VIVUS Inc (NASDAQ:VVUS)
Q2 2014 Earnings Conference Call
August 7, 2014 04:30 PM ET
Dana Shinbaum - Corporate Development and Investor Relations
Svai Sanford - Interim Chief Financial Officer
John Slebir - Senior Vice President, Business Development and General Counsel
Seth Fischer - Chief Executive Officer
Matt Lowe - JP Morgan
Matthew Andrews - Wells Fargo Securities
Good day, ladies and gentlemen, and welcome to the VIVUS Second Quarter 2014 Financial Results Teleconference. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this teleconference is being recorded.
And now, I'll turn the program over to Mr. Dana Shinbaum, Corporate Development and Investor Relations. Please go ahead.
Thank you. Before we get started, I would like to remind you that during this conference call, VIVUS will make certain statements that are considered forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements may be identified by the use of forward-looking words such as anticipate, believe, estimate, expect, forecast, intend, likely, may, opportunity, plan, potential, predict and should, among others. These forward-looking statements are based on VIVUS' current expectations and actual results could differ materially. There are a number of factors that could cause actual events to differ materially from those indicated by such forward-looking statements.
VIVUS does not undertake an obligation to update or revise any forward-looking statements. Investors should read the risk factors set forth in the VIVUS Form 10-K for the year ended December 31, 2013, as filed on February 28, 2014 and as amended by the Form 10-K/A filed on April 30, 2014 and periodic reports filed with the Securities and Exchange Commission.
I will now turn the call over to Mr. Seth Fischer, CEO of VIVUS.
Thank you, Dana. Hello, everyone and welcome to our second quarter 2014 financial results teleconference. Joining me today in addition to Dana, are Svai Sanford, Interim CFO and John Slebir, Senior Vice President, Business Development and General Counsel.
Today, we will review with you our financial results and progress made during the most recent quarter. We achieved successes during the second quarter 2014 in the areas of increasing Qsymia revenue per prescription, improving market access and retail availability. The challenges continued during the quarter with respect to building the obesity market and creating an increased utilization of Qsymia including reluctance to treat, reimbursement barriers, prior authorization of hurdles and general lack of awareness of Qsymia and its benefits.
While our prescription has grew quarter-over-quarter, our weekly trends have been relatively flat. Our efficient commercial efforts have held Qsymia market shares stable among our targeted physicians in the face of enhanced competition. We believe this is a testament to the strong efficacy and physician and patient experience with Qsymia.
We focused throughout the past quarter on the productive prescribers within the anti-obesity market. We believe our field sales alignments are appropriate given the size, geography and characteristics of the audience. We examined our deployment and resource allocation on an ongoing basis and make adjustments according to the latest information. Our messaging focuses on the parameters of the high need patients when initiating conversations with physicians about obesity treatment.
By discussing with potential prescribers specific patient types and depicting what 10% weight loss can accomplish in the treatment paradigm, we’ve been able to bring new prescribers into the franchise and also have existing prescribers thinking about additional patients for whom Qsymia may offer benefits they had not fully considered.
As we have discussed, our market research will build continuing challenge among prescribers with respect to navigating prior authorization procedures and securing reimbursement for Qsymia patients. We continue to support healthcare providers with reimbursement assistance services that help to take much of the prior authorization burdened away from the prescribers and their administrative staff.
Feedback has been positive from healthcare providers’ officers that have implemented these services. In parallel of these reimbursement assistance services, we continue to drive coverage at the payer level and increase pull-through at the provider level by emphasizing where medically appropriate, the availability of Qsymia as a prescription benefit. We are also working to secure for Qsymia the best possible formulary positioning.
Our coverage for Qsymia excluding free trial offer prescriptions improved from 36.7% at the end of the first quarter 2014 to 37.4% at the end of the second quarter 2014. The payer landscape continues to evolve and there is growing interest in providing coverage for Qsymia and obesity. We believe our contracting and reimbursement will continue to improve. The REMS modification in mid-2013 eliminated the regulatory barriers to obtaining Qsymia at local-certified retail pharmacies. And Qsymia availability now exceeds 40,000 pharmacies which include major retail chains, independent, mass merchandizes and food stores.
As we recently discussed, we have refined our Qsymia discount offers in an ongoing effort to lower out-of-pocket cost for patients. We continue to provide a discount of up to $75 off, any amount of co-pay above $60 for covered patients and a cash discount of $75 for patients who are paying cash.
These offers cover all doses, and are good for up to 12 prescriptions. These discount programs broadening the availability of savings across the franchise and extending the time period during which patients can save money on their Qsymia therapy compared to our prior offerings.
