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Progenics Pharmaceuticals (NASDAQ:PGNX)

Q2 2012 Earnings Call

August 09, 2012 8:30 am ET

Executives

Amy Martini - Executive Vice President and Co-Leader of Corporate & IR Practice

Mark R. Baker - Chief Executive Officer, Director, Member of Science & Technology Committee and Member of Strategy & External Technology Subcommittee

Robert A. McKinney - Chief Financial Officer, Principal Accounting Officer, Senior Vice President of Finance & Operations and Treasurer

Analysts

Alan Carr - Needham & Company, LLC, Research Division

Jonathan M. Aschoff - Brean Murray, Carret & Co., LLC, Research Division

Ryan Martins - Lazard Capital Markets LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Progenics Pharmaceuticals Second Quarter 2012 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Amy Martini, head of corporate affairs. Please go ahead.

Amy Martini

Good morning. Thank you for joining our conference call today to discuss second quarter financial results. With me on the call today are Mark Baker, CEO; and Rob McKinney, CFO.

Before we begin, I will remind you that remarks made on this call that are not historical in nature, may be forward-looking statements and are subject to a number of risks and uncertainties. Our actual results may differ materially.

Such remarks may include, but are not limited to, those related to regulatory actions related to various formulations of Relistor, our business and commercialization strategies and expectations of future growth, revenues and assessments of our competitive position.

We ask that you please refer to our quarterly report on Form 10-Q and other filings with the U.S. Securities and Exchange Commission for more information on the risks that could cause our actual results to differ.

As a reminder, statements made today are only as of August 9, 2012, and we undertake no obligation to update or revise them.

I'll now turn the call over to our Chief Executive Officer, Mark Baker. Mark?

Mark R. Baker

Thank you, Amy, and good morning to everyone on the call with us today. Let me start by addressing the FDA's response to the sNDA that we and our collaborator, Salix, filed for the use of subcutaneous Relistor by patients with chronic noncancer pain who suffer from OIC.

In the second quarter, the FDA notified us that it required additional time to complete its review of the sNDA and extended the April 27 PDUFA goal date to July 27. On July 27, FDA issued a complete response letter requesting additional clinical data. Following receipt of the letter, Salix has requested an end of review meeting with the relevant division within FDA. Our goal for that meeting is to better understand the contents of the letter.

Relistor global sales in the already-approved population, individuals with advanced illness, as reported by our collaborators for the second quarter, were $10.8 million, more than double that reported for the same quarter 1 year ago when Salix first started selling Relistor.

Turning to the pipeline beyond Relistor, an update on PSMA ADC for prostate cancer. I was pleased by the excellent reception our preliminary Phase I data got at ASCO. ADCs were a hot topic at the conference, and we had good traffic and discussions around our poster.

In the second quarter, we determined that the maximum tolerated dose in this Phase I study of end stage prostate cancer patients is 2.5 mix per kg. We expect the trial to be completed soon and are planning a Phase II study to commence at the end of the current quarter. This will be an open label study of about 75 patients with late stage disease and we expect that it should be completed in about 15 months to 18 months.

As we continue to move the clinical program forward, we remain in contact with potential future development partners. With that, I'll turn the call over to CFO, Rob McKinney, for a discussion of our financial results. Rob?

Robert A. McKinney

Thanks, Mark. You can read details of our financials in the press release we issued this morning and in our 10-Q. But let me provide you now with some brief highlights beyond those Mark already discussed.

Cash and securities at the end of the second quarter were $51.1 million, reflecting cash used for the quarter of $8.3 million. We reported a net loss for the second quarter of $10.7 million or $0.32 per share compared to net income of $55.5 million or $1.64 per share in the second quarter of 2011.

Net loss for the first half of 2012 was $23.8 million or $0.70 per share compared to net income of $32.6 million or $0.97 per share for the first half of 2011. You will recall that we received a $60 million upfront payment from Salix in February 2011, and that year's results included the recognition of almost all of the upfront payment plus significantly higher development cost reimbursements from Salix for the Relistor collaboration. Reimbursements from Salix decreased as development work they requested of us declined.

