NPS Pharmaceuticals' (NPSP) CEO Francois Nader on Q2 2014 Results - Earnings Call Transcript

| About: NPS Pharmaceuticals, (NPSP)

NPS Pharmaceuticals Inc. (NASDAQ:NPSP)

Q2 2014 Results Earnings Conference Call

August 06, 2014, 05:00 PM ET


Susan Mesco – Executive Director-Investor Relations

Francois Nader – President and CEO

Luke M. Beshar – EVP and CFO

Eric Pauwels – SVP and President-NPS Pharma International

Roger J. Garceau – EVP and Chief Medical Officer

Paul Firuta – President-US Commercial Operations


Tazeen Ahmad – Bank of America

Lisa Zhang - Goldman Sachs

Joseph Schwartz - Leerink Partners.

Kim Lee - Janney Capital

Alan Carr - Needham & Company

David Nierengarten - Wedbush Securities, Inc.


Good day, ladies and gentlemen, and welcome to the NPS Pharmaceuticals Second Quarter 2014 Financial Result Conference Call. My name is [Estobon] (ph) and I will be your operator for today. At this time, all participants are in listen-only-mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Susan Mesco, Executive Director Investor Relations.

Susan Mesco

Thank you, Estobon and welcome to our second quarter conference call. Before we start, let me remind you that today’s call will include forward-looking statements based on current expectations. Such statements represent our judgment as of today and may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Please refer to our filings with the SEC, which are available from the SEC or our website for information concerning the risk factors that could affect the company.

Joining me on today's call are members of our executive management team, including Dr. Francois Nader, our President and Chief Executive Officer; Luke Beshar, our Chief Financial Officer; and Paul Firuta, President, U.S. Commercial Operations. Roger Garceau, our Chief Medical Officer and Eric Pauwels, President, NPS Pharma International, are also here to participate in our Q&A session.

At this time, I will turn the call over to Dr. Francois Nader.

Francois Nader

Thank you, Susan, good afternoon and thank you for joining us today. My management team and I are delighted to share with you some important targets that we made during the second half of 2014 positioning NPS as a premiere global rare disease company.

Our focus first on our key strategic priority. Growing our international Gattex customer, global rare disease business would continue in success of Gattex in the U.S. and the introduction of Revestive in key European markets later this year.

Our second strategic priority is building our global endocrinology rare disease business as we prepare for the approval and launch of Natpara in the U.S. and the filing of Natpara in Europe.

And third, strengthening our pipeline with the recent initiation of our Phase 2 proof-of-concept study of NPSP795 in autosomal dominant hypocalcemia, and the commitment to continue building our portfolio for licensing and acquisitions.

Beginning with Gattex, we continue to be very pleased with the success of Gattex in the U.S. as the first and only GLP-2 analog that is indicated for adult patients with Short Bowel Syndrome dependent on parental support.

In the second quarter, sales of Gattex Revestive were $22 million and year-to-date we have achieved net sales of $40 million leaving us confident that we will deliver on our full year guidance of $100 million to $110 million in net global sales. And we remain very bullish on the long term potential for Gattex.

We continue to grow our existing prescriber base with more than 50% of new prescriptions coming in from first time prescribers leaving plenty of room for significant market growth.

We were also gratified to receive FDA's approval of a revised label for Gattex, which includes the long term data from our STEP2 study. This data showed that Gattex treatment beyond two years resulted in clinically meaningful reductions in volume of parental support, more day of parental nutrition and for some patients complete independence from PN.

This revised label has allowed us to strengthen our promotional and educational materials to boost Gattex's appeal to physicians and patients. While we are very pleased with the effectiveness of our current field organization, we leverage our launch experience and recently implemented a field force expansion to extend our in-depth reach to more prescribers in more territories.

On the international front, we are preparing for the roll-out of Revestive, which is the ex-U.S. brand for Gattex. To this effect, we filed our price in the U.K. in June, which now allows Short Bowel Syndrome patients to access Revestive via individual funding requests.

We also submitted the health technology assessment for Haute Autorité de Santé in France. We will be filling the AMNOG dossier in Germany in the fall which will mark the launch of Revestive in Germany and the start of the three months equate review process.

