, it’s not a lot of money, and it’s actually an extremely cheap price to get an FDA-approved product. Two, we look at the market potential for Aversion oxycodone. we believe in the product. if we just assume the 5% sales level, $2 million will be paid off with $40 million in sales that we had eight years of patent rights left in order to recruit that.

So we felt that was an extremely cheap price. And mostly from our perspective, it was controlled. It’s worked out for us to buy the control of this product back, because that Pfizer, it was languishing, it wasn’t doing any good for the company, and for a relatively cheap price we felt very, very impediment about getting our asset back and being able to put it to work and I think easily recruit that $2 million.

Graig C. Suvannavejh – MLV & Co. LLC

Okay, fair enough, I appreciate that. And my second question just has to do with; I know that the plan going forward will be to solicit interest. Have there been any preliminary discussions ahead of this or – and in terms of that process, how long do you think something like that might take?

Robert B. Jones

Right. So we have been in discussions with other companies around the Aversion hydrocodone/acetaminophen product. So we have some established dialogs in place. Due to the nature of this transaction, we really did not reach out to a broad audience of people. we needed to keep this transaction confidential until it wasn’t out. So we will be proactively reaching out and we’ve actually, already started to proactively reach out to perspective partners. I can also tell you that we’ve had people that we haven’t been in discussions with, have contacted us already with an interest in exploring more about the Aversion oxycodone product.

So there seems to be very strong interest, I think there’s always strong interest in FDA-approved products that can be immediately brought to market for companies with the appropriate infrastructures. And so we really, as I said in the intro, we are committing – committed to getting this product back on the market as rapidly as possible. So we think those discussions, we can identify a satisfactory partner quickly, and we intend to not overly negotiate this, really the objective is to identify a partner and get this product on the market quickly and we certainly believe that we can get this product back on the market in 2014.

Graig C. Suvannavejh – MLV & Co. LLC

Okay. Thank you for that. And I think given the profile of the product, I think, we should be able to generate significant interest. so I want to wish you well in that process. Since then, you talked about hydrocodone/acetaminophen and I know this is an Aversion oxycodone focused call. is there any update you can provide for us in terms of anything that you might have been carrying it all, if anything from FDA with regards to the timing of when they might be able to come to a decision on the 301 Study?

Robert B. Jones

Yes. unfortunately, no update there. FDA has not provided us with any decision. we continue to work with the FDA and query them on an informal basis. but at this point, we have no update from the FDA on the Aversion hydrocodone/acetaminophen product. We do have some sense. we feel good that it would be easy for the FDA to say no for that product.

So it certainly gives us some hope and expectation with regard to that product that there is at least someone in the FDA that’s supportive and a champion of that, and we just have to wait for the FDA to fully deliberate it.

Graig C. Suvannavejh – MLV & Co. LLC

Okay. Thank you very much for taking my questions and congrats again, on getting the product back.

Robert B. Jones

Thanks, Graig.

Operator

We’ll go next to Kevin Kedra with Gabelli.

Kevin Kedra – Gabelli & Company, Inc.

Hi, guys. I’ll offer my congratulations well on getting back the rights to the product. I’m wondering if there’s any work, additional work that maybe you guys need to do on the product, whether it’s maybe abuse liability study, say label, looking at additional strengths, I mean any of that element more sort of being planned, and so would you be doing that on your own or would that also be coming – comes in with the partner?

Robert B. Jones

That’s a great question. Let me start with the label side of that first, and then direct it back to the additional strengths. On the label side of things, the – we’ve been challenged under the FDA’s guidelines vis-à-vis the abuse liability study in particular, the snorting study. And we certainly ended up with mixed results in the Oxecta label of the Aversion oxycodone label.

We ended up with some mixed results in the Aversion hydrocodone/acetaminophen liking – drug liking study. That we believe can be fixed and we know that we’ve got very, very strong results out of the Aversion oxycodone study or King that was technically the King study. And the problem there was the sequence of factor, or the carryover effect in that study.

