Daniel Saks – Vice President of Investor Relations and Corporate Communication
Patrick Soon-Shiong, M.D. – Chairman and Chief Executive Officer
Lisa Gopalakrishna – Chief Financial Officer
Abraxis Bioscience, Inc. (ABII) Q1 2008 Earnings Call May 15, 2008 11:30 AM ET
Good day ladies and gentleman and welcome to the Abraxis BioScience Inc. First Quarter 2008 Earnings Conference Call. My name is Amanda and I’ll be the coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question and answer session towards the end of today’s conference. If at any time during the call you require assistance, press * zero and an operator will be happy to assist you. At this time, I’ll turn the call over to your host for today, Mr. Daniel Saks, Vice President of Investor Relations and Corporate Communication. Please proceed sir.
Thank you. Good morning everyone and thank you for joining us today to discuss Abraxis BioScience Inc. 2008 First Quarter financial results. Please be advised that this conference call is being broadcast live on the internet at abraxisbio.com as well as earnings.com. Before we begin, I’d like to remind everyone that the information discussed on the call today is covered under the Safe Harbor Provision of the Litigation Reform Act. The company’s discussions today may include forward-looking information reflecting management’s current forecast of certain aspects of the company’s future and actual results could differ materially from those stated or implied. On the call today are Dr. Patrick Soon-Shiong, Chairman and CEO and Lisa Gopala, Chief Financial Officer, and now I’d like to turn the call over to Dr. Soon-Shiong. Patrick?
Thanks Daniel. Good morning everybody. We’ve been off to a successful start into the year and continue to make significant progress in clinical regulatory and business development activity. ABRAXANE sales increased 13% to $80 million in the first quarter of the year compared with the prior year period. Let me provide you with a few market statistics related to ABRAXANE. These are as of March 2008 as reported by intrinsic. The percentage of ABRAXANE share of the overall Taxane market in March was approximately 35%. Since October 2007, ABRAXANE share has increased 4% and has been vying for market leadership with Paclitaxel. The ABRAXANE share of the Taxane market in first-line metastatic breast cancer continues to steadily increase. This represents growth from 16% to 22% since November 2007. In the second-line metastatic breast cancer market, ABRAXANE share is tied for market leadership with Paclitaxel and has now reached an all-time high of 37%. This represents a strong gain of 10% since October 2007. In the second-line plus setting of the breast cancer market, ABRAXANE is the clear Taxane of choice capturing 46% of the market in this setting. When we look at the total ABRAXANE usage, the first and second line share of all ABRAXANE usage represents an all-time high now of 52%. When we look at the combination, ABRAXANE in combination with Avastin represented an all-time high of 38% of all ABRAXANE usage in March 2008. This incidentally is approaching the ABRAXANE monotherapy share of 45%. In more detail, ABRAXANE in combination with Avastin and ABRAXANE monotherapy together represented 59% of ABRAXANE usage in first line metastatic breast cancer; 44% were ABRAXANE monotherapy and 35% were ABRAXANE plus Avastin. Physicians continue to use ABRAXANE more in the weekly regimen. Weekly usage increased to about 86% as of March 2008, and this is now consistent with the use of weekly Paclitaxel.
Let me now address our global expansion plans for ABRAXANE, and I’d like to now report in a few highlights since our last review in early April. ABRAXANE today is approved for marketing in 34 countries including the United States, Canada, the EU, India, and Korea. The Korean approval came subsequent to the end of the first quarter. As you may recall, Abraxis entered into an exclusive license agreement with Green Cross Corporation for commercialization of ABRAXANE in Korea. Green Cross made an upfront payment and will pay a royalty on net sales of ABRAXANE in Korea as well as milestone payments. Green Cross expects to launch ABRAXANE in the first quarter of 2009, and as part of that launch, Green Cross plans to establish a dedicated sales force for ABRAXANE and implement various marketing campaigns. An exciting aspect of a separate agreement with Green Cross is that Abraxis was granted an exclusive license for the future commercialization of biosimilars in United States and Canada including erythropoietin, pegylated GCSF, interferon alpha, recombinant Factor VIII, and etanercept or Enbrel. In addition to Korea, we made progress in Japan in the first quarter with the filing of the Japanese new drug application with the Japanese Ministry of Health. This was accomplished with our partner Taiho Pharmaceuticals, and our partnership with Taiho has been very productive and pleased to have reached this milestone. Turning now to Australia, Russia, and China, ABRAXANE is all under active review by these respective regulatory bodies.
