The Medicines Company's CEO Discusses Q1 2014 Results - Earnings Call Transcript

Apr.23.14 | About: The Medicines (MDCO)

The Medicines Company (NASDAQ:MDCO)

Q1 2014 Earnings Conference Call

April 23, 2014 08:30 AM ET

Executives

Neera Dahiya Ravindran - IR

Clive Meanwell - CEO

Adam Sharkawy - SVP, Tenaxis Medical

Bruce Rosengard - VP, New Business Ventures

Bill O'Connor - SVP and CAO

Analysts

Steve Byrne - Bank of America

Matt Lowe - JPMorgan

Jason Kantor - Credit Suisse

Louise Chen – Guggenheim

Umer Raffat - ISI Group

Joseph Schwartz - Leerink Partners

Traver Davis - Piper Jaffray

Biren Amin - Jefferies

Operator

Good day, ladies and gentlemen and welcome to The Medicines Company Q1 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder today’s conference is being recorded.

I will now like to introduce your host for today’s conference call, Ms. Neera Dahiya Ravindran. You may begin ma’am.

Neera Dahiya Ravindran

Thank you, Kevin. Good morning and thank you for joining us today for the Medicines Company’s first quarter 2014 financial and operating results. Please note that slides will be used during our call today and can be viewed and downloaded on the Investor Relations section of our website, www.themedicinescompany.com.

I would like to remind you that this call will contain forward-looking statements about The Medicines Company that are not purely historical and all such statements that are not purely historical maybe deemed to be forward-looking statements that involve a number of risks and uncertainties.

Without limiting to foregoing the words believes, anticipates, plans, expects, estimates, aims, promises and similar expressions are intended to identify forward-looking statements. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements are identified in the Company’s SEC filings, including the Form 10-K filed with the SEC on March 3, 2014. Copies of our SEC filings can be obtained from the SEC or by visiting the Investor Relations section of our web site.

I would also note that during the call, we may refer to adjusted net income measures, which exclude amortization of acquired intangible assets, deal-related charges, stock-based compensation expense, arbitration awards, changes in contingent consideration, non-cash interest and net income tax adjustments.

Please refer to the reconciliation of GAAP to adjusted net income and adjusted EPS statements in our press release for explanations of the amounts excluded and included to arrive at the adjusted net income and adjusted earnings per share. The press release can be obtained by visiting the News and Events section of our web site.

This morning Dr. Clive Meanwell, Chairman and CEO of The Medicines Company will provide an overview of the company and Bill O'Connor, Senior Vice President and Chief Accounting Officer will present operating and financial results. Glenn Sblendorio, our President and Chief Financial Officer is recovering from elbow surgery, and therefore unable to join us on the call today. Dr. Adam Sharkawy, Senior Vice President, and Surgery and Perioperative Care Global Innovation Group Leader, and Dr. Bruce Rosengard, Vice President, New Business Ventures will provide an overview of Tenaxis acquisition announced this morning.

With this introduction, I give you Dr. Clive Meanwell. Clive?

Clive Meanwell

Thanks Neera, and good morning to everybody. It’s been very sunny spring like finally in New Jersey. Thanks for joining the call today as we announce results for the first quarter of the year. The rumours that Glenn’s elbow injury was during the Tenaxis negotiations is not true. We continue to execute on our acute intensive portfolio plan, focused on achieving our purpose which is to stabilize, alleviate suffering and contribute to the economics of healthcare by focusing on the need of leading hospitals worldwide.

We will begin with that news announced this morning, the acquisition of Tenaxis Medical for its novel surgical sealant. With me here, as you heard from Neera, is Adam Sharkawy, our Senior Vice President, leader of the business unit that runs this area. Adam came to us last year from Smith & Nephew where he was Senior Vice President and executive team member of the emerging international market division, and of the endoscopy global business unit. Adam knows the field of surgery and surgery drug device combinations well from his time with Smith & Nephew; and before then at Abbott Vascular and Guidant Vascular, and also from a number of minimal invasive surgery start-up companies where he played leadership roles.

So Adam, over to you, what’s going on?

Adam Sharkawy

Thank you, Clive. In surgery and perioperative care, we aim to create value for hospitals, caregivers and patients across the whole spectrum of care and within that spectrum of care, we’re executing a thoughtful strategy at surgical hemostasis. Now the addition of the Tenaxis product announced this morning is a very important addition to our portfolio. As Neera mentioned we’ve included a few slides on our website that will help us take you through our thinking on the surgical hemostasis landscape, as we detail our execution approach. So I would like to point you to Slide No. 1.

Surgical hemostasis includes several product categories and combinations. The market is approaching a $1billion in the U.S. alone, and because the control of surgical bleeding is dependent on anatomic location, wound topography; source of bleeding such as arterial, venous, capillary, and then severity of bleeding; surgeons need a range of solutions to meet their needs of completing phased cost efficient surgical procedures.

So to help this slide via choices range and practicality of surgical hemostasis, which underscore our portfolio strategy, I’d like to introduce Dr. Bruce Rosengard who is the Vice President on the New Business Ventures team here at the Medicines Company. Before joining the bright side Bruce was a practicing cardiac surgeon and was also most recently the surgical director of cardiac transplantation at Nasharo Hospital and Harvard Medical School. Before then Bruce was the inaugural British Heart Foundation Professor and Chair of The University of Cambridge in the UK where he pioneered bleeding heart transplantation. Bruce?