Second quarter revenue was $1.8 million and first half revenue was $4 million. Revenues for the quarter and for the half were down significantly compared to those periods last year when, again, we recognized almost all of the Salix upfront payment and when expense reimbursement revenues were significantly higher. We recognized $1.6 million of royalty income on Relistor sales during the second quarter 2012, and first half 2012 royalty income was $3.5 million. This compares to royalty income of $527,000 for both the second quarter and first half of 2011.

I'll now turn the call back to Mark.

Mark R. Baker

Thanks, Rob. I know that a complete response letter is a disappointment to those of you on this call who have been following the progress of Relistor for so long, as it is to me. The length of the delay that will result from the complete response letter is uncertain and will only come into focus as we have the opportunity to discuss matters with the FDA. I believe in this drug. I believe it has a place in treating a broader range of patients suffering from the constipation caused by the opioids they use to relive their pain. And I believe that we will find, together with our colleagues at Salix, the best path to move Relistor forward.

As I told my colleagues at the company after we got the complete response letter, this will be a challenging time for us. But we have come through challenges before and we are measured not by how we do things when things happen according to plan, but by how we respond when that is not the case. Let's open the line now for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Alan Carr from Needham.

Alan Carr - Needham & Company, LLC, Research Division

Based on your current balance sheet, I mean, what sort of flexibility do you have, going forward here, if there's a need for more clinical trials with Relistor?

Mark R. Baker

Well, Alan, the Relistor development costs are completely paid for by Salix, so I don't think additional trials will impact our balance sheet.

Alan Carr - Needham & Company, LLC, Research Division

Okay. And then what's your role in this point in terms of interacting with the FDA? Is this driven entirely by Salix? To what extent are you all involved?

Mark R. Baker

Yes, I would say we're quite involved. We've been collaborating very well with Salix. We've been involved in all of the responses to the FDA and in the meetings with the FDA. Salix takes the lead and Doctor Bill Forbes, the Head of Development, I think, is doing an excellent job in interacting with the FDA. So I've been pleased by our ability to respond to the FDA and the way that we've done that.

Alan Carr - Needham & Company, LLC, Research Division

And I guess to get to the FDA's concerns, to the extent you can comment, I mean, is it -- is this tied in any way to safety concerns like -- like came up with the class before with Entereg a few years ago around potential heart rates?

Mark R. Baker

We have said that we are not able to comment at this time on the nature of the data that the FDA has requested. Yes, and we just don't feel that we'll be able to do that until we've had an opportunity to discuss matters with the FDA. So I'm afraid I just can't give you any more color on that, Alan.

Alan Carr - Needham & Company, LLC, Research Division

All right. And I guess the last thing is, it looks like Salix is saying that they're moving forward with their -- proceeding forward the expectation that they'll submit an oral NDA sooner than later or in September. Can you comment around the oral NDA submission timelines from your perspective?

Mark R. Baker

I think that we need to have this meeting with the FDA and our hope is that we'll have the meeting in that timeframe. So I know Salix said yesterday that they plan to go ahead with the submission following that meeting.

Operator

Our next question comes from Jonathan Aschoff from Brean Murray.

Jonathan M. Aschoff - Brean Murray, Carret & Co., LLC, Research Division

Mark, I was wondering if you could tell us anything about that additional info that was submitted to the FDA earlier in 2010. That was, I'm assuming, part of the delay. And at least, maybe, if you cannot tell us what it was, tell us if it's part or all of what is the FDA's concern now?

Mark R. Baker

You said 2010, but you meant...

Jonathan M. Aschoff - Brean Murray, Carret & Co., LLC, Research Division

2012, I'm sorry.

Mark R. Baker

Yes. So we, at that time, said that we couldn't comment on the information request, and so I feel that we can't do that and we'll wait to have this FDA meeting to provide more clarity around that. But the FDA's complete response letter does deal with the information that they requested at the end of the original PDUFA period.

