Avanir Pharmaceuticals, Inc. (NASDAQ:AVNR)
Citi 2012 Global Health Care Conference Call
February 29, 2012 9:00 AM ET
Keith Katkin – President and CEO
I’d like to start with our forward-looking statements, as I will be making comments that are forward-looking in nature pertaining to our other development and commercialization of our product candidates. I’d refer everyone to our quarterly and annual filings of the SEC, available on the Avanir website, or on the SEC’s website.
Avanir is a uniquely positioned specialty biopharmaceutical company focused on CNS therapies. Our lead product compound NUEDEXTA was approved in late 2010 as the first and only therapy for the treatment of pseudobulbar affect. Subsequent to the FDA approval in late 2010, we launched NUEDEXTA in February of last year approximately one year ago, and since launch we’ve seen a steady and continued growth in both physician adoption and prescription, and I’ll get into more detail later in the presentation about pseudobulbar affect, as well as our commercial launch of NUEDEXTA.
In addition, with arguably the largest hurdle behind us, that being FDA approval, it opens up NUEDEXTA, or as we call it in clinical development, AVP-923, for a number of additional indications. Those listed on the slide include: central neuropathic pain in multiple sclerosis, behavioral disturbances in Alzheimer’s patients and a host of a number other potential indications. And many of you may have seen this morning, an announcement that we made in regards to a license agreement with Concert Pharmaceuticals, and that license agreement gave us access to their deuterated dextromethorphan, and we really view that as a next-generation dextromethorphan with the potential in all of these indications that I mentioned, and I’ll go into more detail on these indications – potential indications as well as the Concert deal later in the presentation.
Taking a quick snapshot of our pipeline, you can see NUEDEXTA on the top there with FDA approval for the treatment of pseudobulbar affect. In addition, you can see NUEDEXTA or AVP-923 in Phase II studies for central neuropathic pain in multiple sclerosis. In regards to behavioral disturbances in Alzheimer’s, we’re currently working on our investigation on New Drug Application. We’re planning on filing that with the FDA in the second quarter of this year with the intent of enrolling our first patient in mid-to-late summer of this year. And, finally, our diabetic peripheral neuropathic pain, you may be aware that we announced a publication of our Phase III studies in diabetic peripheral neuropathic pain a number of weeks ago, that program looks very promising. However, we it on hold right now until we get the results of our neuropathic pain and multiple sclerosis. Additionally on the slide, you now see the addition of our deuterated dextromethorphan program. That is a preclinical asset that’s what we’ve planned on to moving that into the clinic as quickly as possible. And then, finally, our non-CNS related products ABREVA and Thravixa.
So a quick overview of the deal that we signed with Concert Pharmaceuticals this morning, it is an exclusive worldwide license agreement to develop and commercialize deuterated dextromethorphan. Concert is a privately-held company in Lexington, Massachusetts. We’re getting a several deuterated dextromethorphan compounds. And what’s very exciting for us is that deuterated dextromethorphan is a new chemical entity and therefore has the associated intellectual property with the new chemical entity and the existing patents lasts through 2030, with opportunities for extension, as well as additional patent applications in the future. And I’ll go into a little more detail on the deuterated technology later in the presentation.
So turning now to recent achievements of the company, as I mentioned at the onset, the launch of NUEDEXTA continues to go quite well. We have achieved a record prescriptions in December of over 5,600 prescriptions and over 6,000 in January, showing nice continued growth. If you take data point from early February, we’ve had over 1,600 prescriptions in that week alone. If you annualize the value of those prescriptions, it annualizes to a run rate of $37 million in NUEDEXTA sales, and that we continue to see – expect to continue to see growth in weekly and monthly prescriptions.
With regards to adoption of the physician community, we continue to see 70 to a 100 subscribers each week. We’ve seen this over the past year and we think it’s a very positive sign for the product, as more and more physicians get exposure to NUEDEXTA and the benefits that it brings to patients. Then, finally, in the fourth quarter of last year, we deployed our institutional sales force, approximately 32 representatives focused on the long-term care setting and we’ve seen a very strong uptake within that segment, with long-term care now representing over 50% of the total prescriptions written for NUEDEXTA.
Turning now to a quick overview on pseudobulbar affect and the PBA market, for those of you not familiar with PBA, PBA is a neurologic disorder that causes uncontrolled emotional outbursts. In our case, we studied episodes of uncontrolled laughing and/or crying in our Phase III clinical studies. And what’s important about pseudobulbar affect is it must occur secondary to a neurologic disease or injury. So it occurs secondary to multiple sclerosis, to Alzheimer’s disease, and other forms of dementia, secondary to Parkinson’s, dramatic brain injury or stroke.