Bruce Rosengard

Thank you, Adam. I would like to first say that bleeding remains a major challenge for surgeons worldwide. I’d like to ask you now to turn to Slide No. 2 where we mapped out the entire space of surgical hemostats. As you can see there are two overarching categories, hemostats and sealants. Hemostats shown in the slide in red are therapeutic agents designed to stop active bleeding. Sealants shown in the slide as blue are prophylactic agents designed to prevent bleeding. There is one product currently on the market, fibrin gels that can function either as a hemostat or as a sealant. Therefore they appear on the chart as purple.

Hemostats include a wide range of solutions. Mechanical hemostats are the oldest and simplest category of solutions for surgical bleeding. They come in the form of sponges, ribbons or powders. They have no biological activity. They function nearly to provide a scaffold for normal cellular ointments and proteins that comprise the coagulation system. As you can see from slide, they function best in the context of mild bleeding in a simple surgical topography. Aqueous Thrombin was the first biological hemostat used and dates back to before World War II. Biologically thrombin is an enzyme and catalyzes the conversion of fibrinogen to fibrin and is always used with a mechanical hemostat. Therefore, similar to the mechanical hemostats, it’s ideal for mild bleeding with a simple surgical topography.

Flowables are simply the application of a powder hemostat mixed with Aqueous Thrombin. Surgeons have been making their own flowables for years prior to any commercial products being introduced into the market. Our flowables can be used both in simple circumstances, but also in complex topographies and they are actually best for mild bleeding, even though the slide here shows it on the moderate side of the scale. Fibrin gels are a mixture of Aqueous Fibrinogen and Aqueous Thrombin. These are loaded into a double barrel syringe and when the two Aqueous mix, they form natural fibrin clot.

Sealants are categorized as either biological semi-synthetic or full synthetic. In additions to gain a hemostatic agent as I mentioned previously, fibrin gel is an example of a biological sealant. BioGlue is an example of a semi-synthetic sealant since a component of the formulation is bovine serum albumin, a naturally occurring protein. CoSeal and Omnex are examples of fully synthetic sealants.

Our entry into the market with the Tenaxis surgical sealant is a semi synthetic that focuses across the entire range of vascular and asthmatic bleeding. Most importantly, it works in high pressure arterial bleeding and is quite effective in this area. In our product portfolio, our two innovative solutions Fibrocaps or powered fibrin shown in the lower left hand corner and the Tenaxis vascular sealant, a synthetic sealant shown in the right lower quadrant of your slide function in the extremes of the two domains of surgical bleeding, tissue bleeding and vascular citrulline bleeding. I personally, as part of the diligence process tested the Tenaxis vascular sealant in an animal lab and found that the product performed extremely well, consistent with all of its approved indications.

At this point I’ll now turn it back over to Adam who’ll talk to you about the execution of our hemostasis strategy.

Adam Sharkawy

Thank you, Bruce. As I mentioned before, we’re actually hitting a very powerful strategy in surgical hemostasis to address the valuable portions of the spectrum of needs that Bruce just explained and let me take you through the execution of our strategy by pointing to Slide No. 3. So, first [indiscernible] point here. First we entered the mild bleeding segment when we acquired Recothrom from Bristol-Myers Squibb and Recothrom, as you know is a Recothrom thrombin formulation which has really established our footprint in the U.S. market.

Secondly, we also going to take Recothrom to the EU by creating a flowable formulation to address that upper left portion of the spectrum on that chart on Page 3. We then acquired ProFibrix last year for Fibrocaps, the first biologically active powder hemostat and investigational product which successfully completed Phase III studies and is currently under NDA and MAA review in both the U.S. and EU to address that moderate bleeding segment that’s also on Slide No. 3. Now the review process is tracking through our schedule, the same schedule we outlined in our October 9th Investor and Analyst Day and we anticipated marketing that product from early 2015 and we’re still on track.

Now in addition, we are also developing Fibropad, the application of Fibrocaps through a surgical sponge to potentially address that moderate severe bleeding segment. And we’re also developing an endoscopic delivery system to bring value into the minimally invasive surgical procedure space. Fourthly, so the transaction we announced today also places us into the right side of that hemostasis spectrum.

The Tenaxis vascular sealant is already approved in both the U.S. and Europe for broad use in vascular reconstruction. The product’s ability to seal vascular structures in environments without some of the safety concerns that have been linked to other sealants or biological glues positions us to potentially achieve segment leadership.

And fifth, consistent with our strategy in surgery and perioperative care, we’re leveraging our existing commercial infrastructure adding very little incremental cost to our operational expenses, as we offer more and greater potential solutions to hospitals performing surgery for hemostasis as a key driver of patient care and cost.

And in that, we’re doing the following. We intensified our sales efforts in surgical hemostasis in the U.S. by training over a 100 additional to existing sales reps in our surgery and perioperative care products including Recothrom and including Tenaxis and we’re starting that next week. We also plan our entry in the European market in late 2014 and within the next 18 months or so, we plan on partnering one or more of our surgical hemostasis solutions in Asia Pacific and Latin America.

So, with that I’d like to turn it back to Clive.

Clive Meanwell

Thanks again Adam and Bruce. It’s exciting to see a build-up in this field and congratulations to you and Bruce and the team. I know that a field-based organization is looking forward to bringing this innovation to hospitals. In other news this morning, we reported good results for the first quarter of 2014, which Bill will elaborate on shortly and investment thesis continues to represent what we believe is an opportunity for investors. We anticipate six product launches over the next 18 months as we move through regulatory processes in U.S. and Europe. We have those six regulatory filings underway, we are advancing manufacturing scale up in distribution systems and we’re working on pricing and reimbursement program for countries that need them.