Turning now to the study of ABRAXANE for other oncology indications. As at the end of this first quarter approximately 30 companies sponsored clinical studies and approximately 90 investigated initiated studies are planned or underway of which more than 36 have active participation enrollment. We’ve also recently presented a wealth of data on ABRAXANE during two key conferences. At the American Association for Cancer Research meeting in San Diego in mid April, several scientific posters were presented. Two of these were combination studies with ABRAXANE; one with Avastin in breast cancer and the other with Gemzar in pancreatic cancer. In the first study, we released pre-clinical data demonstrating the effect of ABRAXANE in combination with Avastin to eradicate large size orthotopic breast tumors and systemic metastases. Results confirm a synergistic effect of ABRAXANE and Avastin on metastasis in breast cancer that was previously presented orally at the San Antonio Breast Cancer Symposium last December. They also suggested a novel mechanism through which ABRAXANE can overcome a newly discovered phenomenon which we have described reactionary angiogenesis.
Let me turn to the study report we presented at AACR relating to pancreatic cancer, and this is very exciting data. We reported promising [instrumental] clinical data from a phase I trial showing a clinical benefit of ABRAXANE in combination with Gemzar or gemcitabine in more than 70% of advanced pancreatic patients. This high level of activity is a very compelling result for phase I trial and we intend obviously pursing this with randomized phase III pancreatic cancer trial. Coming up at the ASCO meeting in late May in Chicago, there will be a substantial amount of data that will be presented highlighting the potential utility of ABRAXANE in combination with targeted therapies and other chemotherapeutic agents. There are 23 submissions that have been accepted. We’ll provide further updates on the company or the presentations at ASCO at that time.
With regard to the ongoing registration trials in 2008 and 2009, the company expects to have 5 phase III clinical trials, active or initiated. Our phase III study of ABRAXANE in first-line non-small cell lung cancer continues to enroll patients, and this study is planning to include 1050 patients. For melanoma, we’ve agreed upon the study design and the endpoints with the FDA in the phase III trial subjected to begin in the second half of 2008. We also have a meeting planned with the FDA regarding our results of ABRAXANE in phase II head to head against Taxotere which we’re currently submitting for publication, and the data relating to the very exciting progression-free survival data. We intend to present this data as part of our phase III study of ABRAXANE versus Taxotere during the second half of 2008 and first-line treatment of metastatic breast cancer. As I mentioned, we intend to initiate two randomized phase III trials of ABRAXANE for use in both first and second line pancreatic cancer by the end of 2008. So with that overall review of the activities of the ABRAXANE, let me turn the call over to Lisa. Lisa?
Thank you Patrick, and good morning everyone. For the first quarter, net revenue was $82 million, a 14% increase over net revenue of $72 million in the first quarter of 2007. ABRAXANE revenues grew 13% to $80 million from $71 million in last year’s first quarter. ABRAXANE revenue includes recognized deferred revenue of approximately $10 million related to the co-promotion agreement with AstraZeneca and the license agreements with Taiho and Green Cross compared with $10 million in the 2007 first quarter. As Patrick pointed out, the ABRAXANE market share is increasing; however, ABRAXANE revenue was slightly down compared to the fourth quarter. We believe this primarily reflects the difficult nature of the Taxane market. Gross profit was $74 million or 90% of net revenue versus $64 million or 89% or net revenue in the first quarter of 2007. R&D expense was $21 million compared with $16 million in the comparable period in 2007, primarily reflecting costs associated with the Phoenix manufacturing facility acquired from Watson Pharmaceuticals in July 2007. R&D expenses are expected to increase throughout the year as phase III clinical trials are initiated and progress. SG&A expenses were $45 million versus $49 million in the comparable period in 2007. This decrease was primarily due to lower ABRAXANE marketing expenses and lower compensation costs. SG&A expenses are expected to rise throughout the remainder of 2008 due to increased marketing costs in the US and the introduction of ABRAXANE in global markets. As part of the separation from APP in November 2007, Abraxis received $700 million in cash. Interest income in the first quarter of 2008 was approximately $6.8 million compared with interest income of approximately $300,000 in the prior year period. On an adjusted basis, 2008 first quarter net income was nearly $20 million or 49 cents per diluted share compared to $4 million or 11 cents per diluted share in 2007 first quarter. On a GAAP basis, the net income was $4 million or 11 cents per diluted share versus a net loss of $6 million or 14 cents per diluted share for the first quarter of 2007. Turning to the balance sheet, at March 13, 2008, Abraxis had $698 million in cash and cash equivalents and no long-term debts. As we have mentioned previously, our cash is currently invested in AAA rated money market funds right across several banks. None of our cash is invested in option rate securities and we do not expect to take any write-downs on any of our investments. Regarding financial guidance, we currently are taking a conservative approach and do not intend to provide guidance at this time; however, the company currently plans to issue financial guidance sometime after mid 2008. Now I’d like to turn the call back over to Patrick.
