Cardiome Pharma's (CRME) CEO Bill Hunter on Q2 2016 Results - Earnings Call Transcript

| About: Cardiome Pharma (CRME)

Cardiome Pharma Corporation (NASDAQ:CRME)

Q2 2016 Earnings Conference Call

August 09, 2016 04:30 PM ET

Executives

David Dean - VP, Business Development & IR

Bill Hunter - President & CEO

Jennifer Archibald - CFO

Analysts

David Novak - Cormark Securities

Joseph Walewicz - LBS

Operator

Good afternoon, ladies and gentlemen, and welcome to the Cardiome's Second Quarter 2016 Financial Results Conference Call. Please be advised that this call is being recorded.

On the call today are Dr. Bill Hunter, President and Chief Executive Officer of Cardiome; Ms. Jennifer Archibald, Chief Financial Officer of Cardiome; and Mr. David Dean, VP of Business Development and Investor Relations.

Before proceeding with the call, I will first read the company's forward-looking statements. Statements contained during this conference call relating to future results, events and expectations are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company or industry results to be materially different from any future results, performance or achievements expressed or implied by such statements. Such factors include, among others, those described in the company's annual information form.

I would now like to turn the meeting over to Dr. Hunter, President and Chief Executive Officer of Cardiome. Dr. Hunter, please go ahead.

Bill Hunter

Thank you very much and good afternoon to everybody on the line. Thank you for joining us on Cardiome's Q2 2016 Conference Call. Since I've been with Cardiome, I don't know that there has ever been a more eventful few months for the company. Certainly, there has been a tremendous amount of work over the past few years that was involved in transforming Cardiome from a single product licensing-based R&D company into a global multi-product commercial and hospital company, but none of those events were more impactful than the series of transactions that were executed over the last few months.

In May, the company executed a license agreement with our organic for the rise to market in sales XYDALBA or Dalbavancin in the United States in over 28 international markets including four of the major G7 Western countries, the UK, Germany, France and Canada. This marked the first time that Cardiome has gained access to a top-tier proprietary new-to-market drug in major markets for sale through our own direct sales force. More on this later, but clearly a lot are meant for the company.

We followed that up in June with a debt refinancing agreement with CRG Managed Funds for $20 million loan with an option to increase this later. This accomplished, in my opinion, two critical tasks: one, we made good on our promise to funding our organic transaction with the combination of debt and equity; and two, it provides us an additional debt capital for future growth initiatives that we may attack on to the existing business.

Also, we recently completed an equity financing for gross proceeds of $34.5 million to fund our operations through profitability. While this transaction is completed in a very difficult and trying financial environment, I cannot stress just how strategically important this financing was. For the first time in our company's history, Cardiome has sufficient funds to finance this operations through the sustainability. Lastly, we reported $13 million in revenue during the first half of 2016 which is about 16% year-over-year growth versus 2015, due entirely to increased sales of both AGGRASTAT and BRINAVESS.

If you break this down a little bit, you can see that AGGRASTAT and BRINAVESS are performing not just the stable, but a growing base upon which we can launch our new products like ESMOCARD, XYDALBA and TREVYENT. Our previous investments in sales and distribution infrastructure have created a platform off of which the company can leverage growth and sustained profitability. We now have the financial resources to do just that. In very short period of time, we've taken many of the critical steps necessary to execute on our business plan and transform our company, making us a stronger, more stable and higher growth organization as a result.

With that, I will hand it over to our CFO, Jennifer Archibald to take you through the specifics of the Q2 financial results.

Jennifer Archibald

Thank you, Bill. Good afternoon, everyone. Cardiome has issued its 2016 financial results. The financial results, press release and a replay of this conference call will be available later today on our website at Cardiome.com. I will now provide an overview of our 2016 Second Quarter Financial Results. Amounts unless otherwise specified are assessed in U.S. dollars and in accordance with generally accepted accounting principles used in the United States of America.

Revenue for the three months ended June 30, 2016 were $5.9 million, compared to revenue of $5.7 million for the three months ended June 30, 2015. Revenue for the six months ended June 30, 2016 and June 30, 2015 were $13 million and $11.2 million respectively. The 16% growth year-over-year for the six months ended June 30, 2016 was from increased sales of both AGGRASTAT and BRINAVESS.

Gross margin for the three months ended June 30, 2016 was 71% compared to 80% for the same period in 2015. Gross margin for the six months ended June 30, 2016 and June 30, 2015 were 76% and 79% respectively. Gross margin that's mentioned in previous quarters may fluctuate depending on the customer mix. The change in gross margin from the prior year was mainly due to a large segmental high margin distributor in the second quarter of 2015.

Selling, general and administration expense for the three months ended June 30, 2016 was $8 million compared to $8.4 million for the three months ended June 30, 2015. Selling, general and administration expense for the six months ended June 30, 2016 and June 30, 2015 were $14.2 million and $14.7 million respectively. The decrease in SG&A expense in each period is primarily related to the decrease to stock-based compensation expense as a result of market fluctuations in our share price.

