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Executives

Art Przybyl – President, CEO

Jeff Whitnell – CFO

Analysts

Noelle Tune – Soliel Securities

Scott Hirsch – Credit Suisse

Jason [Area] – [Jolla] Equities

Doug [Dieter] – Broadpoint Securities

Akorn, Inc. (AKRX) Q4 2007 Earnings Call March 11, 2008 5:00 PM ET

Operator

Good day and welcome to the Akorn Inc conference call. Today’s call is being recorded. At this time for opening remarks and introductions, I’d like to turn the call over to the president and CEO, Mr. Art Przybyl, please go ahead sir.

Art Przybyl

Good afternoon ladies and gentlemen, welcome to Akron’s conference call. My name is Art Przybyl and presenting our financial position today is Jeffrey Whitnell, our Chief Financial Officer. We will hold a brief question and answer period at the end of the presentation. I would like to begin with a brief recap of 2007 and then provide you with our outlook for 2008. although we have historically not provided guidance I believe from this 2008 outlook you will be able to understand our several significant 2008 revenue opportunities and catalysts their market sizes and how they relate to what we believe is a robust business model for Akorn in 2008 and beyond.

In 2007, we advanced our specialty pharma business in several areas with significant emphasis in vaccines, and with even greater emphasis placed on events that will lead to increased revenues in the short term, mainly 2008. Our business model is comprised from revenues derived in four distinct business segments, vaccines, hospital drugs, ophthalmic drugs, and contract pharma manufacturing.

Each one of these business segments has a significant catalyst associated with it that is now providing or is expected to provide significant revenue growth in 2008 and beyond. Allow me to present the advances in opportunities in each business segment. The vaccine business segment was born from an opportunity to exclusively distribute Massachusetts Biologics laboratories Tetanus Diphtheria vaccine. The three year exclusive arrangement was announced on March 2007. Akorn strategies in entering the vaccine market was several fold. First, begin to expand and diversify our business into biologics and vaccines an area that we believe represents greater long term value through BLA licenses with lesser competition.

Second, the TD vaccine has only one other competitor, Sanofi Pasteur and is approximately a market size of $225 million, a significant revenue opportunity for us. Third, an exclusive relationship would allow Akron to act as a manufacturers representative and control market pricing, both direct and to distributors. Fourth, MBL had applied to FDA for a unit dose preservative free version of the vaccine primarily used in hospitals and through our hospital infrastructure, we felt that we compete with Sanofi and break this monopoly. And fifth, the relationship for this vaccine would allow us to build our distribution model for other vaccines and biologic products.

Initially beginning in 2007, in September, Akorn began selling a multiple dose version of the TD vaccine to distributors serving the office based physician and clinic markets. From September 2007 to year end, we have generated revenues of $7.5 million from the TD vaccine. More importantly, in late November 2007, and sooner than we expected, we announced MBL’s FDA approval for their unit dose preservative version of the vaccine.

Since then and because of this event we have been able to contract with every major hospital group purchasing organization, including Novation and Premier. Currently we have a sales team of approximately 50 representatives selling this vaccine in hospitals, clinics, to office based physicians, and to distributors. Unit dose preservative free version of the vaccine is no different than the multiple dose version that most office based physicians like to use. It is a price sensitive vaccine and if we can save hospital or physician money they will convert to our product.

Since the unit dose preservative free launch we have converted 280 hospitals through our direct selling efforts. These accounts represent approximately $3 million in annualized sales and the hospital market represents approximately $80 million of the $225 million TD market. Again, until now, a virtual monopoly for Sanofi. 54 distributors also sell our vaccine, primarily to clinics and office based physicians. We remain confident in our ability to ramp our sales of TD vaccines to eventually obtain our target market share of 50% for the TD vaccine.

