NPS Pharmaceuticals, Inc. (NASDAQ:NPSP)
Canaccord Genuity 32nd Annual Growth Conference Call
August 14, 2012 8:30 AM ET
Francois Nader – President and CEO
Salveen Richter – Conaccord
Salveen Richter, one of the biotech analyst here at Canaccord. And it’s a pleasure of having NPS Pharmaceuticals with us this morning. Really this is an exciting time for them let's say potentially will enter commercial phase of their life, going with Gattex, which has a December 30 PDUFA date for short bowel syndrome, and then they have a second filing following after with Natpara for hypoparathyroidism that could be filed by year-end.
So with that, I’ll turn it over to Dr. Francois Nader, who is President and CEO.
Thank you, Salveen and good morning. As you might hear it, I am struggling with my voice this morning, being a little bit under the weather. This being said, we are indeed, Salveen and the audience at very, very exciting times at NPS. Companies live and die without filing one NDA. We have the pleasure of not only filing one, and currently Gattex is under review, but we’re filing a second one by the end of this year.
As you might see it’s from the slide, our mutual area of focus are rare diseases, more specifically in gastrointestinal and endocrine disorders. Give me a second to review the Safe Harbor statement. And this is our outline. It’s a rich pipeline and the uniqueness probably of NPS is we combine a strong development pipeline that you can see in orange here and I will spend a little bit of time talking about our two lead products, but we have also as you can see in blue a number of products that had been partnered over the years which provides us with a very, very interesting royalty stream which makes our company a very interesting and balanced risk benefit.
So our value proposition can be defined as follows. We have, as Salveen mentioned, a near-commercial pipeline. So Gattex is our lead product. It’s a teduglutide, GLP-2. And we’re pursuing the indication of short bowel syndrome. We filed last year and we expect now the PDUFA date to be December 30 of this year. Meanwhile our partners ex-North America, Nycomed/Takeda also filed and expect to have their EU marketing authorization before the end of this month. So very exciting times both in the U.S. and in Europe for Gattex. Natpara is our second product. We would be filing this product in hypoparathyroidism before the end of the year.
Interesting elements of this filing, it is a BLA, PTH. It’s an 84 amino acid peptide and therefore our filing will be end of PDUFA V and could grant us a 20 year exclusivity which is also very, very interesting. Last but certainly not least, we have two products, the calcilytics family, that we are currently preparing for development in a ultra rare indication called ADHH. These are products that we got back actually from GSK last year. The transfer of technology has been completed and we’re currently working on our development and manufacturing plan.
As I mentioned, we have a very interesting royalty stream coming from a number of products, and probably the most important one is Sensipar. Sensipar is a product is marketed by Amgen as you might know, and the product is doing extremely well, year-over-year as you can see 13% and year-to-date 2012 through the end of June about 16% year-over-year growth.
We get 10%, meanwhile we partially monetized this royalty and we still owe Amgen $92 million as of end of June. What we did however is we negotiated the reimbursement of this non-recourse debt and extended the terms. So basically instead of Amgen really getting reimbursed through 100% of the royalty, what we did was we will be reimbursing Amgen at $8 million per quarter or $32 million per year and we will keep the rest of the royalty which is perfect for us frankly, because it significantly helps us with our cash flow plus the terms are extremely interesting with a 9% interest rate.
This being said, we also negotiated with Amgen a $25 million payment for the royalties post 2019. So 2019, 2020 which is residual ex-U.S., so very good deal for the company and we expect to repay the debt by 2015 which means practically that from 2015, 2016, 2017 and 2018 we’ll get 10% of the revenues estimated to be in the $80 million, $90 million, $100 million range depending on the sales.
We have also two other products where the royalties are unencumbered and this is Nucynta, it’s a pain medication currently marketed by Ortho-McNeil and Revestive which is the name of Gattex in Europe. Last but certainly not least, we have a very strong operational position. We ended the quarter with $135 million as in pro-forma cash and with that we enough cash now to support the launch of our two lead products, Natpara and Gattex. Our full-year cash burn guidance is between $60 million and $70 million. And the only non-recourse debt that the company has is $17 million which is convert due in 2014.