On June 30, 2016, we extinguished our term loan feasibility with Midcap Financial LLC. As a result of the extinguishments, a loss was recorded in the income statement in the second quarter of 2016.

We recorded a net loss of $7.5 million for the three months ended June 30, 2016 compared to a net loss of $7.4 million for the same period in 2015. On a year-to-date basis, we recorded a net loss of $8.7 million for the six month period ended June 30, 2016 and $11.2 million for the same period in 2015. The decrease in net loss on a year-to-date basis was due primarily to an increase in revenue and an increase in research and development expense as upfront payment made to SteadyMed Therapeutics upon the execution of a license and supply agreement with TREVYENT was recorded as a research and development expense in the prior year.

Accounts payable and accrued liabilities was $18.1 million at June 30, 2016 compared to $10.8 million at December 31, 2015. The balance at June 30, 2016 includes the final upfront payment of $8 million payable to Allergan for the execution of XYDALBA license agreement. Long-term debt of $19.3 million at June 30, 2016 relates solely to the $20 million in posts [ph] from CRG Managed Funds, net of an amortized debt issuance cost. The term loan agreement with CRG Managed Funds is for up to $30 million for the second and third trench of the $5 million each available to us if we are able to reach our revenue milestone.

The loan matures on March 31, 2021 and an interest-only period is provided for us for that principal repayment begins in June 2019. The interest-only period may be extended to June 2020 if certain revenue milestones are matched. Interest is payable on a quarterly basis to the full term of the loan.

At June 30, 2016, we had cash and cash equivalents of $12.9 million, compared to $17.7 million at December 31, 2015. The change in cash and cash equivalent for the six months ended June 30, 2016 includes the extinguishment of our existing term loan with Midcap Financial LLC of $10 million, a $5 million upfront payment made to Allergan 9:03 for the execution of the license agreement to commercialized [ph], offset by $19 million in net loan proceeds from CRG Managed Funds.

Subsequent to quarter end on July 29, 2016, we closed an underwritten public offering of $11.5 million common shares on treasury for aggregate growth proceeds of $34.5 million, including the underwriter's full exercise of their option to purchase $1.5 million additional charge. We believe our cash on hand will be sufficient to meet our operational funds as currently forecasted until we reach profitability.

With that, I will now turn the call back over to Dr. Bill Hunter.

Bill Hunter

Thanks, Jennifer. Where do we stand now? Cardiome is now a fully-funded multiple products specially pharma company whose current and existing product portfolio is sufficient to reach the same profitability. I don't want to sound like a broken record, but I can't overstate the importance of making to this critical inflexion point.

As part of that effort, I believe we've built a differentiated rest of world business that participates with early life cycle drugs that will be sold in the acute care in hospital market – a state where to the best of our knowledge, very few competitor companies are focused. In addition to having a direct sales force in all of the major Western European markets, Cardiome has also assembled a top-tier distribution network and now has global reach into 60 countries worldwide and continuing to expand. Our strategy of targeting prelaunch, but largely post-regulatory risk products means that we have the potential to benefit from years of compounded growth from proprietary assets with abundant intellectual property protection still remaining in front of them.

All of this has been assembled in an extremely tax-efficient and intelligent manner with switched domicile to operating company and a Canadian parent that possesses an excess of $300 million in unrealized tax losses that can be applied to future profits. With most of its major product launches still in front of it, Cardiome already has two commercial products: BRINAVESS and AGGRASTAT that are growing top-line revenues already this year versus 2015.

I believe this next stable nicely summarizes all that has been accomplished since the beginning of 2014. European operations as you know were built out with the acquisition of Correvio in late 2103. Despite is a really generic erosion of AGGRASTAT with a combination of creative competitive tactics and generic markets and geographic expansion into new global markets, revenue declines were slowed, stopped and ultimately have been reversed. The infrastructure required was then used to launch BRINAVESS into selected European markets throughout 2014 and 2015. Business development efforts in 2015 brought Cardiome ESMOCARD and TREVYENT while the most recent quarters our company complete the end-licensing of XYDALBA from Allergan.

So where does this leave us moving forward from here? ESMOCARD is starting to launch in selected Western European markets right now. XYDALBA will be launching in Europe towards the end of 2016 and throughout 2017 while TREVYENT will roll out in 2018. All of these products have a few key things in common -- they are all new to market. They are all proprietary and exploration flexibility and they all have years of patent protection still in front of them. In a few years, Cardiome will be in the enviable position of having multiple drugs growing in multiple markets for multiple years. I know a lot of you have seen a lot of spec pharma companies over the years that have been based really around end of life cycle assets – that is not what we are doing here. What we are doing here is new-to-market, new-to-launch products where we participate in the entire up cycle and growth cycle of these products from launch through to peak revenues.

