CollaGenex Pharmaceuticals Inc. (OTCPK:CGPI) Q4 2007 Earnings Call March 12, 2008 11:00 AM ET
Evan Smith - IR
Colin Stewart - President and CEO
Welcome to the CollaGenex Pharmaceutical fourth quarter 2007 financial results conference call. (Operator Instructions). I would now like to turn the conference over to Evan Smith. Please go ahead, Sir.
Thank you. Good morning, everyone, and thank you for joining CollaGenex Pharmaceuticals fourth quarter and full year 2007 financial results conference call. With me from management are Colin Stewart, President and Chief Executive Officer; Nancy Broadbent, Chief Financial Officer; and David Pfeiffer, Senior Vice President Sales and Marketing.
Before I turn the call over to management, I would like to remind everyone that during this call, as in the Company's press release, management will make forward-looking statements that are intended to fall within the Safe Harbor provisions under the Private Securities Litigation Reform Act. As set forth in the press release, forward-looking statements involve risks and uncertainties, including those factors listed in the Company's SEC filings and annual reports that may affect the Company's business and prospects. Actual results may differ materially from the forward-looking statements.
Now, I'd like to turn the call over to Colin Stewart. Colin?
Evan, thank you, and good morning, everybody. Firstly, I'd like to comment briefly on our recently announced transaction with Galderma. On February 26th, we announced that CollaGenex had entered into a definitive merger agreement with an affiliate of Galderma Pharma S.A., pursuant to which Galderma's U.S. holding company, Galderma Laboratories, Inc., will acquire all of the outstanding shares of CollaGenex at a price of $16.60 per share in cash, representing approximately $420 million for the equity of CollaGenex.
The transaction was unanimously approved by the Boards of Directors of CollaGenex and Galderma. The transaction is expected to close before the end of the second quarter of 2008, and is subject to customary closing conditions. Due to this pending merger, we will not be providing financial guidance for 2008.
Now I'd like to turn to review of our fourth quarter financial results and the key accomplishments in 2007.
Total net revenues were $17 million in the fourth quarter of 2007 compared to $13.2 million in the fourth quarter of 2006. The key drivers of these revenues were net sales of Oracea at $15.2 million compared to $9.7 million in the prior year's quarter. During the fourth quarter of 2007, total deductions from gross sales for estimated product returns, trade discounts, government, managed care, patient rebates and wholesale distribution fees, increased to 17.4% of gross sales compared to 9.5% of gross sales during the fourth quarter of 2006, primarily the results of discounts to managed care organizations for expanded Tier II coverage.
As of December 31, 2007, wholesale inventories were well within the Company's target range of three to five weeks of sales. Net income, allocable to common stockholders for the fourth quarter of 2007 was $438,000 or $0.02 per basic and diluted share, compared to a net loss allocable to common stockholders of $5.3 million or $0.28 per basic and diluted share in the fourth quarter of 2006. The weighted average shares used in computing fully diluted per share amounts increased to $21.7 million during the fourth quarter of 2007 compared to $19.2 million in the prior year's fourth quarter, primarily due to the issuance of 3.5 million shares in a common stock offering completed in November of 2006.
Research and development expenses in the fourth quarter of 2007 declined slightly to $4.7 million compared to $4.8 million in the fourth quarter of 2006. Selling, general and administrative expenses were $11.6 million in both the fourth quarter of 2007 and 2006. For the year ended December 31, 2007, net revenues were $63.6 million compared to $26.4 million for the year ended December 31, 2006.
Net loss allocable to common stockholders for the year ended December 31, 2007 was $10.9 million or $0.51 per basic and diluted share compared to a net loss allocable to common stockholders for the year ended December 31, '06 of $35.4 million or $1.98 per basic and diluted share. Our cash, cash equivalents and short-term investments at December 31, '07 were approximately $64.2 million compared to $65.8 million at December 31, 2006.