And what happens is there is essentially a legion in the brain, because of the disconnect between the front and the back of the brain, these people no long are allowed to control their emotions and they have these uncontrolled outburst that can last anywhere from five to 30 seconds to upwards of 5 minutes. And if you’ve seen – if you’ve met one of these patients or if you’ve seen the impact of PBA, you can understand that these patients are already dealing with a very significant neurologic disease or (inaudible) sustained a neurologic injury, and this uncontrolled episodes add significant burden for these patients. To give you a sense in our clinical studies, the average patient was having five to seven episodes per day. So five to seven uncontrolled emotional outbursts per day between 35 and 50 episodes per week. So it takes a significant toll on these patients.
Now turning to NUEDEXTA, as I mentioned, the first and only FDA approved therapy for the treatment of pseudobulbar affect. And NUEDEXTA pharmacological have become very important in light of the Concert deal that we signed this morning. So if you look at dextromethorphan mechanistically, dextromethorphan is an NMDA receptor antagonist and a sigma-1 agonist. The issue with dextromethorphan by itself is it’s rapidly metabolized by the human body into its metabolite dextroamphetamine (ph). So for decades, clinicians have been trying dextromethorphan on a number of potential CNS disorders with equivocal results. What we found is that if you inhibit the body’s ability to metabolize dextromethorphan, then you can get the sufficient enough levels of dextromethorphan in the plasma, allowing dextromethorphan to pass the blood-brain barrier and confer benefits in PBA and additional benefits and other potential indications that talks about like pain and behavioral disturbances.
So what you can see here on the graph there is you just delivered 30 milligrams of dextromethorphan by itself you get very low plasma concentration of DM. However, with the addition of just 10 milligrams of quinidine, you see roughly 25-fold increase in the amount of dextromethorphan in the plasma, and that’s because the quinidine is blocking the body’s ability to metabolize dextromethorphan. Now this will become critically important as we talked about the Concert deal in deuterated dextromethorphan. What deuterated dextromethorphan has the potential to do is to reduce the amount of quinidine needed to maintain this level of dextromethorphan in the plasma or potentially eliminates the need for quinidine in altogether, thereby allowing the body to have high levels of dextromethorphan with no quinidine.
So I’d like to spend the next few slides talking a little bit of the efficacy data that we observed in our Phase III clinical studies. And whenever we speak with physicians that have had clinical experience with NUEDEXTA, we hear the same thing over and over again. They can’t believe how well the NUEDEXTA works for the treatment of PBA. Even neurologists and psychiatrists that have been dealing with therapies will offer some benefit, but very often not very observable in their patient population for things like suppression or for multiple sclerosis treatments and the likes.
So the treatment effect of NUEDEXTA is incredibly evident as you can see by this slide. And here you’ve got the number of episodes that patients were having on a weekly basis from our Phase III clinical studies. As I mentioned, the baseline patients were having between 35 and 50 episodes per week. And you can see the NUEDEXTA treatment line down below where patients achieved a 60% reduction in their episodes within two weeks of starting NUEDEXTA therapy and that increased to approximately 80% to 82% reduction in their episodes starting on week five and beyond. So quite an efficacious product that’s delivering a substantial benefit to these PBA patients.
In addition, for some patients, one episode is too much. They’re trying to maintain a job that doesn’t allow them to have any episodes. So one of the predefined endpoints that we had in our study was remission, and that was defined as no episodes during the last two weeks of the clinical study. And here you can see that 51%, more than half of the NUEDEXTA treated patients had no episodes during the last two weeks of the study, again a very, very positive results, especially in the minds of neurologists and psychiatrists treating these patients with pseudobulbar affect. And when we talked to doctors, we hear that this is what they’re observing and they’re very impressed with the efficacy of NUEDEXTA.
Turning now to the commercialization and the launch of NUEDEXTA which happened last February. Really four main areas that we’re focused on as we continued our commercial of NUEDEXTA. First is expanding physician adoption of NUEDEXTA; second, increasing the diagnosis and treatment of PBA; third, is motivating patients to request NUEDEXTA; and then, finally, maximizing access or minimizing barriers to access to NUEDEXTA. And I’ll just spend a few minutes on each of these to give you a sense of some things that we’re working on in these areas.
First in terms of expanding physician adoption of NUEDEXTA, we now have two separate sales forces that are selling NUEDEXTA. The first sales force is our outpatient or specialty sales force, calling primarily on neurologists and psychiatrists and in the outpatient offices of these physicians. The other sales force is our institutional sales force, primarily calling on long-term care facilities and long-term care pharmacies. And as we learn more and more about the market and also more and more about the long-term care opportunity, we continue to refine our mix the amount of time that we’re spending within each of these segments, so we decided to do over the last few weeks is make a slight tweak to our sales forces.