Just a quick look at the markets that we participate in, particularly, with our direct sales force; we call it acute care and that really is a combination of emergency room and cardiology. With respect to that, I think acute care is both small enough and big enough for a company of Cardiome's size to handle. What I mean by that is acute care in hospital parental products in Europe can be managed by a small targeted sales force. This is the call point that would require under 100 reps even an excess of $100 million a year in revenue, would be a sales force of that size. That is clearly something a company of our size can actually manage. It wouldn't be a call point or require thousands of reps in the life to manage the growth aspirations that we have.

On the other hand, it's not too small either. There is a lot of parental drugs and even devices that fall into this particular call point. Off the top of my head, you can think of things like pain treatments, any psychotics, any epileptics, antibiotics, bunch of cardiac drugs, even some cardiac devices that would fit in. This means that the company has multiple agents to choose from and we're not going to find ourselves boxed in. We're not going to have limited or narrowed opportunities to that moving forward. There are drugs out there that we can and will continue to add to our portfolio and use those to enhance our growth profile and compound strategy that we've already built. It also, in my opinion, makes Cardiome attractive to a wide range of other companies that have global aspirations in a wide range of potentially diverse therapeutic variables.

I think it's worth a couple of minutes to briefly recap the XYDALBA transaction that we completed in the middle of Q2. First and foremost, XYDALBA is an excellent fit with an in-hospital acute care focus business. Acute bacterial, skin and skin structure infections are common emergency room conditions. The product is approved the EU authority and pricing reimbursement work is already under way. It is expected that there will be a limited role out occurring as early as prior to the end of 2016, whereas more countries and obviously more revenues will come online in 2017.

Secondly, this is the high-quality, high-potential drug with worldwide applicability. Allergan has launched and is successfully growing this product in the United States. The combination of FDA approval and the marketing efforts of the global big pharma partner will certainly aid our team in launching this product in major international first-world markets. When our docs from France, in the UK, in Germany go to major infectious disease meetings in the United States, they're going to see the Allergan name, they're going to learn all about this product and they're going to go back to their home countries and ask their authorities and folks why it isn't available or when it's going to be available for them. I think this will be the first chance we will have a tailwind from the U.S. opportunity as opposed to what we experience on the BRINAVESS launch. I also think it validates Cardiome as partner of choice in our chosen field of business and it shows that we can do deals with both big companies and small companies to build out our product portfolio.

Importantly today, we're very pleased to announce that the EMA has approved the single-dose regimen for XYDALBA. Initially, XYDALBA was approved in two doses: one that was given on day one or a treatment initiation; and the second was given a week later. A lot better to the Vancomycin to be sure which can be a couple times a day, over a week or more, but still a two-dose regimen. The FDA recently approved the move to a single-dose regimen where the drug is now given once a single infusion over 30 minutes – really the quickest and fastest way that this type of infection can be treated. One dose, 30 minutes is the entire treatment regimen. I think this has really important clinical implications and in the U.S. anyways, it certainly help drive adaption of Dalbavancin since its approval there.

For Cardiome, this means that we'll be launching XYDALBA with the single-dose 30-minute infusion label right from launch on. We won't have to transition from one therapeutic way of giving the drug to another. We're going to be out of the gate with the single-dose regimen. We believe this material increase Cardiome's positioning of XYDALBA versus alternative antibiotics. Why we think that -- well, when we're looking at the market and we're trying to break down with the patient demographics was like with respect to our particular countries, you look at some of our territories, places like Germany and Netherlands, UK and France to a lesser extent and look at the type of patients that present with ABSSI, you'll see that about 10% to 20% of these patients are IV drug users from obviously non-sterile technique. Those of you know I practiced those once upon a time in the previous life in an inter-city hospital and I can tell you that getting these types of patients to return a couple of times a day for one to two weeks of therapy is of absolute impossible.

Even though Vancomycin is potentially a cheaper and readily available treatment for these patients, they're just never going to come back and it's unrealistic to think that they're going to come back day-after-day to receive that therapy. The important thing is that these patients get lost the follow-up and end up returning to a hospital in septic shock. The cause of the system now goes into the hundreds of thousands of dollars. This is just the worst possible outcome. Having a single effective therapy that can solve and prevent a very serious and expensive problem from happening, I think is going to be a really impressive therapeutic option for physicians in those countries.

Now if you look at another group of patients, about 50% of the people will be of advanced stage. Here you're talking about things like infected bed sores, infected stasis ulcers, these are patients that come from extended care facilities, managed care facilities and the only transport of these patients back and forth to an IV infusion center is equally impractical. What often happens is that they just get admitted for simplicity's sake and you end up with a one-to-two week hospital admission of a complicated medical patient simply because you wanted ease of administration of the drug. Again, if you got a single therapy and it allows it under return home, back to their actual environment and under their own conditions that is infinitely cheaper and infinitely better for the patient and the system.

