BioDelivery Sciences International's CEO Presents at Bank of America Merrill Lynch Healthcare Conference (Transcript)

| About: BioDelivery Sciences (BDSI)

BioDelivery Sciences International, Inc. (NASDAQ:BDSI)

Bank of America Merrill Lynch Health Care Conference Call

May 13, 2014 11:40 a.m. ET


Mark Sirgo – President and CEO


Suman Kulkarni – Bank of America Merrill Lynch

Suman Kulkarni – Bank of America Merrill Lynch

The Specialty Pharmaceuticals Analyst Chair's Bank of America Merrill Lynch. I'd like to welcome all of you to the First Specialty Pharmaceuticals Presentation for that we have BioDelivery Sciences and from BDSI, we have Mark Sirgo, the President and CEO who's presenting today.

I would like to thank all of you for making it to the conference clients and companies and also everyone who's tuned into the webcast or is reading the transcript at a later time. It's very rare that you have buckeye's up on stage without any football talks. I'm going to try leaving some references here.

With that, I'll kick it off with Mark.

Mark Sirgo

Thank you. Hopefully about the buckeye's from BDSI mid this year were certainly expecting to. I want to thank folks at Bank of America Merrill Lynch for inviting us this fine conference again this year. We are pleased to be here.

I'd ask you to take a look at the forward-looking statements for a minute and as you do, so if you're interested learning more about the company, please look at our website at I'll also mention that given our pending June 7, PDUFA date for BUNAVAIL. This will be our last formal presentation.

Prior to that timing, we will go into a quiet period after today's presentation and one-on-one meetings'. BDSI is a specialty pharmaceutical company. We focus in pain and addiction medicine. We utilize drug delivery to reinvent proven therapeutics and doing so, we typically fall the 505(b) (2) B2 regulatory process, where we can reference the originating products, pre-clinical, clinical data to large degree, which typically allows you to bring products to market faster, at less expense and lower risk.

This is truly set up to be a transformational year for the company. We have three products in various stages of Phase III; BUNAVAIL is actually sitting at FDA right now under review with the June 7, PDUFA date. This is our Buprenorphine/Naloxone and product the treatment of opioid dependence, if we are successful with that review. The company will launch its first product that is BUNAVAIL in the latter part of the third quarter, 2014. So truly an exciting time for the company.

BEMA Buprenorphine for chronic pain that we partnered with Endo. We'll have the second Phase III pivotal study read out sometime in early July. The first study in opioid, naïve patients read out positively in January. If we are success with the second trial, we were looking for an NDA filing sometime later this year, early 2015 and then our Clonidine Topical Gel product for the treatment of pain from diabetic neuropathy. We just announced that, we are past to 50% to enrollment rate for that trial to bid ahead of schedule.

We finally did an interim analysis sometime in third quarter, that's moved up from fourth quarter now and that's a positive read out, we would expect to have top line results. As always the end of the year, but certainly no later than first quarter of 2015.

For the commercialization perspective, we've always partnered our products up until BUNAVAIL. So this is an opportunity for us to become a fully integrated company, we are looking forward to that and talk more about in a minute. BEMA Buprenorphine for chronic pain, we partnered with Endo Pharmaceuticals, the Clonidine Topical Gel.

We have not entered in any partnering discussion at this point and certainly has a primary care footprint, so we will indeed look for a partner at the appropriate time. Then ONSOLIS, which is our marketed product for the treatment of breakthrough cancer pain, is marketed worldwide by Meda Pharmaceuticals.

Want to spend a minute, talking about BEMA technology because it really is the foundation for our portfolio up until this point in time. Being a stance for BioErodible MucoAdhesive film. It's a buccal film, pierced the inside line of your cheek, is bi-layered. The MucoAdhesive layer contains the active ingredient in case of BUNAVAIL, its buprenorphine.

The backing layer is the second layer which prevents the fusion the drug back into the oral cavity that's maximizing absorption and this is really the critical difference. This technology as it relates to our BUNAVAIL product that I'll address in just a minute.

It's a very simple film to use and it adheres within seconds to mucosa surface dissolves over by 10 minutes to 15 minutes and totally biodegradable but its efficiency is what's key to be at a maximum drug absorption from the buccal mucosa.

So I'll spend a few minutes talking about BUNAVAIL combination of Buprenorphine/Naloxone for the treatment of opioid dependence. Needless to say, this is really a growing problem not only here in United States but throughout the world. The good news is that, buprenorphine through the marketing of Suboxone, has really revolutionized the treatment of this condition.