And our pricing submissions in Denmark, Norway and Sweden are well underway. Japan is a key market for the global success of the brand. We are very pleased with the recent meeting we had with PDMA, the Japanese Pharmaceuticals and Medical Devices Agency.

Our development program has been defined and includes a bridging study in adult Japanese Short Bowel Syndrome patients, as well as a pediatric study. We are also preparing to file for orphan status later this year.

The last point to touch on regarding our G1 franchise, is our global development program in pediatric Short Bowel Syndrome. The global study in this setting is progressing well. We are currently enrolling our second cohort of patients and anticipate reporting top line results later on this year or early next.

I would like to now switch gears and turn to our global endocrinology rare disease franchise. The FDA's review of the Natpara BLA is advancing as planed. At September 12, AdCom date was recently published in the Federal Register and the Natpara PDUFA action date remains October 24.

As we successfully did with Gattex, we are working with distinguished outside experts including former FDA reviewers and panel members and holding a number of marked Advisory Committee meetings to ensure readiness.

In connection with the Natpara AdCom meeting, we will begin a self-imposed quiet period on August 18, in anticipation of receiving the FDA briefing documents. We will list this quiet period on September 12, as for the completion of the AdCom meeting.

A key components of our global rare disease endocrinology strategy is to secure approval of Natpara in Europe and the 10-year exclusivity that will come with it. We remain on target to finding the Natpara European marketing authorization application before the end of this year.

As you know, patients with hypoparathyroidism face a significant burden of disease, given the multitude of physical, cognitive, and emotional symptoms associated with the disorder. Findings from our landmark PARADOX study were recently published in Endocrine Practice.

The data described the high burden of illness with hypoparathyroidism patients as they experience symptoms for more than 13-hours a day. 72% of patients have 10 or more symptoms despite taking calcium and vitamin D. If approved, Natpara could provide hypoparathyroidism patients with the first replacement therapy to treat that condition.

In preparing for the successful introduction of Natpara in the U.S. our commercial team has been advancing three priorities. First, generating disease awareness. Second, profiling potential prescribers, and third, ensuring market access.

I would like to now invite Paul Firuta, our President of U.S. Commercial Operations to update you on our pre-launch activities for Natpara. Paul?

Paul Firuta

Thank you, Francois, and good afternoon to everyone joining us on today's call. Let me begin by telling you how delighted I am to have joined NPS at such an exciting time. I've enjoyed getting to know the commercial team at NPS. I have found them to be very experienced, highly motivated and patient focused.

I am confident that strong execution will deliver significant growth in the month and years ahead that lie for Gattex. We are making excellent progress executing the 2014 plan and the team's doing a very good job analyzing the market dynamics and developing strategies and tactics to address findings identified in the early phases of the launch.

We think Gattex highlights include an expanded sales force with 11 new members, enhanced targeting tools, the addition of powerful long term data to our label and additional NPS care coordinators to support the growth in the patient phase.

So, for Gattex, we are very pleased with the continued success the team is delivering. For Natpara, we're advancing numerous priorities to the U.S. launch readiness. Generating awareness around the burden of hypoparathyroidism is a mission-critical component of our commercial strategy.

Like many orphan disorders hypoparathyroidism is often misunderstood and we're using multiple educational tools to enhance patient and physician understanding of hypoparathyroidism and the burden of the disease.

We have generated significant results through our digital and social media platform like our unbranded website, where patients can register and opt in to receive information and updates from NPS.

We've also seen a terrific response to our YouTube channel and Facebook page. Through these platforms, patients can access educational information, view videos and download e-books. Last month in support of world Hypoparathyroidism Awareness Day, we introduced a free emergency resource kit for patients.

This kit which includes a medical alert bracelet and ID cards, is designed to support accurate and more rapid diagnosis of hypoparathyroid symptoms in emergency settings. In less than one month, we received nearly 500 patient requests for this kit, another indication to us of the unmet medical need in the community.

Let me turn now to our second key commercial priority, physician targeting and field force deployment. We recently deployed a contract field based team of 38 professionals. This team is charged with profiling approximately 3,500 endocrinologists, who would be our primary prescriber targets.

