The Medicines (MDCO) Clive A. Meanwell on Q2 2016 Results - Earnings Call Transcript

| About: The Medicines (MDCO)

The Medicines Co. (NASDAQ:MDCO)

Q2 2016 Earnings Call

July 27, 2016 8:30 am ET

Executives

Krishna Gorti - Vice President-Investor Relations

Clive A. Meanwell - Chief Executive Officer & Director

William Bernard O'Connor - Chief Financial Officer

Stuart Anthony Kingsley - President & Chief Operating Officer

Analysts

Jessica M. Fye - JPMorgan Securities LLC

Umer Raffat - Evercore ISI

Louise Chen - Guggenheim Securities LLC

Tazeen Ahmad - Bank of America Merrill Lynch

Adnan Shaukat Butt - RBC Capital Markets LLC

Chris Shibutani - Cowen & Co. LLC

Joel L. Beatty - Citigroup Global Markets, Inc. (Broker)

Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2016 The Medicines Company Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Krishna Gorti, Vice President, Investor Relations. Mr. Gorti, you may begin.

Krishna Gorti - Vice President-Investor Relations

Thank you, Danielle. Good morning and thank you for joining us today for The Medicines Company's second quarter 2016 financial and operating results conference call.

I would like to remind you that this call will contain forward-looking statements about The Medicines Company that are not purely historical and may be deemed to be forward-looking statements that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by such forward-looking statements are identified in the company's SEC filings and press releases, which can be obtained from the SEC or by visiting the Investor Relations section of our website.

During our call, we may refer to certain non-GAAP performance measures included in today's earnings press release. Please refer to the reconciliation of GAAP to adjusted net income and adjusted EPS in our press release for explanations of the amounts excluded and included to arrive at the adjusted net income and adjusted earnings per share. The press release can be obtained by visiting the News and Events section of our website.

On today's call, we are joined by our Chief Executive Officer, Clive Meanwell; and our Chief Financial Officer, Bill O'Connor, who will summarize our recent progress and financial results for the second quarter of 2016. Our Chief Operating Officer, Tony Kingsley; and our Chief Corporate Development Officer, Chris Cox, will also joint us for the Q&A portion of the call.

Now, I'll turn the call over to Clive.

Clive A. Meanwell - Chief Executive Officer & Director

Well, thank you very much, Krishna, and good morning to everybody. Thank you for joining our call. I am going to frame this up and provide an update and then provide something of an outlook for the rest of 2016.

At the outset of the year, we set a strategic path to deliver on our core R&D programs, to divest our non-core assets, to seek ways to raise non-dilutive capital that we could use against our R&D programs, to reduce our cash burn from operations and to optimize our capital structure. We've got all of that done. And as a consequence of our execution in the first half of the year, we're in a position – I'd say an advantageous position to continue on this strategic path.

We completed the divestiture of our non-core acute cardiovascular assets, Cleviprex, Kengreal and the rights to Argatroban for injection, to Chiesi. On closing of the transaction, we received $264 million in cash, which includes the value of the product inventory as well and the potential to receive up to another $480 million in future sales-based milestone payments. Closing the transaction not only brings in that non-dilutive cash, but when combined with the related restructuring also substantially reduces the costs associated with our business operations.

We estimate annual savings mostly from SG&A and related R&D in the order of $65 million to $80 million, recurring once we've completed restructuring. As you may recall, following the announcement of the transaction in our first quarter earnings call, we updated our 2016 revenue and expense guidance. And Bill will provide further expense guidance on top of that today.

Additionally in the second quarter, we successfully completed the refinancing of a significant portion of our 2017 convertible debt. We offered and sold $402.5 million of new convertible senior notes due in 2023 and used a portion of the net proceeds to repurchase approximately $220 million, around 80%, of our outstanding 2017 convertible notes.

In connection with the sale of the 2023 notes, we also entered into a series of capped call transactions, which had the effect of increasing the effective conversion price of the notes to $64.68 per share. For reference, the effective conversion price of the prior 2017 convertible notes we repurchased was $34.20. That's also the effective conversion price of the approximately $55 million worth of 2017 notes that remain outstanding.

We also strengthened our leadership group for The Medicines Company during the quarter. Tony Kingsley, who is here, joined us as President and Chief Operating Officer. Previously Tony was Executive Vice President and Head of Global Commercial Operations for Biogen. As previously announced, Christopher Cox joined us in the first quarter as Executive Vice President and Chief Corporate Development Officer. Chris was previously Co-Chairman of the Corporate Group at Cadwalader. And before that, he had about a 20 year career doing a number of significant biopharma deals as a corporate attorney.

Our capital redeployment has created strategic flexibility for the company and will allow us to place our operating focus squarely on the development of our pipeline, a pipeline indeed of potential blockbuster products in a way that will drive long-term value for our patients, our customers and naturally for our shareholders. The addition of two outstanding leaders, I think, highlights our commitment to execution. So now let me briefly talk about that execution and highlight the pipeline progress during the second quarter.

Major R&D programs remain on track towards their goals. First, a PCSK9 synthesis inhibitor continued to advance with enrollment completed in the ORION-1 study on June the 2 of this year, ahead of schedule. We continue to expect that we'll complete the trial for the primary endpoint which is, of course, percent reduction in LDL-C from baseline at day 180 with the release of data by the end of the year as planned.

In addition, during 2016, we expect to initiate a randomized study of this compound in patients who have homozygous familial hypercholesterolemia. This will be called the ORION-2 trial. No lack of logic here. MDCO-216 or ApoA-1 Milano program, the 120 patient MILANO-PILOT trial remains on track. As today, we've enrolled more than 100 of the 120 planned patients and completed follow-up of at least the first 40 patients.

Pursuant to the Interim Statistical Analysis Plan, which governs the monitoring by the Independent Data Monitoring Committee, an interim safety and efficacy analysis is currently being performed on the first 40 patients, who have completed the end of treatment. That analysis will be reviewed by the Data Monitoring Committee in August.

The company is blinded and firewalled from all clinical data during the Committee's monitoring and analysis. However, if there are no safety concerns that require further evaluation and if the predefined efficacy criteria are met, the Committee will provide the company with the efficacy data from the first 40 patients. In any case, we'll give the financial community an update of the MILANO-PILOT trial during the month of August.