At the share the vaccine represents $100 million revenue opportunity for Akorn at approximately 25% gross margins. We will continue to announce our revenues for the TD vaccine in subsequent quarterly conference calls. Recently in February 2008 we announced an agreement to distribute CSL biotherapy flu product, Afluria, our strategy to enter this vaccine market was simple, first our ability to lever up our 50 sales reps selling TD vaccine to the same customer base. Second, the overall size of the flu market, 90 to 100 million doses per year and $800 million market and potentially a large revenue opportunity for us. And lastly we believe we can help CSL gain market share in the US. They have both a preservative free and latex free pre filled syringe and the multiple dose vial vaccine.

Since our representatives have began pre-booking sales for the 2008 flu season, we have generated orders of $865,000 since we launch on February 22nd. Flu revenues are primarily recognized in August through October when the vaccine is delivered and shipped to customers. Our expectations for the flu vaccine are nominal for 2008. representative of only 1% market share. However from our selling experiences in 2008 we expect to be able to significantly increase share in 2009 and beyond and become a major distributor of flu vaccine in the United States.

The TD and flu vaccine are significant immediate revenue opportunities for Akorn. But our more significant business relationship for vaccines is our partnership with Serum institute. We announced our exclusive agreement in October 2007 with Serum from which we intend to commercialize four of Serum’s vaccine in the US market, Hepatitis B, Measles Mumps and Rubella, Rabies, and bladder cancer vaccine product. Along with an earlier announce exclusive development and marketing deal for Rabies Microcromal antibody product, Serum represents our longer term opportunity for vaccines. Through this partnership we intent to provide safe, efficacious and affordable vaccines for the US healthcare consumer. You will hear more about this important partnership in 2008 as we advance it.

To recap, in 2006 Akron had no potential revenue opportunities for vaccines, in 2007 we began to generate nominal vaccine revenues, our revenue opportunities in 2008 are significant and our goal is to be a major US vaccine company with a portfolio of affordable vaccine products by 2011. we advance our hospital business segment opportunities in 2007 in several ways. First and foremost and one of two main revenue opportunities for our hospital segment in 2008 is our relentless pursuit for a safe effective and affordable generic Vancomycin product.

In 2007, a major milestone in our joint development and marketing partnership with CIPLA for Vancomycin was the filing of the ANDA early in the second quarter of 2007. Our ANDA is not yet a year old. In addition we were granted an expedited review for this ANDA and our ANDA clearly demonstrates equivalency to the reference listed drug based on published FDA guidance and our CRC and stability results.

Based on these facts, I guided to a year end AMDA approval for vancomycin. Unfortunately and to the detriment of the US healthcare consumer, I was wrong. The market opportunity for safe effective generic version of oral Vancomycin remains robust. The monopoly continues to exist where no patent does. And the market opportunity continues to grow now at $225 million, primarily generated from price increases.

We remain resolute in our pursuit of a safe an effective affordable generic oral version of Vancomycin and expect our generic approval to contribute to our revenue base in 2008. our second revenue opportunity in our hospital business segment is for the potential forward deployment of DPTA our radiation chelating agent to be used most effectively within 4 – 6 hours of a nuclear accident or dirty bomb terrorist event. After several senior level meeting with HHF officials, we believe this forward deployment of DPTA to be representative of an important objective for health and human services. Full scale forward deployment of DTPA would represent a revenue opportunity for us of approximately $40 to $50 million and would utilize the remaining DTPA units on our HHS contract.

Forward deployment efforts could begin in the second half of 2008. lost in these two revenue opportunities are our product and business development efforts in the hospital business segment. Additional revenue opportunity exists for a schedule 2 Narcotic ANDA. And we hope to receive approval in the third quarter 2008. In 2007, we continued in earnest our efforts in announcing product partnerships. In January, we announced a right to exclusively market hydase for Premapharm and we expect it generate sales of $1.3 million in 2008.

In July, we announced with Cipla the exclusive deployment and supply oral and injectible version of an organ transplant rejection drug. In July we announced the exclusive development and supply of two injectible suspension products, one based in women health cared with [Tyleron]. In September together with our partners [Softgen] we submitted our ANDA after a successful bio study for our first soft gel capsule product, a controlled substance.