The demographic information they are capturing will help us refine our physician targeting list, support our field force mapping, and develop our launch playbooks.

Our medical sales team is also playing an important role in profiling effort. This team of 14 is focused on building hypoparathyroidism awareness through education of centers of excellence and other key institutions.

Regarding the build-out of our NPS Natpara sales organization, we will be hiring a dedicated team using a gated approach based on upcoming regulatory milestones. The plan is to have the sales leadership in place by end of September and the majority of the sales team in the field after approval.

The last here I'd like to cover is market access. Specifically specialty distribution, patient services and payer mix. We will utilize a limited network of specialty pharmacies to distribute Natpara directly to hypoparathyroidism patients. This network is now being established.

We are also expanding our NPS advantage support programs to include hypoparathyroidism team, who will be ready to provide patients and healthcare providers with personalized support by October 24th PDUFA date.

In addition, as we do for Gattex, we’ll offer suite of patient assistance programs to support broad access to Natpara. These programs will be easy to navigate and designed to enhance the patient and physician experience.

The last thing I will cover is the payers. Our recent research shows that the payer mix for hypoparathyroidism patients is approximately 60% covered by commercial plans, 35% government and 5% uninsured.

So, to summarize, our team continues to make excellent progress on the commercial front, and we are really excited to bring the first parathyroid hormone replacement therapy for hypoparathyroid patients as quickly as possible.

With that, I'll turn the call back over to Francois.

Francois Nader

Thank you, Paul. I would like to now cover some highlights from our endocrinology development program. We recently reached an important milestone with the initiation of the Phase 2a proof-of-concept study of NPSP795 for Autosomal Dominant Hypocalcemia or ADH.

As a reminder, ADH is a lifelong genetic disorder that affects only a few thousand patients globally. It is caused by mutations of the calcium sensing receptor gene, which plays a major role in calcium homeostasis.

Patients with ADH continuously excrete calcium in the urine, because the receptor always senses that the serum calcium is too high even when it is not. ADH can present with severe hypocalcemia, which can cause life threatening neonatal complications, such as cardiac arrhythmias, seizures or laryngeal spasms.

In adult, ADH patients are at a significantly increased risk for renal complications, including nephrocalcinosis and impaired renal function. Unfortunately there is currently no approved treatment for ADH.

NPS has embarked on the development of NPSP795 which is a selective calcium receptor antagonist that binds to the calcium sensing receptor and decreases its sensitivity to serum calcium. This in turn could restore normal calcium homeostasis.

Because NPSP795 mechanism of action normalizes the physiological activity of the receptor, it could be the first treatment specifically targeting the ADH mutation. We look forward to reporting topline results from this important study later this year or early next.

So, in summary, we are focused on delivering tremendous value in 2014 and beyond. We are very confident in the significant market potential of Gattex and Revestive. We are preparing for the U.S. launch of our second orphan product Natpara and the filing of the Natpara European marketing application later this year and our Phase 2a of NPSP795 in ADH is now underway.

Behind these programs, we have implemented a very active business development strategy to pursue acquisition or in licensing opportunities that are either first end or best end rare disease therapeutics that provides quantifiable value to patients and society.

We have a lofty vision here at NPS, nothing less than to create a world in which every patient, every person living with rare disease has a therapy. Our GI and endocrinology franchises are only the beginning.

Our patient centric ambition is to 10 in 10 or developing treatments for 10 rare diseases in 10 years. I know that this is an ambitious goal. Some would say unrealistic but I truly believe, that given our team, our expertise and our patient focus motivation, we will make it happen.

At this time, I will turn the call to Luke for his financial report. Luke?

Luke Beshar

Thanks, Francois. Again, good afternoon to all joining us on today's call. I am really pleased to report that NPS Pharma turned in another strong financial performance this quarter. We achieved $20 million in net global sales of Gattex and continue to feel very good about delivering our full year global net sales guidance of $100 million to $110 million.

Our Sensipar royalties remain an important value driver, bringing in nearly $32 million of revenues in the quarter. As a reminder, under the repayment terms of royalty advance from Amgen, on August 15th, we will receive a $24 million cash payment, and Amgen will withhold the remaining $8 million to repay interest and principal on the advance.