The Carbavance which is meropenem with vaborbactam, TANGO 1 Phase 3 pivotal trial analysis was completed in June with positive results and ahead of schedule. Carbavance met both FDA and EMA pre-specified primary endpoints in patients with complicated urinary tract infections. For the FDA primary endpoint, statistical superiority was demonstrated over piperacillin-tazobactam, with an overall success rate of 98.4% in the Carbavance treated patients.

As you know, the FDA has granted Carbavance Fast Track status and has designated Carbavance as a Qualified Infectious Disease Product, QIDP. We expect to submit an NDA to the FDA in early 2017, as planned.

The TANGO 2 open label trial in CRE patients is ongoing. And we'll submit all available data from that TANGO 2 trial at the time of the NDA submission as microbiological response information for the regulators in the critically important CRE patients.

For ABP-700, our intravenous anesthetic agent in development, we completed Phase 1 clinical pharmacology, dosing and safety studies in more than 300 subjects, including ABP-700 use with pre- and co-medications routinely given as part of procedural sedation and induction of general anesthesia. In June, we dosed the first patient in a Phase 2 clinical trial for procedural sedation. This Phase 2 trial is expected to enroll 75 patients undergoing elective colonoscopies at three sites in The Netherlands. In consultation with the FDA, we'll perform an additional animal study to support the submission of an IND Application in the United States.

We expect to report results from the Phase 2 trial from The Netherlands before the end of 2016. Meantime, a number of important scientific presentations are anticipated at the American Society of Anesthesia (sic) [Anesthesiologists] (10:43) and the International Society of Anaesthetic Pharmacologists (sic) [for Anaesthetic Pharmacology] (10:46) meetings both in October. Included among these are the results from our final Phase 1 study, AVN05, a dose ranging study for induction of general anesthesia as well as a number of non-clinical oral presentations and posters.

So what's next? Our action plan for 2016 – for the remainder of 2016 is that we expect to bring an exciting series of events for the company, including progress and news events on several of our potential blockbuster products. By way of example, we anticipate announcing data from our interim analysis of the MILANO-PILOT study. We expect to complete and report data from the interim analysis, 90 days' worth of data from ORION-1 and, of course, the final data before the end of the year for our PCSK9 synthesis inhibitor. We'll be initiating the ORION-2 study in familial homozygous hypercholesterolemia patients, completing and reporting data for the first Phase 2 trial of ABP-700, and continuing to grow our hospital launched products, Orbactiv, Minocin and Ionsys, all of which are making steady progress, thanks to the dedication and efforts of our commercial teams and their colleagues in the hospitals around both the U.S. and Europe.

So, with all of that and exciting news ahead, I'm going to turn it over to Bill for some of the financial information on the quarter. Thanks, Bill.

William Bernard O'Connor - Chief Financial Officer

Thank you, Clive, and good morning, everyone. Today, I will focus on a few financial highlights from the second quarter, details of which are included in our press release, which went out this morning.

Net revenue for the quarter totaled $54.7 million, which includes $24.4 million of royalty revenue from the authorized generic sales of Angiomax by Sandoz. Revenues were down 27% year-on-year, mainly by the loss of exclusivity in mid-2015 for Angiomax. Net sales from our remaining launched products increased 131% from Q2 2015 to $6.3 million.

We continue to be focused on tight expenditure management for essential investment programs. In view of the progress we have made in our MDCO-216 program, a $10 million milestone payment was made to Pfizer during the quarter. This drove our increase in R&D expenses versus Q2 2015, was earlier than anticipated and was not included in our previous guidance.

Our SG&A expenses were flat compared to Q2 2015. However, included in operating costs for the current quarter was approximately $22 million of costs associated with the disposal and restructuring in connection with the sale of our non-core cardiovascular assets to Chiesi. $12 million of these charges were not reflected in our previous guidance.

Included in other income for GAAP purposes for the quarter is the gain on the sale of our non-core cardiovascular assets to Chiesi of $288.3 million and a loss on the extinguishment of 80% or $220 million of our outstanding 2017 convertible notes of $5.4 million. We ended the quarter with $644 million in cash, which is sufficient to deliver on our operational plans in the next 12 months, including R&D initiatives.

This morning, we uploaded to our website a revised 2016 guidance worksheet which gives effect to the items just noted. The worksheet provides both GAAP and adjusted data. The adjusted amounts remove the impact of intangible amortization, milestones, changes in contingent consideration, severance and restructuring costs, disposal costs and stock-based compensation.

And, with that, I'll turn the call back to Clive.

Clive A. Meanwell - Chief Executive Officer & Director

Thanks, Bill. It's really good. It's really all about execution for the rest of the year. We're excited about the future of the firm and getting on with our strategic priorities. We're optimizing our balance sheet and cash position and making good progress moving forward our four potential blockbuster R&D programs and with exciting key data disclosures in the second half of the year. We're certainly managing expenses carefully to preserve cash. And we're really continuing to focus on creative ways to unlock shareholder value and generate non-dilutive capital. As a company, we're very excited to be where we are, eager to drive forward for the remainder of 2016 and into 2017.

So, with all of that, we'll be glad to open it up for questions. Thank you.

Question-and-Answer Session

Operator

Thank you. Our first question comes from Jessica Fye from JPMorgan. Your line is open.

Jessica M. Fye - JPMorgan Securities LLC

Hey, guys. Good morning. Thanks for taking my question. I'm curious with the Milano update. You cited some predefined efficacy criteria at the 40 patient interim look. Can you tell us what those criteria are? And, I guess, following-up on that, maybe a question more about the effect size. To what extent do you want to see an effect in 40 patients to continue that program? And should you need to kind of run it out to the full 120, would that suggest that you're not seeing maybe dramatic effect size that you'd want to ultimately advance that asset?

Clive A. Meanwell - Chief Executive Officer & Director

Hey, Jessica. It's Clive. Thank you. The criteria are based on the same endpoints that Dr. Nissen used in his original trial. And the primary endpoint we're looking at is change in percent atheroma volume. It's a difficult concept without pictures, for me at least. If you think in terms of the outside elastic membrane inside an artery, this is a hose pipe. You think of the inner lining of the hose pipe. And if it was further up, you'd think about how much gunk was on the inside of the hose pipe.

