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

Aegerion Pharmaceuticals (NASDAQ:AEGR)

Q2 2014 Earnings Call

July 29, 2014 5:00 pm ET

Executives

Mark J. Fitzpatrick - Chief Financial Officer and Principal Accounting Officer

Marc D. Beer - Chief Executive Officer and Director

Craig E. Fraser - Chief Operating Officer

Mark Sumeray - Chief Medical Officer

Analysts

Robyn Karnauskas - Deutsche Bank AG, Research Division

Cory William Kasimov - JP Morgan Chase & Co, Research Division

Joseph P. Schwartz - Leerink Swann LLC, Research Division

Steve Byrne - BofA Merrill Lynch, Research Division

William Tanner - FBR Capital Markets & Co., Research Division

Eileen Flowers - Jefferies LLC, Research Division

Yatin Suneja - Cowen and Company, LLC, Research Division

Navdeep Singh - Goldman Sachs Group Inc., Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Aegerion Pharmaceuticals Second Quarter 2014 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Mark Fitzpatrick, Chief Financial Officer. Please go ahead, sir.

Mark J. Fitzpatrick

Thank you, operator. Good evening, everyone. Thank you for joining us today on our call to review Aegerion's financial results for the second quarter and to provide a business update on our progress during the quarter. I would like to introduce the members of Aegerion's management team today on the call: Marc Beer, Chief Executive Officer; Martha Carter, Chief Regulatory Officer; Mark Sumeray, Chief Medical Officer; and Craig Fraser, President, U.S. and International Commercial and Global Manufacturing and Supply. At the conclusion of the prepared remarks, we will open the call up for questions.

Please note that we have slides posted in conjunction with the webcast that supplement some of the information we will be discussing during today's call. These slides can be found on the Investor Relations section of our website under the Events & Presentations tab. If you are following along, please turn to Slide 2.

Before we begin, please remember we will be making certain forward-looking statements on today's call, which may include our statements, forecasts and expectations regarding the commercial potential and growth opportunity for lomitapide; the estimated market size; our forecasted future financial and operating results; the potential timing and outcome of pricing and reimbursement decisions; the timing and ramp of potential revenues in countries outside the United States, including from named patient sales; the potential for future approvals; the potential impact of competitive products; the potential impact, timing and outcome of government investigations; and our planned commercial, regulatory and clinical activities and anticipated impact and results of such activities, as well as other statements which relate to future events. These statements are based on the beliefs and expectations of management as of today. Our actual results may differ materially from our expectations. Investors should read carefully the risks and uncertainties described in our earnings release and in our reports filed with the SEC, including the Risk Factors section of our Form 10-Q filed on May 9, 2014, available on the SEC's website at www.sec.gov. We assume no obligation to revise or update forward-looking statements whether as a result of new information, future events or otherwise. Also during this call, we will discuss non-GAAP operating expense results and guidance. The difference between GAAP and non-GAAP operating expense results and guidance is addressed in today's earnings release.

At this time, it is my pleasure to turn the call over to Aegerion's Chief Executive Officer, Marc Beer.

Marc D. Beer

Thank you, Mark, and thanks to everybody for joining us on Aegerion's second quarter conference call. I'll be providing an update on our business activities. Then I'm going to ask Craig Fraser, our President and Head of Commercial Operations in the U.S., International, to provide additional details about our U.S. launch experience to date. I also would to like to have Mark Sumeray, our Chief Medical Officer, to provide a clinical update. And then Mark Fitzpatrick will end our call by providing an analysis and insight on our second quarter financial results and the 2014 revenue and OpEx guidance. Please note that Martha Carter is also here, Head of Regulatory, to answer any questions during the Q&A portion of our call.

Now I'd like to have you turn to Slide 3. In the second quarter, we achieved 34% growth in net product sales of JUXTAPID compared to the first quarter of 2014, with solid growth in the number of U.S. prescriptions written and patients coming on to therapy. We believe this is a strong Q2 performance in the second year of launch, and we are encouraged by these results and trends. We expect to continue to see traction in the third and fourth quarter from our efforts to optimize the scale of our business. We are approaching cash flow positive operations, and we expect this to occur during the second half of this year. I'm proud of our progress in transforming Aegerion into a growing global organization treating HoFH patients in need of therapy. We have established a global footprint, including regulatory reaching over 45 countries and commercial infrastructure in certain of these countries in an efficient and an effective way that in the future should create significant leverage. I have great confidence in our ability to execute on our commercial strategy, navigate through challenges and create value by providing meaningful therapeutic benefits to HoFH patients globally.

During the first 2 quarters of 2014, Aegerion's focus has been on optimizing our commercial strategy and execution, specifically through investments in the U.S. sales force expansion and scaling our patient services in the first quarter. We believe the increased commercial reach and patient interaction, as a result of these efforts to optimize the scale of our business, has the potential to result in continued growth in the second half of 2014.

It was important that we executed on our expected growth for newly prescribed patients and new patient starts in the second quarter, since this creates the potential to catalyze the trends necessary to achieve our goals this year. We continue to build on a growing business around lomitapide as an important treatment option for HoFH patients based upon strong clinical data. We believe HoFH, while still a rare disease, is underdiagnosed and that there are still more HoFH patients globally in need of therapy. This belief is shared by an increasing number of experts in the medical community and is reflected in peer-reviewed publications. We've been encouraged by our progress in the second quarter and believe we're on track to achieve our goals. And importantly, we believe we have the strategy and infrastructure in place to continue to build momentum over the coming quarters and years.