Here again, we believe that these programs will increase Qsymia utilization and patient persistence. We are maintaining the free-to-start program that provides the first 14 days of Qsymia starting dose, free of charge for all patients. VIVUS also offers assistance to covered patients with high monthly co-pays.
You may have seen recent consumer media attention for Qsymia that reported on an independent pharmacoeconomic study conducted by researchers at Duke Medical Center. The study examined cost and effectiveness of three diet programs and three weight loss medications and found that weightwatchers and Qsymia were the best alternatives within the respective categories based on metrics including cost per kilogram of weight loss and incremental cost per quality adjusted life years.
Regarding our plans for Qsymia in Europe, as you are aware we modified the design of the Phase IV CVOT trial required for Qsymia by the FDA in order to establish a potential pathway to European approval through a centralized European Union procedure.
We received helpful feedback earlier this year from European Union Regulatory officials regarding the acclaimed CVOT protocol and we have recently received feedback from the U.S. FDA regarding the amended protocol. As a part of addressing the FDA comments, we are working to ensure that the planned interim analysis will not jeopardized the overall integrity of the study and we’ll support other objectives in both the EU and U.S.
Our Qsymia partnering efforts are ongoing and we remain open to establishing commercial alliances for Qsymia on a global or regional basis, if they create value for stockholders. We cannot provide guidance with respect to the timing or structure of the potential partnership. But we intend to update the market when appropriate regarding any material developments.
Throughout the balance of 2014, we intend to continue to develop the obesity market and the Qsymia brand. We believe that the foundation of the obesity market has been and will continue to be education of healthcare providers and allied professionals regarding the need to treat obesity with the proper clinical tools, including increased diet and exercise along with effective, safe and well tolerated pharmacotherapy such as Qsymia.
We planned to continue to deliver this message to in-person promotion, continuing medical education, and peer-to-peer programs, clinical publications and participation in major scientific meetings.
As we have discussed, we are pleased with our commercial alliances with Auxilium, Menarini and Sanofi our partners for Avanafil in the U.S., Europe and certain rest of world territories respectively.
Auxilium launched STENDRA in the U.S. in December 2013; and as of April 2014, Menarini completed the launch of SPEDRA in the EU5. SPEDRA is now available at retail in approximately 20 countries within the Menarini territory.
As previously announced, we've submitted to FDA a supplemental application that proposes to revive the Avanafil prescribing information with positive data from the study designed to assess the efficacy of two dosages strengths of STENDRA approximately 15 minutes after dosing. The PDUFA date for this application is September 20, 2014.
We are also working with the European regulatory authorities with respect to these data for the SPEDRA label. For Latin America and certain Asian countries, we are in discussions with potential partners for license and commercialization arrangements.
I will now pass the call over to Svai Sanford our Interim CFO for an update on the financials. Svai?
Thank you, Seth. Good day everyone. I will now discuss our financial results for the second quarter ended June 30, 2014. I also refer you to the financial results and the recent highlights included in our press release.
Our total revenue was 21.9 million for the current quarter compared to 5.5 million for the second quarter 2013. Of this total revenue, net product revenue from sales of Qsymia was 11 million for the current quarter, compared to 5.5 million for the second quarter of 2013. In addition, under our commercialization agreement for STENDRA and SPEDRA, we recognized 4.2 million in license and milestone revenue. $5.7 million in supply revenue and $1.1 million in royalty revenues.
The license and milestone revenue represents a milestone payment for the launch of SPEDRA in Spain. The last of five launch milestone payment received under the agreement with Menarini. The supply revenue represents product shipments to our commercialization partners.
For Qsymia there were approximately 138,000 prescription dispensed in the current quarter, compared to 81,000 in the second quarter 2013 and 121,000 in the first quarter 2014. Approximately 61% of Qsymia total prescription in the current quarter included either free goods or discount offers, compared to 45% in the second quarter of 2013 and 54% in the first quarter 2014. Net revenue for prescription for the current quarter excluding free trial offer prescriptions reached $102 in the current quarter, up from $97 in the second quarter 2013 and $95 in the first quarter of 2014.
Including free trial offer prescriptions, net revenue per prescription in the current quarter is $80, compared to $68 in the second quarter of 2013 and $76 for the first quarter 2014. As a reminder we record revenue for sales of Qsymia on a sell-through method, whereby revenue is recognized when a prescription is sent to a patient. We shipped 22.2 million of Qsymia to the wholesaler in the current quarter, compared to 10.5 million in the second quarter 2013.
As of June 30, 2014, our deferral revenue related to sales of Qsymia is 15.2 million, which represents product shipped to the wholesaler but not yet to spend to patient through a prescription. Total research and development expense was 4.1 million in the current quarter, compared to 9.2 million in the second quarter 2013. The decrease is due primarily to the completion of studies related to STENDRA, timing of Qsymia study activities and lower employee cost as a result of our 2013 reduction enforce.