And if you can subtract the area or the volume of the hose pipe itself – of the junk from the hose pipe interior that would give you the percentage that is gunk. And that's what the percent atheroma volume means. Reducing that meaningfully is what we're after and that's as Dr. Nissen showed. If the result shows something that is supportive of Dr. Nissen's original study, the DSM – or the interim analysis committee will tell us and we'll have various choices what to do.

But I should say that, as I mentioned, we're already over 100 patients enrolled. So the likelihood is we're going to have a lot more data to look at as well. So that's going to be the situation. But I think we'll look at the 40 patients data – or the committee is looking at the 40 patients data. We'll know fairly soon what the answer is. And depending on that answer they will either reveal the data to us or not. If they reveal the data to us, we'll have to decide what to do with it. In any case, we have a large number of patients available beyond the 40 to look at. Go ahead.

Jessica M. Fye - JPMorgan Securities LLC

And just given where you are with enrollment now, is it possible we could see the – I mean to the extent this continues, the full data set by year-end?

Clive A. Meanwell - Chief Executive Officer & Director

Yeah. I think that's a reasonable guess, yes. We've got various opportunities to present the data in the public domain late in the year. And we obviously – we realize there is a lot of focus on this compound. And we'll make every effort to keep the community updated on what we're seeing as we get the data ourselves. But, again, the answer is, I think, we will have data from at least 100 and possibly 120 patients by the end of the year.

Jessica M. Fye - JPMorgan Securities LLC

Okay. Great. And is it possible to be a little bit more specific aside from just sort of alluding to the Nissen paper of what numbers you're looking for on PAV, TAV and the responder analysis?

Clive A. Meanwell - Chief Executive Officer & Director

No. We're not going to reveal that right now. Let's wait and see what the data show. But the Committee have a set of criteria that they are working with that they feel good about. And we'll let them do that and tell us what they think.

Jessica M. Fye - JPMorgan Securities LLC

Okay. Thank you.

Clive A. Meanwell - Chief Executive Officer & Director

Thanks, Jessica. Thank you.

Operator

Thank you. And our next question comes from Umer Raffat from ISI. Your line is open.

Umer Raffat - Evercore ISI

Thank you very much. I have a lot of questions today. Clive, is that okay?

Clive A. Meanwell - Chief Executive Officer & Director

Do I have a choice, Umer?

Umer Raffat - Evercore ISI

Okay. So, I am going to basically catch up on two broad topics. The first one is on Angiomax and second one is on the Milano. So perhaps quickly on Angiomax. Clive, could you frame for us what the court decision could mean in the first quarter 2017? And also when we think about damages, is it fair to say that whatever the delta is between your reported sales since second quarter last year versus an annual run rate of like about $600 million, is that basically how damages are calculated? That's one broad and I'll get to the Milano next.

Clive A. Meanwell - Chief Executive Officer & Director

All right. All right. Well, good, let's get going. So what might happen in Q1 2017, like most things in call cases, I'm going to be very guarded about what I say here, Umer, because I don't want to – firstly I am not qualified to and secondly it might not be prudent to try to second guess what very sophisticated judges are going to decide. In brief summary, with 12 en banc judges unanimously agreeing without proposition, I think, it's likely that the – when it goes back to the three of them that they will continue in the same position. But I don't know that for sure, but I think it's a reasonable supposition.

What they do with it, though, I don't know. They could judge definitively on it. They could send it back to a lower court. And there is real uncertainty that I think would be an educated guess by me. So I won't try and do that. I think the timeframe you mentioned of the first quarter is reasonable timeframe based on what we know. But even that is not certain because the courts naturally travel at their own pace.

So there will be probably news around that time. It could be referred to a lower court. It could be dealt within the court. And let's see what happens. I wish I could be more explicit than that, but I'm neither qualified to nor inclined to. As far as damage is concerned, that's an even more delicate topic. One of the world's greatest drug companies is on the end of this discussion. That's called Pfizer. And we have great respect for them. We're partners of theirs. And to have such a conversation on a conference call might be a bit premature at this stage.

Umer Raffat - Evercore ISI

No worries. But just to be clear, Clive, if Angiomax had not gone generic, you would have had an additional $1 billion in reported – additional – beyond what you reported – additional $1 billion in sales between 2Q 2015 and 1Q 2017. Is that a fair statement?

Clive A. Meanwell - Chief Executive Officer & Director

Well, as an estimate from you, I'll take that. And, yes, certainly, our sales of Angiomax have been crippled for a significant period of time, even possibly before the entry of generics. And certainly the company's business prospects have been significantly harmed by what happened. As to whose fault it was and whether damages are due, that's for someone else to judge, not us. But at the present time, I'd agree with you, very significant financial impact on The Medicines Company. And many of the things we've been doing in the last 12 months, including restructuring the entire firm, laying off a lot of people and selling assets, have come as a direct result of fall of cash flow from Angiomax. So, yes, significant set of issues created.

Umer Raffat - Evercore ISI

Got it. Got it. And so, on Milano, I have a few – I'm extremely sorry. So, one, what exactly happened on Milano to trigger the $10 million milestone? Secondly, am I reading too much into the phrase in the press release where it says, no safety concerns that require further evaluation for the Data Monitoring Committee? Was there something that was seen on safety?

And then, third, on the original Nissen paper, I didn't see any data on basically the responders, the percent of patients that had a PAV regression of more than two standard deviations. Do you have that number for the original trial? And, finally, how do you interpret CSL's lack of reporting their 1,200 patient outcomes trial, which also had some cholesterol efflux improvement? But they haven't reported that data yet. And I think it's been down for more than six months.

Clive A. Meanwell - Chief Executive Officer & Director

Good. Look, the easiest part that is the language in our press release is verbatim lifted from the Independent Data Monitoring Committee charter, actually from one of the appendices. And that I think knowing the great interest in what we're going to do in the timing, we felt that we should just literally lift it. But no, there is nothing sinister to be read into that part of the press release. It's just that part of the remit of this Committee is to check safety. And, obviously, therefore it's written into their instruction manual, if you like. So we listed into press release.