With that as an overview, I'd like to now turn the call over to Craig to provide additional color on the operational dynamics that we experienced in the U.S. business in Q2 and discuss our international business. Craig?

Craig E. Fraser

Thanks, Marc. Turning to Slide 4. I will begin by saying that the investments we made in the commercial organization in the first quarter have created significant gains and capacity and capabilities that we believe are beginning to positively impact Aegerion's operations. While the first quarter represented a pivotal period for the U.S. sales force expansion and establishing the patient engagement team, the second quarter presented the opportunity to continue to strengthen our commercial execution and refine our processes. I am confident that we are now operating at an adequate scale and are focused on ensuring consistency of execution across our teams.

We have taken the steps we believe necessary to maximize long-term fundamentals, including applying best practices learned from our top sales territories. Commercial launch, particularly in rare disease, is an iterative process, and we are more knowledgeable and effective each day through our continued refinement. We executed well in the second quarter with the focus on the most important dynamics associated with our growing business. With strength in processes and teams, we believe strong execution in the coming quarters will continue to lead to continued growth. As our experience grows, we continue to have confidence in our estimates of the HoFH market size. We believe there are more cardiologists and other physicians who have HoFH patients than we have yet to reach, and with the expanded team, we are making meaningful gains to do so. On that note, I continue to be encouraged by the growing breadth of our prescriber base. In the second quarter, 45% of our prescriptions were from new prescribers, a similar rate to that in the first quarter, which is a positive sign. This experience confirms our belief that we had limited reach in 2013, and we are now extending that reach through an increased sales force. Importantly, we see early positive traction behind the sales force expansion with prescriptions in new patient starts in the U.S. in line with our plan.

Another significant initiative we have focused on is the efforts of our nurse educators. We completed the hiring and training of our nurse educators during the second quarter. We believe these nurses will have a positive impact working with the practices and helping physicians to educate HoFH patients to support commitment to treatment and adherence to therapy. While too early to quantify the impact, we believe that our nurse educators are beginning to positively impact the commitment of HoFH patients who have been prescribed JUXTAPID to start therapy. The quality of our patient interactions working together with physicians has improved markedly with the introduction of these nurses in the field and the increased scale of our in-house case manager teams. We understand the dynamics associated with patient commitment to therapy. Further, we recognize that education about adherence to a low-fat diet is a key driver of success with JUXTAPID therapy. And therefore, additional investments in dietitian-directed patient support have also been made. Nurse educators may also have the potential to reduce patient dropout rates with patients beginning therapy in an informed way and nurses working together with physicians to help to support and maintain them on therapy.

Reaching the appropriate undiagnosed adult HoFH patients and gaining scripts for those patients, along with securing access in increasing patient commitment to start and maintain therapy, remain integral to the long-term success of our business. We believe the recent investments in our commercial team were correctly targeted given the insights we gain from market research and our experience in the field. And we expect these investments to impact those factors in a positive way. We look forward to having several quarters of data for true clarity on the precise impact of these strategies and investments. Reimbursement continues to track according to our expectations. And it is something to which we devote significant efforts as the payer environment grows increasingly challenging.

Turning briefly to our international business. Outside the United States, Brazil remained the second largest country for both patients on therapy and revenue. We're pleased that Brazil federal orders contributed more meaningfully to sales in the second quarter than in Q1 when we saw a delay in purchased orders that caused an anticipated significant decrease in x U.S. sales. A partial recovery of federal orders in the second quarter is encouraging. And to date in Q3, we have already exceeded our Q2 revenue in Brazil. We expect to see strong demand for JUXTAPID therapy in Brazil and continue to believe the opportunity there is significant. However, we also expect continued unpredictability in Brazil order flow quarter-over-quarter as the government orders can either have longer turnaround times, as we experienced in the first quarter, or be delayed, as we continue to experience in São Paulo. And when received are typically for both multiple patients and multiple months of therapy. Based upon recent interactions with government officials in Brazil, as well as KOLs there, we believe that Brazil will continue to be an important market for JUXTAPID.

We were also pleased to have reported our first revenue in Canada in the second quarter. We continue to be engaged in the reimbursement process both there and in Mexico and expect further contribution from these markets in the near future. It is our goal to reach adult HoFH patients in need of therapy globally, and we are executing on our plan to achieve this goal by strategically opening up new markets. With that, I'll turn it back over to Marc for an update on our EMEA business.