We continue to anticipate that we will fully repay the remaining balance of the $41 million in the third quarter of 2015, after which we will receive 100% of Sensipar royalties through March 18 in the U.S. and through the end of the 2018 for the rest of the world.

With annualized sales of Sensipar now $1.2 billion, we believe our cash flows in Sensipar royalties provide tremendous financial flexibility to NPS over the coming years as we drive towards our 10 in 10 goal and bring in new pipeline opportunities.

We also receive a cash royalty for Janssen sales NUCYNTA, which for the quarter was approximately $700,000.

Moving to the expense side of the P&L, cost of sales were $3 million, or roughly 12% of net sales which consisted primarily of royalties and packaging costs. As you may recall, the product being used to support the introduction of Gattex was manufactured before approval and therefore expense to R&D.

We expect that this will result in the benefit to our gross margin and to the later part of next year when the pre-approval product is fully consumed. After that, we expect our gross margins to normalize at approximately 80%.

Second quarter research and development expenses were $21 million, representing a decrease of approximately $10 million from the same quarter last year. The primary driver of this variance was the cost related to the production on pre-approval, Natpara inventory produced in 2013.

Selling, general and administrative expenses were $26 million for the second quarter versus approximately $14 million for the same period last year. The increase is attributable to the activities to support the launch of Gattex, pre-launch initiatives for Natpara, and the build-up of our international business.

We continue to maintain a strong financial position and ended the quarter with approximately $170 million in cash. This leaves us very well capitalized to globally commercialize both Gattex and Natpara as well as to advance new pipeline opportunities for growth.

So to summarize the second quarter financial results, we remain highly confident in our growth prospects for Gattex Revestive 2014 and well beyond. We believe that Natpara will be the second significant sales driver for NPS Pharma, and our team is very focused on advancing the regulatory process for this drug both in the U.S. and the EU.

We have a number of key pipeline initiatives in place to deliver growth beyond Gattex and Natpara, including our development programs for Gattex in pediatric Short Bowel Syndrome and NPSP795 in ADH.

And finally we have the financial strength to allow us to execute on these initiatives.

That concludes this afternoon's prepared remarks. At this time, I'm happy to turn the call back over to the operator to begin our Q&A session. Estobon?

Question-and-Answer Session


(Operator Instructions) Our first question comes from Tazeen Ahmad with Bank of America.

Tazeen Ahmad – Bank of America

Hi, thanks for taking my questions. Just a couple on Gattex. You mentioned that more than 50% of scripts are coming from first-time prescribers. Can you breakdown whether most of those prescribers are KOLs or are they more community based?

Francois Nader

Thank you, Tazeen. We are not breaking down who our prescribers are. Sad to say that, it represents exactly what we said it will, which is part of the prescribers are KOLs coming from large institutions.

And about one-third of them are coming from centers of excellence and two-thirds really are coming from large practices and other specialties.

And I'm very happy to report that with the expansion of our sales organization, we will be able to reach even more target and more diverse targets as well.

Tazeen Ahmad – Bank of America

When was that sales retention completed?

Luke Beshar

We finished the sales force expansion in July as the teams in the field and just starting the process as meeting their customers for the first time and then we characterize.

Tazeen Ahmad – Bank of America

Okay. And I guess the last question I have is, what are you noting on discontinuation rates, if you could provide some sort of directional view on that? And has there been any change on the time to secure prior authorization from payers? Has it stayed stable or is it getting faster?

Francois Nader

Yeah, let me start with part two of our question. We haven’t seen any changes in the reimbursement pattern and we are very pleased with how the reimbursement is going. Really underlining the value frankly that Gattex is bringing to payers and patients.

On the discontinuation rate, what we said and continue to say is over the long-run, we'd expect the discontinuation rate to settle in around 20% to 30%. At this stage, we are not disclosing what debt rate is on a quarterly basis.

Tazeen Ahmad – Bank of America

Okay. Thanks.

Francois Nader

Thank you.


Our next question comes from Navdeep Singh with Goldman Sachs.