And you can see here that our outpatient sales force or our specialty sales force, we’re making a slight reduction to taking from approximately 76 sales representatives, down to 71 sales representatives, and then we’re going to reallocate those five – those five sales representative to our institutional sales force and then add an additional five sales representatives, increasing our institutional sales force from approximately 32 sales representatives to 42 sales representatives. And we think given the growth that we’ve seen within the long-term care setting and the fact that represents more than half of our business already, this is the right thing to do to continue to accelerate the growth of NUEDEXTA.
Moving now to increasing awareness and coverage of PBA and NUEDEXTA, we continued to receive lot of exposure locally and nationally. This gives you some of the snapshots of various media outlets that have covered NUEDEXTA, including the local news, local CBS news here in New York, which has run actually a number of spots on NUEDEXTA with their medical health correspondent.
But I’ll draw your attention to the next slide, which is the February 21st edition of the Washington Post. And this is an article that appeared on the front page of the Health & Science section, and it’s quite an achievement to get an above the center story within the Washington Post, a nationally-acclaimed newspaper. And here the story focuses on one of the PBA patients that suffered a dramatic brain injury due to getting hit by a drunk driver and talks about the impact of PBA on this patient’s life, how it’s effected his family, his ability to be a father, his ability to spend time with his friends, and also talks about the benefits that he has received from the treatment of NUEDEXTA.
So I really believe there is a significant public interest and patient interest aspect in NUEDEXTA, and we expect we will continue to see media pickups going forward as the general population learns more and more about PBA, understands the differential diagnosis versus depression and really understands that there is now the ability to treat PBA as a separate and distinct neurologic condition.
Now, switching gears to motivating patients to request NUEDEXTA. We’ve got a number of programs in place to help facilitate this. Probably the most important is our consumer campaign that we’re going to be piloting here in the upcoming months. We’re trying to reach out to the periodicals, the magazines that many of the caregivers of these neurologically comprised patients read, as well as some of the journals that they read. This will include the AARP Journal, it will include magazines likes Better Homes and Gardens, Reader’s Digest and the likes, again with the goal of increasing the awareness of PBA, but also motivating the patient or their caregivers to ask their doctors about NUEDEXTA, the treatment for PBA.
And, finally turning to patient access, very important, we continue to make progress in patient access. You can see here we’re making good progress on Tier 2 access, which is the best possible position for a branded pharmaceutical product, and down below you can see that we’ve got approximately 65% of lives that are covered at either Tier 2 or Tier 3 unrestricted, which I think is a very good progress that we’ve made since launching NUEDEXTA approximately one year ago.
So turning now to NUEDEXTA prescription growth, which is – what’s on most people’s minds in relationship to the launch. So this gives you a sense of the monthly prescriptions going back to our launch in February of last year. As I mentioned, you can see, over 6,100 prescriptions in January, over half of them coming from the institutional setting. And if you look at the January growth rate layer over the first month of the fourth quarter versus October of 2011, you can see that we’re growing at approximately 50% growth rate versus that first month last quarter. So again we continue to see very nice sustained growth in the overall prescriptions.
Moving now to the other potential indications for NUEDEXTA or AVP-923 as we call it in the clinic, really again if you look at the mechanism of NUEDEXTA as an NMDA receptor antagonist and a sigma-1 agonist, the medical literature is populated with a number of potential indications. You take that and combine it with some of the results that we’ve seen in our clinical studies, either our Phase III PBA studies or other pain studies that we’ve done, and then you quickly draw a picture of all the potential opportunity for NUEDEXTA and AVP-923 and now our deuterated dextromethorphan technology.
And just to give you a sense on the neuropathic pain front as I mentioned, we’re enrolling the large Phase II studies for central neuropathic pain in multiple sclerosis, we also have positive data and Phase III data in diabetic peripheral neuropathic pain. Behavioral disturbances in dementia, we’ll be, as I mentioned, filing that IMD in the second quarter with the goal of enrolling first patient in that study in the mid-to-late summer. And then a number of these other areas like Parkinson’s, we’re looking to partner with external sources and foundations as the Michael J. Fox Foundation in order to explore the therapeutic utility of NUEDEXTA or AVP-923 in a number of these areas like Parkinson’s, memory and cognitions. And then we have a very active investigator initiative study program, looking at things like Alzheimer’s, as well as potential treatment for the progression of Alzheimer’s disease as well. So we look forward to a continued flow of news and information in the coming months and years in regards to the potential benefits of NUEDEXTA.