Marc D. Beer

Thanks, Craig. I'd like to have you move to Slide 5 now. We expect reimbursement decisions in key countries in the EU to be received in the next 6 to 12 months, and we are making progress towards reaching certain markets at this time. In the meantime, our country managers in Europe have executed well to prepare the markets for launch, similar to the preparatory work that we completed in the U.S. prior to the U.S. launch. We have elected to forego pricing negotiations in Germany at this time as a result of the G-BA's final decision for LOJUXTA but no additional benefit based upon technical deficiencies of our dossier without a review on the clinical merits. We plan to explore providing LOJUXTA to HoFH patients there on a compassionate use basis until we resubmit the value dossier. We expect to resubmit the value dossier in June of 2015, which is the time period specified by the G-BA. This will allow us to go under an assessment based upon the true merits of lomitapide data which was not previously reviewed. With the reimbursement decision in Germany now expected at the end of next year. We continue to believe that Europe is an important market with longer-term potential. However, it remains a slow and challenging market for establishing reimbursement. We believe the majority of our revenue in 2014 will continue to come from the U.S. and, to a lesser extent, from non-European x U.S. markets, primarily Brazil. Let me now turn it over to Dr. Mark for an update on our clinical development activities. Dr. Mark?

Mark Sumeray

Thank you, Marc. Turning to Slide 6. We're pleased with the progress of the therapeutic bridging study of lomitapide in Japanese adult HoFH patients and expect that it will be fully enrolled as of the end of this week. The Japanese regulatory authorities have indicated that it will allow the new drug application to be filed following completion of the 26-week efficacy phase and our goal continues to be to submit our Japanese NDA as early as mid-2015. Regarding our pediatric initiatives, we're making progress in our discussions with the FDA and the Pediatric Development Committee of the EMA on the unified protocol for a clinical trial of lomitapide in the treatment of pediatric HoFH patients. Assuming we are able to gain alignment with the agencies, our goal continues to be to initiate that study late this year. I'll now turn the call to Mark Fitzpatrick to review the financials. Mark?

Mark J. Fitzpatrick

Thank you, Mark. Turning to review of our financials on Slide 7. Net product sales of JUXTAPID were $36 million in the second quarter of 2014 compared to $6.5 million in the second quarter of 2013. In the first half of 2014, net product sales were $63 million compared with $7.7 million in the first half of 2013. The majority of our revenue in 2014 continues to be tied to 2 markets, the United States and Brazil. In the second quarter, the x U.S. business contributed 7% of our total net product sales. Recall that in 2013, x U.S. product sales represented 13% of our total net product sales. Our near-term forecast since it's a greater revenue impact from both current and new x U.S. markets. Products shipped to fill named patient orders outside the U.S. is often for multiple months of therapy, and as discussed earlier, order quantities can fluctuate significantly from quarter-to-quarter.

Total operating expenses were $41.3 million for the second quarter of 2014, including $32.3 million for SG&A and $8.9 million for research and development. This compares with operating expenses of $24.5 million, including $16.8 million in SG&A and $7.6 million for research and development in the second quarter of 2013. Operating expenses for the second quarter of 2014 contain $8 million of stock compensation expense compared with $6.8 million for the second quarter of 2013. Operating expenses were $81 million for the 6 months ended June 30, 2014, including $64.1 million for SG&A and $16.8 million for research and development. This compares with operating expenses of $43.5 million, including $30.1 million for SG&A and $13.4 million for research and development for the 6 months ended June 30, 2013. Operating expenses for the first 6 months of 2014 contain $16.5 million, stock compensation expense compared with $10.4 million for the comparable period in 2013. We had a GAAP net loss of $9.6 million or $0.33 per share for the second quarter of 2014 compared with a GAAP net loss of $18.9 million or $0.66 per share for the second quarter of 2013. We had a GAAP net loss for the 6 months ended June 30, 2014, of $25.4 million or $0.86 per share versus a GAAP net loss of $37 million or $1.30 per share for the 6 months ended June 30, 2013. Non-GAAP net loss was $1.7 million or $0.06 per share for the second quarter of 2014 compared with a non-GAAP net loss of $12.1 million or $0.42 per share for the second quarter of 2013. For the first 6 months of 2014, non-GAAP net loss was $8.9 million or $0.30 per share compared with a non-GAAP net loss of $26.7 million or $0.93 per share for the first 6 months of 2013. The increases in selling, general and administrative expenses in the second quarter and first half of 2014 over the comparable periods in 2013 were primarily related to the increased headcount in both selling and administrative functions, as well as outside services required to support the commercial launch of JUXTAPID in the United States and our global expansion and increased legal fees. The increase in research and development expenses in the second quarter of 2014 over the comparable period in 2013 was primarily related to increased employee costs related to increased headcount in the company's medical affairs and international regulatory activities, outside services required to support pharmacovigilance and manufacturing process development activities in the U.S. and clinical trial costs, as well as outside contract manufacturing process development activities associated with regulatory requirements in Brazil.

Turning to the balance sheet, we ended the quarter with $104.7 million in cash, cash equivalents and marketable securities as compared to $126.2 million as of December 31, 2013. Our cash used in operating activities was approximately $10.7 million for the second quarter of 2014. We continue to believe that we will achieve cash flow positive operations in the second half of this year and that aside from the impact of any potential future assets brought under development, we will maintain a positive cash flow trajectory. Given the first 6 months of JUXTAPID's sales in 2014, plus increasing experience with our sales dynamics, we are able to refine our 2014 sales forecast. Based on our results to date and our current plans and expectations for the balance of the year, we believe full year JUXTAPID net product sales are most likely to come in towards the lower end of our previous guidance range of $180 million to $200 million. Our current forecasts assume that similar quarter-over-quarter growth as experienced in the U.S. business in the second half of 2014 as was seen in the first half, and that our x U.S. business, particularly Brazil, contributes more in line with our expectations and at least equivalent to our experience in 2013, where our x U.S. business was 13% of total revenues. We expect total operating expenses, excluding stock-based compensation expense, to be between $145 million and $155 million in 2014. Including stock-based compensation expense, we expect total operating expenses to be between $185 million and $195 million in 2014. Based upon our current forecasts, we believe the upfront investments we've made have optimized our U.S. commercial operations to a scale that we expect will support our U.S. growth for the next 3 years, but we will continually asses our size and investments related to the U.S. HoFH market opportunity. With that, I'd like to turn the call back over to Marc Beer.