Lastly, there is still the potential here for other indications. Things like osteomyelitis or endocarditis are potential label expansions that this drug could have throughout the life cycle of its 10-year -- as you see, there's 10 years on the license for this to evolve and is something that can grow future markets for us and increase of therapeutic potential going forward. I think this is a really important step for the company, a really important step for XYDALBA in the markets that we have.

Many of you have seen this puzzle graphic before. It was designed to try and simply illustrate how we're piecing together the Cardiome global commercial business that we've been talking about for a while. We've certainly already illustrated how we pulled together many of these pieces in the last couple of years. The one remaining piece is now garnering the bulk of our attention from a business development perspective. Certainly, the recently closed financing removed the urgency around all these. We can now reach profitability with the current portfolio which again, I think is a watershed event for the company. However, we're still on the lookout for an asset or a collection of assets that could bring in $10 million to $15 million in immediate annual revenues. I don't think this has to be perfectly strategic, at least from a product perspective or a market perspective. As long as it's something that we could use our distribution resources, or our supply chain, or our finance resources to manage the product, I think it would likely work.

But from a corporate perspective, I think a transaction in this space would really accelerate the evolution of our business plan. First and foremost, we've immediately become profitable. We would allow all these new product launches that we're excited about to be made into an already self-funding profitable base. We will immediately get to that point in time where we were still funding and now XYDALBA, ESMOCARD, TREVYENT would all be enhancing that -- not taking us there, but adding to where we already were. It also would allow us to immediately access and monetize the $300 million in NOLs that we currently get no market value for. We're talking about a value here that is well an excess of two times our market cap for only three times our market cap.

And last but not least, it would significantly lower the cost of debt capitals. We wanted to move forward in terms of corporate finance and reduce our dependence on equity capital going forward because at that point in time, it's a profitable business. We have corporate finance options open to us that just weren't and haven't been open to us as a non-profitable company; big steps, something to look forward towards the end of the year, something that we're working really hard on. No, we don't have anything imminent in front of us, but want to give you a heads up as to what we're looking for and why we're looking for it.

With respect to Canada; a few comments here with respect to both the growth and the potential for tax realization. As I think you all know, we're preparing to move towards Canadian commercial efforts in the not-too-distant future. I think Canada is an important Western market that we currently are accessing and it's not just because we're a Canadian company. I often say that the Canada really is halfway between the United States and Europe. It certainly has a socialized medicine system like Europe, but this is a country that expects first-world medicines, expects access to standard of care and certainly has a willingness to pay premiums for proprietary drugs that bring real value.

As I think many of you know, AGGRASTAT is approved in Canada, but doesn't really have a significant sales at the moment. We think this is due primarily to the fact that we do not have a stemmy label in Canada. The stemmy label is present in many other parts of the world and it's certainly driven sales in places where it has been given. We submitted the application at whole Canada to expand the AGGRASTAT label last year and we're expecting approval of that indication before the end of 2016. We also filed for BRINAVESS approval in Canada towards the very end of last year and we're expecting a decision on approval from Health Canada probably in the first half of 2017. As mentioned, both XYDALBA and TREVYENT licenses included Canadian rights and we intend to pursue Canadian filings for both these drugs in due time.

As a result, in a very short period of time, we could find ourselves with a portfolio of four impressive in-hospital drugs for sale in Canada. With over quarter of billion dollars in Canadian tax losses alone, matching the revenue potential of these four drugs with the inherent tax protection already in place for the company makes for a very unique and interesting opportunity at Cardiome. A lot of you sticking on the Canadian side will be familiar with companies that have successfully matched pharmaceutical assets with Canadian tax losses and have used that business model to their advantage going forward. That is an asset currently embedded within our company that I don't think is particularly realized for how valuable it might be once we make that switch to profitability.

In our last quarter, we discussed the emerging trend of asset acquisitions in our particular business segment, our particular area of expertise. As you know, the medicines companies divested its cardiovascular franchise for about 11.5 times revenue, area sold, its EU operations for about 8 times revenue plus a significant royalty. Just a few days ago, Huntsman sold its European surfactant business to Inspec [ph] for about 10 times EBITDA. I'm not implying that this was a perfect fit, or that these are exact comps for us, but I think the recent activity just reaffirms our own internal belief that for one, European and the rest of the world businesses are strategic and are important for any company that has global expansion plans or global aspirations. Yes, European markets are difficult, yes, they are not as easy to do as the United States, but after you've done and gone for the United States and you're looking for growth, this is the first place you go. If you have global aspirations as a company, this is the first place you're going to look.

I think it also shows that assets in the States are particularly plentiful, and that means that they command significant and compelling premiums once you do have a motivated acquiring. And last but not least, I think that reaching profitability with multiple growth assets would place us into an entirely new strategic position. I think a business that requires a big investment from an inquirer is very different from the business that contributes revenue from an inquirer. We believe that accelerating the transformation into a profitable business or business development activity is an intelligent thing for the company to do for multiple strategic reasons going forward.

