Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR)
Aegerion QLT Merger Closing Call
November 29, 2016 04:30 PM ET
Amanda Murphy - Associate Director of IR
Mary Szela - CEO of Novelion Therapeutics
Greg Perry - CFO and Administrative Officer of Novelion Therapeutics
Andrew Walker - Rangeley Capital
Jessica Fye - J.P. Morgan
Good afternoon. Welcome to the Conference Call introducing Novelion Therapeutics. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time [Operator Instructions].
I would now like to introduce your host for today’s conference, Ms. Amanda Murphy, Associate Director of Investor Relations. Ma’am you may begin.
Good afternoon, everyone. Thank you for joining us for today’s special call. It’s our pleasure to introduce you to Novelion Therapeutics. With us on the call today are Mary Szela, Chief Executive Officer of Novelion Therapeutics and Greg Perry, Chief Financial Officer and Administrative Officer of Novelion Therapeutics. The slides in today’s presentation, along with the press release issued earlier this afternoon, are available, in connection with the webcast, on the Investor Relations section of the Novelion Therapeutics’ Web site, novelion.com.
Today, we’ll be making forward-looking statements regarding, among other things, the strategic benefits of the merger transaction, the expected impact of the transaction, and Novelion’s future plans, goals and strategies. It is possible that actuarial results could be materially different from our current expectations. Please note that, except as required by applicable law, we do not update forward-looking statements even if actual results or future expectations change materially.
We ask you to please refer to the cautionary statements contained in our SEC filings for a more detailed explanation of the inherent limitation of such forward-looking statements. At the conclusion of the prepared remarks, we’ll open the call up for questions.
I’ll now turn the call over to Mary Szela, Chief Executive Officer of Novelion Therapeutics.
Thanks, Amanda and good afternoon. This afternoon, we announced the completion of the merger, between Aegerion Pharmaceuticals, a company focused on the development and commercialization of innovative therapies for rare disease and QLT, an Ophthalmic Biotechnology company based in Canada, also focused and train rare diseases. The completion of the merger results in an organization with an intensified focus on rare disease, drawing upon complementary capabilities from each company. The transaction also provides an infusion of capital to Novelion that enhances our ability to invest in the future. Shareholders of both companies overwhelmingly agree to support the transaction with nearly 80% of shareholders from both companies voting in favor of the merger.
Following completion of the transaction, QLT has changed its name to Novelion Therapeutics and will be trading on NASDAQ under the ticker NVLN and the Toronto Stock Exchange under NVLN, it’s a tongue twister. Aegerion common stock will be delusive from NASDAQ and the QLT’s ticker symbol QLTI will no longer be listed on the NASDAQ and Toronto Stock Exchanges. Novelion’s headquarters will be based in Canada and the company’s operational center to manage by Aegerion will be in Cambridge, Massachusetts. Aegerion will remain a wholly-owned indirect subsidiary of Novelion.
In February, we shared with you our roadmap for transforming Aegerion. The completion of the transaction with QLT served as a fundamental step and re-establishing Aegerion as a growing high performing rare disease company; in fact, throughout 2016, Aegerion has refined, defined and executed against six deliberate actions to stabilize the company and began its transformation to deliver high performance and growth. These includes the transformation of our leadership team, resetting its cost structure, remediating legacy issues, revitalizing its commercial organizations, executing the merger with QLT and developing the operating framework for Novelion.
I am firm believer that any transformation starts from the top, and Aegerion’s most important accomplishment has been the reshaping of its leadership team. This was a process that began with the appointment of Greg Perry as Aegerion’s Chief Financial Officer in 2015. Greg brings extraordinary discipline and governance to the planning process and financial system, but more importantly, he is valuable leader with a keen eye on delivering value for shareholders with the right stewardship to invest for growth.
In building its management team, Aegerion further strengthen the company commitment to strong science with the recent appointment of Dr. John Orloff, Head of R&D. Dr. Orloff is an endocrinologist by training; has over 20 years of experience in clinical development; and following this transaction, he will oversee the development strategy for all our existing and future assets; with the near-term focus on overseeing the design of our clinical program, that develops MYALEPT to its full potential; while also leading the strategic development of the zuretinol.
Nicole [indiscernible] is a seasoned regulatory leader who will spearhead our regulatory organization. She brings more than 20 years of experience in orphan product category, regulatory development and is preparing to file a marketing authorization application for metreleptin in Europe and launch JUXTAPID in Japan.
In strengthening Aegerion‘s commercial capabilities, Remi Menes Alexis recently joined as Chief Commercial Officer of Aegerion, intensifying its shift to a clinically focused organization that is essential to its identity as a rare disease company. Following the transaction, he will oversee the commercialization of Aegerion’s products and be directly involved with prelaunch activities related to zuretinol. And we completed our Novelion executive team with strong leaders in legal compliance and human resources with the appointments of Ben Harshbarger, General Counsel; Roger Lewis, Global Chief Compliance Officer; and Linda Buono, Senior Vice President of Human Resources.