Marc D. Beer

Thanks, Mark. I'd like to conclude by reiterating that we're proud of the progress we've made in the short time since the approval of lomitapide, our first product, and build the Aegerion into a global commercial organization. We have confidence in our ability to execute on the ongoing launch of lomitapide, navigate the challenges inherent in opening up new markets around the globe and build a global company focused on developing and commercializing therapies for rare diseases. We are intent on driving to cash flow positive operations in the second half of this year in support of continued growth and leveraging of our capabilities and infrastructure with future potential assets.

I'd like to now turn it back over to the operator to open up the call for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] The first question comes from Robyn Karnauskas from Deutsche Bank.

Robyn Karnauskas - Deutsche Bank AG, Research Division

I guess, 2 points. Just, can you help me understand a little bit more about what led to the narrowing of guidance? Like what did not happen that was responsible for that upper end? And then my second question is, can you give an update on the nonstarters? Are you seeing an impact from the field in line with that benefit, and do you expect it to be maintained or continue?

Marc D. Beer

Thanks, Robyn. Let me give you some clarity around how we look at guidance in general, which is consistent with all the prior calls about how we forecast the business and look at guidance. And then I'll ask Craig to talk about non-starts and the investments we've made, which we think are the wise investments. On our guidance, Robyn, we try to at all times just give the absolute most clear, transparent look at what our forecasting model is telling us, and at the same time, not plan on everything going well across the globe. So our business is going to become increasingly dynamic, and hopefully is going to mitigate the risk of revenue guidance as we open up new markets, and we don't rely just on 2 markets, but the majority of our revenue that we're counting on 2014 is really coming from 2 markets, the U.S. and Brazil, and we see good flow in Brazil. However, that flow could be volatile quarter-over-quarter so you see some hedge in how we look at x U.S. revenue. We ended last year with 13% of our revenue x U.S. This quarter was 93% in the U.S. and 7% out. In the last quarter, it was 3% in x U.S. So you see the nice trend back to the growth that we're expecting at the beginning of the year on x U.S., but you see some hedge because again, the international markets are a little less predictable when we go to our model. U.S. business is just more predictable. So you see some hedge there based on those trends, Robyn. Now let me ask Craig to comment about the nonpatient starts and then see if you have a follow-up. Craig?

Craig E. Fraser

The patient-elected non-starts is an area that we have invested in and are implementing host of programs designed around HoFH, patient education, onboarding, patient and physician commitment to therapy. There's many programs and these investments have included the addition of the field-based nurse educators that we've been talking about, as well as peer-to-peer patient ambassadors and an even greater focus on patient onboarding and education. Really Q2 is the first quarter that we've had these types of programs and these assets really coming on line, with everybody fully hired, fully trained and the supporting materials and initiatives into place. But as I indicated during the call, we have some early encouraging signs. However, it is too early here closing out the second quarter to fully understand the impact on these initiatives on the patient-elected non-starts. One other thing, of course, is we've moved away from providing very specific quantitative metrics.

Robyn Karnauskas - Deutsche Bank AG, Research Division

Got it. I guess, if I can have one follow-up on Mark's clarification on the guidance. I'm just trying to understand like how much wiggle room you have. If there's so much uncertainty, why not create a lower end of guidance and rather just say it's going to come in at the lower end, like do you still, like, you have enough wiggle room there given the unpredictability?

Marc D. Beer

Yes, we do, Robin, because again Mark and Craig and I point to a specific model, and we're coming out of Q2 with the trends that really make us feel comfortable with the guidance we're giving, of the lower end of that $180 million to $200 million. So I think we've got enough predictability around this business to feel comfortable at this point in time of the year of pointing to that expectation, and I feel like we're going to hit that goal. So I feel -- to reiterate kind of your specific question, which I think is very appropriate is the higher end of that range, we like to get back to more x U.S. business and not put such a burden on the U.S. growth, and we look forward to that by opening up new markets. We also look forward to markets other than Brazil internationally starting to make meaningful contribution like Argentina, Columbia, Mexico and Canada. These are markets that we've made investments in. We've got -- not approval, but we've got non-patient -- named patient sales in. And we look forward to the contribution being more meaningful in those markets going forward and taking that percentage up of the international or x U.S. contribution.

Operator

The next question comes from Cory Kasimov from JPMorgan.

Cory William Kasimov - JP Morgan Chase & Co, Research Division

I also have a question for you on your guidance. I just want to come out of it from a different angle. So you showed a nice jump in 2Q, clearly. But even with that, you still need to nearly double sales in the second half of the year to meet the bottom end of your guidance. So do you have confidence that you can do this by -- with a continued rate of new patient adds you're seeing in July and that the enhanced sales force can overcome the seasonality issues you saw on the fourth quarter of last year? Is that how you're comfortable at the bottom end?

