Cardiome Pharma Corporation (NASDAQ:CRME)
Q1 2014 Earnings Conference Call
May 12, 2014 17:00 ET
Bill Hunter - President & CEO
Karim Lalji - Chief Commercial Officer
Jennifer Archibald - CFO
David Dean - Cormark Securities
Neil Maruoka - Canaccord Genuity
Good afternoon Ladies and gentlemen. Welcome to the Cardiome 2014 First Quarter Financial Results Conference Call. Please be advised this call is being recorded. On the call today are Dr. Bill Hunter, President and Chief Executive Officer of Cardiome, Mr. Karim Lalji, Chief Commercial Officer, and Ms. Jennifer Archibald, Chief Financial Officer of Cardiome. Before proceeding with the call I will first read the company’s forward-looking statement disclaimer.
Statements contained during this conference call relating to future results, events and expectations are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of the company, or industry results to be materially different from any future results, performance or achievements expressed or implied by such statements. Such factors include, among others, those described in the company’s annual information form.
I would now like to turn the meeting over to Ms. Archibald, Chief Financial Officer of Cardiome. Please go ahead, Ms. Archibald.
Great. Thank you. I will be providing an overview of our financial results and then Karim Lalji will be providing an overview of our operational results and then he will be handing the call over to Bill to provide his concluding comments for the quarter before we go into questions and answers.
Cardiome has issued it's first quarter 2014 financial results, the financial results press release and a replay of this conference call will be available later today on our website at Cardiome.com.
I will now provide an overview of our first quarter 2014 financial results. Amounts, unless specified otherwise, are expressed in U.S. dollars and in accordance with Generally Accepted Accounting Principles used in the United States of America.
As of March 31, 2014 we had cash and cash equivalents of $13.2 million compared to $11 million as of December 31, 2013. The balance of the deferred consideration related to our acquisition of Correvio was $9.8 million compared to 10.7 million as of December 31, 2013. Revenue of $7.6 million achieved in the first quarter of 2014 were from worldwide sales of both BRINAVESS and AGGRASTAT and is on plan. This is the first full quarter of AGGRASTAT sales included in our financial results and AGGRASTAT sales have been stable and above expectation.
We expect the next quarter to reflect a true BRINAVESS commercial quarter as a remaining EU distribution and logistics issues were resolved midway through the first quarter. Cost of goods sold relating to the sale of BRINAVESS and AGGRASTAT was $1.5 million in the first quarter of 2014. We did not have any cost of goods sold in the first quarter of 2013.
We reported a net loss of $3.1 million for the first quarter of 2014 compared to a net income of $18.4 million for the first quarter of 2013. The net loss in the first quarter of 2014 is according to plan and it's primarily driven by our marketing efforts and other cost required to support the commercialization of BRINAVESS and the sale of AGGRASTAT. The net income reported in 2013 was attributable to the $20.8 million gain on the settlement of debt owing to Merck.
On March 11, 2014 we completed a prospects offering of 1.5 million common shares from treasury for net proceeds of approximately CAD14 million. We believe that our cash position and expected cash inflows from the sales of BRINAVESS and AGGRASTAT along with other financial vehicles will be sufficient to finance our operational needs for the foreseeable future.
I will now turn the call over to Karim Lalji to provide you with our first quarter operational review.
Thank you Jennifer. We have continued to make good progress to expandability to sell BRINAVESS in our key markets. We now have agreements signed with key distributors acting effectively as wholesales in our direct markets where we have key account managers on the ground. These markets include Spain, Sweden, Denmark and Ireland. Prior to the last quarter and for Sweden actually at the end of last quarter we didn’t have access to those markets so we’re very encouraged by the fact that now we really have coverage across all of our markets where we’re direct.
We have also entered into a classic distributor arrangement in Greece with VIANEX and we’re very encouraged by this particular distributor arrangement because Greece was a leading BRINAVESS market for Merck and we are looking forward to the relaunch of VIANEX in this market in the near future.