It's an honor for me to assume the role of CEO of Novelion Therapeutics, and the collective leadership here brings deep capabilities to the organization in the respective areas of expertise. But more importantly, they share a common vision for building a high performing growth business within the Novelion entities. Fundamentally resetting Aegerion’s cost structure was the second objective we deliberately pursued it at Aegerion throughout 2016. Through key measures to reduce operating expense in align spending top-line performance Aegerion dramatically reduces annual operating cost by approximately $75 million in 2016.
The anticipated resolution of remaining legacy issues will continue to pack Aegerion cost structure over the next few years, but with actions we’ve implemented. And with the merger complete Aegerion has been strengthened. Greg Perry will address how we plan to close-out 2016 and comment on the financials of the merger at the end of my remarks.
In restating Aegerion for growth, Aegerion’s third action was to address the number of legacy issues I just referenced. The management team that I introduced you early on the call has made resolution of these issues as a top priority and concort to preparing Aegerion for a sustainable future. The most significant among these legacy issues are investigations by the department of justice and the securities exchange commission. This May, Aegerion entered into preliminary agreements in principal with the DoJ and SEC. These preliminary agreements allow Aegerion to address the concerns raised by the DoJ and SEC, while allowing Aegerion to move forward and build for the future and we are working to finalize the settlement.
Aegerion’s fourth priority it was to revitalize its global commercial organization. Specifically, Aegerion needed to ensure its structure mass, the research requirements of patients, and healthcare professionals in this market. Aegerion has skilled services to meet those needs across its global markets and build or enhanced skill set better serve patients and our healthcare professionals. Aegerion also refocused its efforts on strengthening its U.S. commercial capabilities by increasing the use of data and the analytics to more precisely match field-based gap toward generalized lipodystrophy or adult homozygous familial hypercholesterolemia, or HoFH patients respectively, are most likely to be identified and treated.
Accurate identification and diagnosis of adult HoFH patients is difficult, the emergence of the PCSK9 inhibitors, while disruptive for JUXTAPID in the U.S. has improved physician’s ability to identify these HoFH patients and Aegerion has begun contracting with Managed Care organizations to minimize stepped at for JUXTAPID when HoFH patients have not responded to treatment with the PCSK9. Given the severity of illness associated with HoFH, the simplification of this administrative process would be a win for patients transitioning to JUXTAPID therapy and keeping them on treatment.
In Japan, where Aegerion recently received both regulatory and pricing approval for JUXTAPID, Aegerion has structured its customer facing organizations to focus on areas where HoFH patients have already been identified, including apheresis center and academic medical centers. Many patients have already undergone genetic testing to confirm their diagnosis of HoFH.
Because HoFH has long recognized by Japanese Health Authorities as an orphan disease without adequate treatment, we’re excited about the opportunity to enter this market. Aegerion recently secured strong pricing approval and will be initiating the launch of JUXTAPID in Japan in January. The alignment of Aegerion’s U.S. field-based organization, that I mentioned moment ago, provides increased capacity for field-based discussions around MYALEPT. With MYALEPT, Aegerion has a drug with a very strong value proposition for patients. And Aegerion is intensifying its medical education efforts as lack of awareness of generalized lipodystrophy is a barrier for successful treatment for patients.
Our fifth action was the completion of the merger transaction between Aegerion and QLT, with the potential to build a company organization with the portfolio has the potential to achieve $500 million in peak year sales. When we spoke to you in June about our plans to pursue a merger, we highlighted the strategic fit of the two organizations. QLT’s capital strength and development, asset zuretinol coupled with Aegerion’s clinical regulatory development expertise, global commercial presence, and two unmarked therapies. With respect to zuretinol, Dr. John Orloff is examining this program to determine the best development path for this important asset and will provide more detail as it progresses.
As we’ve been preparing for successful merger and building the future of Novelion, Aegerion’s first priority was to define the operating framework with three key strategies; first, deliver transformational therapies for patients with diseases; second, support comprehensive patient care with education, services and support; and last, become an industry model for performance and accountability as it works to rebuild its reputation as a trust partner in healthcare.
As I reflect on the last months with Aegerion and even more compelled by the importance of JUXTAPID and MYALEPT as treatments for both adult HoFH and GL, Aegerion is working to reach the appropriate adult HoFH patients with JUXTAPID, and we’re excited about the prospects for a successful launch in Japan. And we see tremendous potential with MYALEPT for its current indication in GL, and the potential expansion of this indication includes partial with the dystrophy OPL based on the clinical data we’ve seen in the subset of patients with PL.
Before the end of the year, Aegerion plans to submit an MAA filing for metreleptin in GL and the PL subset population in Europe. And under the oversight of John Orloff, Aegerion is building a scientific platform for MYALEPT with the goal of realizing the full potential of therapy for other rare diseases as the modulation of the leptin signalling pathway may provide clinical benefit to patients with severe unmet needs. And finally, we’ll explore the potential for zuretinol as a treatment for a rare ophthalmic disease.