Marc D. Beer

Yes, Cory. So I -- yes, I'm going to comment about it and then turn it over to Mark Fitzpatrick who can comment probably a little bit more of a methodical model form of growth quarter-over-quarter. But at a macro level, if you look at the growth coming out of Q2 over Q1, and you say at minimum, we'd like to see the organization at that kind of growth with the investment we've put in the additional sales reps in the U.S. combined with I'd like to see international contribution on a percentage basis get back to where we were in 2013 and then actually grow beyond that. You'd like to see international contribution go from 3% in Q1, 7% in Q2 to something at and above what it was in 2013, just to balance out this business on a global basis. So there's 2 components here. You look at the U.S. growth that we saw quarter 1 over quarter 2. You've got that number on the percent of revenue that was represented in the U.S. both quarters, and you say we look forward to feeling the full impact of the sales force expansion, which we're not yet we're seeing the trends that we need to see in the expansion, which represented this growth. But we obviously would like to see the full impact in the back half of this year and all of 2015. And then we'd like to see international, and I think we've made the right resources, we may have the right plans in place to see international take on more contribution of our revenue going forward from a percentage standpoint. Mark, would you add anything to that?

Mark J. Fitzpatrick

Not a lot, Marc. I mean, our -- as you stated, we just experienced a 29% growth in the U.S. business Q2 over Q1. As we, Craig and I and our analysis team works through our models on the business and in terms of all the variables whether scripts and conversion and the like, we can see our way clearly to replicating that kind of growth over the course of the remaining 2 quarters. And we did state during the call that already quarter to date Q3, we've got Brazil revenues in excess of what we experienced in all of Q2. So we are on a path, we believe, where we can get that x U.S. revenue to contribute more meaningful to our overall outcome this year. Those orders are very, very chunky for multiple patients and multiple months of therapy, and they're a little bit unpredictable. They're quite unpredictable actually. And so therefore, we've taken this all into account from a very detailed modeling standpoint to try to more accurately portray our guidance statement on this call is towards the lower end of that previous guidance range for you.

Cory William Kasimov - JP Morgan Chase & Co, Research Division

Okay, understood. And then also one follow-up from an international standpoint. I realized Europe isn't really playing into 2014 expectations. But when thinking about Europe longer-term, what's the risk that other countries simply follow Germany's lead with regard to the decision-making and reimbursement?

Marc D. Beer

Yes, that's a good question, Cory, and I'm glad you asked it. I kind of wish we would've put something in the prepared remarks. I just got back from Europe about a week ago and was working on government affairs and reimbursement. And I can tell you, we're not seeing evidence of that happening. And I would point you back to the G-BA did not do a thoughtful review based on the merit of our clinical data. If they had and they came out with the same conclusion, perhaps you could find that trickling over to other countries. But in my interactions with government officials in Europe, I'm not feeling that there is any trickle over at this point in time. To the contrary, I think in the back half of this year, we hope to turn over some good reimbursement cards in certain countries in Europe. And I think we're in the late stages of those discussions with certain countries. So I have not seen evidence from people communicating to us, "But what about Germany?" And I think it's because the technical challenge of the dossier allowing for a clinical review not to happen.

Operator

The next question comes from Joe Schwartz from Leerink Partners.

Joseph P. Schwartz - Leerink Swann LLC, Research Division

I was wondering if you can give us some insight into your Brazilian revenue this quarter and so far in the third quarter, in terms of the proportion of the sales that are for refill patients, if you will, versus new patients.

Marc D. Beer

Yes, Cory (sic) [Joe], so I went to Brazil in Q2, and I'm going back to Brazil in a couple of weeks. Latin America as a whole is a very important market. It's not only myself investing in that area, but Craig and Muffy Carter and Dr. Mark have spent a significant amount of time in Q2 in all of Latin America. So we opened up the Mexican market, we had a good ad board in Argentina, and we're investing a lot in the Brazilian business at a government affairs level and KOL level. So I would just characterize that region as an important region, and I have confidence that we're doing the right things to stabilize the Brazil business and grow it. The KOL's reaction to the patients that are on therapy is very positive. I now have spent time multiple hours with over 50% of the physicians who had treated patients in Brazil, and the reaction of the physicians that have had patients on therapy for multiple months is very positive. So I feel that the business is very stable, I think to your point of patient reaction to the product, physician reaction to the impact that JUXTAPID is having on these patients. And I think that the strides we've made with the government are very positive. We were not known down there. I will emphasize that these investigations that Brazil does is becoming more common in health care, and I feel very confident that patients that we have on therapy that the government's going to talk to, they're going to find a very severe HoFH patient, and the physicians are the right physicians treating these patients. So I feel very good about the solidity of our Brazil business. That said, I still think it will be chunky in the way that they order product. The Brazil government and the head of purchasing at the federal level in Brazil likes to package patients into groups. They make group purchases. It's just the way they like to process it in the government. And when they do that, they put multiple patients together, sometimes double-digit number of patients together, is what we have seen and they order for multiple months. So you will see chunkiness in that business, but expect the management team to continue to invest in Latin America because we're off to good start. We just need to continue to invest in government affairs, have them know who Aegerion is and know the severity of the disease. Is there a follow-up to that, Joe?