Jonathan M. Aschoff - Brean Murray, Carret & Co., LLC, Research Division

Okay. And does not getting the approval milestones, does that have -- let's just say that's meaningfully delayed. Does that have an immediate impact on your product acquisition plans? Or was that -- or was to be a stock type of item?

Mark R. Baker

We were hoping to receive the $40 million milestone payment, and so that's been delayed. That's the milestone payment associated with approval in the chronic pain setting. We have an additional $15 million milestone due to us upon approval of an oral formulation. So it's a disappointment not to receive those funds today, but I believe that we're looking here at a delay. So I do expect that we will receive the funds but the timing of it is not certain now. The approach to growing the company, as you know, based on our prior discussions, has been around using our stock and building in that way. And so I do expect that we'll be able to do it, to build the company in that way. But for the moment, obviously, our focus is on getting Relistor back on track.

Jonathan M. Aschoff - Brean Murray, Carret & Co., LLC, Research Division

Okay. And lastly, is it still the case that you book royalties on a one quarter lag or was that just a sluggish Wyeth thing?

Robert A. McKinney

That was just with Wyeth. We book them current.

Operator

[Operator Instructions] Our next question comes from Ryan Martins from Lazard Capital.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Mark, just a question on your complete response. Can you -- obviously, you're going to be -- you and Salix are going to be already proposed an agenda because that's kind of what the guidance dictates. In terms of what the agenda is going to be during the meeting, can you maybe broadly talk to what this agenda tries to approach? Is it approaching clinical trial design, alternative designs? And just so if you can give us some kind of color around that.

Mark R. Baker

Yes. I would say there are 3 areas that we want to talk to the FDA about. First is to understand the concerns that led to the complete response letter in more detail than is set forth in the letter. I think the second is to suggest and discuss with the agency, alternative ways of dealing with that concern. And then the third item would be around the clinical paths and possible designs. Those would be the 3 areas that we would be focused on.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And in the case of subcu approval, is that in any way tied to oral approval? I understand, obviously, the data is going to be referenced, but it's -- the oral, as far as I understand, is under separate NDA, right?

Mark R. Baker

It is a separate dossier, a separate filing. The letter that -- the complete response letter does not speak about the oral formulation in any way nor does it address the currently-approved indication in any way. But obviously, since the active molecule is the same between the subcu formulation, the oral formulation, there is an interconnection.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And so related to that, if you are too far apart in your views, let's say, post the meeting, I mean, is it an option that you could abandon the filing for the subcu and go ahead and focus on filing the oral directly at that point?

Mark R. Baker

Yes. I think it's way too early to comment on that. Certainly, all things are possible, but that is not the focus today. The focus is on the subcu and setting a path forward for it with the FDA.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And how does the complete response, if in any way, does it impact your potential for European partnership that, I guess, was under discussion?

Mark R. Baker

So far, we have not heard of any impact on that. We've been told by Salix that they are moving forward with discussions with partners, and so we have not seen any impact to date.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And the multi-dose pen, that's still on track for filing?

Mark R. Baker

We have not heard of any change on that development being handled by Salix.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And then maybe, can you talk about the sales this quarter? Relative to last quarter, it seems like there was -- it seems like it's fallen off a little bit, at least from the U.S. I mean, was that just a quarter-over-quarter thing that we saw and should we take away anything in terms of trends there?

Mark R. Baker

I think the main driver of that was that in the prior quarter, the prefilled syringe was launched. And I thought that Salix did a excellent job with that launch and with broadening the distribution of the product. So I think that there was some stocking in the first quarter as we mentioned when we reported on that. So my interpretation, but obviously, quarter-to-quarter fluctuations can be caused by many things, but my interpretation is that that's the reason we're seeing a slight decline from first quarter to second quarter.

Operator

I'm showing no further questions at this time. I will now turn the call back over to management for further remarks.

Amy Martini

All right. Well, we thank you on behalf of Progenics' management team for joining us today. Operator, we're finished at this time.

Operator

Thank you. Ladies and gentlemen, that does conclude today's conference. You may all disconnect and have a wonderful day.

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