For the first time, back in the early 2000s. Physicians could actually treat patients from the privacy of their own offices. Prior to that, the only care that a patient could receive was through a Methadone clinic and Methadone clinics are typically in very unsavory parts of inner city and because of that many patients would not be cared.

So this really has revolutionized the treatment of opioid addiction. Its great product, it contains Naloxone albeit because of the fact these patients will abuse any type of products, so that's in there, is a abuse deterrent agent. Suboxone sales last year were approximately $1.4 billion and the overall market for these products was $1.7 billion which included generics and the market grew by about 14%. So it's still an evolving growing market place.

So again, BUNAVAIL. The benefits here over Suboxone, which I'll talk about really driven by the BEMA technology, what I'm really talking about here is convenience and efficiency. In order to appreciate BUNAVAIL, you have to understand how Suboxone is used. So it's a sublingual film. It's placed under the tongue and patients are instructed for 10 minutes, not to eat, drink, talk or swallow.

Swallowing alone is the physiological process that you do every minutes. So very, very difficult to utilize Suboxone however, you don't need to get a lot of buprenorphine on board for these products to work, but there is clearly need for advance technology which we offer through our BEMA technology.

Secondly, the efficiency of delivery. We have 50% of our product absorbed through that buccal mucosa versus 25% with Suboxone. So a lot of drug is wasted, when applying the Suboxone film compared to our BUNAVAIL and with all that extra drug going down the gastrointestinal tract, it's also a setup for certain side effects particularly GI related such as constipation.

Now we had three components to our NDA. We had to show while accordance to Suboxone, which we done. We presented there about a year ago actually and FDA would not have accepted this application for review had it not been while and prevalent.

Certainly we have to do a safety study. We converted 250 patients from Suboxone over 12 products and then followed them through three months period and finally the manufacturing of controls, sections or stability package. If you will, was the third component of the NDA.

This is some data from the safety study. Again, we converted 250 patients over from Suboxone. These are treatment emerging side effects, as I occurred as they came onto our product and really was uneventful as you can see here. The important thing I will point out is the constipation down at the bottom four patients out of 249, are 1.6% incredibly low number but we attribute this to the fact that most of our product gets absorbed in the blood stream.

With this step further, we did ask the patients coming into this study of Suboxone had the experience constipation on Suboxone. 76 of this 250 patients actually said they had 41% very high numbers, but it's a real [rule] number which we don't often see in clinical trials.

At the end of the three months after being on BUNAVAIL, that percentage dropped from 41% to 13%. 24 patients still had constipation at the end of that three months, that's resolution in two-thirds of the patients. So intuitively, because constipation off of opioid is usually driven from a topical effect in the GI tract.

We think that, we may have a product that offers some benefit in terms of this particular side effect. And if you do the math, which we've kind of done here. So we've got 50% viability with BUNAVAIL compared to 25% on Suboxone. We get half as much drug to get same plasma concentration. So our formula gram dose is equivalent to their A, which means 2 mgs of each products is absorbing in the plasma directly down the gastrointestinal tract.

So 300% more drug going down the gastrointestinal tract with Suboxone compared to BUNAVAIL. We went ahead and asked patients as they completed the trial, how they felt about the product in terms of ease of use and taste and as you can see here. It rated very high on both these attributes.

So again, in conclusion in terms of the advancements here in the patient benefit that we are delivering with BUNAVAIL compared to Suboxone. It really revolves around convenience of use, giving something that these patients can take it's very, very simple. They don't have to really think and we think more enhanced compliance and a population that struggles with compliance and secondly, the efficiency of the delivery system.

Well giving less drug to get the same plasma concentration of Suboxone. We think these are both significant advantages to using BUNAVAIL. Commercial opportunity behind the again, again it's substantial to growing market place as I mentioned earlier. Market sales exceeded $1.7 billion in 2013 for this category.

It's really driven from Buprenorphine or Suboxone film; this is a film market place. And that's important because that's what we are going to be competing in. the generic tablets came in, a year ago March. It captured about 15% of the marketplace, but haven't really changed since that time, so it really turned into a film market.

This is our forecast, for our product and you look out five years to 2018. The left-hand side of this slide really focuses on the fact that we believe, that generics will continue to [rope] the marketplace overtime, roughly having 40% in 2018. The branded products will have about 60% or approximately $1 billion in sales.

We expect to achieve about 20% to 25% of that market, roughly $250 million. Again that's peak sales for 2018. Commercialization as I mentioned earlier, we plan to take this product to market ourselves. We announced a contractual arrangement with Quintiles about a month ago, so they'll be helping us on the sale side and we sign an agreement with Ashfield, who'll be handling the managed market and trade side.