Joseph P. Schwartz - Leerink Swann LLC, Research Division

Yes, that was very interesting. I guess, on the U.S., I was curious about something and that is, what proportion of the patients are you finding are doing their diet run-in now after the enhanced services? Is that improving?

Marc D. Beer

What I can tell you -- I'd like to comment about what our investment is doing in giving the patient the opportunity to do that and then Craig can give you some discussions that he's hearing from his nurse educators. But we had a bolus of patients in 2013 come in that was greater than our forecast of prescriptions that we have previously communicated. I don't believe we were staffed appropriately to handle that number of prescriptions and onboarding. So we had a big fluctuation in how people are onboarded. And I think there were a number of patients that not only did not have a burn-in of the diet before they tried JUXTAPID and went on JUXTAPID, but patients did not have, in many cases, the direct involvement with a dietitian and nutritionist because we weren't set to handle that, but we are now. And I look forward to looking at the trends of this business over the next couple of quarters now that we're staffed appropriately where every patient has the opportunity to get the proper nutritionist and dietitian counsel before. Craig, any follow-up to Joe's question about, are we having more patients actually conduct the burn-in diet?

Craig E. Fraser

Yes, Joe. We have -- as Marc was mentioning, having enough dietitians and then encouraged them through the right type of onboardings with the nurse educators and upsize scale of the team is getting a lot more people to have the dietary consults, as Marc said, and then that was the important first step and that'd be the absolute norm. The second thing is, is having enough -- that it happens in a very timely fashion. Certainly, before a product is shipped to the patient because sometimes reimbursement can be a little bit quicker than other times as well. So those are really the important steps. We encourage the patient from the moment that they have a dietary consult and understand to start the diet, to throw away all of the fatty foods in their house as well and all those important steps. And that is happening a lot more often. I couldn't provide you an exact quantification of it, but I can tell you on all of those fronts, getting the dietary consult, it's happening in a timely fashion, happening prior to shipment of any bottle. And the things that come along with the direction of the dietary consult, including immediately starting the diet, is -- has made a lot of positive gains.

Operator

The next question comes from Steve Byrne from Bank of America.

Steve Byrne - BofA Merrill Lynch, Research Division

[indiscernible]

Marc D. Beer

Steve, if you can hear us, you're not coming through. It sounds like you got a bad reception.

Steve Byrne - BofA Merrill Lynch, Research Division

I had a question for Craig. I wanted to ask him about the new reps that were hired. How would you assess their productivity level in the second quarter relative to the legacy reps? And does that give you some conviction about being able to hit the bottom end of your forecast range?

Marc D. Beer

Craig, comment -- tell me about some of the new territories and contribution.

Craig E. Fraser

Yes, absolutely. And that's a great question, because that's one of the things that we paid careful attention and look and measure looking for a similar type of contribution rate and impact profile across the range of these new representatives. And I have to tell you, really, in the first half of this year continued into the second quarter, it's been very much in line with our expectations and in line with the plan. And it is something that we look forward to seeing and needed to see, and that is exactly what we are seeing. We can -- across that whole group, across any new group that you hire and any type of function all at once, you find yourself then focusing on what I call performance consistency. And that is ensuring that across that range of people that you continue to develop the bell-shaped curve so that you're running on all cylinders, if you will, from the new people, and that's exactly our focus right now. So we're seeing what we wanted to see in terms of productivity per LSM, and in comparison with what we saw last year, very much in line with what we hope to see in our expectations.

Steve Byrne - BofA Merrill Lynch, Research Division

And how long do you think it would take before those new reps are similarly productive as your legacy reps?

Craig E. Fraser

Well I think we see a number of them being that way now. I mean, there definitely is a range. You start to see that happen more quarter-on-quarter, less so in the first quarter because they're all just learning and the other people have been in place for a year with access and open relationships. But we're seeing that increasingly happening or the number of them mixing their way into the legacy representatives, and this is all becoming kind of a more common mix. We're seeing that shape up right now. And I expect over the next couple of quarters we're going to find it -- all find its way into them generally looking the same.

Steve Byrne - BofA Merrill Lynch, Research Division

And then I had a question for Mark Sumeray and that was whether he's seen any quantification in the literature of all of these mutant alleles that contribute to this HoFH phenotype, and how does that affect your overall view on the prevalence of this addressable patient population.

Mark Sumeray

Well, as I'm sure you're aware, there has been at least 2 or 3 recent publications that suggest that the prevalence of heterozygous condition is certainly more than historically reported in the literature. The original paper, it goes back to 1973, reported the prevalence of only 1 in 500 and more recent estimates of closer to sort of 1 in 200 kind of range. Now, obviously, one then extrapolates from that how prevalent we think homozygous FH is and as you suggest, as we understand more about the genetics of the condition, as we discover more mutations and even potentially, the possibility of more genes being involved, it lines up in a sort of consistent way with the prevalence, the more recent prevalence estimate that we've seen in the literature. And I have to say that my expectation is that this is an evolving area of understanding, and that there is research going on currently, and I expect to see more published in the literature in the fairly near future, which takes those prevalence estimates in the same direction. And our understanding of the disease of homozygous FH will continue to improve the sense of confidence in the true prevalence of the condition.