Lisa Zhang - Goldman Sachs

Hi, this is Lisa in for Navdeep. Thanks for taking our questions. First, in 2Q did you work through all that weather headwinds from Q1? And additionally at the beginning of 2Q, you added about seven to eight patients on Gattex per week and saw about nine to 10 new prescriptions written per week.

So, can you just talk a little bit about how these trends faired throughout the rest of the quarter, whether they increased, decreased or remained the same? And then, what are you seeing in the early days of 3Q?

Francois Nader

So, fortunately winter is behind us, so that's good news and other headwinds they are also behind us. As I said in my prepared remarks, we are very confident that we'll reach our target guidance of $100 million to $110 million this year.

This has really fostered by the fact that we have added - among other things, we have added an additional sales force. But also Paul and his team and he can comment on this, they did fabulous job in targeting and really giving our marketing teams the tools they need.

This being said, we are not providing anymore with any real-time or intra-quarter metrics on prescription and dispenses.

Lisa Zhang - Goldman Sachs

Okay. And I saw you took about like 10% price increase in July 1st. So, can you just talk a bit about what that says about, one, the pricing power in this market, and then two, the underlying growth of Gattex?

Francois Nader

Well our increase was 9.4% and we took this increase after carefully setting the market, adjusting the value that Gattex brings to the patient especially when we have now in our label, very strong data on the long term use of Gattex.

So we were very deliberate if you will in making this decision. Fact of the matter is, as is said, we haven’t seen any negative reaction from the payers and our reimbursement continues to be very, very strong. And we are working with the payers on reducing the time from, if you will prescription to dispensing.

So on the reimbursement front, things are going as well as one could expect.

Lisa Zhang - Goldman Sachs

Okay, thanks. And then lastly on Natpara, this is just a question we receive a lot from investor. For Natpara, received a complete response letter for osteoporosis, so, can you just walk us through what the issues were there? And then why you’re confident you won't face the same issues with Natpara for hypoparathyroidism? Thank you.

Francois Nader

Well back in the day it was called pre-outs and the indication was osteoporosis, so, very different indication. The two reasons where we received an approvable letter was number one, the risk of hyperglycemia, when at that time kiosk was used in - with osteoporosis patients.

And the second reason was some comments from the FDA on the trend that was used back then.

Now, fast-forward to 2014, the indication is the front because now we’re talking about hypoparathyroidism and hypoparathyroidism patients suffer from hypocalcemia.

So boosting the serum calcium level up is exactly what we need. And this is why we are very confident that Natpara has the ideal mechanism of action for a condition like hypoparathyroidism because it replaces a hormone that is missing in these patients, which is not the case at all in patients suffering from postmenopausal osteoporosis.

And the second aspect is the trend that was used back in the day in the development of pay-out is long-gone. And we have a new trend that has been used during the development process.

So, in many ways completely end related when it comes to the trend and frankly good news when it comes to boosting the serum calcium levels up.

Lisa Zhang - Goldman Sachs

Okay. Great. Thanks so much and congrats on the progress.

Francois Nader

Thank you very much, Lisa.


Our next question comes from Joseph Schwartz with Leerink Partners.

Joseph Schwartz - Leerink Partners.

Great, thanks very much. Natpara has either, I though I'd ask one on Natpara and then one on your 795 program.

First of all, Natpara has some biomarker data which a lot of the specialists we speak with are convinced should translate into clinical benefit because it’s the same biomarkers they focus on managing today with vitamin D and calcium supplementation.

And we've heard anecdotes about hypoparathyroidism patients feeling better after they go on Natpara. But I am wondering what clinical data do you have to demonstrate this in a rigorous enough way to satisfy the FDA if they ask you this in the upcoming panel?

Francois Nader

Thank you, Joe. And I will ask Roger Garceau, our Chief Medical Officer to answer, maybe both of your questions. Let's start with Natpara first. Roger?

Roger Garceau

Let me just talk about Natpara. So, in the clinical trial we have so far as we looked at, as a replacement trial it says, can we maintain serum calcium base that we take away to supplements, which we could do. In addition to that, we have both clinical pharmacology studies but also in the replaced trial.