We have not – as we previously described, we have the same group of people reviewed the first 24 patients. We have been careful with safety on this program for good reasons as you've actively written about. And I think we're in good shape. So no is the answer but the no was not meaningful. The $10 million milestone payment – there had been some debate between us and that same fantastic drug company I mentioned about whether this was really a qualified trial for the milestone we have with them.

Clearly, our preference would have been to pay it later rather than sooner. Clearly, their preference would generally be for us to pay it sooner rather than later. We agreed with them and paid them. And so that was the reason the $10 million came forward – is there is some discussion about whether this was a qualifying trial under the terms of contract and indeed we agreed that it was.

And then the third question which is Steve Nissen's proportion of patients responding, that wasn't published in the original paper, as you know. But yes, we do have the data. And about three-quarters of the patients showed a meaningful regression, so about a 75% response rate. As to what – I don't have it on my fingertips whether that was within one or two standard deviations of mean. So just take it from the simple point of view that about three-quarters of the patients showed meaningful regression in that on drug and a good deal fewer on placebo. I think it was more handful like two patients or three patients.

So that's that. And within the work we're doing, we will be looking at ordinal data as well as data on means and medians. So we will think carefully about the meaning of having, I don't know, 75% response rate or an 85% response rate or a 50% response rate. All those things do matter and we'll talk about the data when we have them. It's interesting to be performing what feels a bit like an oncology Phase 1 trial in terms of number of responders in a cardiovascular setting. But at the end of the day we are looking for tumor regression.

The fourth question you asked is also interesting, but, again, difficult to comment on. We've observed and thought about the CSL program. We're very impressed by the commitment to recruit 1,200 patients in an outcomes trial. Principally though that study we understand has been for safety monitoring purposes with the secondary endpoints of MACE. And, as I think I've said on previous conference calls, 1,200 patients for a meaningful reduction in clinical outcomes, particularly MACE, is what – you have to see a very large effect size in order to see a meaningful statistically significant difference.

So I'm not expecting – we're not expecting major findings on the effectiveness side. I hope, although I haven't seen the data, that their trial came through safely. The difference here, of course, is that CSL are using the wild type ApoA-1 protein extracted from plasma. And we wouldn't expect it to be turbocharged as is we believe Milano. And as a consequence of that, you have to give a lot more drug, perhaps fourfold big a dose. And I think giving that much protein to patients by infusion on a regular basis has been somewhat problematic both from a formulation point of view and from a liver toxicity point of view and even renal. So, hopefully, they have got through those hurdles and we'll see the data soon.

Umer Raffat - Evercore ISI

Got it. This is super helpful, Clive. And just to clarify, I think this might become the bogey into the actual press release. You said 75% of patients on the original Esperion trial were responders. But do we know for sure they had more than two standard deviation PAV regression because if that's not then I suspect 75% might become the bogey into your own press release?

Clive A. Meanwell - Chief Executive Officer & Director

Can you explain what you mean by that? I am not quite sure I'm following you.

Umer Raffat - Evercore ISI

Sorry. As in people might peg the press release you put out next month to that 75% which may not have been two standard deviations. Do we know for sure -?

Clive A. Meanwell - Chief Executive Officer & Director

Oh yes. I agree with you and we'll clearly look at the statistics of that and make sure -

Umer Raffat - Evercore ISI

Okay. The 75% had a reduction is what you've said. We don't know what the two standard deviation was.

Clive A. Meanwell - Chief Executive Officer & Director

Right. Not on my fingertips now, no.

Umer Raffat - Evercore ISI

Okay. Great.

Clive A. Meanwell - Chief Executive Officer & Director

Thank you. Thank you very much.

Umer Raffat - Evercore ISI

Thank you very much.

Operator

Thank you. And our next question comes from Louise Chen from Guggenheim. Your line is open.

Louise Chen - Guggenheim Securities LLC

Hi. Thanks for taking my questions. I had a few here. So, first, on PCSK9, just curious how we should think about the efficacy of your products versus those that are currently on the market? And then how you think the outcomes data could potentially improve the market opportunity for these products? And what are you expecting from that outcomes data that's coming out this year? And then, secondly, as we think about MDCO-216 and PCSK9, how do you think these complement each other in terms of opportunities? And then the last one is just on Carbavance. Just curious how we should think about peak sales potential here and the type of TANGO 2 data and CRE infections that you may see on the product label? Thanks.

Clive A. Meanwell - Chief Executive Officer & Director

Hey. Thanks, Louise, very much. Let's see if I can take these one by one. I may get some help from Tony here as well on a number of the points. So PCSK9 efficacy, ultimately, as we've seen, people are most interested in stopping heart attacks happening and potentially stopping deaths. That's the ultimate efficacy of this new class of molecule and we'll be seeing that later in the year. Let's talk about that for a minute because you asked that question too. Given the numbers of people who need protection from high LDL and heart attacks, I think, anything north of a 15% risk reduction would have a massive impact of the American population. With millions of people needing treatment, a 15% reduction in death and disability is meaningful to the healthcare system and meaningful to our country. So while, in rarer diseases, small differences may not have a big social impact. In cardiovascular disease, it's been shown over 30 years, 40 years that even what some might regard as modest improvements lead to big public health steps forward.

Now, that having been said, if we look at the pooled meta-analysis, I mean two very good studies published of the totality of PCSK9 monoclonal antibody trials, one that's published in the analysis of – forget what the other one is, but we can get it to you. These are showing, if you believe in lumping together data in meta-analysis, fairly robust reductions in cardiac events and deaths of the order of 40%. Now that might be the – or even 50%. That's might be the high-end of the range and 15% might be the lower. And I think the targeted goal of low 20%s – 20% to 25% is very realistic indeed and that would be very important to healthcare. So that's where we're standing on this based on really not reading anything more than you've read.

We don't obviously have any outcomes data from our own product yet. But we're very impressed by the way that both Amgen and Regeneron and Sanofi have conducted their Phase 3s. And we also have big studies coming from Pfizer. I think that they're going to show a robust clinical – a meaningful clinical impact in the 20% to 30% range, if you really want to pin me down. That would be my best guess looking at all the available data. I'd ask Tony for the difference between having with or without those outcomes data commercially.