In October, again with Softgen we announced the exclusive development of supply of a soft gel capsule drug product in women’s healthcare. In November, we announced the exclusive development and supply of an inhalation drug product. Again expanding our relationship with Cipla. And finally in December, we announced a successful ANDA filing for our first anti cancer injectible drug developed through our previously announced [sierramista2] partnership.

Currently we have 40 product regulatory filings with the FDA and our regulatory affairs department anticipates 22 product approvals in 2008, and three have been received to date. Several noted changes in our product development efforts, our different markets, different container closure systems, more representative of tougher to develop advanced through clinical bio studies niche specialty pharmaceutical products. While our need to execute to our short catalyst remain paramount, our need to maintain a constant flow of product development is just as important.

Our last remaining significant revenue opportunity for 2008 and longer term is in our ophthalmic business segment. In January 2007, we announced that we completed a pivotal phase three 200 patient clinical study with positive results for Acton, our internally developmed NDA. Five months later, in June we filed our NDA for Acton and we have received the [fidufa] date in the second quarter of 2008. of significance for Acton is it’s breadth of indication for any ophthalmic procedure that requires a topical anesthetic. We believe the provides for potential wide spread use of Acton. At 20% use or share of the topical anesthetic market, Acton would generate approximate sales of $20 to $25 million at 80 to 85% gross margins.

Because of Acton’s potential for widespread use across ophthalmology we will explore the opportunity to partner with large pharma and their larger sized detailed sales teams for potentially further uptake and use of Acton. In 2007, we were not without our setbacks. In February we received a warning letter on our Decatur manufacturing plant. This affected IC Green sales, which has subsequently recovered to historical levels and affected any potential for new contract pharma manufacturing agreements. The main reason why our year over year contract pharma business unit sales decreased by $1.9 million. After our CGMP inspection later in the year, we were found to be in substantial regulatory compliance. Significant advance for our business in the short and long term for 2008, it affords us the opportunity to grow our contract pharma manufactured revenues and we have seen large pharma companies visit Akorn with renewed interest.

For the longer term, the inspection also included a pre approval inspection for our new injectible and [monopolized feel] sweeps. The successful result from the PAI inspection allows our manufacturing at that to be placed into service. The [feel sweep] is a state of the art design that requires little manual intervention and represents a significant upside opportunity for our [layauthorized] contract pharma manufacturing business. We would expect to begin to realize revenues in 2009 through [layauthorized] chemical batch manufacturing and a more significant rise in [layauthorized] contract pharma revenues in 2010 to 2011. At this time in our presentation, I will turn the floor over to Jeff Whitnell who will describe to you our financial position.

Jeff Whitnell

Thank you Art, good afternoon ladies and gentlemen. Total revenue for the fourth quarter 2007 was $13.7 million versus $14.6 million in the fourth quarter 2006. The year over year decline is principally due to the lack of DPTA revenue in this year’s fourth quarter results. During the fourth quarter 2007, Ophthalmic and hospital drugs and injectible business segment revenues excluding DTPA increased by approximately 40% and 11% respectively versus the prior year comparative period.

In our ophthalmic business segment net revenues were $5.4 million versus $3.9 million for Q4 ’06 and reflect a strong sales of our diagnostic products primarily IC Green and AK flor. The hospital drugs and injectible business segment of net revenues were $4.2 million versus $3.8 million for Q4 ’06 led by greater hospital contract compliancy. The company recorded DTPA product revenues of $3.6 million in the fourth quarter 2006 and negligible DPTA product revenue in the fourth quarter 2007. The company also recorded vaccine revenues of approximately $2.8 million in the fourth quarter 2007.

The contract services business segment net revenues were $1.3 million versus $3.2 million in the comparative prior year period a decline of $1.9 million. In the fourth quarter 2007, the company announced the successful results of the FDA inspection for the Decatur Illinois facility. The satisfactory resolution of past CGMP issues and a successful pre approval inspection of the [layauthorization] facility are both significant events. Further, regulatory compliance indicator will enable us to actively market and increase our contract services business segment net revenues including the introduction of our [layauthorization] capabilities.