Looking at the PRIME study, which is a study of AVP-923 and central neuropathic pains, secondary to multiple sclerosis, a four-arm study exploring three different dose formulations of AVP-923, as well as the NUEDEXTA formulation, the 2010 formulation, we’ll be looking at an 11-point Likert pain rating scale within the study, and it will be a 12-week double-blind study, approximately 400 patients, so a very robust study. And based on we’ve observed in our Phase III PBA studies, where we’ve looked at BMS pain to the secondary endpoint, we do believe that there is a strong proof of concept here for this study.
And behavioral disturbances and Alzheimer’s another very significant unmet medical need. No therapy is currently approved for behavioral disturbances or agitation in Alzheimer’s disease, so again we have the ability to set a path here and bring significant benefit to these patients. You can see on the graph there, a very significant problem, affecting over 50% of patients with mild Alzheimer’s disease going up to in excess of nearly 70% in patients with moderate-to-severe Alzheimer’s disease. So we’ll continue to find updates on that, including acceptance of our IMV by the FDA in the coming quarter.
And, next just moving quickly to the deuterated dextromethorphan technology, just to give everyone a sense of why we’re so excited about this program. It is a new program; it protects and expands our franchise focusing on NMDA and sigma-1. And it’s very – as I mentioned, a similar mechanism to NUEDEXTA, however potentially with the need to reduce or ideally eliminates the need for quinidine in NUEDEXTA. It is a new chemical entity, which intellectual property through 2030 at a minimum, and we believe that we can integrate it into our existing clinical development programs for NUEDEXTA, specifically in the BMS pain arena, as well as the behavioral disturbances in Alzheimer’s. And as I’ve demonstrated down the potential slide – the potential indication slide, that really opens up the door for a whole host of new indications, where we don’t have intellectual property protection right now for NUEDEXTA, we do get that protection with deuterated dextromethorphan as an MCE.
So our goal here with this program is to initiate human PK studies as quickly as possible. We want to get those studies completed by the time we unblind our Phase II study in the multiple – in the secondary to multiple sclerosis and our behavioral disturbances in Alzheimer’s with the goal being to include deuterated dextromethorphan in the Phase III programs associated with those indications.
So – and just to give you a sense of how deuterated technology works, it’s actually quite simple. Essentially, you’re replacing regular hydrogen with heavy hydrogen. And what the heavy hydrogen does is it slows the body’s ability to metabolize dextromethorphan and thereby increasing the bioavailability of dextromethorphan. It’s an emerging therapeutic area and we’re very excited to be partnered with Concert in this area.
And if you take a look at some of the characteristics of deuterated dextromethorphan, it was this data that got us extremely excited about this program. On the top there you can see the 8% of dextromethorphan or deuterated dextromethorphan here referred to as C-10003 and the amount of the (inaudible) remaining in the – as you can see the level of deuterated dextromethorphan remains much higher than regular dextromethorphan, we believe mimicking the profile of NUEDEXTA. So we look forward to taking this into humans and see if we can recreate the NUEDEXTA dextromethorphan to profile in humans without the need for quinidine. And down below important that binding – receptor binding remains the same. You can see both NMDA receptor binding and sigma-1 binding being very similar between the products. So we’ll continue to provide updates on this program, but very excited to continue the advancement from preclinical into humans and then ultimately file an IND in the US.
And finally turning to a financials; and for Avanir, we ended December 31st at approximately $75 million in cash on the balance sheet. We believe that puts us in a very strong position. We get a lot of questions about our need to raise future capital and I think it’s important for everybody to note that we do not expect to do a large diluted financing anytime in the future. We believe that the cash that we have as well as access to capital in a number of ways provide us sufficient runway for the company.
Taking a look at our income statement, we expect that our annual operating expenses will be between $85 million and $92 million, excluding share-based compensation expenses. And this includes the recent Concert deal. So we are not increasing our expense guidance even with the signing of this Concert deal. We believe that we want to absorb the upfront costs, as well as the costs of the clinical developments in fiscal year 2012 within our existing budget.
So with that our goals and objectives for 2012 remain very clear, to continue to build the PBA market and grow NUEDEXTA sales. As I mentioned, we have a number of initiatives focused on that, including initiating the direct-to-patient advertising for NUEDEXTA, driving increased reimbursement and reallocating our resources towards this institutional opportunity with our institutional sales force expansion.
Outside of our commercial objective, we’ll continue to enroll the PRIME study, we’ll get this behavioral study in Alzheimer’s filed and get patients enrolling before the end of the year, and additionally we’ll continue to advance the marketing authorization application with the EMA and continue to have partnership discussions for NUEDEXTA outside of the US. And then, finally with the addition of deuterated dextromethorphan, continue to advance that program into PK studies, and then look to innovate it into our existing pipeline.
So I’d like to thank everyone very much for your time and attention. I’ll be going to the break out room which was mentioned shortly, and look forward to all of your questions. Thanks very much.
[No Q&A session for this event]
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