Medicines Company today is no longer just an investment in Angiomax, as good as we believe that can be, but it’s also an investment in a portfolio of potentially best-in-class therapeutic products in surgery, infectious diseases and cardiovascular medicine.

Let’s get into few specifics, starting with infectious disease care pathway. We’re gearing up for the launch in the U.S. of intravenous medicine targeted at Acinetobacter infections during the second half of 2014. New formulation work is also moving forward as planned. We expect to file regulatory submissions for the new formulation late this year and in Europe next year. We’re also gearing up for commercialization of oritavancin, which will have trade name Orbactive. Our NDA for oritavancin was accepted by the FDA in February with a PDUFA action date of August 6, 2014. Obviously its QIDP designation is on fast track.

Recently confirmed by the FDA, we do not anticipate an advisory committee meeting for this product. The EMA accepted our MAA for oritavancin in February and that review is also continuing as planned. On the gram-negative front, after consultation meetings with both FDA and EMA, Carbavance is expected to enter Phase III trials as expected in the second half 2014.

In January, during the first quarter, Carbavance received QIDP designation from the FDA for range of indications. We were awarded also a BARDA contract of $19.8 million in subsequent option periods over five years that if completed to bring the total value of the BARDA grant -- excuse me BARDA contract to approximately $90 million. The BARDA contract is a cross sharing arrangement that includes non-clinical development activities, clinical studies, manufacturing and associated regulatory activities, designed to gain approval of Carbavance in treatment of serious gram-negative infections.

The unique profile of our beta-lactamase inhibitor RPX7009, given alongside a leading carbapenem provides a potential spectrum of activity in resistant gram-negative infections that we believe can play a very significant role in therapy in the future. As mentioned in passing by Adam, as surgery and perioperative care business, NDA for Fibrocaps, the dry powder formulation of fibrinogen and thrombin being developed to aid hemostasis during surgery was submitted and accepted by the FDA with a PDUFA action date of January 31, 2015. The EMA accepted the MAA for Fibrocaps in December.

For IONSYS, SME and MAA filings continue to track according to plan. Our acute cardiovascular care business continues to deliver the kind of growth we showed in financial results today which I believe are quite impressive. Obviously we continue to work to protect that intellectual property for bivalirudin and we were encouraged that on March 31, Judge Andrews is in U.S. District Court of Delaware upheld the validity of our 343 and 727 patents which extend to 2028.

We were disappointed that consistent with his claim construction of July last year, Judge Andrews was only able to support two of the three infringement issues in our favor. We expect to file an appeal. For Cangrelor we’ve continued to respond to FDA requests for information about our NDA, addressing questions in the manufacturing pre-clinical and clinical field since the advisory committee in February. The PADUFA date is April 30, 2014. In the meantime MAA filing of Cangrelor with EMA is progressing as per plan and we currently await the 120 day questions from that agency.

Before I turn it over to -- I keep saying Glenn, sorry Bill -- before I turn it over to Bill, I’d like to announce that detailed reviews for the financial community will be held on Thursday, May 22nd for our surgery and perioperative care business, and on Thursday September 4th for our infectious disease business. Both of them are going to be huge components in our growth over the coming years. The events will both be held at our offices here in Parsippany and detailed agendas and invitations will follow.

With that I’ll turn it over to Bill.

Bill O'Connor

Thank you Clive and good morning everyone. I will review the financial results for the first quarter starting with net revenue. First quarter worldwide net revenue increased 14% year-over-year. Each of our products grew year-on-year. Worldwide Angiomax revenue was up 9% from $142.9 million in Q1 of 2013 to $155.7 million in Q1 of 2014, driven by growth in the U.S. from $131.3 million to $146.2 million.

Recothrom sales were up to $13.5 million in U.S. in first quarter of 2014 compared to $8.6 million in 2013. Keep in mind that we license Recothrom in February of 2013. Other products including Argatroban RTU, Cleviprex, Minocin IV and injectable generics recorded increased sales in the first quarter of 2014 of $8 million.

We changed our revenue recognition policy for Cleviprex and Argatroban during the quarter, which led to a one-time increase during the quarter of $0.7 million and $1.6 million for Cleviprex and Argatroban respectively. These product sales were the first as of the end of 2013.

As discussed by Clive, we are on track with our R&D programs and are spending reflects that for the quarter. SG&A was also in line with our expectations. We recorded a first quarter GAAP net loss of $0.08 per share, compared to a net loss of $0.21 per share in 2013. Our adjusted net income was $0.33 on a fully diluted basis compared to $0.31 for Q1 2013.

Adjusted net income excludes upfront collaboration payments, amortization of inquired intangible assets, changes in contingent consideration, acquisition related charges, restructuring charges, stock based compensation along with non-interest, non-cash interest and net income tax adjustments. We ended the quarter with a cash balance of $378 million, before today’s announcement about Tenaxis.

As previously discussed by Glenn in our guidance update in February, the tax provision is driven by expenses which are not deductable for tax purposes, mainly relating to CVRs or contingent value rights and foreign losses. We continue to expect that cash taxes for the year will be in the $3 million to $5 million range. With the announced acquisition of Tenaxis this morning, we expect the impact on GAAP bottom line to be between $9 million and $11 million, which includes deal costs, amortization and milestones. The final accounting is being worked on currently and any adjustments to the guidance above will be made in our next earnings call.

And with that I’ll turn it back to you, Clive.

Clive Meanwell

Thanks a lot, Bill. And if we could, please operator, we’d like to open it up for questions.

Question-And-Answer Session

Operator

(Operator Instructions). Our first question comes from Steve Byrne with Bank of America.