Gross profit for the fourth quarter 2007 was $3.1 million as compared to $4.2 million the fourth quarter 2006. the aggregate decline in fourth quarter 2007 gross profit versus the comparative prior year period was due to product mix and the prior year DPTA order. Sequentially, fourth quarter 2007 gross margin improved to 22.3% versus the third quarter 2007 gross margin of 18.8%. Lower contract services business segment volumes resulted in under absorbed manufacturing costs at our Decatur Illinois production facility. Consequently the company has completed reorganization that will generate projected annual cost savings of approximately $2 million.

Selling general administrative expenses totaled $6.1 million for the fourth quarter 2007 an increase of $800,000 over the comparative prior year period. This increase is due to the investment in our newly created vaccine sales team of 20 sales representatives bringing the total field and inside sales representatives at the company to 50. research and development expenses were $1.5 million in the fourth quarter 2007 versus $5 million in the comparative prior year period and reflect lower milestone payments for product development efforts.

The net loss available to common stockholders for the fourth quarter 2007 was $5 million or $0.06 per fully diluted share versus the net loss available to common stock holders of $6.2 million in the fourth quarter 2006 or $0.07 per fully diluted share. The December 31, 2007 fully diluted share account for the company is approximately 92.4 million shares, which assumes stock option and warrants are outstanding for the full year rather than on a weighted average basis. As of December 31, 2007 the company had cash and cash equivalent to equal $7.9 million and then additional $10.5 million of un drawn upon availability under our credit agreement.

I would now like to draw your attention to the balance sheet. We ended the fourth quarter 2007 again with $7.9 million in cash and cash equivalents. In addition we have a restricted cash account balance of $1.25 million with our commercial banker. As of December 31, 2007 the outstanding borrowing against our line of credit was $4.5 million with an additional $10.5 million available under our $15 million credit facility. We expect to be cash flow positive in the second half of 2008 and have sufficient working capital to meet our business requirements this year.

The emphasis on our balance sheet of increased year over year by proximally 6% in 2007. a reflection of multi dose tetanus Diphtheria vaccine and the corresponding inventory position. Today, Akorn is the only multidose vial supplier of Tetanus Diphtheria vaccine on the market place with product dating greater than 12 months. And we look forward to servicing this important market through 2009. at that time, the supply of multi dose vials will be exhausted in the marketplace and we would have transitioned our customers to the unit dose preservative free vaccine, primarily in the office based physician market.

As of December 31, 2007 we have no long term debt, nominal mortgage obligation that will be retired in June 2008 and a current ratio at year end equal to 2.2. Finally I would like to briefly review the statement of cash flows. During the fourth quarter 2007, we invested a total of $714,000 in equipment and software along with our investment in a product license with one of our development partners. The majority of our capital investments were for necessary machinery and equipment upgrades as well as our ongoing investment in new software and hardware to accommodate electronic FDA filings by our corporate regulatory affairs group.

We’re also pleased to announce that our 2007 form 10 K will be filed with the securities and exchange commission later this week and that our independent registered public accountants has issued an unqualified audit opinion, to consolidated financial statements, in addition their review of our internal control procedures indicated no material internal control weaknesses or deficiencies. For fiscal year 2008, we have engaged Earnst and Young, LLP to be our independent registered public accounting firm. Thank you for your time and attention, I would now like to turn the teleconference back to Art.

Art Przybyl

Thank you Jeff, before the question and answer period I would just like to reiterate our significant short term revenue opportunities for 2008. in vaccines the sales ramped for our TD vaccine and our flu vaccine sales. In hospital drugs, our FDA approval for and ANDA for oral Vancomycin and our forward deployment revenue opportunity for DTPA along with an anticipated and approval for a schedule 2 narcotic in the third quarter. And ophthalmic drugs are FDA approval is anticipated for Acton based on its [fidufa date] in the second quarter and in contract pharma our manufacturing plants are free to operate in a state of substantial compliance and to attract contract pharma business including [layauthorization].