Now I’m going to turn it over to Greg Perry to summarize the financials of the transaction, how we expect to close 2016, and we’ll make some final comments then we’ll take your questions.
Thanks, Mary. Good afternoon, everyone. With the completion of the merger, shareholders of Aegerion common stock will receive 1.0256 QLT common shares with shares of Aegerion; QLT will begin trading as Novelion Therapeutics on the NASDAQ and Toronto Stock Exchanges; QLT shareholders prior to the closings have received warrants with respect to the DoJ SEC in class action matters exercisable in the DoJ and SEC in class action matters that result from amount excessive subscribed threshold as further described in the S4.
Turning to performance for 2016, we expect full year sales for JUXTAPID and MYALEPT between $145 million and $150 million. Throughout 2016, Aegerion has worked to reduce operating expenses to better align with top-line revenue. And in fact, Aegerion made significant progress in managing its operating expenses and expects to reduce those expenses by approximately $35 million from full year operating expense in 2015. This excludes charges of $28.5 million for the proposed DoJ settlement in 2016 as well as $4.1 million in restructuring announced earlier this year.
Spending discipline reflects the commitment to invest for growth while returning value to shareholders. We will expect to provide 2017 guidance for Novelion Therapeutics, including projections for Aegerion’s product sales at our presentation of the JP Morgan Healthcare Conference on Wednesday, January 11th at 4 AM Pacific Standard Time.
We’ll look forward to seeing you there. And with that, I’ll turn it back to Mary Szela.
Thanks, Greg. Today, we’ve summarized the business accomplishments of 2016. And looking ahead as Novelion we’re confident that we’re stronger company than QLT or Aegerion were on a standalone basis, with the multi-asset portfolio for rare diseases and continued potential with our core growth drivers of MYALEPT and JUXTAPID. Novelion has strong clinical development capabilities in addition to our commercial expertise and global presence, which is unique for a company of our size.
And additionally, the rare disease category benefits from rapid clinical development pipelines. We’re unique among rare disease companies in our global commercial capabilities and key markets, including the infrastructure that has been built in demand commensurate with the launch of JUXTAPID, and our goal is to establish ourselves as a partner of choice for development of rare disease assets. And we’re supported by a strong portfolio of intellectual property around our clinical assets. These attributes combined make us well position to deliver returns to shareholders while investing for growth.
With that, we’d like to open it up for questions.
[Operator Instructions] And we do have a question from the line of Andrew Walker with Rangeley Capital. Your line is now open.
Just a quick question, so I think in the press release today, you said your forecast is 2016 sales of $145 million to $150 million. And in June -- or in June or July, the forecast was I think it was $90 million to $100 million for JUX and $40 million to $50 million for MYALEPT. Can you just talk about was there particular strength in one of those products that drove kind of you coming at the very tippy top range, or did one of the products outperform that would be great.
This is Greg. I think basically you know when we reset the guidance earlier in this year we were looking at a pretty strong slope and precipitous decline in JUXTAPID in the U.S. And we’re also looking at a good deal of uncertainty in Brazil. And I’d say MYALEPT is very much on track in terms of that guidance. And I think JUXTAPID probably outperformed in certainly in Latin America. And certainly, we are seeing declines in the U.S. that to mitigate pretty significantly. So, we haven’t quite dropped yet, but we’re seeing -- we feel like we’re closer to the bottom here in U.S. JUX.
And then with the closing of the merger, this is still on the bank debt. Is that still kind of -- will that free up the restricted cash from that, or is that still going to be an issue?
No, that’s still in restricted cash. And in fact, we’re looking at the role of FCD and the cash structure.
And then in January when you’re coming out with the updated 2017 guidance I would think, do you guys have any plans to tackle the convertible debt as well, or are we kind of in wait and see mode there?
I don’t think anyone is particularly happy with the debt low that Novelion is carrying right now. And so I think it will be important to explore options in terms of the convertible debt.
Thank you. And our next question comes from the line of Jessica Fye with J.P. Morgan. Your line is now open.
In response to the comment you made about JUXTAPID declines really starting to taper-off here and maybe the franchise beginning to stabilize. Not looking for a guidance number, but at a high level, are you looking at 2017, now that it’s a month away as being up year or down year relative to ’16? And then also on the potential for breakeven cash flow year in 2017, is that a possibility for the company or how should we think about that?
I think just what our prior view is to hold off until we issue more-fuller guidance, but as I -- just to make sure that everyone is clear in terms of we talked about potential property and cash flow positive, that’s in the Aegerion base business. And so we’re obviously working very hard in terms of 2017 budget, and we’ll be updating folks pretty shortly here.
Thank you. And I am not showing any further questions, at this time. I would now like to turn the call back to Ms. Mary Szela for closing remarks.
Thank you all for joining. We really appreciate it.
Ladies and gentlemen, thank you for your participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.
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