So we think we can strengthen the label from that perspective. We think also that the label can be strengthened from the gelling characteristics of the product. And from that perspective, we do have some discussion of the generic – the gelling characteristics of the product in the dosage and administration section of the label. We don’t have it in the abuse liability section of the label. since the Aversion oxycodone product was approved, we know that the FDA has made some movement on gelling technologies in the label, based upon what oxycodone got. So I think both of those things lend some promise to potentially improving the label.

Now back in 2012, we did some label research on the Aversion oxycodone product on the existing label. And those results came out favorable, the physicians clearly could distinguish the features that were different in the label and had indicated that they were inclined towards using the Aversion oxycodone product with some of their patient population. So we don’t think it’s imperative to improve the label, but we think that the label can be improved. And I think all of those discussions and what we will do, will probably fall to our partnering discussions on the product.

Relative to developing additional strengths, so for those of you, who are looking at the current market’s immediate-release, oxycodone hydrochloride products that have no abuse deterrent features in them. there’s really of the 16 million or so prescriptions. those are really offered in four dosage strengths.

If I remember correctly, I think it’s a five of 15, a 20 and a 30. Oxecta currently, or Aversion oxycodone is currently available in a five and a 7.5 strength. The five and the 7.5 strength, the five obviously measures – matches up well with the five, the 7.5 is obviously a two-tablet dose to get to the 15. One of the big sellers in the market is a 30 milligram dose and it’s actually, probably the most often abused, or that we don’t have any specific data on that.

So the question that we’ve run with other that we’ve been in discussions with and one we are partnered up with Pfizer and King was can we develop a 30 milligram dose. The answer to that question is yes, we’re not exactly sure what it would take to get that product approved by the FDA. But we have developed the Aversion technology with other opioids in amounts up to 75 milligrams. So certainly, that 30 milligrams would fit within the capabilities of the products that we’ve designed so far. And again, I think at the end of the day that will be a point of discussion and future development work that we’ll undertake with the partner.

Kevin Kedra – Gabelli & Company, Inc.

Thanks, I appreciate the color on that. And then as far as talking to partners, what will you be looking for in a partner and specifically, what’s the influence that you would like to have over the product? I think it’s kind of safe to say that Pfizer is handling the product. there has been some satisfactory. So I mean, how much control do you feel you’re going to need to have over the product going forward when you work with the partner?

Robert B. Jones

Well, there’s multiple ways of looking at a partnership and keeping some teeth into the arrangement, if you will. I think the biggest thing that may have made a difference with Pfizer is, if we had a co-promote option, not that necessarily you need to exercise that option. but certainly, if your partner isn’t putting the resources behind the product. it allows you to step in and put your own resources against the product. And I dare say that, if we had an option with Pfizer, we probably would have stepped in and made a difference with the product. And oftentimes that spurs the partner into providing more resources as well, or cutting the ties sooner rather than later.

And that’s just one way of looking at it. we could, I’ve seen deals where people build in minimum numbers of sales reps, minimum number of sales calls. The challenge that I think we really face to unlock the real potential of an opioid product is breadth of reach.

Now by that, I mean that there are so many physicians, specialties that prescribe opioids, and in particular, immediate-release opioids that it’s almost easier to count specialties that don’t prescribe opioids than do prescribe opioids. And so it really takes a pretty broad sales effort to reach all of the targeted physicians in the space. We probably won’t find a partner that can – that calls on every call point. And for example, not so much with the oxycodone products, but the hydrocodone products, a big segment of prescribers are dentists.

Now you can reach dentists, but there’s not too many people that are out actually making sales calls on dentists unless you have got a line of toothpaste or toothbrushes or something of that nature. So, we’ll reach out to the dentists. so I think that the reach of a company will be important. And then also from our perspective, it’s going to be the amount of resources and the focus they’re going to put behind the product and prioritization. So those are just going to be some critical elements that we’ll look out in the partnership.