I would like to thank our two analyst, Noelle Tune from Soleil who has been providing coverage for the last three years for the company and our newest analyst, Scott Hirsch from Credit Suisse First Boston. I will now open our conference call to questions.

Question-and-Answer Session

Operator

(Operator instructions). I will go first to Noelle Tune with Soliel Securities.

Noelle Tune - Soliel Securities

Good afternoon, thanks for taking the questions.

Art Przybyl

Good afternoon Noelle.

Noelle Tune - Soliel Securities

I appreciate the props too. I have a handful here, I guess I’ll ask all of them so the operator doesn’t cut me off but let’s see if we can start out by can you just talk about what sort of opportunities you see in 2008 to expand your current vaccine relationships and then following up on that, maybe you could touch on the upcoming milestones for the Serum vaccines with regard to regulatory hurdles you guys have this year.

Art Przybyl

I think our relationships for vaccines right now are in place, in both flu and TD. So our objectives are really to execute and to establish a run rate that is representative of the market share that we’re attempting to attain eventually which is 50% in this market. We think we can do so we’re found that the market is really a price sensitive market and that Sanofi has not reacted to our pricing in the GPO hospital market which is the reason why we’ve been successful in getting our product on every contract as you know Sanofi is a right of first refusal.

But it takes a sales call. And it takes a sales call to convert those hospitals. It’s an important opportunity $40 million opportunity 50% of the $80 million in hospital marketplace for unit dose preservative free vial and we’re going to concentrate on that. I can’t speak to whether or not there’s additional opportunities for partnering for additional vaccines with other companies because none right now are on the table. We certainly will always keep our options open to us, but for now our partners are established.

The additional information that you should look forward to Noelle in regards to the Serum relationship really will be forth coming after we have initial meeting on Hepatitis B will be the first product that we take through initial meetings with CBER, we’ve engaged a consultant at Serum, the same consultant Dr. [Bill Egan] who is a former vaccine director at CBER and we’re using his expertise and guidance to help position our data responses with CBER prior to an IND meeting.

The results of which we would then make public if it’s relevant to the point of how many patients are required to conduct a bridging trial in order to help commercialize that respective vaccine in the United States. And I think at that point in time, we’ll be better suited to discuss publicly what that investment requires, what that time line is like and obviously how many patients that requires as well to conduct the necessary clinical trials.

Noelle Tune - Soliel Securities

Okay do you guys have any guidance on maybe when the meeting might take place or when you might be able to add more color?

Art Przybyl

I think we are hopeful that the meeting will take place in the second quarter of this year, and perhaps that will be the time when we’ll be able to provide color.

Noelle Tune - Soliel Securities

Okay great. And then just a couple for I guess both of you guys, in terms of the revenue growth potential for 2008, obviously excluding generic Vanco and DPTA, I understand that those are tough products to nail the timing on but how do you see your revenues excluding those two products in the current year?

Art Przybyl

We see our revenues ramping on a quarterly basis because of the TD vaccine and obviously the flu vaccine. If you recall, we always said that we felt our TD vaccine could double the core revenue base of this corporation and we certainly still feel that way, but we do see obviously a ramp. At the same time, we see a number of product approvals that we hope to achieve this year whether our regulatory affairs department is correct in saying 22 product approvals, nevertheless that’s the expectation and you’ve already begun to see today a product approval for our strides joint venture and I think many of those will be forth coming as the year progresses fort hat joint venture.

The question obviously is how quick can we launch them you saw earlier in the first quarter a product approval for [Calsi] trial that we intend to launch in the second half of this year for through our one of our own manufacturing plants and I think you’ll see a ramp on a quarterly basis as associated with revenues with the vaccines giving us the opportunity to double our core business we have two additional models that obviously layer on top of that a Vancomycin launch and subsequent approval or approval and subsequent launch as well as the forward deployment of DTPA. In the forward deployment of DTPA, might not be a revenue event, it is recognized in a [bowl list] but rather over time as the forward deployment occurs.