So, if we look at the other markers and that is where you're talking about. So, we looked at the effect tenure on calcium, we looked the effect on phosphate, which is real critical with long term because it the high calcium phosphate product that is associated with tissue disposition in the brain, kidney and other places. And we looked at the levels of serum phosphate again, part of that scenario.

We also looked at bone effect disease. These patients have adynamic bone and bone is important as a reservoir for calcium. They are the one to start mobilizing calcium from bone and really are normalizing bone turnover and also these patients have really abnormal hyperdense bone.

So, what we will do with FDA and our whole presentation package, we're looking at this, replacement of the hormone which is the effect across these multiple metabolic parameters are now the two major concerns or the persistent hypocalcemia over the long term. We know we will raise serum calcium supplement to drive hypocalcemia, and we showed that in our trial and it has been well.

The other reasons would be at the long term [indiscernible] high calcium phosphate product, and we clearly showed in our trial, that we can decrease [indiscernible] as well as the other parameter. So it's the totality of replacing the hormone is what's important in this, it's just not about calcium or supplements but totality of replacing the hormone.

Joseph Schwartz - Leerink Partners.

Okay. Are these correlated with clinical outcomes for these patients in a rigorous way through quality or life measure or PROs. We heard anecdotes about people feeling better of course but, how is this measured because those sound like more biomarkers?

Roger Garceau

So we have in the trial, within quality of life but it’s not a specific instrument and in an orphan trial there is not a primary trial driven for quality-of-life. We don't see any significant versus placebo in the overall but the trends for the individual parameters are positive.

And certainly when you talk to patients which is most important, okay. You see positive, but this trial wasn't designed for quality-of-life, there are publications in the literature, we can talk about quality-of-life and change from baseline but for this trial, the overall was not significant but that's not an expected, given the pilot nature of this disease in the trial.

Joseph Schwartz - Leerink Partners.

Okay. And then on, NPSP795, can you talk a little bit about what the Phase 1 trial is designed to show? Is there going to be anything more than biomarkers in this Phase 1?

Roger Garceau

The Phase 2 trial because it's actually in ADH patients. And it's really just a dose escalation and even in the biomarker trial. We want to see it, it doesn't have any effect on serum calcium and the urine calcium and a whole bunch of other biomarkers.

So, that's why it will take - probably a while to sort through all the data as we go through the different patients in the dose escalation.

Joseph Schwartz - Leerink Partners.

Okay, great, very helpful. Thank you.


Our next question comes from Geoff Meacham with JPMorgan.

Unidentified Analyst

Hi, this is [Carter] (ph) on for Geoff. Thanks for taking my question. With the sales force expansion and the broadening, you reach to more patients, is there any reason to expect a different sub-segment of FDA patients that are currently targeted? Either patients are a lot severe and for whatever reason less compliance?

And then, the second question, how should we be thinking about, how are you planning sort of the base case or topics for discussion or potential questions from the FDA at the AdCom? Thank you.

Francois Nader

So, two good questions. The first has to do with the indication. So, the indication of Gattex is for the treatment of adult Short Bowel Syndrome dependent on parental nutrition.

So, from this perspective the label doesn’t qualify mild, moderate or severe doesn’t quantify per say, how much PN, a patient should be on or should not be – basically it is left to the physician to determine the dependency on parental nutrition.

Our clinical trial was geared towards the more severe patients in many ways because the threshold in our clinical trial was a minimum of three days on parental nutrition per week. We know now from our clinical experience and real life experience, that a wide range of patients can benefit from Gattex as long as – again they're qualified as dependent, and think of it this way, if a patient is dependent and only on one or two days of parental nutrition, the probability of them being weaning-off is quite high.

Now, on the other end of the spectrum, if patient is on six or seven days, obviously a significant reduction of the parental nutrition dependency is a major life changing event for them.

So, we really don't think of a segmentation of the market. And to be more specific related to our expansion, the expansion was really intended if you will to broaden the reach and have our representative deal with smaller geographies.

And, originally we had 25 and these are really very large geographies that they have to manage. Now with 35 plus, the geographies are smaller and therefore our representative can go deeper into that territories.

Now, your second question had to do with the AdCom. I wish I could answer your question, because then we could 100% prepare for the outcome, if we had a full understanding of the question.