Cardiome has also undertaken significant activities at the country level to support the relaunch of BRINAVESS in Europe as well as launch of their recently approved STEMI indication for AGGRASTAT. The activities at the various country level medical meetings have included exhibit booths, satellite symposia and presentations on BRINAVESS specifically either through poster presentations, through abstract presentations as well as just through general presentations on the product.
We have been very encouraged by the attendance and the response at these meetings and as well as our success in the trenches and without going into the detail of everything you see on the slide in front of you, I would like to just highlight a few examples of a few success which I think would be helpful. If we look at the fourth item on the slide which is the symposium in Italy. We basically have built a strong champion in (indiscernible) who is one of the leading emergency physicians in Italy and he has brought together consortium of physicians to have spoken to the value of BRINAVESS and he is now engaging in doing a review of a very large database of emergency room hospitalizations or emergency room admissions and hospitalizations to basically look at the impact that drugs like mephedrone have on long hospital stays and great admissions because he believes that what he has seen with BRINAVESS will make a difference.
So he is working very closely with us on his own because he sees the value in BRINAVESS to help us drive to reimbursement and launch in Italy and that’s something which and he has really taken a leadership position based on our data.
If you look at the next slide there is a listing of further activities we have undertaken and I would like to specifically highlight the meetings that took place in Sweden. At that particular satellite symposium in Sweden we had over 100 attendees and when the attendees walked in the room they were asked their views of BRINAVESS kind of a sodo market research approach were asked what -- the share of patients they would actually give to BRINAVESS versus rather than a different approaches with cardio version.
And once the presentation was done and they felt they really understood the information on BRINAVESS including the real life data and that’s really important because real live data is not been something that has been really aggressively addressed until now where you’re seeing efficacy rates not a 50% but more of a 70% to 80%. The share that is -- the physicians stated that they would give us would double in Sweden. Now again this is not necessarily scripts written yet but it gives us a very strong direction that when we get our message out in a very clear way and our value message out and that’s very important value even at the higher price -- high price of €390 as well as at a potentially discounted price we’re getting very positive response.
So without going through details at a meeting by meeting level, we basically had a success stories coming out of each one of these meetings and we really expect that to drive our success in the coming quarters.
In addition to the country level meetings we have also had multiple local and regional meetings. Obviously the medical meetings are important but selling each hospital, each ER doc, each cardiologist, each pharmacist on the ground is really where we’re going to have our wins and there were countless number of meetings that have happened at that level to basically drive adoption. For the future we will of course continue our presence of the key local medical meetings, but there is a key international meeting which will be taking place in Barcelona which is a European Society of Cardiology meeting in late August, early September of this year and like last year we will have a major symposium presence and we expect to have over 1000 physicians attending our symposia. It was very well received last year and we expect it to be just as well received this year.
And at the meeting in Barcelona, not only do we expect participants from the European markets where we have our direct sales presence to help us drive understanding and adoption in those countries but our distributor partners are also going to be sending representatives to the meeting in Barcelona so we can drive sales in markets for which we also benefit outside of the key European markets as well.
I also would like to share a little bit of a background on center of excellence program that we had launched earlier this year. Basically you’ve heard from the past that Malmo, Sweden is a hospital where we have had disproportionate success in terms of market share for our product. That hospital alone drives almost 50% of all of Swedish sales for our product and there basically is an approach that’s been taken in Malmo which we feel is very important to share with the rest of the country and with the rest of the continent quite frankly. So we basically brought in 25 participants from Spain, from Germany, from Finland and from Austria and we basically had them spend a couple of days in Malmo to understand why Malmo was doing what it was doing and why it was driving success in terms of cardioversion rates of 70% or so.