Steve Byrne - BofA Merrill Lynch, Research Division

And would you suggest that's still in the 3,000 to 5,000 range within the U.S.?

Mark Sumeray

Yes, certainly. Our current best estimate is that it's around the 3,000-patient mark in the U.S. for adult HoFH.

Operator

The next question comes from Bill Tanner from FBR Capital Markets.

William Tanner - FBR Capital Markets & Co., Research Division

A couple for you, Craig. Just as it relates to the x U.S. business. I know you -- I think you guys mentioned that there was a 70% reduction on a quarter-over-quarter basis in the first quarter of this year, and can you just give us the number on what the rebound actually was. And then on that, how are you tracking -- or what you did in this quarter -- and then how are you tracking kind of to what your thoughts were heading into the year? Is there any chance that you might be able to catch up or did you just think you're going to kind of hit that peak revenue from Brazil as an example sometime farther out than you originally contemplated? And then I just had a quick follow-up on the U.S., please.

Craig E. Fraser

Sure, sure. Well we -- I think the main thing that, as I've mentioned in my prepared remarks concerning Brazil, was that in Q2, we started to see the flow of federal orders once again. And therefore, Brazil contributed much more meaningfully to the business in the second quarter. A trend that we also mentioned continued into the third quarter, and I think it is notable that as we said today, early in the third quarter we already have more revenues related to Brazil so far in this quarter than we did in the entirety of the second quarter. So we're starting to see that flow happen at the federal level for these new patients and so forth coming on to therapy. And that needs to continue. The queue for named patient sales in Brazil, the prescriptions are there, the demand is there related to these named patient sales, the queue is there, the court cases won and so forth. So we are looking for, as Mark Fitzpatrick said earlier, continued growth there and a lot more out the country in the back end of this year. Regarding peak, we have a market that is a very big market just like the U.S. and other major markets that's going to take a couple of years to continue to go. So we look for a, continued growth quarter-on-quarter for some time to come out of a place like Brazil. The other aspect for the international is these other markets. We're in the early days. It was really meaningful to gain approval in very important countries like Canada, where there's a founder effect, in places like Mexico, which for the rare disease business has really come on as something that I think most rare disease companies are getting excited about. And we're working through to think of securing reimbursement, but we brought revenue online in Canada so that's a neat little benchmark to happen in the second quarter. And then Latin America as a whole, as Mark mentioned, is a lot of different activity. So we're looking for that 93% that was the U.S. portion to be the U.S. continue to do well, but the international business to grow nicely over these coming quarters.

William Tanner - FBR Capital Markets & Co., Research Division

And then as it relates to Brazil, I guess, one quick follow-up on that for the U.S. I understand that it's going to be kind of lumpy, but I'm assuming that it's going to be volatile or lumpy from whatever higher revenue base. So you're not going to see big excursions in the absolute revenue, just maybe a similar magnitude off of a higher base. But then as it relates to the U.S. on the nurse educators, I think you said it's too early to quantify the impact. And I guess, my question is, is it too early to quantify the impact or is it too early to really commit to the Street as to how it's going because I'm assuming there's got to be something more semiquantitative or quantitative that you guys are seeing about what the impact actually is?

Marc D. Beer

Yes, Bill, let me comment about the investments because I'm watching it very closely, and we just had a complete review of how that investment is trending late last week. It is early because we hired the 15 nurse educators in Q1 and they've been out there making the impact in Q2 because they were hired over the course of Q1. And but we're seeing early signs that, that really is going to make a difference. And I wish I would have them in place at the beginning of the launch because it's needed on this product. It's the investment that you have to make in the nutritional education and do it before the patient goes on JUXTAPID. So I would just say that we're seeing the early signs that we need to see that, that investment was the right investment. It is just off of an end that the management team starts to quantify trends, we really want it off of the large end. So we want to see a couple more quarters of that trend, but the early signs are that the trend's going the right way.

Operator

The next question comes from Eun Yang from Jefferies.

Eileen Flowers - Jefferies LLC, Research Division

It's actually Eileen Flowers in for Eun Yang tonight. So my question is with the increasing number of scripts in patients that you saw started on therapy in the second quarter, are you seeing a higher script conversion rate than previously or the number remaining relatively stable?