So, two things, number one, as I said that we run a number of marked AdCom and sitting on those marked AdCom panels, where really experts who were sitting on AdCom with FDA former and experts in the field.

And frankly the reason we did and we are doing these marked AdCom's is to really be ready to any question that will come our way. This being said, part two of my answer has to do with the recent book that the FDA would give us in due time and this will enable us if you will to zoom-in on the specific questions that the FDA might have for us. But this will come later on in the process.

Unidentified Analyst

Thank you.

Francois Nader



Our next question comes from Kim Lee with Janney Capital.

Kim Lee - Janney Capital

Good afternoon and thank you for taking the question. Just a follow up on the meeting there. What do you think the FDA will likely focus on, is it more safety side of things or efficacy? If you can give us some clarity into what you're preparing for exactly?

And then, two, as far as the pricing stage for Japan goes, one, should we anticipate data for that and your potential filing? Thanks

Francois Nader

Sure, so I will take the AdCom question and ask Roger to comment on Japan.

So, let's go to the basics if you will. When an FDA convinced an AdCom, it's usually to discuss the approvability of a drug given its benefit risk profile.

So, we don’t have specific questions for the moment and we will receive those questions when we receive the FDA briefing material. And honestly we won't be able to discuss those publicly until as per the meeting.

All this being said, all this being said, the FDA is focused on the benefit risk and the approvability. We are very fortunate because if you look at the safety data base, Natpara is a product with a very large and usually large safety data date for an orphan indication. And we frankly have the benefit of the development program that we had that we had with previous and patients with osteoporosis.

We have the benefit of the data base, as the post marketing safety data base since the product was commercialized in Europe and will be trademark free of tax for osteoporosis.

And we have also the safety data base of the Natpara development in hypoparathyroidism. So, all-in-all we have a very large, very extensive data base. And here also, the product has been known for a long time and we very clearly characterized the product from a safety perspective.

Now, if we turn to efficacy, as Roger mentioned a minute ago, we had a six months trial, that is our pivotal trial but we have a two year extension study as well.

So, we have – again for an orphan condition quite a solid benefit that has been demonstrated over a period of 2.5 years and we still have some patients on Natpara as well.

So, we're getting into this AdCom and through this review process very confident that Natpara will be approved, could be approved. But ultimately it's certainly not our decision. It's the decision, recommendation of the AdCom and a decision by FDA, but we're very confident.

Now, regarding our Japanese development program, Roger?

Roger Garceau

We're starting to do with that adult program first because the - and that program at the prevalent time is just starting. We've finished discussions with PDMA putting the protocol together and starting the program.

So, our goal would be to have this approved in Japan by some time in 2017.

Kim Lee - Janney Capital

Great, thanks for that.

Francois Nader

This is very early days and we will brief you on our progress in Japan as they become material. We're still certainly just early in the planning process.

Kim Lee - Janney Capital

Great. Thanks for that clarity.


Our next question comes from Eun Yang with Jefferies.

Francois Nader

Eun, are you on mute?


Our next question comes from Alan Carr with Needham & Company.

Alan Carr - Needham & Company

Hi, thanks for taking my questions. Can you comment on, has there been any evolution over time in terms of the proportion of patients with severe or mild disease since the launch of Gattex? Have you tracked that and can you comment on any changes that you’ve seen over time?

Paul Firuta

Not really or not yet. So, not really because currently what we hear are really anecdotes coming through our NPS advantage care coordinators and by the definition of the interactions they have with the patients.

These are anecdotes, one patient at a time. What I can tell you though is the receptivity of Gattex by physicians and patients has been extremely well received and quite high.

Now, I am saying not yet because as you might know, we're putting in place registry and the whole idea of the registry is frankly to have patients, Short Bowel Syndrome patients on Gattex and patients who are not and to look at their progression over the years. So, actually this is a 10-year commitment.

What this registry will give us is a baseline. So, when patients are enrolled in the registry and we already have patients in the registry, we have pretty good idea as to their dependence on parental nutrition, how much we undertaking the condition and everything else.

So, this will enable us overtime to have a pretty good idea of the effect on Gattex on patients with Short Bowel Syndrome, again PN dependent versus those who are not treated.