Steve Byrne - Bank of America

Can you put the comment about 100 reps in the surgical setting into perspective with where are you at now? And then across the three business units the cardiovascular, the surgical and the infectious; where do you -- where are the number of reps now? Where do you think it could be at the end of the year assuming [indiscernible] is approved?

Clive Meanwell

Clive here. We get about 150 people in the field now but it’s had more than that. They are all selling, almost all of them are selling Angiomax of course and will continue to do so but we’re beginning to cross train them onto the surgical space so that they can work on these surgical hemostasis products. We’ve had a relatively small team on Recothrom this far. We’re going to honestly broaden on that. We’ve had a very small team on Cleviprex thus far. We’re going to broaden that too. So what you are seeing is a migration of our resources as we move forward. So that teams -- we’ve good success with small numbers of focused sales representatives both for Recothrom and for Cleviprex. And I would like to train everybody else on it; because now we have started to get a bit of critical mass in the surgical space. So, not hiring new people. Although later in the year, we will start hiring new people.

And let me come to the second part of your question. Obviously with Oritavancin expected -- well, I’ll put it this way. With the PDUFA date of August 6th, and a very progressive review cycle happening, we might expect that to get approval in August, possibly before, you never know. But clearly a September launch timeframe is in the offering. And then we’re going to have to step up the numbers. I think we’ve said this before that if we were going to add numbers to the frontline, it will be in the fourth quarter timeframe rather than earlier. And I think when we look at the sort of numbers of people we’re going to need in infectious disease, it’s obviously very significant. In 2015 we will be building up to the full force. So starting in the fourth quarter, and if you sort of see it building on top of the U.S. presence -- and of course as these drugs start to get approved in Europe, same thing applies.

Initially cross-training at existing cath lab reps, where we can, it’s not reasonable to expect the cardiovascular representative expert to also become an infectious disease expert. We’re going to have to add infectious disease expertise to the team. But I think having some cross training is going to be very useful.

Later in the year I think you’re going to see us come out with a different model of how we’re organized in the frontline where we would be moving to a much more key account management structure with a core group of people managing the business-to-business relationships with hospitals which we’ve learned so carefully in the last years; with three specialty groups around them, one for surgery and perioperative care, one for infectious disease care, and one for cardiovascular care.

There have been Steve, and I -- it may be probably what’s behind your question and sort of going off script for a moment because people are anxious to know what we’re thinking about this. Clearly as the mix of our products changes, for better or for worse and I’m not trying to signal anything, we have a very flexible frontline organization. But one thing that’s always constant though is that we always need to be in the same hospital. So it’s very fungible this, if you think it true. I hope that’s a helpful answer.

Steve Byrne - Bank of America

Yes, it is. And anticipation of Orita being improved, are you having dialogue with the hospitals, with respect to the interest level in a long-acting antibiotic like that and what is the feedback?

Clive Meanwell

Yes we are, and of course the notion of it is the ability to give a single injection, so that the patient can be moved through the system whatever that system is in that hospital, very easy without necessarily requiring in-patient hospitalization. And I think overwhelmingly, quite frankly the bigger the system and hospital we go to, the greater the interest. And so obviously our launch is likely to be focused and targeted towards hospitals that are very well organized and are looking to improve their revenue and margins by moving patients with MRSA infections of the skin and soft tissue structures through the system much more quickly and of course effectively and safely.

Operator

Our next question comes from Cory Kasimov with JPMorgan.

Matt Lowe – JPMorgan

Hi there, it is actually Matt Lowe in for Cory today. Just have a few questions on the new acquisitions. So it looks like the market was around $86 million. So $86 million sorry, for the sealants in 2012. Just wondering where you think that might be able to grow to, if you’ve had to give like -- to the sell potential of a new drug. And in fact it reached Baxter product in Phase 3, reduction in bleeding, is that essentially a differentiation in the market? And if you ever be prepared to give the current split between the Baxter and the Tri-Life [ph] (27:46) product in the market right now, then that would be great.

Clive Meanwell

Hey Matt. First of all, I think, a little bit early in the day to give you a concrete sales estimate at peak but you’re right. The slide we showed this morning shows that in the U.S. that $86 million; that is the segment we’re talking about. So you’re dead on that. As far as the differentiation of the product versus other similar products that are already out there, I’m going to turn that over to Bruce and Adam, just to answer. And as far as share is concerned, I think, until we’re out there working at hospitals, it might be a bit premature to do that. But I think there is one thing that we should say. We do believe this market can grow overall as well on a worldwide basis, not just a question sliced into pieces, it’s also a question of baking a bigger one. But Adam and Bruce, I don’t know, how you want to talk about that product -- why the product is attractive to us and what we like about it relative to others that might be available. Bear in mind we haven’t done randomized comparison trials Matt. So we won’t overstate too much here.

Adam Sharkawy

Thank you Clive. I was hoping for the – the Tenaxis sealant is really a safer alternative to bivalirudin. And it’s going to appeal the surgeons, both products have similar indications and they’re both approved for our mechanical [indiscernible] in vascular surgery. The device composition of the Tenaxis sealant is efficacious and really reduces cost by eliminating associated expenses with the barrier or complications of the current alternatives. We believe that very conservatively we should be able the north of our diluted share, the current market with the current bivalirudin and then we’ll be layering on additional indications in specific portions of vascular surgery that will grow this business further. And I’m going to also ask for Bruce to comment on that.

Bruce Rosengard

Thanks Adam. I would agree with really everything you just said. Right now based on the slide, roughly 86 million. That will extend in the synthetic market. About two-thirds of that is going to CryoLife’s BioGlue and the other third is going to a combination of CoSeal and J&Js on that. I agree with Adam. Our goal is to take at least 50% of that market and the reason -- there are a number of reasons to believe that that market can grow and not the least of which is when some of the limitations of the other products became well known, their growth curves leveled off, and we think that a product without limitations can grow on an unfettered basis.