Stuart Anthony Kingsley - President & Chief Operating Officer

Look, I think – it's Tony. I think the outcomes data for the MAbs are important to us. Some of the barrier to adoption of that category and the fair resistance we think has been driven by a lack of outcomes data and payers who want to see that. To the extent there is positive outcomes data that demonstrates the value of the class that's good and that is helpful to us as a follower, we will clearly need our own and that is something that is in the plan process as well.

Clive A. Meanwell - Chief Executive Officer & Director

Okay. Louise, does that cover the PCSK9 question?

Louise Chen - Guggenheim Securities LLC

Yeah. Maybe if you could just quickly remind us the difference in efficacy between your product and the others on the market. I know you have a duration benefit.

Clive A. Meanwell - Chief Executive Officer & Director

Oh, I see.

Louise Chen - Guggenheim Securities LLC

Okay. Yeah.

Clive A. Meanwell - Chief Executive Officer & Director

Well, yes, thank you. So, in terms of the, what we could call the surrogate or the biochemical marker of LDL lowering, I think, all of these products are in the same basic ballpark of amount of reduction, depends exactly how you measure it and whether you do this without statistical analysis but they are all in the same ballpark. And as you say, the duration of effect that we showed in our Phase 1 study was without the six months. And obviously in ORION-1, our attempt here is to show in a more robust and larger group of patients that long duration of effect.

I think in the relatively small numbers we have been able to report so far relative to the large trials done by the other companies, we're obviously very focused as well on PCSK9 protein levels, which give an even tighter strength of evidence that we're out for six months. So all eyes on ORION-1 data coming out soon and hopefully will show – reaffirm that six months effect. I believe we will. We're excited about it and looking forward to seeing the data and presenting it to you.

Now you asked about complements but you also asked about something else. Oh yeah, the complementarity of the – sorry, yeah, the complementarity of ApoA-1 Milano in this. It's interesting. So, many of us have worked in oncology and many of the product companies with oncology products. And the concept of tumor debulking followed by maintenance or adjuvant therapy is a very well-established concept in cancer care.

Now, what I said earlier is if you think of – I mean the essential problem here is you have a tumor – a benign tumor maybe but a dangerous one on the inside of your coronary arteries which will restrict blood flow and cause a heart attack. Well, if we could debulk that tumor rapidly and then keep it small for the rest of your life that would be good. Now just to add to the complexity – and I apologizes for this. Some would anticipate that PCSK9 inhibitors would shrink these tumors on the inside of your arteries as well. And that may be the case. The question is how quickly can they do it. By lowering LDL should we say doing it sort of naturally would the body gradually see a reduction in plaque burden over time?

We know with high, high dose stanching over three years or four years, you can see some modest to – I'll call it plaque regression, tumor regression. But it takes forever and you have to take your products very carefully and regularly. So our theory here is could you rapidly shrink the tumor, the plaque in a matter of a few weeks with this drug. And then, of course, you would hope that if the patient was at appropriate risk that you have to put them on lifetime LDL lowering therapy and lifestyle improvement. And that may well include a PCSK9 synthesis inhibitor. So we said it was sort of one/two punch, a debulking followed by maintenance. And we'll see with a lot of interesting data coming out both from us and others over the coming months as to whether this theory is intact.

Stuart Anthony Kingsley - President & Chief Operating Officer

Louise, it's Tony. If I could just add to that. We're obviously thinking through the different scenarios. As Clive, I think, laid out, there is some science to be done; it's probably early to try to make a definitive call on that. You can certainly picture a world where these products are quite complementary, given the context that Clive talked about. You can also figure a world where they treat actually quite different patient populations but are both quite meaningful on their own individually. We're thinking that in this part of our strategy process and we're trying to model out what those different scenarios would look like. But, as Clive's pointed out, there is a bunch of science that needs to be done to get a clearer answer to that.

Clive A. Meanwell - Chief Executive Officer & Director

And then, Louise, that was a suitable answer. Next, you asked about Carbavance peak sales and the importance of CRE data, I think. We haven't really gotten an answer on the peak sales right now. We can tell you there's a lot of patients with gram-negative infections. And we can tell you that as you know well, I think, there's a good proportion of those growing all the time who have CRE resistance. In one of the charts we've shown in our public filings and presentations, I think, we've gotten up to sort of 10% at the moment, but growing fast.

So if there are millions of patients with gram-negative infections and some of them are clinically important, and among those clinically important ones you have a proportion of them, shall we say 10% right now, that is CRE. Provided you can diagnose that and spot it soon enough, you have a fairly large market. Most, I think, have pinned the new generation of gram-negative drugs as among the major financial opportunities in antibiotic care going forward. And we're certainly excited by that opportunity as well as finding and treating these patients who have a 30% to 40% mortality risk. So there's a big thing – there's a big ball to swing at here. It's a big issue.

For that reason and maybe that's why you asked it, the generation of data in patients with CRE, not just with gram-negative infections, is very important we believe. And providing prescribers with information that show that Carbavance actually deals with CRE infections, we can demonstrate it in vitro. We can demonstrate it in animal models very nicely. We need to provide some clinical data, so that people know what to do in the clinic.

What we're hoping to do – and we have very constructive discussions with the FDA on this – is that at the time we file TANGO 1 we will add to it as many CRE patients as we have gathered in TANGO 2, which is a pure CRE study. And that that information can be used in some way to educate the pharmacists and physicians in patient care once the drug hopefully is approved and launched.

So important and I think we have a laser focus on CRE. We do not believe that Carbavance should be used broadly in gram-negative infections. That doesn't make much sense. We do believe it should be a very important potential choice in patients with potentially resistant infections or proven resistant infections. And that's the brave new world of targeted antibody therapy that we're all developing.

Louise Chen - Guggenheim Securities LLC

Okay. Thank you.

Clive A. Meanwell - Chief Executive Officer & Director

You're welcome.

Operator

Thank you. And our next question comes from Tazeen Ahmad from Bank of America. Your line is open.

Tazeen Ahmad - Bank of America Merrill Lynch

Hi. Good morning. So a couple of question for me, Clive, if I might on – one on Angiomax. So if your legal action results in a favorable decision for your company, I guess, given the recent divestitures that you've completed in the CB space, would your focus now primarily want to stay on development of pipeline? And I guess what I'm trying to get to is what would be the benefit if you were to win Angiomax back of keeping the asset now and selling it as part of Med Co or just trying to divest it for some additional non-dilutive cash?