And I think what has happened with this is that physicians have locked away very encouraged to say I can see the value here, I can see the value of using a drug which is still priced at €390 in Sweden by the way versus DC Cardioversion because of the fact that number one, patients are in and out of the hospital very quickly, number two, there is not a real compromise in terms of efficacy rates because you still are getting 70% and number three the physician has to spend less time in worry about that patient because they are in and out of the hospital quickly. The emergency room bed is available for what they consider more serious patients and it's a win-win across the board.
And so the comments at this particular center for excellence program, we’re very positive and we expect to see the trickledown effect of this again in the coming quarters because we’re selling each hospital, each doctor, one at a time as they are coming to hear about a peer to peer sharing of successes and ideas.
And in order to expand on that, one of the other hospitals that we have had success with in the recent past which has come up very positively is a hospital called Kuopio in Finland and so we’re holding a center for excellent there too. It's a hospital we have not talked about before but it's also now become one of our success stories and we’re going to be holding centers of excellence there and as the quarters go on, we hope to hold centers of excellence in all the major markets as we start building these Malmo’s in each market.
And in terms of the last slide that I will speak to today. We have number of extract activities going on to drive value for Cardiome in Europe. We’re undertaking reimbursement submissions in key markets. We’re working on those in Belgium, Italy, France and UK and we’re actually quite encouraged by our prospects of having successful outcomes. These can be fairly difficult processes but we believe with our new data and with our ability to have some more flexibility on the value proposition we should be able to drive to approvals in those market so that’s very important value driver for this year.
In addition to that we also are looking for commercialization partners, where BRINAVESS is not currently approved or it is approved but not actively sold primarily in some key markets in Latin America, South Africa and other regions of the world that is an area we’re continuing to focus on and finally we also continue to evaluate the other options in terms of acquisitions and licensing opportunities for products that can share similar call points to BRINAVESS and AGGRASTAT basically products that will be acute cardiovascular products in nature, hospital use products in nature, ER focused products in nature and we’re looking at other products we can bring into the bag so to speak both as drugs but also open to devices where there could be some synergies between the drugs and the devices.
So with that I will stop my formal presentation and pass it over to Bill. Thank you.
Thanks very much Karim. First slide is you know some data that we put out early in Q1 and I won't go into in great detail because it was certainly covered at the time but I do want to highlight then efficacy that we have seen in the post-cardio surgery group. The data that spark -- this came out of Dusseldorf, it was really the first data on post-open heart since the ACT 2 study many years ago and what we found was that in investigator life study of 50 patients that in patients either having CABG or valve or a combination of CABG and valve that BRINAVESS was successful in converting patients at a rate of 74% of patients in 90 minutes and in fact an even higher percentage of patients who had CABG were successfully converted with BRINAVESS.
I want to highlight that because I think we’re starting to realize this is another good way to get into the hospital, success stories about replicating Malmo as Karim alluded to have certainly been an important focus having 25 docks come in and really get the Malmo training and hopefully take that approach to atrial fib back to their hospitals across Europe is certainly something that we’re using to try and create more Malmo type hospitals, more people using that approach to atrial fibrillation. But in through the cardiac surgery ward is another way that we’re starting to see some traction and not the least of which is because anywhere from 30% maybe even 40% of these patients have atrial fibrillation but it's also a group that’s not necessarily a great candidate for DC Cardioversion or potentially even amiodarone that might take 24 hours or more. And being able to save a day or more in the cardiac step-down unit is a real significant savings.
So just a little look out there as something that we think could be a way to continue to grow and maybe a true unmet medical need and opportunity that may not have been as obvious when we first started this process.
So as I look back on the quarter I think we’re pretty happy with it. If you think about the two most difficult things to do in this business, one is to forecast what generic erosion of a product might look like and the other is to forecast what a product launch might look like. We’re in the amidst of both of those simultaneously and well I don’t wish to claim that our crystal ball has any great fidelity we’re happy nonetheless that the 7.6 million in revenue puts us right on top for 30 million plus on the year which was our first forecast. We certainly expect that we will have growth throughout the rest of the year, so starting off on the first quarter and slightly above our target is most encouraging to us.