A lot of people have been asking us to provide an update on BRINAVESS in the United States. I hope you've seen that we've been able to build a pretty substantive business even in the absence of progress in this area, but we thought it would be both timely and relevant to provide a quick update. One of the things we did as we transform from an R&D based company to a commercial company was also rebuild the Board of Directors to reflect the expertise required to run a substantively different business than the previous business. Bob Mayer joined us last year, he spent time at the FDA and senior leadership roles there as well as senior clinical and regulatory roles at Merck in their product development team. Mar Corrigan joined us. He has experience in drug development at both Pharmacia & Upjohn and at Sepracor and has been really invaluable to us. Mark also has the added benefit of having experience with the ABSSI antibiotic market from his time spent on the board at Cubis [ph].

And both, Mark and Bob have helped our senior team led by Sheila Grant to help craft a strategy and action plan designed to attempt to remove the FDA's clinical hold on BRINAVESS. Animal studies have been designed in collaboration with the agency and its hope that the company will be in a position to address the clinical hold with the FDA sometime in the beginning of 2017. While we can't provide any guidance as to what the clinical path forward might look like if and when we get off clinical hold, we do believe that removal of the clinical hold will be a significant step forward for the company and will be a value-enhancing move for the company as a whole. We've been working hard on that, we've been continuing to do that, we've brought in people to help in that area. It's not something we put out there front and center, but we do have a plan to get there and it is our hope that the combination of data that's coming out of spectrum to clinical experience we're having throughout all the world and the animal studies that we've designed to address specific questions, that there may be a path forward to getting off the clinical hold sometime in early 2017.

So this is what our vision is now; the last couple of years of growth and business development activity and operational and commercial build out, a bunch of corporate finance efforts weld and designed to get us to here. It's been designed to get us to a rest of world strategic pharmaceutical company that sells into acute care primarily with parental products. I always say and not really jokingly that the Company have one asset -- it have the rest of the world IV in-hospital products. Guess what? We have to build out a rest of world in-hospital business. I think we've done an awful lot to do that.

I think what's really, really important and I do want to stress it one more time, is that we're planning to do this by launching proprietary brand name early life cycle growth products. This is not what I call managing the melting in the ice cube where you bring in an asset near the end of its life cycle, you try and do things through corporate finance, you pay less for it, then the drug ultimately pays out. That's not really what we're trying to do here. We want to organically develop the markets where we commercialize our pharmaceutical products. We want to grow these by volume, not by price. We're not going out there saying, hey, we're going to take a product, we're going to increase price and that's going to be the way that we're going to increase margins and improve that. No.

We plan to take proprietary products, move them into rest of the world markets and grow them while they are under path and this is a classic building growth strategy and gives you a lot of protection and once you get them going here, you are able to get this compounding on each other for long periods of time. We plan to bring additional products in from both big and small companies and we are looking at things that have ten years plus of market life in front of them when they come into Cardiome.

We continue to build this company in places that other people are wanting into avoid we think that's our niche, we think that the U.S. market while big and impressive is also overpriced and difficult to access while the rest of the world market is not. And we are finding that we are competitive for really, really high quality assets and we believe that the patience we are showing in constructing that will start to be dividended out over the next few years as we move forward. And we think that putting multiple launches of proprietary products one on top of the other ultimately is going to build strategic value for ourselves and our shareholders.

So just be kind of circle that where we started, this has been a period of intense and critical activity for Cardiome, without questions I doubt it was an important addition to our product portfolio. We executed two financing in a very difficult market that provided the company with the resources to stand on its own two feet and make it through to profitability and our underlying business is performing. It has developed and started to grow even in the absence of the product launches that we are trying to put on there and provide them extra leg of growth. So in a relatively short period of time I do believe this company has gone through a lot of change and but it has also gone to a point of sustainability that just can't be denied and I think that was a really important step for us I think in the last two, three months and all the things that we have accomplished has really transformed the business into something it really wasn't before and I hope that we can use that as a base plan which we can springboard off for further growth and move forward from there.

So with that I would like to open up the questions for those of you who are on the line.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Your first question comes from Difei Yang from Brean Capital. Difei, please go ahead.

Unidentified Analyst

Hello, this is Matt [ph] here representing Difei. Congratulations on the starting of a great process. Going forward, you did mention that you had sufficient funding to finance sustainability for the first time just kind of wondering what kind of timeframe you are looking at for that.

Bill Hunter

Right now, the existing product portfolio we figured gets us there in early 2018 and that right now you are looking at a company that has got mid-20s in revenue this year that is where we are headed all taxes in the low thirties obviously we have debts and few other things we have add for those expenses and so if we you know play that forward we need kind of another $10 million to $15 million in revenue to do that. If we do that in a single set like we are talking about let's that would be plan A but we would need a combination of BRINAVESS, ESMOCARD, and TREVYENT, XYDALBA growth to get to kind of a $15 million run rate to get there we think based on our projections that happens kind of 2018.