Marc D. Beer

Yes, so we -- Eileen, good question. We're trying not to give quarterly metric numbers either directionally or quantifying the individual metrics, but I will say that the pieces of the business that are important are the access in reimbursement in the U.S. still succeeding patient by patient, and we feel good about the access in reimbursement success we've had since the launch, and we continue to build good benefits in line with expectations. And I will also will say that both the investment and the sales force, which gives us better reach and when Craig looks closely at what percentage of our prescriptions come from new physicians and then how do we model that out over several years, how many cardiologists we need to get to and how many patients are out there, that expansion seems to be really right on. And we look at it carefully, did we put it too many territories, not enough territories. I really feel like Craig got it right on the number of territories that we've put in place at the beginning of this year. And that's going to carry us for several years. And the last one is the nurse educators. I got challenged by the Street in the last couple of months. Mark, you didn't short change those 15 nurse educators, did you? And I tried to emphasize to the Street that we will quickly make the decision to put 5 more nurse educators on as needed. We believe in that investment. It's the right patient support for this product. It's a chronic med. We'd like to see a patient exceed on the product, if they deserve to stay on the product and there are not side effects, et cetera. Obviously, assuming that there's good medical decisions putting the patient on the drug and that the side effects are not seen and would cost the patient to come off the product. We want to give the patient all the possibilities to succeed in the product. I think the nurse educators is the right strategy. So we're seeing the right trends in the key metrics that tell us that the resource allocation that we made at the beginning of this year was the right level. And that's probably the most important thing for any -- for investors to get the sense of this. Did you make the right resource allocation at the right level, and will it carry you for a couple of years? Because the other thing I will share with today is it's important for us as a management team to demonstrate leverage in our P&L. We've got to demonstrate separation of expense and revenue and real leverage. I just believe that, that's absolutely critical to create real value on a long-term basis. And I think that the resource allocation and the level of it, is going to allow us for the next several years to show that separation in leverage in the P&L.

Operator

The next question comes from film to Phil Nadeau from Cowen and Company.

Yatin Suneja - Cowen and Company, LLC, Research Division

This is Yatin calling in for Phil. Just continuing on Eileen's question. So I'm just trying to understand how many new patients were added during the quarter. So in terms of U.S. sales, my calculation shows that you added about 60 new patient per month, does it sound about right?

Marc D. Beer

Yatin, I don't know where you're calculating that from. But first off, it doesn't sound right, but we're not going to give direction on quantified patients or scripts. I think it should be encouraging to all that we saw the new patient starts and prescriptions in line with what we expected given the significant investment we've made in the field. So I'm going to leave it at that and have you follow our annual guidance. And on an annual basis, we'll dive a little bit deeper into key metrics.

Operator

The next question comes from Navdeep Singh from Goldman Sachs.

Navdeep Singh - Goldman Sachs Group Inc., Research Division

Just trying to better understand the real underlying end-user growth here. So I was wondering if there were any onetime changes in inventory or gross to net change or anything like that. I also saw that you took about a 5.9% price increase in early June or so, so I was just wondering how much of the growth you saw this quarter were due to any onetime effects such as the price increase you saw -- you took in early June. And then I have a quick follow-up.

Marc D. Beer

Thanks, Navdeep, and thanks for asking the question. I would actually steer you back to material things that we're trying to focus on in giving true, transparent knowledge about where the business is going. And the line of questioning of the price increase for any onetime events is not relevant to the growth that we're seeing in the business. So the material growth that we're seeing in our business is real metric changes in our business. So -- and the key metric changes here, the future success of this business is our ability to get appropriate HoFH patients prescribed which happened in Q2 at the rate that we were expecting with the expansion. It is to invest in the onboarding process from an education standpoint so we take down the patient non-starts and the dropout rate. So I think that I would steer you towards the key metrics of the business, not the onetime. There were not onetime events in Q2 that have material impact on our business. Was there a follow-up?

Navdeep Singh - Goldman Sachs Group Inc., Research Division

Yes, Mark, that's actually very helpful. So I think in your prepared remarks, I think you mentioned 45% of the prescriptions during Q2 were from new prescribers. So I'm trying to think through, how -- I'm trying to figure out how recurring this revenue stream is from the new prescribers. So do you think that these new prescribers have a larger queue of HoFH patients versus the prior prescribers?

Marc D. Beer

Yes, so in a launch mode -- and I'll let Craig comment about this but he's launched more products than I have. But in launch mode, you want to see recurring patient success within practices that have previously written, and you want to see expansion of prescriber base. And I want to emphasize that with the size of sales force we had in 2013, there was a lot of the potential prescriber base we just couldn't get to. So we did not expand the sales force, and I want to get clear about this, we did not expand the sales force because we thought that it was harder to get to the patients out there. To the contrary, we just saw that there were more physicians with HoFH patients that we needed to get to, and that was a good investment long-term. So what you want to see in launch mode, which we're seeing both -- we're seeing recurring commitment to HoFH patients going on therapy from our prescribers from 2013, and we're seeing new prescribers and that's what you want to see on launch mode. Craig, would you add anything to that?

Craig E. Fraser

No. I'm not. I think that's it, Marc. We're seeing both happen.

Marc D. Beer

Craig always emphasizes that to me when he comes in with dashboards and he shares with me what's happening in the business. In every launch, he's done exactly what you want to look for. You want to see reoccurring prescriptions and success within our practice even calling on for 18 months, and you want to see new prescribers.

Craig E. Fraser

I think seeing the percent of new prescribers in Q2 could be similar to that of Q1 was something that was very welcome. So I think that shows that, that trend is continuing nicely.

Operator

I am showing no further questions. I would now like to turn the call back over to Marc Beer.

Marc D. Beer

Great. Thanks, operator. I want to thank everybody for joining us tonight. I look forward to keeping everybody updated on our progress in the market as this global launch continues. Thanks for joining us today, and have a nice evening.

Operator

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Aegerion Pharmaceuticals' (AEGR) CEO Marc Beer on Q2 2014 Results - Earnings Call Transcript
This Transcript
All Transcripts