Matt Lowe – JPMorgan

Just maybe quick follow up on the potential new indications; is there much more you can say on the plans going forward on the timelines of when you may -- broader indications for the new products?

Clive Meanwell

I think, its Clive again and again Bruce can comment on this. But I think the milestone payments of future regulatory activities relate to a potential to expand the product into cardiac structural repair. Is that correct Bruce? Did I say that right?

Bruce Rosengard

The product has already proven as a vascular sealant. So a wide range of procedures on both large and small vessels are now appropriate for this product. Extending it however into procedures that involve the actual heart muscle and [indiscernible] structural reconstruction, that’s where we want to go with this in the first pass.

Operator

Our next question comes from Jason Kantor with Credit Suisse.

Jason Kantor - Credit Suisse

I wanted to go to the core business for a moment. It looks like the U.S. Angiomax number was quite strong. I am wondering if you could kind of review the trends there, what was the unit growth, what was the price contribution, was there anything one-time in that, is there any explanations for that strength and is that a trend that we can build linearly off of.

Clive Meanwell

This is Clive. Look, we had a strong quarter, there’s no question. There were a couple of things, little bit of tailwind behind those. One of them was that one of the last ordering days of the month fell literally -- the quarter fell literally on the last day of the month. So you got a kind of bit on the first week of the second quarter stuck in there. So I wouldn’t necessarily linear extrapolate 13% or 14% for the rest of the year. I think we’re very challenged with Angiomax. I think we’ve talked about 8% to 12%, hovering around 10%. I think that’s something we’re okay with but it’s tough out there. A lot of hospitals are struggling still to control the costs, get the best outcomes. So I wouldn’t say 13.5% is a number to go forward with. Maybe we get lucky for a couple of more quarters but I think 10% is a safer bet.

Jason Kantor - Credit Suisse

So what is the contribution of price and…

Clive Meanwell

I am sorry, sorry Jason. It is volume more than price Bill?

Bill O' Connor

It’s virtually all volume Jason. And again I think Clive’s point on the -- just the ordering pattern, unlike distributor, it literally fell on the last day of the quarter.

Jason Kantor - Credit Suisse

And just to clarify one of the earlier questions around the 100 reps. So you said that you have 150 people in the field now. Are you sort of re-arranging some of those people or are you saying that you’re going to hire a 100 new reps for this surgical perioperative part of your business and if so when does that, that’s starting now?

Clive Meanwell

No we’re not hiring a 100 new reps. We are training and redeploying people to share that time somewhat differently. And if you remember when we did the BMS sale, I think we brought in 55 people from BMS over the -- which sort of was added to about 90 or 100 than Angiomax only reps. So that gets about 150. We’ve stayed around that number. We’ve focused the surgery team, FDAs from 50 downwards and really intensively trained people on Cleviprex and Recothrom and putting a whole new level of education training which is really proven to be very effective. And so acquiring courage when we stole [ph] into the surgical units with Recothrom and Cleviprex story, it’s been quite where we see.

Now just to be clear Recothrom is a contracting fight. We’re up against formidable competition in the form of Pfizer’s JMI thrombin and obviously have used these products. They’re extremely valuable. The contracting plays a big part in winning business and contracting is often focused on price volume trade-offs. So that has certainly, and our team is continuing to grow volume. It’s tough to get great price but when you add value on the product side, the Tenaxis product and Cleviprex, which by the way has been sold for the last year by no more than about a dozen people, we’re beginning to see -- get our sea legs I see like this in the surgical suite, very able [ph] products in there. I think we have more to talk about. So sorry for the long answer, but it’s an important question.

So we are cross training a lot of our Angiomax reps aren’t recalling [ph] an engagement managers. We’re cross training a lot of these guys into the surgical suite so that they’re comfortable working with the same accounts, the same hospitals but extending their repertoire of offering. I think we’re trying to get more out of the team. They’ve done an amazing job with Angiomax. Obviously growing Angiomax gets harder and harder and we got to start thinking about how over time we’ll be focusing resources and probably increase resources too but not immediately on these new parts of our business. Jason, if that’s not a clear answer just stay on and ask me again because I don’t mean it to be complicated and opaque.

Operator

Our next question comes from Louise Chen of Guggenheim.

Louise Chen – Guggenheim

I had a few. So first question I had was on Oritavancin. Was there any read throughs from the positive adcoms for Dorada and Cubist and we’ve got a lot of questions as to why you didn’t receive an adcom and just curious if you could maybe provide a little bit more color if there is any? And then secondly, with respect to the hemostasis market, if you can’t give a peak sales estimate at this point could you say, which of your three products, what percent of that market you’d ideally like to take share? And then last question is just on the appeal process for Angiomax and if there’s any read through from the Hospira case to the upcoming Mylan case in June? Thanks a lot.

Clive Meanwell

Well, all right. So, welcome to first quarter conference call where I’ll address Louise’s important question. No, seriously, great questions, Louise as always. Let me see if I can deal with a few of them. First of all the Dorada and Cubist presentations at the FDA were brilliant. I thought their teams did a marvelous job and I thought the FDA and the panelists were very straight forward, looking at the data and really if I wasn’t competing with these guys, I’d have to say well done and I’d have to say this whole space of managing and treating MRSA is going to be so much better served when they’re all in the marketplace than it has been before. So that’s – the main thing was we learned a lot from their presentation about the strength of their data and the way that they’re organized and I think it was very encouraging for us as well with what we regard as a wonderful set of data on Oritavancin.