Thanks Lisa. So, let me now turn my attention briefly to some of our corporate initiatives and some of the mergers and acquisitions activity. In terms of corporate initiatives, we’ve completed our first acquisition in April adding Shimoda Biotech and a separate company, Platco Technologies, to our portfolio. Let me describe a little bit about these two companies. We believe that both Shimoda and Platco are valuable assets that provide for a revenue stream, a product pipeline based on novel cyclodextrin delivery platform, and access to very exciting next-generation platinum-based compounds. These compounds we believe can expand Abraxis growing oncology franchise and target global markets in excess of $2 billion. Shimoda’s first cyclodextrin based product is Dyloject, a diclofenac sodium solution injection which is an injectable pain killer for the treatment of post-surgical pain. Dyloject is the world’s first solubilized intravenous formulation of diclofenac, one of the most widely prescribed non-steroidal anti-inflammatory drugs. Dyloject was launched in December 2007 in the United Kingdom by Javelin Pharmaceuticals on exclusive worldwide license agreement to Shimoda. We understand that Javelin intends to file additional marketing applications through the mutual recognition process in a number of European Union member countries including Germany, Europe’s largest market for prescription injection pain medications, and pursuing completion of the clinical trials in United States for filing in this country. Shimoda’s second cyclodextrin-based product candidate is an oral tablet formulation of diclofenac that offers fast relief for wide-range acute pain indications including headache, migraine, sore throat, and musculoskeletal pain. We intend at Abraxis to independently and directly develop this formulation. A number of additional cyclodextrin-based product candidates are in development at the pre-clinical stage.
Turning to Platco Technologies, this is a company with a scientific team of world class experts on platinum group metals chemistry, who’ve developed several next generation platinum-based anti-cancer compounds, which have shown extremely promising pre-clinical results compared to currently marketed proprietary platinum-based compounds. In addition, with the aid of this technology, there is an opportunity to significantly improve the cost effectiveness of the supply chain of platinum and used in cisplatinum and carboplatinum.
Let me turn very quickly to our efforts in planning for the launch of ABRAXANE in Europe. Here we’re actively recruiting senior staff to establish our regulatory and marketing operations in the region. Our team now includes Maggie Massam who has joined the company as Senior Vice President Global Marketing. In this role, Maggie with have responsibilities for global commercialization initiatives and ongoing marketing efforts for ABRAXANE and supporting licensees and business partners. We’re in the process of finalizing our packaging and labeling, and continue to expect to launch ABRAXANE in Europe during the second half of the year. So, with that, I’d like now to turn the call back to the operator to begin the question-and-answer session. Operator?
Thank you sir. (Operator instructions).
Thank you operator. I guess we can therefore conclude the call today as there are no further questions.
No sir, not at this time.
Alright, very good. Well, we thank you all for joining us, and if you have any further questions, please don’t hesitate to contact the investor relations team at Abraxis, and that will conclude our call for today and we thank you for your attention.
This concludes today’s presentation. You may now disconnect.
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