I will just reiterate now so that I can get credit for saying it well in advance you know when you have a European hospital based business there is a certain amount of seasonality to it even though there isn't seasonality to atrial fibrillation. There is to Europe sales and in fact in distributor sales as well. So first quarter is usually a reasonably good quarter, second quarter is as well I mean it's not unusual to see a little bit of a falloff in third quarter when there is just not the same number of procedures in July and August done in Europe and then a bit of a rebound in the fourth quarter but we’re right where we want to be and I think we’re very happy with the revenue pace. We’re very happy with our AGGRASTAT; it is doing exactly as we hoped.
It is stable and certainly those of you who followed data coming out on (indiscernible) and Medicines Company and alike will know that if anything the product seems to be well-positioned and recent data is perhaps giving us a good reason to make people consider using AGGRASTAT again particularly in the situations where they need a fast on fast off approach to the management of the ischemic heart disease patient. We have had EU distribution logistics issues. None of which I think are out of line with our expectations we knew this going in that some of these things take a while to resolve this is not an execution problem it is an issue with just setting up in the EU.
Most of that is now done, Spain being the last major market to come online in a strange way this should help us going forward because we’re adding markets in Q2 and in Q3 going forward that weren’t present in Q1 and will certainly help us keep our trajectory going through a combination of both increased sales and increased areas in which to sell.
Within BRINAVESS itself the roll out I believe is absolutely on top of where we expected it to be at this in time. I think the product perception is definitely improving, the experience that Karim relate to you where physicians when they walk in a room might say, I might use this and kind of 10%, 15% of patients but by the time they have heard about it, say geez, that’s more like 25% or 30% of my patients -- is replicatable. We've seen that in surveys that we have done if you will, conferences and other places. So we believe that educating physicians has an impact in this drug, that the drug is responsive to promotion and that trying to set up that environment within the hospital to manage atrial fib patients similar if not identical to the way they are doing Malmo is a good strategy going forward. And again just to go back to my last point the second areas is, this cardiac surgery opportunity is probably a little bit bigger than we thought and it's probably a group that is very receptive to the BRINAVESS story because they don’t have the other therapeutic options out there that they might otherwise and so we’re going to continue to look at that as an opportunity to get ourselves into hospitals.
If you look at the data from different sources pricing is starting to become, I won't say the last obstacle because certainly not everybody practices medicine the same way but it remains the most significant obstacle. I think that in itself is fairly encouraging because that’s something we can solve. We knew that going in, we weren’t always setup to offer the pricing discount but now that we’re we can start doing that type of thing and we can address one of the customers’ most significant needs. So that’s another opportunity for us to drive the brand and to drive expansion of BRINAVESS into hospitals, another places around Europe and outside of Europe quite honestly.
We completed a successful financing, we all know how volatile the biotech markets can be. I think we were pleased that we were able to finance during an opportune window in the financing environment. That has set us up in what I think is a very nice position. If you look at our business plan now and by that I mean driving sales, continuing to look for reimbursement, maintain the AGGRASTAT brand and growing BRINAVESS and promoting BRINAVESS.
We’re capitalized to do that. I carefully phrased that last bullet point that says no further delusion on the business plan and what I mean by that is that if we keep doing what we’re doing we can grow and we can use our own revenues to get there. There are other financing vehicles that are non-dilutive out there that we can use to help with the business. We have a lot of cash in this company tied up and working capital right now. We can look at things like revolvers and some debt vehicles to potentially free up additional cash and so I think in terms of executing our business plan we’re well setup to do that. Obviously if we continue to move forward with the FDA or there is other trials or other opportunities we may have to cross the bridge when we come to it but as we sit here today in the second quarter the company has done what it needed to do from a balance sheet perspective to get where it needs to get to.
So all in all I think a very successful quarter on top of target right where we want it to be, encouraging signs of growth and a nice financially stable business right now. So with that I will hand it over to the operator and any questions you might have.