Now, I'd like to turn to a discussion about some of our accomplishments in 2007 and in early 2008. As we reported since we launched Oracea in July 2006, prescriptions have continued to grow steadily and by the end of the first quarter 2007, Oracea was the most prescribed oral systemic treatment for rosacea. In 2007, we further strengthened our intellectual property, doubling Oracea with the issuance of two key patents, the 267 and 579 Patent. We have also significantly expended patient access to Oracea by securing Tier II access on managed care formularies, covering over a 100 million lives.
Combined with our patient rebate program, the vast majority of adults in the United Sates now have access to Oracea with modest and affordable copay. As a result, the fourth quarter saw a steady and sustained growth in the number of Oracea prescriptions written and sold. Total Oracea prescriptions grew 10.5% in the fourth quarter of 2007 versus the third quarter of 2007.
In early 2008, we released a very important Phase IV clinical data, solidly validating the benefits of Oracea. This data compared the safety and efficacy of Oracea with 100 milligrams of doxycycline, an antibiotic dose that is frequently prescribed off-label for rosacea. The result showed equivalent efficacy and onset of action between Oracea and a 100 milligrams of doxycycline, as Oracea had a significantly better side effect profile than the 100 milligrams of doxycycline.
We fully expect these results will further expand the prescriber base for Oracea. This data has already been very well received, and we have seen strong first quarter growth in Oracea prescriptions as reported by weekly IMS data, with almost 10,000 total scripts generated for the week ending February 29th. This is a new high point record.
Although, we discontinued the development of incyclinide in 2007, we continue to make considerable progress in building our pipeline. In August, we announced highly favorable results from our large Phase II clinical trial in COL-118 for the treatment of erythema. If approved by the FDA, COL-118 will be the first effective treatment for erythema, the bright skin redness associated with rosacea and other dermatological conditions.
Earlier this week, we had rescheduled end of Phase II meeting with the FDA. I am pleased to report that the FDA continues to be enthusiastic about COL-118, as a potential treatment for erythema and we now have a clear path for moving forward with this development program. The clinical endpoints for the program will be Clinician and Patient Erythema Assessment scores and Investigator's Global Assessment score.
Prior to starting the Phase III studies, the FDA has requested that we do a small additional Phase II study, which we anticipate will enroll about 20 patients and take several months to complete. The purpose of this study is to augment data from a Phase I bioavailability study that we conducted -- that showed that administration of COL-118 to the skin of healthy volunteers did not yield measurable levels of 118 in plasma.
As a safety precaution, FDA has requested that we repeat this study in rosacea patients to demonstrate that plasma levels of COL-118 are not increased in patients with the disease skin of rosacea. We anticipate completing the study in the third quarter of 2008 and commencing our Phase III clinical trials before the end of 2008.
In May, as part of our business development program, we acquired the development and commercialization rights to becocalcidiol, a novel Vitamin D analogue for treatment of psoriasis, from QuatRx Pharmaceuticals Company. In early Phase II studies, becocalcidiol patented new chemical entity, demonstrated promising efficacy in the treatment of psoriasis without the dose limiting toxicities and irritation being with existing Vitamin D treatments. In January, we initiated a large Phase II study of becocalcidiol, which we expect to complete in the fourth quarter of 2008.
Overall, 2007 was an excellent year by any measure. Our dermatology sales force is doing a great job in building Oracea and we have a robust and focused pipeline of products addressing large market and significant unmet needs in therapeutic dermatology.
With that, I conclude my prepared remarks, and once again, I'm joined by Nancy Broadbent, our CFO and Dave Pfeiffer, our SVP of Sales and Marketing. And we would now be pleased to take any questions that you may have. So operator, can you please open up the lines for questions.
Thank you. Ladies and gentlemen, we will now begin our question-and-answer session. (Operator Instructions).
It looks as if we don't have any questions at this time.
Well, if that's the case Operator, I'd just like to say to the ladies and gentlemen present that that brings us to the end of the fourth quarter earnings call, which I believe has highlighted significant progress in developing our pipeline, commercializing Oracea and building our IP estate to protect these assets. In closing, I'd like to thank you for your questions and your support for CollaGenex. Thank you.
Ladies and gentlemen this concludes today's CollaGenex Pharmaceuticals fourth quarter 2007 financial results conference. Thank you for your participation and you may now disconnect.
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