Clive A. Meanwell - Chief Executive Officer & Director

Yes, great question and important question, Tazeen. First of all, I think, we believe that in a perfect world, Angiomax should be in the same bag as Kengreal. I think that the synergy in all sorts of dimensions makes a lot of sense. However, during our deliberations to divest our acute cardiovascular assets, a terribly difficult task for someone to value from a financial point of view the Angiomax asset, simply because of all these uncertainties.

And so we felt that doing a deal that included Angiomax at that time, somebody was going to get it wrong. And it could have been us. And, therefore, we hung on to it. We have a very small team managing Angiomax now. We don't have a sales force, as you point out. Sandoz, our partner, is doing a terrific job distributing and selling. I think we have, based on Symphony data, a large majority of the marketplace. So we've done well through our colleagues at Sandoz and we're happy with that.

What would happen if everything went beautifully well? We should reevaluate that at the time. But clearly the notion of us rebuilding a cardiovascular sales force of the power and magnitude we had before, that's highly unlikely. So at the very least a more focused approach would be needed and possibly other strategic options would be looked at as well. But a good question. It would be a wonderful problem to solve, if we have it.

Tazeen Ahmad - Bank of America Merrill Lynch

Okay. And then maybe one question on PCSK9. For dosing frequency, when we get the data before the end of the year, are we going to be able to – or are you going to be able to know which dosing frequency is best? Is it going to be once every three months or once every six months? And with that in mind, what is your doctor feedback telling you on what the advantages of once quarterly versus once every six months dosing regimen may be? Obviously, both of them would be better than the antibodies that are available now. But is there one that would be preferred over the other?

Clive A. Meanwell - Chief Executive Officer & Director

Yeah, another perceptive question. And I think with the data on approximately 500 patients in various dose groups and dose interval three months and six months, we should be able to pick out the most efficacious and safe approach. The study is not designed to look at feasibility or convenience. That would come next. I've heard different views on this actually, Tazeen. I've heard that some European docs say three months is perfect. I've heard some people say six months is perfect. It's a little bit dependent upon the logistics of patient care in any given clinic.

But I think as you point out, assuming less frequency is generally better, the best we can do today with the monoclonal antibody is a month. Congratulations to Amgen for their latest device approval. Three months or six months seems pretty good to me. I have a leaning towards six months because it obviously fits the monitoring cycle well. And as someone who is taking statins, I prefer to do it less frequently than frequent if I could but it will be more market research data. Tony, I think, has gone to really tease that out. What do you think?

Stuart Anthony Kingsley - President & Chief Operating Officer

Look, I would agree with Clive. Intuitively, six months feels better. Remember, the value dosing frequency we think is if it translates into better compliance and if better compliance translates into better outcomes. So, that's the first order of business. And then I think, look, three months versus six months, Clive talked about it. It has a little bit to do with the natural rhythm of the care of the patients, how frequently do physicians typically see these patients, when do they come in for test. And to the extent you can line up against that, that's the advantageous. Whether that's specifically three months or six months, I don't think we know definitively yet. Either could be a good value proposition relative to the alternatives.

Clive A. Meanwell - Chief Executive Officer & Director

One way to think about this, just to add a little bit. If I designed a clinical study with our team and I told you that one group was going to get six monthly dosing with an active PCSK9 synthesis inhibitor like ours and the other group was going to get every two weeks an injection of a monoclonal antibody. But after six months, 50% of those patients would be taken off drug altogether. And we continue observing the patients for the next two years. And we're going to see if we're going to win that. You would probably scream blue murder and say that's cheating. But that's exactly what is happening in the world. That after six months, half of the patients who are taking their statins stopped taking them and that one year is less than that.

So if I designed a trial to replicate real world where only half or less of the patients continued on drug versus a highly active drug, would we expect to see a difference in patient outcomes? I think we probably would, not assuming these drugs work to create outcome changes, which we believe they do. So it's quite a big deal, this adherence compliance problem. And there is a plain truth that drugs don't work unless you take them. And we believe that's important. In a chronic disease where people are largely asymptomatic and busy and running their lives, anything we can do to help people be adherent, using modern technology, good counseling, lots of feedback, would be a terrific advantage potentially.

Tazeen Ahmad - Bank of America Merrill Lynch

Okay. Thanks for that color. And then maybe just one on ApoA-1 Milano, you talked about your – looking at percent atheroma volume in the study. Just was unclear, are there advantages to looking at that particular endpoint versus say coronary plaque volume which, I think, was also something that in essence paper measured?

Clive A. Meanwell - Chief Executive Officer & Director

Well, they are measuring the same thing but in different ways. Total atheroma volume is measured in millimeters cubed. And that's an absolute measure of how much plaque in the segment of artery you're interested in is there. And the other as a percentage of the total available volume of the artery – I wasn't around for the design. I'm not quite sure why one was chosen than the other now that you ask me. I think that if we see regression then the real question is going to be does that make a difference to your outcomes. But, right now, we're working with the tools that have been used extensively and validated. And I think that's the right thing to do at this stage of Phase 2.

Tazeen Ahmad - Bank of America Merrill Lynch

Okay. Thank you.

Clive A. Meanwell - Chief Executive Officer & Director

Yeah, welcome.

Operator

Thank you. And our next question comes from Joseph Schwartz from Leerink Partners. Your line is open.

Unknown Speaker

Thank you. Good morning, everyone. This is Brad (49:04) on for Joe this morning. Few questions on Carbavance, first on the TANGO 1 results. Curious if either today or later this year you can disclose for us how many patients each treatment arm had suspected or confirmed CRE infection looking forward to TANGO data.

Clive A. Meanwell - Chief Executive Officer & Director

In TANGO 1 you mean?

Unknown Speaker

In TANGO 1 initially, because there is certainly infected in a large study. There should have been likely some patients. Is that something we can either hear now or will that be disclosed later this year?

Clive A. Meanwell - Chief Executive Officer & Director

I don't have the data at my fingertips. I think you're probably right. But we will be revealing all the data in that scientific meeting. So the team will certainly put all that on the table. As you would anticipate it's not a significant number that you could draw any real conclusions from. That's why we're doing TANGO 2.