(Operator Instructions). Your first question comes from David Dean from Cormark Securities. Please go ahead.
David Dean - Cormark Securities
It sounds like you had a lot of success on the educational front during the quarter as it relates to launching BRINAVESS in Europe. Maybe it is too early to ask this question but have you seen any isolated examples of any commercial successes? Maybe in the region or particular hospital or group of docs or anything at all to give us a hint that you’re headed in the right direction?
Yes, David, there are a lot of little stories that come out here and there and then as reflecting on your question, I'm thinking looking to Spain. For example in Spain we really effectively only launched there within the last six weeks because we've got our logistic agreement in place in March. And there is one hospital I can think of, its hospital Reina Sofia in Cordoba and that's a hospital that really was only using the drug a little bit in the ER setting.
And as they have seen the real world data now start to come out across the Board including just the data that came out in Dusseldorf February and now we are talking about May right now. So this is only two or three months later. They basically have been approaching us to say we do want to use more of your drug in ER, however our current formulary approval is only for the ER, we want to expand it to also go into surgery.
So will you work with us and work with our hospital to get the data that we need to do to go beyond what the current approval is? So that’s one example, David. I think the other example is the fact that there has been a hospital in Spain that has used BRINAVESS more than other hospitals and now they are also showing efficacy much greater than what we see in the trials and they are starting to share that with for example that was shared at the medical meeting.
I know you are asking for hospital specific question but at that medical meeting based on some of these discussions, hospitals that MSD, Merck are never called on. We have now developed leads with where they are saying we’re interested, can you come to our hospital and lets meet with our pharmacist and our cardiologist and our ER doctors all together because together we need all parties to be on Board to use this drug but we will be your champions and this is the cardiologist speaking to us.
So we’re seeing I think the beginning of a dialogue which will lead to success and we’re actually seeing true success where people are saying we want this approved now for broader than what we already have it. So those are couple of examples for BRINAVESS in Spain.
I'd also like to share with you David, AGGRASTAT because AGGRASTAT is also very important product for us in terms of, its our financing vehicle and we want to make sure we keep our sales up there as much as possible. I'd like to share with you a success -- examples of success for the launch of our STEMI indication. We have this new indication for STEMI patients which the drug may have been used for any way by certain physicians but never was an approved indication.
And our drug is priced very competitively with for example ReoPro which did have the or does have the indication but was charging almost three times or more the price. And what we are seeing for example in France is hospital after hospital after hospital at least five that I know of just through some quick contact conversations I have had with them -- my people there of hospitals making wholesale switches saying, ReoPro is off, AGGRASTAT is on, all business going forward, that we were giving to ReoPro, now is coming your way because you have the indication.
But it's obviously not just the indication that gets there but it's also the sell, the relationships that have been built and this success comes from the Correvio side of the business, that acquisition is working and the previous example came from the Cardiome side of the business. I don’t think we see ourselves as two companies but we believe the integration is going very well and our success is coming from all parts of the company.
David Dean - Cormark Securities
Okay, in the past we've spoken about AGGRASTAT as being hopefully a stable asset, do you think you might have a bias towards maybe a little bit of growth or you still want us to think of it as --
No, I think what we are seeing is we had forecast a decline and I’m not ready to declare stability yet, but I think maybe our expectations on the climb were a little bit too draconian. So with the caveat that our plan didn’t involve growth but it's ahead of what we had expected and the way I phrased it to my staff today when we went through the quarter is, it's really doing everything we can ask of it.
David Dean - Cormark Securities
Okay and are you breaking down revenues between BRINAVESS and AGGRASTAT?
We will eventually. I think I said on our last call and because when you've got a small product launch and you have lots of distributors and you have orders coming in that are lumpy you get messy numbers around BRINAVESS and I don't want people reading into trends that aren't there because somebody places an order the day before quarter ends versus the date the quarter starts and once we get to a more stable run-rate, we will start to be a little bit more transparent on that. We are not being cute, but I think we gave pretty explicit guidance as to what we thought we could do in total revenue and what we thought we could do on BRINAVESS and we’re right where we want to be.