As far as not having an adcom, I’d like to think it was because the FDA thought we were beaten up enough on the [indiscernible] adcom but it’s probably not the reason. I think the fact is that the data that we have are extremely clear. Some of you will recall that some years ago this drug did go through in adcom and given that there is not much controversy around how to assess these drugs anymore because of the excellent FDA guidelines, I think probably it’s a matter of review efficiency. That’s our best guess. But you know we don’t really obviously have full insight into what the agency is thinking about these things. So those would be my remarks to your questions about Oritavancin. And it’s coming soon in about a month.

Hemostasis as a percentage, we’ve got about $1 billion in the U.S. and something similar in the rest of world Adam. That’s a $2 billion market. I think it’s not a market that’s well tracked by the biotech financial analyst community. I think it’s new to all of us in a way. And a $2 billion market where you have what you believe a potentially superior product and which is exactly the same footprint as your hospital business and by the way exactly the same footprint as I answered when it comes along.

We think getting a third to a half of that is a very exciting idea and so that’s kind of how I believe that. I think we’ve got to be players. Our strategy from the get go has been that one product is not enough. Surgeons as you’ve heard Bruce needed a repertoire. They needed a range of ideas and products and our aim is to bring them the next generation suite of excellent hemostasis approach. So, we want to be a player. We like it very much. It’s important for hospitals and economically very attractive place to be and worldwide 2 billion sales today and probably unless I look -- probably an expanding market because surgical procedures and turning around patients quickly without bleeding is more monotonous.

All right and finally putting my legal Beaverhead on here, the short answer is the answer we always give our [indiscernible] that it will continue to affect our intellectual property aggressively. We expect to appeal the judge’s decision on the Hospira case. Usually that appeal is launched fairly quickly after the judge’s decision and there are timelines that need to be met which we will meet. Generally have 30 days to appeal the decision. That’s say to middle of May. And the appeal process would probably take the better part of the year. Significant pre-trial proceedings have been occurring on the Mylan case, which goes before Judge St. Eve in Chicago on June 9th. It would be inappropriate to me to comment further than that and I think that’s what I can say at this stage. There is a hope that’s it’s least somewhat clarifying.

Operator

Our next question comes from Jonathan Eckard with Citi.

Jonathan Eckard - Citigroup

Thanks for taking the question. So I just had one more question regarding your comments on the Angiomax trial. So like Clive, you said, only two out of the three infringements were upheld and if one of the infringements was upheld, wouldn’t that prevent a generic launch and so I’m just trying to figure out if there was one infringement that’s still left, isn’t that enough to keep somebody from launching and why do you need to appeal? And then another question on oritavancin commercial strategy. I think in the past you said the company was potentially entertaining leveraging third-party sales force to complement whatever additional people you may add to your own team. Is that still something that the company is potentially entertaining or would you rather just go alone with the oritavancin?

Clive Meanwell

Unfortunately you’re going to get three or three on infringement I think. Otherwise you don’t win. So, although we were close, we got no cicada [ph]. So I’ll try to give some detailed color. Clearly we were found, it was found because of that ruling that Hospira did not infringe by Judge Andrews. I wish it was best of three kind of thing and then on the oritavancin, yes. We are still thinking on how to best deploy resources in the field, certainly in U.S. and we would consider partnering if we felt we needed added firepower and that remains a possibility.

Operator

Our next question comes from Umer Raffat with ISI Group.

Umer Raffat - ISI Group

I had a couple of questions but I wanted to start with one and maybe ask the follow-up right after. So the implied OpEx guidance for the year, the SG&A plus R&D is about 370 million this year and this is a single day investor question I’m getting, what will the OpEx be next year if there is a generic?

Clive Meanwell

That’s a great question, does anybody give you an answer yet? Because short answer is well we have long range plans and scenarios as you would expect. We don’t have a budget for 2015 yet. So, I truly, truly, neither could nor should give you that answer, although I’d love to try. Obviously -- look I understand what people are worried about. They’re saying what happens if Cangrelor doesn’t make it and Angiomax doesn’t make it, do you have the conviction and courage to restructure your frontline efforts in a way that would make the company successful. The short answer is of course, however it is my belief that Cangrelor will get approved. It is my belief that we will continue to fight like crazy to protect hard earned intellectual property, Angiomax. And as we get more clarity on both, I fully understand that not everybody necessarily agrees with me but as those answers come forth, then clearly organizing our frontline, training and re-training people so that they can move to make the biggest difference for the hospitals they serve by being educated on our products, that’s what we’re going to do. So yes of course, it’s a huge topic of planning. We start a company planning cycle. It’s amazing and start your annual planning in like next week ready for 2015. So certainly as we go through that, we’ll be sharing our thoughts, initially, perhaps not specifically but as we go up through September you will see emerging ideas.

And as these products get approved or don’t get approved you’ll see a shift in recourses on front line to match our opportunities. It is tough stuff sometimes to think about how you move people to different jobs and different contributions, but that’s the job we do and we’ve been doing that all our careers. So I don’t have the answer to you but you’re absolutely right, that it’s a hot topic. It’s a hot topic for investors and it’s obviously hot topic for leadership here at the company. And we have very talented people in the front line who can sell in hospitals very, very well. And we can add skills for them in terms of new products, while they maintain excellent relationships with the hospitals, which are becoming more and more sophisticated business-to-business transactions.