But this takes time, again, it’s an orphan condition and we’re enrolling one patient at a time in this registry. But this is the intent, is really to monitor and be able to yield safety data that also potentially efficacy data over the long run.

Alan Carr - Needham & Company

All right, thanks. And then, with respect to Natpara, late last year you put up some estimates in terms of the size of addressable patient population, are you still comfortable with that number?

And then, on timing of launch after approval, would you need a month or two lag after approval to formerly launch it or would it be shorter than that? Thanks.

Francois Nader

Again we’ll continue to fine tune the prevalence as we will have more and more feet on the ground. Currently we expect that the prevalence in the U.S. will be in the 50,000 range. We don’t have any indication that it would be significantly the front, at least for now we don’t have any indication that it would not be in this range.

We also said that based on our estimates we have 40% of these patients who are considered uncontrolled. And these are the patients that we will focus our attention on.

Now, when it comes to the launch timeline, PDUFA is on October 24th. Our plan is to have the product available, so Natpara available I would say within four to six weeks after Natpara is approved.

At the same time as Paul mentioned a minute ago, we will be completing the recruitment of our filed organization. Now, all this being said it is unlikely that we will be in a position to formally launch. So, this is a promotional launch if you will before early January simply because it will coincide with the holiday period, Thanksgiving and the holiday period.

So, think of it as product available anywhere four to six weeks after PDUFA. And think of it as formal launch, promotional launch, I would say early January 2015.

Alan Carr - Needham & Company

Okay, great. Thanks very much.

Francois Nader

Thank you, Alan.


Our next question comes from David Nierengarten with Wedbush Securities.

David Nierengarten - Wedbush Securities, Inc.

All right, thanks for taking the question. I wanted to ask maybe a little bit if you could provide a little bit more detail onto the motivation or the rationale expanding the Gattex sales force, where the reps, I hate to say whether it's, being overworked with geographies are too large that you feel you're missing physicians, certain physicians are lower, maybe lower volume physicians, maybe if you could just run through that reasoning?

Francois Nader

All right, David. Paul will answer your question. Paul?

Paul Firuta

Sure. David, what we found is that there is a significant opportunity and to educate physicians and the interactions with physicians were in-depth discussions and the territories with 25 sales representatives created some challenge for them to get the physician on a frequency basis and a reach basis, covering enough of them.

So, the expansion of 10 ADHs and one more regional business director allowed us to get a little bit further reach and a little bit deeper with the physicians. So, it was an opportunity that we exploited based on the data that we had. And we're happy with the decision we made and optimistic about the impact that the new team will have on business.

David Nierengarten - Wedbush Securities, Inc.

Essentially the patients are more dispersed, so I would say then you're previously anticipated is that fair to say, they’re not going? Like you are not funneling patients or patients are being funneled thorough regional or large centers they are in the care of some more dispersed physicians?

Paul Firuta

I don't think we can necessarily say that at this time. I think there is, it is just an opportunity to allow the sales representatives to work their territories a little deeper. And 25 sales representative initially was fine but with the number of targets that we have and we need to follow on, the additional 10 certainly helps us get to them a little bit more efficiently.

David Nierengarten - Wedbush Securities, Inc.

Okay. And then I had one other question on just the financial guidance. I am assuming, since you've reiterated the expense guidance does that includes your sales build up or anticipated sales build up for Natpara? Just double checking.

Luke Beshar

The EPS guidance includes - $182 million includes all that but it does exclude cost of sales, and share based compensation. So, please don't forget that.

David Nierengarten - Wedbush Securities, Inc.

All right, thank you.

Francois Nader

Thank you, David.


That concludes our question-and-answer session. I would now like to turn the call back to Dr. Nader.

Francois Nader

Thank you, Estobon, and thank you everyone for you questions this afternoon. In closing we are very pleased with the significant progress we are making to drive growth in 2014 and beyond, really by pioneering and delivering innovations to transform the lives of patients with rare diseases worldwide.

We appreciate your time and interest. And we look forward to providing you with future update. With that, have a great day.


Ladies and gentlemen, that concludes today's conference. Thank you for you participation. You may now disconnect. Have a great day.

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