Jeff Whitnell

The only thing I would add to what Art stated is we’ll be cash flow positive in the second half of the year and that’s reflective of a second half launch of Acton given our second quarter [fidufa date] as well as the introduction of our flu vaccine.

Noelle Tune - Soliel Securities

Got it and last question and I’ll hop back in the queue, in terms of SG&A and R&D, trends going forward, should we look at fourth quarter for SG&A and what are you expectations for R&D growth in ’08?

Art Przybyl

We have layered in R&D expenses that will be comparable with 2007, Noelle.

Noelle Tune - Soliel Securities

Okay and on the SG&A side?

Art Przybyl

SG&A I don’t see growth there because we’ve, we’re fully staffed in our sales and marketing efforts right now. That’s part of the foundation for a vaccine sales.

Noelle Tune - Soliel Securities

So we can look at taking the $6.1 million we did in the fourth quarter and sort of run it with that.

Art Przybyl

Yes, and I think you can also see that the 50 sales reps that we employ now that the company can be levered against any of these product approvals that we have coming forth.

Noelle Tune - Soliel Securities

Great, thanks so much.

Art Przybyl

You’re welcome.

Operator

Thank you we’ll take our next question form Scott Hirsch from Credit Suisse.

Scott Hirsch - Credit Suisse

Hi there guys, a few questions as well, with respect to Vanco I just wanted to follow up on the manufacturing, has Cipla manufactured this have you brought it in to the country at all or is it still not here.

Art Przybyl

Cipla has validated the manufacturing process for the drug. The product will be shipped to the United States shortly under quarantine conditions.

Scott Hirsch - Credit Suisse

And then with flu, I know you said kind of a nominal ’08 what’s the large market? What kind of share makes sense for ‘09

Art Przybyl

Well that’s why stated 1% market share which from our perspective is about 900,000 doses which would translate into about $10 million in revenues approximately. We’re feeling our way in the flu market. And so we thought it was best to start with a very conservative number. There are huge opportunities in flu with many different customers. We do not have an exclusive relationship with CSL and we would like to certainly eventually potentially attain one with them. We like their product, we think they have an advantage in this flu season. There’s been some announcements that the CDC is putting in the Brisbane strain with CSL is very familiar with. We feel they have product available in August for our customers which is very important and we’ve seen some announcements form Novartis that they might have trouble delivering that that time. So we certainly think there’s an opportunity for some of Novartis’ customers potentially position some of their pre book orders or percentage thereof with us.

But we’re feeling our way, it’s a marketplace that we don’t know, it’s not a situation, like MBL where we could do an exclusive arrangement and guarantee a certain amount of doses on an annual basis, simply because there are a significant amount of competitors. There are four competitors in flu, one of course is [fumes] but there are three other is GSK, in Novartis, and in Sanofi with flu vaccine. So we’ll see how the year goes but obviously this is a very big opportunity for us and our margins which I didn’t mention will be somewhere in the 15 to 20% range dependant upon whether we’re selling the pre filled syringe or the multiple dose vial.

Scott Hirsch - Credit Suisse

Can you talk a little bit to contract manufacture. What happened with the indicator plant online now, what kind of ramp in that can we see over the next.

Art Przybyl

I think we have a confident individual who is managing our contract services that, and what will typically happen is many of the companies that we already do business with will either potentially expand their business with us either in the same products or in new products while at the same time we seek out new opportunities and I think we’re not too far away from potentially announcing what some of those new opportunities are or will be but primarily in monopolization, we are trying to attract and make sure that any company that’s looking to have, to establish a contract manufacturing monopolization relationships understands and knows that Akorn should be included in any requests for proposals. We certainly can compete in our new [feel sweep] on a price basis effectively at the appropriate margins that think [layauthorization] contract business will bring, somewhere in the neighborhood of 50% and so it’s important that we get the word out and typically what happens is many of these companies will come visit with their quality departments you sign a quality agreement and then you’re in essence good go and operate as a manufacturer as long as your costs of your proposing are acceptable to the other pharma business.