So I’m actually very excited about the following strategy. We have a broad set of assets. We have a very talented front line. We have very flexible group of people. So in the hospitals we’ve got great relationships with, and one day Angiomax is going away. I don’t know when. I certainly hope it’s not till 2019. So our job is to market those resources productively, and I think we can. I probably should shut up before I start boring everybody.

Umer Raffat - ISI Group

And my other -- the thing I was going to ask was will we absolutely get a new claims construction at the appeals court? And then also on Cangrelor, I heard you made a remark but I didn’t quite get it but just want to get an update from you on Cangrelor, where we stand. Sorry go ahead.

Clive Meanwell

Yes. So as a physician with a PhD, I’m not going to comment on any absolute legal likelihoods because I have no idea at that level. I think it’s likely -- and I believe it’s the process that the appeals court does not need to bring forward the claim construction units in the lower court. So whether that’s absolutely different -- you’ll have to talk to your experts, because I am not – I’m not going to answer that quite correctly. But I believe we’ll be revisiting claim construction during that review. And what was the second part?

Umer Raffat - ISI Group

Just on Cangrelor, we haven’t spoken much about it on the call. Just the status where it is? Any update on that side?

Clive Meanwell

I think the important thing is that the product is under active regulatory review with a PDUFA action date of April 30th. As I mentioned we have had interactions and questions on manufacturing, supply chain, patent consideration, clinical trial results and pre-clinical research. So the agency has continued to work through its full repertoire of review. And as we come to the 30th we’ll find out what the action is soon obviously. So that’s where we are.

Operator

Our next question comes from Joseph Schwartz with Leerink Partners.

Joseph Schwartz - Leerink Partners

Maybe I’ll just continue on the last item on Cangrelor. I heard you say that you’re confident it would be approved. And I was wondering if it’s not approved on this cycle, because presumably you can’t know for sure about this cycle in particular but would you be willing to do more development work, what kind of IP runway do you see for this product?

Clive Meanwell

[indiscernible] Bill Clinton, I need to say I think I believe it should be approved. Unfortunately I am not the decision maker but the science of this product is very, very sound. And when you run a 10,000 plus patient clinical trial that meets all of its pre-specified end points, all of which are being debated extensively with regulators for several years, it seems unusual if you wouldn’t get it approved. That’s Clive’s position, okay. It’s unfortunate to say I don’t sign off the approval. Now what was the other question Joe?

Joseph Schwartz - Leerink Partners

Yes, just in terms of I think the patent is pretty close to expiring but you will have some patent term restorations. So just strategically how do you, if you come close again, but it’s not approved on this cycle, again would you do more clinical trial work? What closing you’re thinking there given the very short -- seemingly short life cycle?

Clive Meanwell

Yes, well first of all let’s get it approved. But we have been very open that right now we’ve got clear runway to the seven plus years in the U.S. and clear runway for 10 years in Europe. I’d like to get more than seven obviously. That’s not great. I think your point is an important clarification that investors are seeking, if you got plumped [ph] by the FDA and they said do another 10,000 or 20,000 or 40,000 patient trials, that’s a hard one for me to imagine doing, Joe. Even though I think we do these trails very cost effectively and even on relatively short timelines compared to the industry, I don’t think that makes a lot of sense to me, to do a study that would eat up one to two to possibly three years of that to seven. Well it wouldn’t quite because you dealing a date exclusively but to pile another $60 million to $100 million in and so it double down on that way -- perhaps be so extreme it would make me nearly choke. It kind of doesn’t hang together, does it? So now I am very excited about it still and let’s not have the funeral for Cangrelor just yet.

Joseph Schwartz - Leerink Partners

And then may be just one on something which I don’t think anyone has talked about on the call yet. Being IONSYS you’re expected to file as sNDA this first half, which is an interesting thing in and of itself. So can you talk about that and the state of other active transdermal patches that had to go through multiple revs at the agency. What kind of work have you been doing development work in that you think will support a successful outcome for IONSYS?

Clive Meanwell

Well, I have Adam to help me out here, but let me start it off. First of all yes, we expect it to go in the first half of the year. Are we perfectly on time, just to be totally transparent we’re sort of at the backend of that, of our expectations instead of timing but I think the team has strengthened the work but we’re within the timeframe we said we would file it and of course we’re also -- it is an sNDA and we’re expecting it to be reviewed in the timeframe, a good trial that everyone needs to kind of -- you got better things to do than miss but if you have -- you stick the chart we used on October 9th up on your computer monitor, those are the timelines we’re still working to. I’m not suggesting you don’t have other companies to follow, but you know what I mean. And then …

Joseph Schwartz - Leerink Partners

No, no, it’s interesting.

Clive Meanwell

The work that the team has done in the last six to eight months has been to deal with the questions that agencies ask about transdermal patches, whether they’re driven by IONSYS [indiscernible] as this one is or the patches and Adam, do you want to just quickly review -- I mean all the studies they’ve asked to do have been completed successfully. So do you want to quickly run through what those being??

Adam Sharkawy

Sure. I would actually characterize that IONSYS, especially through ALZA and J&J has actually gone through multiple phases of clinical activity with close guidance and collaboration with the FDA. So I would actually characterize it as already having run through that process. As you know we’ve completed seven Phase 3 studies and obviously they evolved over time with that type of collaborative feedback, back and forth with FDA. As you also know we have three of those studies against a placebo control and four against IV PCA and several thousand patients in. So I actually believe that we were to get into that process we look very forward to continuing to work very closely with FDA and we’re quite [indiscernible] that will get approved.

Clive Meanwell

Adam, no, no, no, it’s – Joe, you may recall that when we announced it there, we listed a set of pharmacology and utilization studies that the FDA asked College of Incline Therapeutics to complete. There were also improvements in the software and program devised. And we can get those back to you as a list of what all the boxes that we had to check with studies and after the call if you wish, just to remind you of the work that’s been done.