Unknown Speaker

Yeah. And then thinking towards TANGO 2, how will that interim analysis work? Well, do you have a date on the calendar that will trigger that or will you pull – be able to pull data at your most convenient time relative to progression with the NDA? And then ultimately is that data that we can expect to receive as it becomes available to you or will it be just sort of – will it be turned around and submitted to the FDA as part of an application?

Clive A. Meanwell - Chief Executive Officer & Director

Yeah. The thing that will drive the activity will be a dialogue with the Agency. They've been highly interested in this information. They recognize that doing CRE-only trials is extremely challenging. And I think that at the time of submission, they will be highly interested – they will probably ask us how many CRE patients you have and can we see them. We'll send them in. And then perhaps during the review procedure, we may be able to update that to give them an ever growing amount of information. So that by the time they complete their review they will have the maximum information available.

What they do with it and how they feel it should be used, we'll have to see. But I think it would be fair to say there is a lot of interest from Agency and their reviewers. And we'll hope to provide them the data on an ongoing basis. There is no formal stopping rule for the TANGO 2 trial. It is set up to gather, glean and observe. And I think, for both us and the Agency, that's very important.

Unknown Speaker

And, Clive, am I correct to interpret that that data from TANGO 2 will not initially be shared with us? It will just be kept for the company and the FDA:

Clive A. Meanwell - Chief Executive Officer & Director

Well, I don't know because I think it's very healthy to have the data out in the public domain, so that experts can look at it and talk about it as well as the Agency. So I don't know the answer to that question yet. And to the extent that the Agency is comfortable, we generally as a company like to share our data with experts at scientific meetings and let them talk about it and review it and kick it around. I think it makes the understanding more robust. So we'll come back to you on that. But I think it is important that we get these data out in the public domain as early as possible. But I think that would be guided by what FDA want to do.

Unknown Speaker

Okay. And then, lastly, there is a broad range of infection types and indications included in TANGO 2. How strong is your understanding or expectation for the consistency versus variability of effect for Carbavance, maybe seen from a path (52:26)?

Clive A. Meanwell - Chief Executive Officer & Director

Yeah. Well, that's another excellent question. The foundational antibody here is meropenem. So we know that it gets into tissues, lung, abdomen, urinary tract very well. I mean it's a good drug. So the usual questions in terms of trials – well, what about tissue penetration, biofilm and things like that – meropenem goes in pretty well, works well. And we're using a relatively high dose. The real question is – can the beta-lactamase inhibitor follow it, and we see no reason not to, based upon the preclinical work. So it should – if you've got something that is resistant, that is CRE, and we know that our beta-lactamase inhibitor overcomes that resistance, it ought to work no matter what the tissue site.

Unknown Speaker

Okay. Great. Thanks for the color. I appreciate taking my questions.

Clive A. Meanwell - Chief Executive Officer & Director

Yeah. You're welcome. Thank you.

Operator

Thank you. And our next question comes from Adnan Butt from RBC Capital Markets. Your line is open.

Adnan Shaukat Butt - RBC Capital Markets LLC

Thanks. Turning to the HoFH study for PCSK9si, Clive, is that going to be a registrational study or is it going to be more dose timing? And then just will there be data at AHA or can we definitively rule out ORION data at AHA? Thanks.

Clive A. Meanwell - Chief Executive Officer & Director

Yeah. The HoFH study will be designed entirely under the guidance of the FDA and/or EMA. We would hope it to be helpful for registrational purposes. And we'll proceed that way.

As for ORION, one data at AHA – that would be wonderful and I think we'll make every effort to get it in front of the audience at AHA. That's the right audience at approximately the right time and we'd certainly shoot for that, Adnan.

Adnan Shaukat Butt - RBC Capital Markets LLC

Okay. Thanks.

Clive A. Meanwell - Chief Executive Officer & Director

Yeah.

Operator

Thank you. And our next question comes from Chris Shibutani from Cowen. Your line is open.

Chris Shibutani - Cowen & Co. LLC

Thanks. Good morning, guys. I just wanted to make sure that I have clarity on some of the disclosure of interim process data points for a couple of your key assets. So for MDCO-216, you described that if there are no safety concerns and if predefined efficacy criteria are met, IMDC (sic) [IDMC] (55:03) shares you the data and that you will then report that regardless you're planning on disclosing an update on the program in August. So there is a scenario whereby the update will simply mean that the efficacy was not met. Is that correct and that the program would continue?

Clive A. Meanwell - Chief Executive Officer & Director

I think that's a good analysis, yes. If in the first 40 patients there isn't something that is reaching the threshold of being convincing, then as always – we're fortunate we'll have another, by then, probably 110 patients to – total of 110 patients to look at. We're using fairly tight tolerances on drug effects here and 40 patients might not show it. If it doesn't show it, but it's directionally going the right way, maybe a few more patients might help. Equally, if it doesn't show it and just nowhere in the ballpark, then we'll know that sooner or later with 100-plus patients and obviously that would be a moment to reflect on whether the program should continue at all. We think -

Chris Shibutani - Cowen & Co. LLC

You did mention that -

Clive A. Meanwell - Chief Executive Officer & Director

Go ahead.

Chris Shibutani - Cowen & Co. LLC

Sorry. Go ahead. You did mention that there were – sorry.

Clive A. Meanwell - Chief Executive Officer & Director

All right. We did plan this study to help us with the business planning and for the product. Meaning, we are looking for early signal here that further significant investment in manufacturing and scale up, which is not low-cost, would be the right thing to do to prepare that Phase 2b, 3 program. So that's what I'd be looking for from the team. They're doing a great job. And I think they will bring forward data within a fairly short timeframe now that will allow us to make the decision whether to commit or not commit more funding. But the first 40 patients are going to be the first look. And if the first 40 patients aren't clear, then we won't even be shown the data, if it doesn't meet the criteria.

So our update, as you point out, would be, well, we've been told by the interim committee that there's not sufficient definitive data here to make a change, so we're going to look at the next 40 patients, which is the 80 patient analysis, and then ultimately 120 patients. I hope that's clear. It's good that you asked for the clarification.