The rest of the world will look for partners. So taking on a first commercial opportunity, of course is a major undertaking for any company particularly one of our size, having said that. I think there is a strong basis for, why we are doing this. First, we have a differentiated product compared to what's in the market place.

As we described this very limited completion, but importantly it's a very concentrated prescriber base. If you look at the map here of the United States. You can see that roughly 80% of Suboxone business is east to the Mississippi. It's really a I-95 corridor business, Appalachia and Central Florida for the most parts.

So this can be handled with about 45 to 50 sales people. So again, limited competitors for the first buccal film into the marketplace. Second transmucosal film, if you will. Differentiated product, modest sales and marketing expenditures. So we are excited about the opportunity that we have in front of us here. We think it's very manageable.

So with that, I'm going to move on to our BEMA Buprenorphine product for chronic pain that we partnered with Endo Pharmaceuticals. Buprenorphine as we like to say is not just another opioid. It's a class 3, and which makes it different from every other opioid that you know of. Class 3 meaning has less abuse and addiction potential compared to the C 2 opioid and the basis for that is really is pharmacology.

All the other opioid are pure muagonist. This is the only agonist, antagonist in the market. Its profile is unique because it has a very low propensity to cause euphoria. And that's really the key here. It's the euphoria the high that these patients, get on opioid, the driving for the craving, which leads to the abuse and the addiction.

So if you can lower than propensity, you certainly have a product with a different commercial profile. The other thing is, C3 opioid's are much simpler to prescribe. Physicians can fill these prescriptions in to the pharmacy and they can do it with results. With the C2 opioid every prescription is a new prescription and the prescription has to be walk into the pharmacy by the patient, so there is convenience factor here as well.

Importantly, we don't lose any efficacy. The product is as potent or comparable to morphine at least in several studies, it has been conducted. Importantly, ulcer is fact that there is the opportunity for fewer other typical opioid side effects with buprenorphine, such as respiratory depression, constipation and cognitive impairment. So a very different profit from what you're accustomed to, with opioid's.

As I mentioned with the onset, we completed and announced the results of our first pivotal trial in opioid naïve patients back in January and we are set to announce the results of the opioid experience throughout sometime in the early part of July. These patients are just finishing up that trial.

This is some of the data from the first trial. As you can see the primary efficacy endpoint, we had a very robust outcome key less than .005 and all the secondary end points, reported that primary outcome and in terms of side effect profile compared to placebo, you can see the main side effects here not uncommon among opioid's, nausea, vomiting, constipation but at a relatively low level.

Speak for minute about the Endo partnership. Financial arrangement, we're looking at $180 million in potential milestone payments. To-date, we've received $55 million, the remaining milestones, there's $20 million this year potentially and that's with the database lock on the second pivotal trial and then with the successful NDA filings, should occur actually first quarter of next year, so that's $20 million.

And then we will receive up to $50 million upon a successful NDA approval, which would be expected in the latter part of 2015. The other $55 million comes with setting certain potential sales milestones. The royalty begins in the mid-teens and loose the upper-teens based on increasing net sales.

The market opportunity we believe is substantial; this is the data that led to our forecast. We are looking on the right-hand side of this slide on the products that we'll going to market share from. The dark blue bar there, are the hydrocodone combination production, the Vicodin products and as you can see over on the last set, that roughly 1.5 of all opioids prescriptions are written for hydrocodone combination products or 130 million prescription.

We're suggesting we're going to have less than 1% of those prescriptions which translates into $300 million. So a small change in that percentage will greatly enhance the market opportunity for this product. The other part of the forecast will come from the C2 opioid's which number of them are listed here.

So all in this is a total peak market opportunity for us, greater than $500 million in sales. The one thing that is changing however, this is going change this forecast on the upside is the fact that, DEA and FDA went to help Human Services back on October and a recommended that the combination hydrocodone [indiscernible] products, moved back to C2.

When this happens, that really opens up a more substantial opportunity for our buprenorphine product and think this will happen within the next 12 months to 18 months. And certainly, last but not least because we think this product may have rare potential than anything in our pipelines Clonidine Topical Gel.

We acquired this product from a private company, a little over a year ago. We quickly got into Phase III with it, but there's a very high unmet need in this market place for painful diabetic neuropathy. Greater than 25 million people in United States suffer from this, from diabetes and over half of them suffer from this type of pain.