Unidentified Analyst

Do you have any particular products that you might want to talk about that might bring those revenues for you that mentioned $10 million to $15 million?

Bill Hunter

Not really. What I will say we are looking at kind of a bunch of different buckets you know the way we build our Europe we went we found an existing product and infrastructure and so I believe that the transactions sort of needs for the company at the same time. We certainly are looking at a couple of Canadian type business that could do that, we could find a Canadian business that had $10 million to $15 million revenue and had existing infrastructure that we could launch AGGRASTAT into, and BRINAVESS into, that would you know basically replicate all of us that we ran in Europe and so it's kind of one type. It certainly hasn't been a pleasant time to be a stock pharma company and I think most people know and so we are also looking at other pharma companies that may be in combination we could reach critical mass and so those are the kinds of things we are looking at right now I think as I said the opportunities set us a little bit larger because it doesn't have to be right down in the middle of the fairway from product perspective, I think if it's even a moderate strategic or operational set we could make it work so we have a reasonably robust target list and our hope we can find something to do and not to just in future.

Unidentified Analyst

I just have one more question, just how exactly should we think I mean you talked about it in the call, but how should we think about the reason of equity raise and if things don't go according to plan, what are the odds that we can expect in the future?

Bill Hunter

I don't know, I am no market expert you know we had to do a financing we brought in the XYDALBA asset, I think those are the right thing for the business and we had to pay for XYDALBA assets, I think that was the right thing for the business. And we had a finite ability to access capital which we did as a first layer and tried to do as much as we could that way and the rest that what we had to do be done with equity financing and other alternatives and you know it was not a good time to be raising capital and not a good market for the business we are in and that's the fact. I think we did the right thing and I think bringing in the right amount of capital to get through the profitability was what we needed to do. I think doing a $10 million to $15 million financing would have allowed us to tip the can down the road to get pass the Allergan -- next Allergan payment but not really solve the problem, it would have potentially been worse solution, so we felt that this was the right thing to do and well you know it wasn't without challenges, it was the right thing to do for the business in the long run.

And I think with respect to the second part of your question, it's a business so we don't have to do an equity financing like that and it's certainly our plan to you know attack that in two different ways, one is operationally to grow the sales away and keep the expenses under control so the money we have makes it there, you know David and I are successful in doing another transaction. And having said that I think the record that shows we have been pretty successful in doing well priced and decent transactions and if we are going to accelerate that and eliminate that altogether by doing another transaction of this sort than that's what we are going to do so I think we ramble those game plans simultaneously and try to avoid that being the case.

Unidentified Analyst

Excellent. Thank you so much for taking the questions.

Operator

Thank you. Your next question comes from David Novak from Cormark Securities. David, please go ahead.

David Novak

Good afternoon, thanks for taking the questions. Just a couple from me, first quickly on TREVYENT, there has been some noise going on between SteadyMed and United Therapeutics regarding potential patent litigation around Remodulin, it appears that should the issue pursue to litigation, the TREVYENT NDA approval timeline could be extended fair a bit. I was just wondering if you could just comment on how if at all we should think about it as it relates to cardio and your EMA filing.

David Dean

Hi David, So I can't comment on their navigation strategy, but since right now we are cardio move receive the NDA around the time or they have proposed NDA around the time or difficult NDA around the time of seeing us filling it and we have adapt it for our territory and buy it ourselves. If there is a material delay due to navigation in the US, we might have to adjust the strategic first above, we are going to see how it unfolds and the statement has been really a great partner I felt we are working really well with them and we don't foresee issues as it relates to from the litigations to present timing of filing.

Bill Hunter

A quick comment as I look in the room and see our patents are only steering week from the other end before we have to make sure when I say this but the U.S. and European patent are dramatically different and the ability to get injunctive relief and the ability to do formulation pattern, type stuff and pattern extension stuff is much, much reduced than United States so I do think it's important to realize that our territories are outside of the United States and well you know there may or may not be challenges within the US and we should have a different pattern environment in which to operate in and I think historically you can see that companies are much less aggressive in pursuing pattern solutions outside United States.

David Dean

One thing I would add is that the patent that SteadyMed is potentially litigating, has not been growing to the equivalents has not been granted [ph].

David Novak

Got you, perfect, that's great. Thanks. And just on XYDALBA for a moment, I know as of yet or reach events it hasn't been launched in the EU and there is no plans as of now to launch it in the EU. However, looking at the two antibiotics side by side, can you elaborate on any of the benefits Dalbavancin has over Oritavancin? I think dal has a quicker infusion time. Is there anything else that's noteworthy, we should be aware of?

Bill Hunter

The infusion time is actually significant thing David, 30 minutes I think of those of Dalbavancin conversion and I think it's three hours for Oritavancin; and when somebody is sitting in the ER that is very significant difference.