Scott Hirsch - Credit Suisse

Just I think kind following up on this ending a little bit, so I heard you right, and I assume that 4Q number includes the new sales reps and I hear you say R&D’s roughly flatish for next year.

Art Przybyl

You should look for our R&D expense including milestones for ’08 to be comparable with ‘07` annual levels and yes the answer to your question Scott is we’re fully staffed right now in our field reps for not only retinol, TD detailing, Ophthalmology’s proactin but also our vaccine field reps all those costs are reflected in our fourth quarter SG&A numbers.

Scott Hirsch - Credit Suisse

Okay thanks guys.

Art Przybyl

We feel we’re fully staffed at this point to attract that market share we described.

Scott Hirsch - Credit Suisse

Thank you I appreciate it.

Art Przybyl

Thank you Scott.

Operator

Thank you I’ll take a question from Jason [Area] with [Jolla] Equities.

Jason [Area] - [Jolla] Equities

Good afternoon, guys I was hoping you could provide us just with a little more clarity around generic vancocin. Can you give us some idea what the OGD is telling you guys to why we didn’t get the approval last year and what makes you think that we’re going to get it this year. I mean are we hearing from hem that we’re going to get it and if so what changed from last year to this year that we didn’t get it and now really expect to?

Art Przybyl

Without going into a lot of detail, my perspective is the citizens petition is holding up the end approval. The [citizen]’s petition was vetted in March of 2005 and quite frankly I think Gary Beuler and folks over at FDA need to get a move on.

Jason [Area] - [Jolla] Equities

Now when you guided last year I know that you got fast tracked on the ANDA was it solely that that led you to the guidance that you would get approval last year or is it discussions. We’re just trying to figure out how certain we are that this is going to come this year.

Art Przybyl

I can’t answer in regards to pinning down an approval time with certainly as you can probably guess. I think you understand why guided where I did from my opening remarks it was based on the expedited review and that fact that based on the dating of when we submitted our ANDA. Typically and ANDA as you know takes 18 months I felt the [citizen’s] petition was placed in March of ’05 and to be quite blunt, I felt the FDA should have completed their work by the end of the year, no question about it. And unfortunately that was not the case.

Jason [Area] - [Jolla] Equities

So it was really not that you had been misled by the OGD it’s more kind of based on your own assumptions.

Art Przybyl

It’s clearly based on my own assumption and that’s why I said I was wrong and I think that I’ve guided towards FDA events in the past. I guided towards compliance back in ’05 I believe in December. I guided towards an HHS contract for the dirty bomb antedote, DTPA in December of ’05 I guided towards first quarter approval for unit dose preservative free Tetanus Diphtheria vaccine, I’m guiding towards a third quarter approval of [hydormophone] our schedule 2 narcotic. But the point is that I will give guidance based on what I feel is proper and when I’m wrong, I’m wrong and when I’m right God bless. But obviously there is no certainty in guidance to an FDA approval date but it’s always based on what I feel is good information from my regulatory affairs department as where we feel we are in the queue for review of that ANDA.

Jason [Area] - [Jolla] Equities

So obviously [Virapharma] has updated the market a believe a few months ago saying that they had additional discussions with the OGD. I assume obviously you have too. Do you have a feel for where they’re coming out on the citizen’s petition?

Art Przybyl

We sure do and obviously we feel their [citizen] petition is meritless.

Jason [Area] - [Jolla] Equities

But you feel that the OGD feels that way obviously more important.

Art Przybyl

I won’t speak for the OJD.

Jason [Area] - [Jolla] Equities

Okay, thank you very much, appreciate it.

Art Przybyl

You’re welcome.

Operator

We’ll take our next question from Doug [Dieter] with Broadpoint Securities.

Doug [Dieter] - Broadpoint Securities

Thanks for taking my question I just you mention additional product approvals expected for the rest of the year. Can you provide a little color on how many new ANDA filings you expect for the rest of the year?

Art Przybyl

You know actually I did not get that information Doug and I apologize, that’s an excellent question. I don’t have that at my fingertips I could tell you that we filed for 11 in 2007 but I do not have the expected number for 2008 in front of me and you know what, I’ll be happy to get back in touch with you Jeff and I know you obviously and we’ll provide you with that information Doug.