Very importantly though in the orphan space we’re in, I’m very, very happy to have a leadership team and specifically development and commercial team, that both of them have very deep experience in launching and developing orphan products, which is critically important given the space we’re in.
I’d like to spend a few minutes talking about Gattex in short bowel syndrome, our lead product. For those of you who are not familiar with the condition, it is indeed a very rare condition, where individuals undergo a resection, significant resection of their small bowel because of chromes or cancer or other reasons and they end up with not enough guts – small guts, actually to absorb enough nutrients for their survival. So these patients, given their situation tend to rely on parental nutrition which is as you know nutrition given IV for their survival.
The way the parental nutrition is delivered, it’s delivered over a period of time so eight to 12 hours a day. And on average these patients are on parental nutrition about six days a week. So they are on parental nutrition hooked to align anywhere between 50 to 60, 70, 80 hours a week. This is very constraining as you can imagine from a quality of life, a social perspective, but also parental nutrition is associated with a number of comorbidities, probably the most important one long-term is the damage to the liver virtually 100% of the patients who are on parental nutrition have some kind of liver damage ranging from an elevation of the enzymes to the need for a transplant.
One of the other elements of the parental nutrition is a permanent fear that these patients have about septicemia. And unfortunately for those patients who have been on parental nutrition for a number of years, septicemia mainly due to the infection of their line could be life threatening and the antibiotic options are fairly limited for these patients and this is the fear if you will they live and socially their fear slightly different, because they lead their lives trying to find restrooms. These patients have to go about 15 to 20 times a day. So their whole life is organized around restrooms and needless to say that it is not a very pleasant situation.
Last but certainly not least, the survival rate as you can see is five-year survival. Range is between 30% to 80% depending on the age and the etiology. So it’s a very serious condition. And if we think about this particular condition, what we need to do is really reduce the reliance on parental nutrition and eventually have these patients survive independently and this is exactly what we intended to do with Gattex.
So Gattex is a GLP-2. GLP-2 is a peptide that is secreted from the intestinal L-cells after meal ingestion. So when we eat, we have dispersed of GLP-2 if you will. And when you look at the different characteristics, this is exactly what we look for when we look for a treatment for short bowel. It enhances the nutrient absorption, expands the intestinal mucosa, stimulates the intestinal blood flow and increases the intestinal barrier function, very, very important physiological activities of GLP-2.
Interestingly enough, we were able to actually take this GLP-2 which has a half life of few minutes and by switching one amino acid extend their half life to two hours and with that we have a pharmacological agent that we can use. And the product is delivered subcu and we had a patent exclusivity until 2020. This is a short summary of our clinical development plan and just to cut to the chase, what we did with our pivotal STEPS 3 is look at a primary endpoint for these patient which consisted of a reduction of the parental nutrition volume of at least 20% -- 20% to 100% at week 20 and week 24, as you can see here 63% so two-third of the patients on Gattex achieved this primary endpoint with the p value of 0.002.
We also looked at the volume reduction and as you can see Gattex was able to reduce parental nutrition volume by about 34% or 4.4 liters knowing that the baseline is 13 liters with a p value of 0.001, so very, very interesting finding. We pushed the funding a little bit further and by keeping the patients on a long-term two year study, where all patients were on Gattex, for an additional two years and the findings were very, very interesting. First, a number of patients, 53% were able to reduce their parental nutrition needs by at least one day a week and that’s very important. So during this one day actually 24%, one fourth of the patients reduced their PN infusion basically three days per week.