David Novak

Got it. Perfect. And then just lastly on BRINAVESS U.S., so I know you guys don't really break out sales this way but I have the growth in the model of 50% year-over-year. I was looking for a little bit of acceleration in second half of this year from the launch in Belgium, Lebanon, Jordan, South Africa, Argentine, etcetera. Can you comment on how I should be thinking about this in the back half of the year? And beyond is 50% year-over-year growth reasonable or should I start to reconsider this? Any sort of insight would be great.

Bill Hunter

I think it is reasonable right now. I think it's the big constraint as you know on the drug outside of the United States is that we have not been able to get reimbursement in some of the major European markets so we are continuing to hire and move on those fronts I think if we were able to get into Italy or France then we could talk about maybe accelerating that a little bit but in the absence of that kind of same source sales I think the growth rate you have is probably around the right one.

David Novak

Alright, perfect. That's it for me guys and thanks again and congrats on the tremendous business development in the recent, it's been a real pleasure to watch.

Bill Hunter

Thank you.

Operator

Thank you. Your next question comes from R.K. [ph] from H.C. Wainwright. R.K., please go ahead.

Unidentified Analyst

Thank you again for taking my questions. On XYDALBA, what needs to be done to start marketing this product in Europe and how long would it be before we can see some meaningful revenue from this product in Europe?

David Dean

It is possible to be marketing the drug in kind of hospital exemptions in certain places so I think we can start doing that before the end of the year, broader role is obviously much easier with national pricing reimbursement and those decisions are coming more in 2017. So I think we will have some sales in 2016, I don't know that they will move the needle a lot but you will start to see a bigger role out in 2017 and obviously there is three countries are matter in Europe where we have the drug in UK, France and Germany. And I think when you see pricing reimbursement achieved in those countries that is when you can expect to see a more meaningful role and the one thing I would say that antibiotics is they do tend to be initially kind of slow grow, they take a while to get going but they tend to be really great drugs once you get going because once they find a home they tend to get used over and over again and they tend to have a very robust and nice lifecycle once they get going. But I think if we keep -- in 2017 as realistic, you that by 2018 we should have reimbursement and really begin to expect sales to be meaningful in 2017 but I expect 2018 would be where things start really to pick up.

Unidentified Analyst

Okay.

Bill Hunter

The regulatory really aren't any between us and launch, where we are now we are really starting to final and very typical supply chain type activities things that are typical outwork and things like that when you are preparing for launch.

Unidentified Analyst

Okay, thank you. And then regarding BRINAVESS in Canada, again what's the timeline for this in terms of launching it and the bigger question is how do you see this launch, the strategy of developing Canada as a market not only for (45:48) but obviously for other products that you want to bring in.

Bill Hunter

I think actually we could reasonably well with AGGRASTAT, so I do once we get labelled there, I'm looking forward to moving that forward, it's the drug that's certainly been successful in the U.S. and we think that the Canada could be a microcosm of that. On the BRINAVESS side, we are expecting to hear from Canada as I said in the first half of next year with respect of approval. Assuming that is positive, we would then have to go through the pricing reimbursement cycle there on a province by province basis that might take on a little while, may a year or so to do all of that. And so I think you'd be looking at the end of 2017 when we first ones came online and kind of 2018 before we started adding sales there.

So as I look at Canada, it's basically the story we tell in Europe but its frame shifted by a year. AGGRASTAT starting now, then Canada comes in reimbursement and then you have the submissions in the other drug. So it's all there but it's a year behind the European roll out at times. And I think a lot of these drugs could have a pretty decent potential in Canada, we haven't broken that out, I think we will do that when we get closer to launch but good drugs in Canada do $10 million, $20 million or $30 million. So we're hopeful that some of the things we have in the pipeline are able to do that.

Unidentified Analyst

Okay. And the last question from me is you know if you consider baseball as an analogy, in which innings are you in in terms of having an optimal number of drugs that your current commercial structure can manage without a need of putting in additional resources.

David Dean

Well, there is nothing more baseball in my mind as rising to give you the appropriate answer on that. Based on the current business plan I feel it's kind of the sixth inning you know the wild card here is whether or not we can bring in one more asset. I think if we are able to bring in another asset that accelerates things dramatically I think that gets us to the late innings very, very quickly.

On the positive side I will say that which is that the more drugs we bring in and the higher the quality of partners we get them from and in particular I'm referring to the Allergan transaction than more opportunities that we seem to be seeing. So what I'd like to do -- I think we'd all like to do is do a transaction that gets us to profitable, it's not that we don't want to do another XYDALBA where we're pre-launched and we're talking about revenues a year from now or two years from now, we do, that's a big part of the business but we don't think that's what the company needs right now. So the end games a little more complicated in my opinion, I think we need to get out one transaction to get us the sustainability. So that I think could accelerate things so that's what really important.

The second part of your question is about whether or not we're at capacity, no we aren't, and so once you did that, then I think then it will make a whole lot of sense to bring in one or two more drugs.

Unidentified Analyst

Thank you very much.

Operator

[Operator Instructions] Your next question comes from Joseph Walewicz from LBS. Joseph please go ahead.