Doug [Dieter] - Broadpoint Securities

Great thanks. And then in terms of and maybe this questions is already asked in terms of TD sales for the first couple months here can you kind of talk about how that has played out since the end of last year?

Art Przybyl

Yeah, we’ve converted approximately and I speak more to the unit dose preservative free product which is the key product for us. We’ve converted 280 hospitals and obviously I mentioned we’ve got our product on every major hospital group purchasing organization including federal supply schedule and Minnesota multi-state as well as premier and [Novation] and [Broadlink] and [Marenette], Medacis. 280 hospitals is representative of about 28 hospitals on average per week. So we’re converting at that rate and we’re pretty happy with our up take to date and really the fact that we held our national sales meeting early in February when we had all of our field sales representatives assembled under one roof and it was really from that point forward that we began a very strong push in launch associated with their products. So we’re pretty happy with our results to date.

Now more importantly, is our put through wholesalers and our GSA contract on a charge back basis. And we’ve seen that ramp four fold from January to February and we expect obviously an exponential rise in pull through sales through our wholesalers for this products in the hospital markets over the next several months.

Doug [Dieter] - Broadpoint Securities

Okay great and on last question here in regarding 19 expected approvals for the rest of the year, are they all gong to be smaller products or are there, are any products in this 19 that are [generous numbers]

Art Przybyl

I think you probably know we include Vancomycin in that number and we include Acton and our schedule 2 narcotic that we talked about. The other products are smaller, yes they don’t represent the same significance revenue opportunity. But never the less some of the products are fairly significant in terms of margin and maybe has less competitors that one might think. Many of them are associated with our strides joint venture.

Doug [Dieter] - Broadpoint Securities

Okay

Art Przybyl

And 10 of them, 11, 12, 11 plus the one received today are associated with our strides joint venture.

Doug [Dieter] - Broadpoint Securities

And then lastly in terms of new NDA’s coming can we expect that those ANDA’s are coming from current partners that you have or can we expect to see some new partners coming online?

Art Przybyl

Well for this year the many ANDA filings are going to come from our existing partners. And you know we have a pretty solid nucleus of partners between Cipla and strides and [hyleron], [Cidia] [softgen] and Serum obviously many of these partners can be levered up and we could add existing development projects with these partners if we’d like to. We are constantly our new business development department is constantly looking for additional partnerships especially ones that have a potential for us to perhaps market a product for that partner in the short term, create a short term revenue opportunity. But I don’t want to say whether or not we’ll announce new partnerships throughout the year. I would certainly hope so but we certainly want to advance the existing partnerships that we have right now and bring those products to market.

Doug [Dieter] - Broadpoint Securities

Thanks for taking my questions Art.

Art Przybyl

You’re quite welcome

Operator

We’ll go next to Brian Rye with Janney Montgomery

Brian Rye – Janney Montgomery

Well my question’s been answered, thank you.

Art Przybyl

Alright I think we’re moderator, I think we’re all set for closing remarks.

Operator

Okay at this time I would like to turn the call back over to Art Przybyl for additional closing comments.

Art Przybyl

I would just like to say in closing that I am acutely aware of our recent drop in our market valuation. Be that the result of the overall market downturn or no vancomycin approval, or increased short position, you can pick your poison, but I believe in and remain committed to our business model strategies in both our short and long term opportunities. We have several short term significant revenue opportunities, each unique and diversified and we are certainly not a one product type company.

Our longer term opportunities are in place and include 40 ANDA filings and numerous development projects. And I believe our vaccine relationship with Serum is unique in today’s pharma marketplace. Ultimately our near term and future market valuation will be dictated by our ability to execute and deliver results as represented by our business model and its opportunities. That is my job, to deliver these results. That I am pleased that we have build such a significant number of opportunities to draw upon and execute against. Thank you for your time and attention today and good evening.

Operator

That does conclude today’s conference you may disconnect you lines at this time.

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