Chris Shibutani - Cowen & Co. LLC

So there is an 80 patient point of another decision juncture where the IMDC (sic) [IDMC] (57:27) would look at safety and efficacy, make a decision about disclosing data to you and then would provide an updated – you would then provide us with an update at the 80 patient point as well?

Clive A. Meanwell - Chief Executive Officer & Director

Yes. I think we would. And that's probably hard on the heels of the 40 patients given that we're over 100 already. So it will happen in a fairly rapid speed.

Chris Shibutani - Cowen & Co. LLC

Understood. And then lastly if I could ask on the PCSK9, your release states that ORION-1 expected to have both three months and six months safety efficacy data at the end of the year or by the end of the year. Logically the three months data would be in-hand before then. Will you plan to disclose the three-month first, followed by the six-month or should we expect that we need to wait for the – all of the data up to six months before you disclose it?

Clive A. Meanwell - Chief Executive Officer & Director

No. I think we have mentioned this on a prior call. What we'd like to do – and there's a difference between what we like to do and what we actually can do. But I think our goal is to present at a major fall medical meeting – late fall probably. And we should at that time have all the three months data. And much like we did at ESC a year ago, we'll have a lot of patients with six months follow-up by then. And to the extent we can clean up those data and get those on a slide, we will. But it won't be the final six months data. That would have to be updated before the end of the year.

So our aim is – we're aware of the importance of the information to the financial community. And we'll try to – within the constraints of academic research and statistical rigor, we'll try and give you the interim analysis which includes three months data for everybody, six months data for a lot of people and then finally give you all six months data at the end of the year – before the end of the year. Again, I hope that's satisfactory.

Chris Shibutani - Cowen & Co. LLC

That's helpful. And then, lastly, what is the additional animal study data for ABP-700 that's now needed?

Clive A. Meanwell - Chief Executive Officer & Director

We continue to – you have to look at central nervous system, EEG tracings for patient – for animals on the product. And that's what we're going to be doing with the FDA before we open the idea and make sure that there is no concerns about the EEG patents. It's a long and arduous story which relates to etomidate which is known to cause myoclonus. ABP-700 also causes myoclonus. That's not the problem. The question is teasing that apart from what would be a centrally-driven seizure. And FDA want to make sure that before we start dosing patients here that that's clearly defined. We have, of course, 300 or more normal subjects and we've seen absolutely no evidence whatsoever of anything other than the expected myoclonus.

Chris Shibutani - Cowen & Co. LLC

Thank you, Clive.

Clive A. Meanwell - Chief Executive Officer & Director

Yeah. You're welcome.

Operator

Thank you. And our next question comes from Joel Beatty from Citi. Your line is open.

Joel L. Beatty - Citigroup Global Markets, Inc. (Broker)

Hi. Good morning and thanks for taking the questions. First is just a follow-up question on the timing for data from ORION-1. With the six months data by year-end presumably or the three months data in-house by the end of the quarter, is that something you'd top-line at all or would just wait for the full data at a medical meeting?

Clive A. Meanwell - Chief Executive Officer & Director

No. Well, look, obviously, top-line information is very useful for our investors. And if it's clear enough to put it in a good press release, we will. We want to be respectful of the investigation. It's very cutting edge research. They want to have their day in the sun and so do we want their day in the sun in front of their peer group. So, some combination, Joel, is absolutely what we'd aim for, top-line release and a detailed data at the medical meeting.

Joel L. Beatty - Citigroup Global Markets, Inc. (Broker)

Sure. Great. And then one last question. Can you just discuss how you think about the timing of additional divestments of your marketed products like Ionsys and Minocin, Orbactiv?

Clive A. Meanwell - Chief Executive Officer & Director

That's – again, we've continued to ask the question what's the right configuration of assets and the right capital deployment of the company, so all options are on the table. I think at this stage, the rest of the year we are very focused on two things. One is executing against these plans and the other is taking stock of our capital deployment strategies and making some decisions later in the year about what we should do next, if anything.

So no imminent further divestments on the table today, but lots of discussion about what this company should look like going forward. And honestly, that somewhat is driven by what the data show and what the way forward for this big assets is. So the good news is we have put ourselves in a position of tremendous strategic and operating flexibility as we work through the summer and early fall. We'll able to work with the board of directors to make some choices, which may or may not include further structural opportunities, but nothing imminent, Joel.

Joel L. Beatty - Citigroup Global Markets, Inc. (Broker)

Sure.

Operator

Thank you. And our next question comes from Umer Raffat from ISI. Your line is open.

Umer Raffat - Evercore ISI

Hi, Clive. Just a quick clarifying question I was getting from investors. So specifically on the $10 million milestone payment, what exactly happened that triggered it? Was there – like was it the trial initiation because that happened a long time ago? Like what happened this quarter that triggered that?

Clive A. Meanwell - Chief Executive Officer & Director

Well, I'd be quite open. What happened is we had a discussion with Pfizer about whether this trial did or didn't meet the criteria for the milestone payment to be made. Our initial position was that it didn't and we didn't want to pay the $10 million. Shareholders would hope I would act that way, I think. But Pfizer made a good argument that it did meet the criteria for the trigger and requested that we paid the $10 million. I guess they needed the money.

Umer Raffat - Evercore ISI

Got it. Okay. Great. Those were the trial initiation, to be clear?

Clive A. Meanwell - Chief Executive Officer & Director

Yes, yes.

Umer Raffat - Evercore ISI

Not on the interim, right?

Clive A. Meanwell - Chief Executive Officer & Director

So if you go back to the redacted contracts, I am sure it's there somewhere. The precise – the definition wasn't perfectly precise. And the Pfizer team and we debated what the definition was and eventually their definition held out better than ours.

Umer Raffat - Evercore ISI

Got it. Thank you very much.

Clive A. Meanwell - Chief Executive Officer & Director

You are welcome.

Operator

Thank you. This does conclude today's Q&A session. I would now like to turn the call back over to Clive Meanwell for closing remarks.

Clive A. Meanwell - Chief Executive Officer & Director

Thank you so much, everybody, for your interest today. It's an amazing moment for the company with the second half of the year upon us and lots of exciting news flow that we're hoping to put in front of you as we have discussed extensively today. And we really do appreciate your support of the company and hope we can keep you well in the loop of everything we're doing to create shareholder value. Thanks so much indeed.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a good day.

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