You've probably seen on TV recently commercials for Lyrica, which is been approved for the treatment pain for diabetic neuropathy. These products are modestly affective, in fact they even say that in the advertising and of course, they add to pill burden these patients already suffer this well as additional adverse events and drug interactions.

So a topical therapy, that's nonsystematic that can be used in combination with these types of products really will serve an unmet need. Our early qualitative forecast puts this product at about $300 million peak sales for this specific indication. The thing I like about this product, is that it allows us to remain in the pain space with a significant asset, but also diversifies us from the BEMA technology and opioid's.

Mechanism of action, I won't get into this, but needless to see. These pain receptors resides in the Epidermis. There is an opioid receptor there, when stimulated by [guanidine] as an inhibitory impact on the pain. So it's well characterized in a number of different enamel models. This study was published in Pain Journal in 2012.

It actually looked at a very similar patient population, what we have in our current Phase III program and what was determined here is at that people that have functional nerve receptor, this population of patients that have functional nerve receptors, which was measured in this study by tissue biopsy as well as capsaicin test, where the capsaicin to the [tibial] of these patients and if they could feel, the heat or the pain from the capsaicin, that correlated very well with having functional nerve receptor through tissue biopsy.

Right here, inside of this slide actually is a sub group analysis of those specific patients and what you see here is, a very highly statistically significant difference Panadeine and placebo and this population, the affect size was 1.2 which is very clinical meaningful.

The left-hand side of this slide was the total population. Where statistical significance was nearly achieved. So going forward in our Phase III program, we are using patients that have functional nerve receptors and this will be determined by the capsaicin test. This is a just a quick look study design that we are using, but most importantly to get these patients into the trial, we stabilize and make sure they have an appropriate pain score.

We don't take them off any of their current therapies and then we do the capsaicin test. If they demonstrate functional nerve receptors, then we put them into a one week single-blind placebo phase to make sure they still have real pain, before randomizing into the active versus placebo phase, which still be on for three months.

So we think, that we've really enriched the station population by the way in which we've created this protocol and we take it optimizing the opportunity for success. So review of the opportunity then, mechanistically we know this drug stimulates receptors that impact pain receptors in the skin. There was a positive Phase II outcome in the population that we are studying in our Phase III program, we had a very good meeting with FDA back in November, where they agreed upon our proposed program for what we believe, will end in a successful NDA.

And most importantly, we started our first Phase III study back in March. We exceeded 50% of patients enrolled just a few weeks ago, we'll have the interim results spread out in third quarter of this year. Those were positive, we should have the top line by end of year early January. So another really exciting program.

Milestones for 2014, again first and foremost if our potential approval of BUNAVAIL, June 7, PDUFA data subsequent launch late third quarter. BEMA buprenorphine for chronic pain. Read out in our second pivotal trial through experienced patients will be early July, if that's successful. We hope to file the NDA late this year, early 2015 and then again, the Clonidine Topical Gel program Phase III interim sometime third quarter.

Balance sheet highlights, cash position roughly $90 million in the bank at the end of the first quarter. With 50 million shares, primary shares outstanding got a market cap just a little over $400 million. The cash on hand really takes us well through 2015, if we stay on course with our Endo arrangement, then we have a modestly successful launch with BUNAVAIL.

There is no need to think, that we'll need to raise any money in the foreseeable future. So with that, I'll close and I'll be happy to take any questions from the audience.

Suman Kulkarni – Bank of America Merrill Lynch

Thanks, Mark. We do a have a mike going on. So please raise your hand, if you need to ask a question. Yes, I'll start it off. So with your nearest term potential approval, at BUNAVAIL on June 7. It sounds like you have all the infrastructure in place already. Is there anything else that you need to do, could you just give us some more details on how you do interest structure and expand?

Mark Sirgo

Well, we have a lot to do, but we've got lot down already and the key was to get contract signed with Quintiles. We've been really discussing us with very over a year. Ashfield managed market is well handling the managed care aspect and Ashfield is actually headed up by Steve Stefano, who anybody who knows Steve. He ran managed markets for Glaxo for over 20 years. He started his own company few years ago.

So we've got, really very good people both on the sales and managed market side surrounding this. We are well down the pathway. We hired the sales manager, through Quintiles just recently. We've got sales trainer on board now. The actual sales people will be hired until after the PDUFA date, want to make sure we have a successful outcome there, first and foremost.

But otherwise, really in good position. We've got an Ad agency working hard behind the positioning of the product and again, we've got attributes that clearly shows superiority in many ways over Suboxone. So lot of work in front of us, so we don't want to downplay that, but I think we're in a very good position, with some very quality people and organization around this.