Total selling, general and administrative expense excluding non-recurring charges was 28.3 million for the current quarter compared to 39.5 million for the second quarter 2013. Selling and marketing expenses for the commercialization of Qsymia totaled 17.4 million for the current quarter, compared to 21.2 million for the second quarter 2013. The decrease in selling and marketing expense was due primarily to our more targeted and focused spending on marketing and promotional programs.
The decrease in general and administrative expense was due primarily to lower stock based compensation expense, headcount and other corporate costs as a result of our cost reduction efforts and reduced product liability insurance. There were no non-recurring charges in the current quarter compared to the second quarter of 2013, doing which we incurred 3.2 million in non-recurring charges related to the proxy contest.
Net loss was 25.8 million or $0.25 net loss per share during the current quarter, compared to a net loss of 55.5 million or $0.55 net loss per share for the second quarter 2013. Cash, cash equivalents and available-for-sale securities, collectively cash totaled 324.2 million at June 30, 2014 compared to 343.3 million at December 31, 2013. In the first half of 2014, our net cash used in operating activity was 17.9 million. In the same period we received approximately 23.5 million in license and milestone payments related to STENDRA and SPEDRA. Excluding such amount our net cash used in operating activities would have been 41.4 million.
I will now return the call back to Seth for closing comments.
Thank you. We continue to work with a broad range of constituents. From prescribers to Medical Society, to grassroots organizations to gain acceptance of obesity as a disease and adoption of Qsymia as the drug of choice among healthcare providers, payers, and patients.
The areas of focus for VIVUS for the balance of 2014 remain as follows. Deliver a strong efficacy and safety message about Qsymia to patients and doctors. Target the most appropriate patients and the healthcare providers most likely to treat those patients.
Continue to improve overall Qsymia insurance coverage. Continue to improve per prescriptions Qsymia net revenues. Continue our efforts to secure a partner for Qsymia. And manage our Avanafil alliances with Auxilium, Menarini and Sanofi to help insure the commercial success of this important erectile dysfunction medication around the world.
In addition, we will continue to discuss and with potential partners for STENDRA and SPEDRA promotional alliances in Latin America and certain territories in Asia.
We will now be happy to take your questions.
(Operator Instructions) Our first question comes from Cory Kasimov from JPMorgan. Your line is open.
Matt Lowe - JP Morgan
Hi there, it’s actually Matt Lowe in for Cory today. I have a few, I guess I’ll start off with -- what could you tell you about how you’re potentially able to leverage the independent studies like the one recently published by Duke regarding Qsymia being good value for money. I guess, if any decode you can give us on how you're kind of potentially able to leverage those?
It’s a third-party trial. We really are not able leverage from a sales and marketing standpoint. Although, we are very pleased with the very broad pickup of that study. There is many different periodicals that have picked on that study and certainly as we move forward and manage markets its important information for them to look at from a pharmacoeconomic standpoint.
Matt Lowe - JP Morgan
Okay and then I apologize if I missed this in your prepared remarks, but just what can say about the potential, the average duration of therapy and also the percentage of scripts covered by insurance in 2Q?
So what we’ve seen so far is that the average duration of therapy is fairly consistent, what we saw on mail-order or what we’re seeing in retail, it's approximately four months.
Matt Lowe - JP Morgan
And then percentage of script covered by insurance?
I am sorry say once again.
Matt Lowe - JP Morgan
Percentage of scripts covered by insurance in 2Q?
So the actual number of scripts that are covered in 2Q -- and that means actually paid for by a third party is 37%.
7.4 to be exact.
(Operator Instructions) Our next question comes from Matthew Andrews with Wells Fargo Securities. Your line is open.
Matthew Andrews – Wells Fargo Securities
Seth, can you just give us your thoughts currently on timing initiation for claim? Sounds like even you’ve gotten feedback from FDA, there maybe a couple of things you want to finalize with the protocol, so will this initiate in Q3?
So our plan right now we’re doing all of the work up to get to patient initiation of that trial. We do believe that there is a very important hearing Monday with FDA, specifically around CVOT and interim analysis, which we know is going to be very important to our submission in Europe so that we do not sacrifice the integrity of the study. But our plan is to move ahead and begin that trial. The timing exactly is hard for me to state right now, but in the near term.
(Operator Instructions) I am currently showing no further questions. I will now turn the call back over to management for closing remarks.
Well, I want to thank everybody for joining our quarterly call today. We look forward to discussions in the future. Thank you very much.
Thank you, ladies and gentlemen. That does conclude today’s conference. You may all disconnect and everyone have a great day.
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