So they can regain their independence three days a week. They don’t have to rely on their line, they can lead a normal life at least three days a week. And we’re very, very fortunate actually the patients were very fortunate that seven patients out of 88 or 8% achieved completed veining off from parental nutrition. To put things into perspective here, the average number of years these patients were on parental nutrition was seven years. One patient has been on parental nutrition for 25 long years and just been on Gattex for a year and he was able to be veined off which is as you can imagine a life transforming event for these patients.
From a regulatory perspective as I mentioned we have a PDUFA due date of December 30. It was extended. We announced it yesterday from September 30 to December 30. We have 190 person years of exposure which is a very big numbers given the small indication in the orphan status. The FDA is conducting pre-approval inspection. Things are going very, very well and the FDA informed us that we will have a panel, they gave us the date. Unfortunately, we cannot communicate the date publicly until the FDA actually publishes the date in the federal register, which is usually about a month prior to the due [ph] date.
As I mentioned in Europe, our partner Nycomed/Takeda secured a positive CHMP opinion back in June and the approval is expected later on this month. This is the indication that they received in Europe. So the recommended indication in treatment of adult patient with short bowel syndrome patient should be stabled following period of intestinal adaptation as per surgery, so very interesting indication and we’re very, very excited to have this product approved in Europe, the next phase will be obviously to start working on reimbursement which in Europe as you know could take time and is not the easiest thing to do.
In the U.S., we have now put in place our commercial leadership and I am thrilled because most of everyone on the team has at the very least biological experience and many of them have very specific orphan GI experience which is great. We have a very, very gated I would say very well defined commercial build up. We need to have the commercial team just in time not before, or not after. And therefore we started building our commercial organization when we had positive Phase 3 results, then when the NDA was accepted, we increased the manpower and the next two very important milestones are the positive outcome and the NDA approval.
We are pursuing a number of strategies. One of the biggest challenges usually in the orphan space is actually finding the patient. And it’s a little bit of paradox in contradiction because there is truly an unmet medical need, yet at the same time few thousand patients out of a population of over 300 million is not the easiest thing to do. So we’re using multiple approaches to find these patients making sure that they know that Gattex will be available. We are obviously limited what we can do prior to approval, but we are using a network of medical scientifically liaison to start working with the key opinion leaders in informing them scientifically about the disease and Gattex.
We have a Gattex website, so it’s short bowel – sorry, it’s not the Gattex website. It’s a short bowel syndrome website that we’re calling Shortbowelsupport.com and we encourage patients to register so that we can continue to provide them with information. As we have a number of our tactics in place, one of the key ones being our partnership with the patient advocacy groups. So all these are in place, but certainly finding the patients is a big, big priority for us. Securing market access and reimbursement usually is not such a big deal in the orphan space, yet we’re taking it very seriously.
This is something that we are building and building the value proposition for Gattex is something that we are working on and will be ready for reimbursement when the product will be approved.
Last but certainly not least, we are putting together a personalized patient service for the patients who will be on Gattex. For couple of reasons, one, we want to alleviate any additional burden on the proscriber but we also want that the patient experience be as positive as possible when they start their Gattex treatment and therefore we have established a concierge service where we will be supporting the patients, where the reimbursement with the understanding of the drug, with the understanding on how to use it, with the understanding of on how to reduce their parental nutrition.
So it’s a very, very comprehensive service that we’re putting in place in support of the patients and in support of the proscribers. I’d like to switch to Natpara in hypoparathyroidism. Here also it’s a very rare indication. About 80,000 patients in the U.S. and the key characteristics of this condition is the absence of parathyroid hormone. As you might know parathyroid hormone is secreted by the parathyroid glands and we have usually four of them that are embedded in the thyroid. About two-third of the patients with hypoparathyroidism have a neck surgery as their primary etiology and what this means is when patients undergo a thyroidectomy or extensive neck surgery, surgeons inadvertently damage or remove the parathyroid glands.