Suman Kulkarni – Bank of America Merrill Lynch

And you mentioned that the target market is fairly contained and your ability to target is, what is an easy or a difficult decision for you to go alone on this product? Given that you're going up again like a formidable competitor in Suboxone.

Mark Sirgo

Sure, well it's never easy when you think about launching your first product. I think we did it for two reasons and they're very consciences decisions, one is that, for our investors going forward. Our royalty place is I think very unattractive. So partnering often times, a means to an end and I think, when you decide to launch your own product. You need to do it, in a space that you think it's manageable.

So I think for those two reasons, we've thought this was the right thing to do. We still do and we think, we have a very good chance of being successful with it.

Suman Kulkarni – Bank of America Merrill Lynch

And do you have peak sales potentials of BUNAVAIL factor in potential competition from a Suboxone, some generic at some point?

Mark Sirgo

Sure. We do anticipate at some point, that there will be Suboxone film in the marketplace. As you know film that is, having said that. I think it's very clear to what I said, patients really do have a preference for what they want to use, in this treatment paradigm and I think record is being able to demonstrate that with Suboxone, fairly converted 85% of their patients over to it before the generic got into the marketplace and they've helped firm with that.

So there's a preference, these patients actually look forward, want to maintain and I think importantly. There's about 30,000 patients to 40,000 patients each month and entering into this market. So our goal is, where we get new patients. We don't want Suboxone patients, we don't need those patients.

In fact, that they're stabilized on Suboxone, that's a good thing. These are gradual patients, what we're trying to do is provide them with something that we believe will enhance their experience. It will hopefully improve compliance and keep these patients on treatment because relapse here is a significant issue and a problem and we think, we've got the solution.

Suman Kulkarni – Bank of America Merrill Lynch

And switching gears to the BEMA Buprenorphine product. We know that, there's going to be a Phase III results of the opioid experience trial coming out, is that data going to be available to us or to you in July?

Mark Sirgo

Yes, well at least have top line results. See week one, week two in July.

Suman Kulkarni – Bank of America Merrill Lynch

And we could have the potential up scaling of the hydrocodone combo products, does you're greater than $500 million sales potential factor that in or is that going to be upside to that?

Mark Sirgo

No, does not factored in and unfortunately at this point, we don't control forecast. Endo does and I see, Rajiv speaking, I think in the next hour or so in this room. It might be a great question to ask him, but clearly there is that built in to our own forecast possibly that the hydrocodone combination products moved back to C2.

We know that it's if it enhanced to forecast, but we've not come out officially and said that will be yet.

Suman Kulkarni – Bank of America Merrill Lynch

Fair and on the intellectual property on your BEMA platform. We know there is some patents extending up till 2032. Is that relevant to all the products in the space that utilize that technology?

Mark Sirgo

Well, it's certainly relevant to the two buprenorphine products, yes.

Suman Kulkarni – Bank of America Merrill Lynch

And from your pharmacy perspective, is there any chance at all of buprenorphine being up scheduled?

Mark Sirgo

Well, there's always a possibility but there is absolutely no evidence at this point in time, if that's going to occur. It's not something that, DEA and FDA take lightly and in fact that the Vicodin potential rescheduling there. I mean that's been underway for years. So I mean, buprenorphine it's harder to imagine a product is actually used to treat opioid addiction with the view to something that, would be C2 classified at this point in time.

So we don't anticipate that and I think until there's some social behaviors and abuse and misuse that is probably went out there with the product and we foresee it happen.

Suman Kulkarni – Bank of America Merrill Lynch

Do we have any questions with the audience? If not, I'll close with one last one. Does the company have its hands full with the pipeline products that you have right now and everything else, you've going on the partnering side or what's your next step beyond these products that you have right now?

Mark Sirgo

While we certainly have our hands full needless to say with these three products, but at the same time we are always looking for other opportunities that fit within the pain or the addiction space and we continue to do that and do have our eyes on it on a couple of assets and there's I think a good possibility, that we may have another product in the pipeline before the end of the year, but we are looking to diversifying in terms of how the products are protected, the technologies that do that diversifying from opioid's.

And offering opportunities that we think, will unmet need and doing that.

Suman Kulkarni – Bank of America Merrill Lynch

Would those still be in the pain therapeutic area and something in that?

Mark Sirgo

Yes, we are going to stay with pain and addiction therapies. Absolutely.

Suman Kulkarni – Bank of America Merrill Lynch

Thanks, Mark. Thanks everyone.

Question-and-Answer Session

[No formal Q&A session for this event]

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