Joseph Walewicz

Good afternoon. Just two quick question may be, first looking at XYDALBA in U.S., we've seen some uptakes since the change through single-done. Just wondering we can kind of look at how the U.S. has rolled out and if there is anything instructive in a way the U.S. uptake is happening we should be thinking about Europe in your upcoming launch? And then second, just regards seasonality, [indiscernible] cardiology is that some are pretty quiet and of course the inventions go down, is there seasonality in this business I think we saw little bit last year we should be expecting that for Q3.

David Dean

The first part on XYDALBA, I think we are very happy to be launching with one story so it's going out first time is the only time with the single dose story is really kind of special to us. I think as I eluded to in the presentation that helps with the positioning and I think that helps with the target market and you know clearly this is a premium priced antibiotics clearly this is a lot more expensive than Vancomycin, we understand that. And we understand that Europe in many case is a price-sensitive market. However, I do think that single-dose and not having to bring the patient back allows us to tell the story of finding the right patient and finding the right patient is the patient that's going to be lost for follow-on for one reason or another and that justifies or savings in hospitalization, and that justifies increased cost associated with it, that story is tougher to tell when you've get a second dose.

So I think that one dose really helps us launch in a targeted way right from day one, we're not going to get every -- this is not AVAC [ph] that's going to be used for every skin and skin structure infection, it's expensive. But we can target the right ones and I think that really helps with positioning and I think it gives us the best chance on going forward. The second part -- I'm sorry, Joe, you were asking about?

Joseph Walewicz

The seasonality with regards to intervention.

David Dean

Seasonality; we certainly do see that so you know July and August are slow months, everywhere they are slow months in Europe. We often do see some seasonality associated with that, it won't be crazy dramatic however because remember that probably 60% of our business is distributor in nature so that smoothen itself out over the course of the course. But yes third quarter is historically not the best; and fourth quarter and first quarter tend to be better than second and third.

Joseph Walewicz

Okay. Finally just can I add to that; was there anything -- I had a chance to see your MD&A before the call but anything in your commentary regarding what time either delayed shipments this quarter or increased shipments usually higher or lower just anything on the inventory side talk about the channel? Thanks.

David Dean

I always make it a point not going quarter to quarter because of exactly those types of reasons you know where kind of directing people this year to work mid-20s and revenues were we hit the midway point in the year at 13%, so we're feeling good about where we want to be and that's six months averaged out is right about where we think we're going to be as we look at the next six months coming now quarter-to-quarter but we feel pretty good about where we have guided people to be on the year.

Joseph Walewicz

Okay, great. Thank you.

Operator

The next question is from Larry Hemowichz [ph] from HMTC. Larry, please go ahead.

Unidentified Analyst

Thank you. Good afternoon, David. Good afternoon, Bill. The only question I have -- lots of questions have been asked that I was thinking about asking but the question I want to ask and you mentioned you've had some progress -- you indicated some of sort of clinical trial or something could may be moving you off clinical holes, is there anything else you can add to that beside what you said in your prepared remarks and on the slide?

Bill Hunter

Not a lot, just to clarify people unlike yourself who aren't as familiar with the situation. Because we're on clinical hold we actually can't do clinical trials. So we're kind of restricted to animal studies. So the back and forth, we've had -- the agencies with about animal studies and they have been collaborative, they've helped us design them, they've helped us to get the endpoints that I believe they are looking for from those studies. So our hope is that the studies go the way we think they will and we get the results that we hope we will and that you know will get us to somewhere. I think the addition of Mark and Bob has certainly helped with the dialogue with the FDA and I think everybody has been involved and to call this feels like that people are collaborating to trying get us there. So, cautiously optimistic.

Unidentified Analyst

So Bill, what that I am hearing is saying does it sounds like you'll get a clinical trial in animals started sometimes this year, hopefully, finish it up pretty quickly and then if all goes well, potentially move off clinical holds in early '17?

Bill Hunter

The idea would be to go back to the agency with all the new data that we have and in early 2017 and the goal of that meeting would be to request to remove the clinical hold and that's when we would be trying to move it towards the decision point.

Unidentified Analyst

So it would be some sort of safety study, basic study, it's safe on animals, therefore we can move into?

Bill Hunter

No, its little more complicated than that. It do kind of has to do with the dosing administration and some particular pharmacokinetic questions that the agency has. So -- but the animal study will be done before the end of the year and it will be -- and that will be part of the package that we go to them within early 2017.

Unidentified Analyst

Okay, thank you, Bill.

Operator

Thank you. There are no further questions at this time. Please proceed.

Bill Hunter

Thank you very much. Well, we're right on an hour. Thanks everyone for participating in the call. As always, we are here and available for follow-up, and we look forward to the coming quarter and advancing business towards the goals that we laid out for you today. So thank you very much and we'll be in touch.

Operator

Ladies and gentlemen, this concludes your conference call today. We thank you for participating, and ask that you please disconnect your lines.

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