These patients become hypoparathyrodic if you will and the key biological – biomarker if you will of hypoparathyroidism is hypocalcemia because the primarily role of the parathyroid hormone is to maintain normal calcemia. So these patients become hypocalcemic and hyperphosphatemic and at the same time in parallel there is a renal wasting of calcium which can cause hypercalciuria. Calcium is extremely important in many functions in the body but mainly in three organ systems, the bones as we all know but people tend to forget at times that calcium is a – it has primary role in the good functioning of our muscular system and our neurological system.
So these patients suffer from structural abnormal hyperdense bones, which is very important, it’s not symptomatic though. Their symptoms what they feel are mainly driven by their neuromuscular systems symptoms, so paresthesias, carpopedal spasm, tetany, seizure and bradycardia. Interestingly enough, when we look at this parathyroid space, there is no approved treatment for a – there is no approved hormone replace for parathyroid hormone. So the only current treatment that are available are symptomatic treatment, which is very simply we tend to give these patients significant supplementation of calcium and vitamin D to artificially boost up their serum calcium and that’s the only quote, unquote treatment that is currently available.
Unfortunately for these patient, despite the fact that we artificially boost up to fuel up serum calcium, they suffer from very significant physic disorders. And the psychiatric disorders as you can see here 39% suffer from cognitive impairment, about 12% from neurosis and about 11% from psychosis. The other problem with this supplementation besides the fact that these patients have to take 30, 40, 50 pills of calcium a day which is quite a bit as you can imagine. The calcium has to go somewhere and these patients suffer from kidney stones, leading to end-stage renal disease. They have deposits of calcium in their heart, so they have cardiovascular diseases mainly arrhythmias, calcium deposits in the brains and cataract.
Actually just to underline this fact, there was a study that was recently published by Mass General and Brigham and Women’s here in Boston and actually when you look at these patients. The patients are usually femalse73%, mean age 52 years, but when you look at their renal effects here virtually most of these patients have renal damage that would require in 2% of the cases a renal transplantation.
So this is pretty serious and just underlying the fact that these patients are taking calcium and vitamin D which is the only available alternative for them. What we are offering these patients is a replacement hormone with our PTH who are able to replicate if you will the full length of the endogenous parathyroid hormone, all 84-amino acids. And basically we are in the hormone replacement business that’s what we are doing.
When we gave our Natpara PTH to patients as you can see 53% of these patients were able to maintain their normal calcemia while reducing the need for calcium and supplementation, calcium and vitamin D supplementation by at least 50%. Interestingly enough and probably more importantly, we had 43% in our study where patients were completely veined off from their calcium and Vitamin D, while maintaining a normal serum calcium.
Because we are in the hormone business, we developed four different doses. Every patient is different and we cover the whole spectrum with 25 microgram, 50 microgram, 75 microgram and 100 microgram. And with these four doses we cover the needs of all different patients. Basically we have a patent exclusivity until December ‘18. The orphan designation takes us to ’20, but more importantly with the BLA designation and we’re filing a Pre-BLA [ph] this gives us ‘20 as exclusivity and so the exclusivity could go until 2025.
We have a busy year ahead of us actually, and basically we started the year – last year actually, fourth quarter with a submission of the Gattex NDA that was accepted back in February. We had a Natpara Pre-BLA meeting in the second quarter. As I mentioned Revestive which is Gattex in Europe will be approved before the end of this month and we have a Gattex advisory panel that will take place in the fourth quarter of this year and our PDUFA date now is December 30.
So we are in this very interesting position where we’re defending an NDA, we’re filing a BLA at the same time. And this is a very interesting position to be and very few companies have the privilege of defending an NDA and we’re filing a BLA. That's in summary what NPS is. We have two late stage products, one of them hopefully will be approved before the end of the year and the other one will be approved next year. Very interesting and valuable royalty based portfolio and a very strong operational position.
Thank you very much for your attention and again sorry for my voice here, and I think we have a Q&A session that follows. Thank you.
We do have a breakout session following in the London breakout room. Thank you.
[No Q&A session for this event]
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!