Adam Sharkawy

Let me elaborate on the clients. Obviously as you know, the product was already approved in U.S. and we just made a change to the controller portion [indiscernible] doing. We’ve again been working very closely with FDA to determine what types of additional characterization work that we would need to substantiate and validate those changes. They’ve really focused on some human factor studies, a FPK [indiscernible] study and send some additional verification validation work that would be normally we expected for the device, all those completed successfully and again we’ve been in very close touch with FDA on the results.

Operator

And next question comes from David Amsellem with Piper Jaffray.

Traver Davis - Piper Jaffray

Just had a quick one. I know lot of my questions have been answered already. So just on Angiomax, so in thinking about the appeals process, say you get through that process and you’re unsuccessful and Hospira can launch at the expiry of the 2015 patents, can you just talk about the situation involving multiple generics launching next year and may be walk us through the agreements of the two other settlements, and what prevents or does not prevent them from launching early, and then also the possibilities that we could get a decision in the Mylan trial prior to those 15 patents expiring?

Clive Meanwell

Interesting question, Traver. Quite complex, which reflects the complexity of what we’re dealing with here. I’m probably not going to speculate on any of that and the short answer is, let’s take it one step at a time, and plan accordingly.

Traver Davis - Piper Jaffray

But just of that, I mean, what ways can you best avoid that scenario happening in the absence of a positive appeals court ruling with Hospira?

Clive Meanwell

I think that the best I can help you is to say that the legal process that we’re in the middle of here is very public now because the court case that was done. All the records are in the public domain, and the foundations of the arguments have been, I think well-articulated both by the companies, Judge and so on. And I think our view is that the claim construction is very important. The problem with it is it’s complicated and not everybody might have the time such you study and meet that. But our view is that the claim construction did not help us. Our view is the claim construction [indiscernible], and our view is that among other things, that will be discussed at the appeal. So that’s kind of that. As to, whether there are other ways to solve the problem, which I’m sure you’re alluding to the potential settlement, we have stated on I think every call we have done, that we’re not only open to settlement proactively, ready, willing and able to discuss them with other parties and that hasn’t changed further.

Operator

Our next question comes from Umer Raffat with ISI Group.

Umer Raffat - ISI Group

I actually did get a bunch of emails from people asking what FDA had done, carton configuration sort of inspections, if the outcome’s not going to be favorable -- does that have any correlation with that outcome of this approval, the review process, on Cangrelor?

Clive Meanwell

There are people much smarter than I am, trying to figure this out, in the financial community. And I’ll leave that you guys to think about. I’m just relaying you what’s happening.

Umer Raffat - ISI Group

Okay. That’s the generally last step in the approval process, correct?

Clive Meanwell

There are many things that the agency needs to do before they can approve a drug, and as to whether these are the final steps, I think that’s speculation. Clearly, all these things need to be done in order for a drug to be approved. And we’ll continue to do, to turn around and provide information to the agency, as we always do on any questions they have.

Operator

Our next question comes from Biren Amin with Jefferies.

Biren Amin - Jefferies

Just on Cangrelor, Clive, can you confirm whether [indiscernible] ongoing discussions with FDA?

Clive Meanwell

I’m not prepared to comment on that, Biren.

Biren Amin - Jefferies

And I guess on the Tenaxis transaction, can you just maybe detail the cost on SG&A and R&D for this year as well as how should we think about accounting for the front payment in our models?

Clive Meanwell

Bill can you help us through that one please?

Bill O'Connor

We didn’t give a specific breakdown Biren, but the total impact on the expense for the year, we expect it’s going to be a $9 million to $11 million range. I would expect that on the R&D side approximately $2 million and the rest would be SG&A. And keep in mind that that money will include -- that has been and includes deal costs, potential amortization and milestones as well. And I will clearly clarify that the final accounting is not done as of yet. And if there are changes we’ll update guidance on the next call.

Biren Amin - Jefferies

Got it, okay. And then, I guess one last question for you Clive. What are your thoughts on this HEAT PPCI trial that showed Angiomax has the higher risk rate versus unfractionated heparin which was presented at the ACC this year?

Clive Meanwell

There were about six trials presented at the ACC which we may not have mentioned. At least four of them showed that Angiomax was superior to heparin. The HEAT-PCI trial was a single standard study performed in Liverpool, England which demonstrated a difference in fiber heparin, which is the first trial in the history of Angiomax that has ever shown that and about 40 trials have been done, most of them multi-center trials including the ones that we have done published in the New England Journal of Medicine and used as a basis to labeling around the world. I think it’s always interesting when you say contrairian trial results and it’s something that we are absolutely looking into and trying to figure out what we can learn from that. The nature of these household products is that you never quit on learning and you never quit on trying to move the ball forward. So, we are well aware of the HEAT-PCI.I expect it will be published in the future, although it hasn’t yet gone through peer-review publication and we look forward to working with the investigators to learn what they have learned and where they leaned it and see how it can affect making -- reaffirming or making patient treatment better than ever. One out of 40 trials, Biren.

Operator

And I am not showing any further questions at this time. I’d like to turn the conference back over to our host for closing remarks.

Clive Meanwell

So, we really thank you for spending time with us today. I know you’re terribly busy at this time of the year and look forward to continuing to update you on what’s going on here and thank you a lot for your interest in these matters. Bye for now.

Operator

Ladies and gentlemen, this does conclude today’s presentation. You may now disconnect and have a wonderful day.

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