David Dean - Cormark Securities
Okay, just two more remaining. I think of the last call you were saying that you were hoping to be breakeven by the end of the year. Still believe you are on track for that?
Yes, I do. I think I'd make the same statement I did at the end which is if we are presented with strategic options either on the regulatory side or potential product development side where we maybe need to go, do a couple things to what we hope will add value to the business we might change that. But if you look at just been able to fund what we are trying to sell right now, yes, we can achieve that.
David Dean - Cormark Securities
Okay and that’s leaving the door open for my last question with respect to FDA.
I don’t have anything new to report from the last time. But the path that we laid out is the one that we are following and so far so good we're doing the things that we need to do and our hope is to have a clear path before the end of the year and nothing has changed to change that view.
Thank you. Your next question comes from Neil Maruoka from Canaccord Genuity. Please go ahead.
Neil Maruoka - Canaccord Genuity
The first one just on -- just give us a little clarity on what has happened in the past quarter with BRINAVESS. Can you give us a little bit of color on the distribution and logistical issues when they overcome and how much of a drag that had on BRINAVESS sales in the first quarter?
Yes, it is kind of a sequential thing. Just getting up and running in different countries requires different -- not just licenses, but distributors and shipping agreements and it is a bunch of stuff. First quarter reflects a pretty significant effort on our part but not a perfect one as Karim alluded to. Spain was, we needed the logistic agreement in order to be able to sell in Spain.
So Spain is going to start contributing towards the end essentially of this quarter, second quarter and will be full on in the third quarter and if anything as I said it makes me feel a little bit better about where we’re at because we’re still kind of on plan and yet we were only at maybe 75% or 80% of what we had expected to be at, from a reach perspective and all of that has come online.
None of that surprises me. Some of that’s actually very difficult to forecast, you and I have had this conversation before and when we have seen each other it's just -- its part of doing business in the EU and invoicing in EU and shipping across country lines and all the rest. And now for the most part it's up and where we need to be and so we don't need it as an excuse fortunately but we’re out of excuses now. We’re kind of where we need to be now.
Neil Maruoka - Canaccord Genuity
Okay. And just looking forward can you provide any additional clarity or do you have any clarity on timelines for reimbursement in some of the major markets in Europe?
Same as before, we will be in front of a couple of other countries this year. It's an annual cycle so even if we are successful that wouldn't kick in from a sales perspective until 2015. France and Italy are at a more advanced stage than the UK. So I look at the UK being anywhere from 6 to 10 months behind that timeline.
Neil Maruoka - Canaccord Genuity
Okay. And last question just on SG&A. Is this an appropriate steady-state level for SG&A? Do you see it increasing or decreasing over the next few quarters as the BRINAVESS launch gains momentum?
I think that our expectation is that this is stable for the time being, but we do expect that it will go up probably slightly as the year progresses and of course as the product is launched it will certainly go up because we will need more support for the product.
Yes we would like to have the luxury of promoting in advance of a product launch and places like Italy and France if we had the chance, but our expectation would be that that would be counterbalanced by an increase in revenues as well.
Thank you. (Operator Instructions). Dr. Hunter, there is no further questions at this time. Please proceed.
Great. Thank you. It was hopefully a quick and efficient conference call because I think it was a fairly quick and efficient quarter. We’re certainly pleased with where we’re, we think we’re on the track that we have laid out for ourselves and we see some opportunities in front of us and we look forward the chance to talk about our second quarter in the not too distant future going forward and share some more stories of launches in other parts of the world as we keep moving on.
So, as usual all of us are in the office and in Vancouver right now. So if you’ve any questions or comments feel free to follow up with us, it's still reasonably early in our business day. Apologies for the folks on the East Coast, at the end of yours. But thank you for your interest and we look forward to talking to you again quite soon.
Ladies and gentlemen this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.
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