Kevin Kedra – Gabelli & Company, Inc.

Thanks.

Operator

We’ll go next to James Liberman with Wells Fargo Advisors.

James Liberman – Wells Fargo Advisors LLC

Thank you. This is very exciting moment in your company’s transformation. And could you comment again, on the potential size as you see it, you mentioned that 16 million prescriptions a year. How would this compare to the extended-release market, which seems to be with the Aversion technology, which seems to be growing and one tends to believe that the immediate-release is our larger market.

Robert B. Jones

Sure. And I’m going to let Pete comment on this in a little bit, presuming he has got a little more top-of-mind on the size of the extended-release market. The opioid market in general, is approximately 250 million prescriptions; about 235 million of those are in immediate-release products, which is by far our largest prescribed drugs segment in United States. The balance of those will cross between extended-release, there are some products out there like the Actiq lozenge, although some people call it the lollipop, there are wafers that are available in the marketplace. there are things like the Duragesic patch, which is topically applied.

So the balance of that market between 235 million and 250 million. that’s a lot of prescriptions in some different delivery systems and extended-release products. So our market is huge. the Aversion oxycodone product is a little more of the niche product. if you will at only 16 million of the 235 million or so immediate-release prescriptions. The bulk of the 235 million falls in the hydrocodone/acetaminophen camp. But the oxycodone market immediate-release is actually one of the fastest growing molecules or product segments within the opioids.

And that seems to be, because we believe physicians are moving away from having acetaminophen in the formulations, simply because of the liver toxicities that have been associated with acetaminophen, and the FDA has identified certain problems with people taking OTC acetaminophen, over-the-counter products, in conjunction with their acetaminophen, containing opioids, and fairly getting a whopper dose.

So I think a lot of – some physicians are moving a little more to the plain single-ingredient opioids. Of that 16 million, just to give you prescriptions, there are about 100 tablets on average per oxycodone prescription. so that’s about 1.6 billion tablet marketplace. Now, currently that is all the generic prices. So that’s on average across all the strengths, it’s generally about $0.20 per tablet market. so I think the market is in the range of currently about $300 million.

James Liberman – Wells Fargo Advisors LLC

At generic price?

Robert B. Jones

At generic prices. If you look at, where Pfizer had priced Oxecta, and we’ve made it pretty clear that we did not necessarily agree with Pfizer’s pricing on Oxecta. But Oxecta was priced at $2.67 a tablet. Well, at 1.6 billion tablets at $2.67, if you converted the entire market that trades up a $300 million generic market, up to over a $4 billion addressable market potential.

We always felt that was a bit excessive. So we think if you looked at the oxycodone, which is an extended-release opioid. If you look at what the price of that is on a per milligram of oxycodone basis. our product should have been priced in the – comparably would have been priced in the $0.50 to $0.80 per tablet range, or even at $0.80 a tablet, those 1.6 billion tablets that equates to about a 1.2 billion addressable market potential.

So I think one of the big, big questions we’re going to have in partnering is, ultimately, what is that we feel is the appropriate price point for the relaunch of the Aversion oxycodone product.

James Liberman – Wells Fargo Advisors LLC

That’s very helpful. thank you.

Operator

There are no further questions at this time. I’d like to turn it back to our speakers for any additional or closing remarks.

Peter A. Clemens

I think that that’s all we have, operator. We appreciate everybody being on today. As I said, I think it’s great, great news for Acura to have this asset back. We certainly believe that there’s a great opportunity here for ourselves and a partner company to bring this product back into the marketplace with an appropriate level of promotion, and a new pricing strategy and really make some great strides and some benefits and bring this important medicine back to the healthcare providers and patients.

So thank you very much for joining us and have a good day.

Operator

This concludes today’s conference. Thank you for your participation.

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