Cadence Pharmaceuticals, Inc. (CADX) 2012 Wedbush PACGROW Life Sciences Management Access Conference August 14, 2012 2:20 PM ET
Scott Byrd – SVP and Chief Commercial Officer
Hey guys, I guess we’ll get started here. I am Richard Lau with Wedbush. Introducing today Cadence Pharmaceuticals who launched their drug OFIRMEV about a year and a half ago and on the dollar basis, it’s actually one of the more successful hospital-based launches in recent memory. Here today presenting is Scott Byrd.
Good afternoon. I’ll just make one slight adjustment to the introduction. I would say, even on a dollar basis, this is one of the most successful recent hospital product launches and I actually support that with my slides, Richard and we can talk about it as we go. Before I get started certainly refer to our SEC documents for more information about forward-looking statements that I will be making in the course of the presentation.
It has been an exciting time for Cadence this last year and a half. We are hospital focused specialty pharmaceutical company. We have, as you heard, launched our first product OFIRMEV, which is IV acetaminophen. It is a differentiated analgesic. It is a new class in and out of itself for IV pain medications as a non-opioid and non-inside analgesic.
It is designed to be used as the foundation for a multi-modal approach to pain management in the hospital setting and we’ve had really, really nice uptake, not only on the hospital formulary adoption, but the physician feedback and the clinical experience has been really outstanding. We’ll share some of those details in a moment.
The very solid revenue growth from my introduction and we continue to see increasing adoption, not only to the basis of adding new customers quarter-on-quarter, but those customers ordering both more frequently and ordering in larger quantities, serving to accelerating our sales to the first half of this year.
We do have an experienced management team and an experienced commercial organization, particularly our field sales organization. We designed the organization around the hospital settings, which means we hire representatives in our commercial team with deep hospital experience which is required to manage the complexities of launching new hospital products and the decision making patterns within those. And we’ll talk a little bit about that adoption process as we go through the launch story for OFIRMEV. Just a little bit of background on OFIRMEV. It’s a proprietary IV acetaminophen formulation. It is the first and only IV formulation for acetaminophen despite the molecule that has been commercialized since the mid ‘50’s around the world. It was only recently that it was made available on IV formulation and brought to the US market in January of last year.
It is in fact the same formulation as has been used in Europe since 2002. That product was launched under the brand name Perfalgan and marketed by Bristol-Myers Squibb. We have quite a nice indication as broad and that it is indicated for the treatment of mild to moderate pain and moderate severe pain with adjunctive opioids that might seem a little bit like motherhood and apple pie to many folks, but to those of us who are responsible for promoting it, this is very, very important language that’s used – it’s used in other words or indicated for the use as a model therapy or a single agent for mild to moderate pain and used as the base line analgesic for moderate to severe pain adding a adjunctive opioids on as necessary to control pain.
It is also indicated for the treatment of fever and importantly indicated for not only adults but children aged two and older. Our message is just simple, significant pain relief, reduced opioid consumption and improved patient satisfaction. I think that one of the things that has been great about having the established history of acetaminophen over the last now 60 years is the safety profile for the molecules. It’s incredibly well established. It is the most highly used pain medication around the world. Therefore the experience space is quite deep for physicians and patients alike. They know what to expect from a safety profile. I think what they are learning now with the launch of OFIRMEV is that they can have new and higher expectations for an efficacy profile that heretofore they could not get with the oral and rectal formulations.
So we had approval on November 2010. Our initial focus was on gaining formulary access. Unlike in the retail setting, we have a formulary decision making process and the gate keepers that sit underneath the same roof as those that are actually responsible for administering the product and taking the product. And therefore the formulary process while always important for launching a new pharmaceutical, is absolutely essential for launching a product into the hospital space. In fact if representatives aren’t already selling other products into the hospital they more frequently than not are not allowed to leave the doors of the hospital until the products on formulary.
So our first focus was on driving formulary access. We’ve been quite successful in that regard. From there then it is about getting access for physicians to use the product after the formal formulary decision has been made, and then ultimately driving sales and pull-through. That’s done through a three-state launch and adoption process. I spoke of creating access. I think traditionally we think of creating access as that formulary decision that’s made and that is in fact the first step in the process. It’s the paper step. It is the most formal step and very, very important. However, there are a number of steps after that formal decision is made by the committee within the hospital that take the product from yes, it is now officially on the products, on the hospital’s formulary to it is available and ready to use for physicians.
It then has of course to be stocked in the institution, not just stocked in the central pharmacy where the pharmacists have easy access to the product, but it needs to be stocked around the hospital at the appropriate places, either in satellite pharmacies, on the floors, or in the pick dispensing units as it were as close to that point of care as possible to facilitate ease of use.
That is a process that certainly doesn’t happen overnight particularly for large complex institutions like most hospitals are. That’s a process that requires a number of decision makers, physicians and nursing staff and pharmacy to coordinate their efforts and even the I.T departments, because nearly all hospitals have either adopted computer oriented systems or are in the process of doing so. So ordering a product to be used on a patient now also requires the IT systems to be updated and programmed so that the physicians have not only physical access but virtual access to write the orders.
That’s stage one. We have been largely in stage for the first portion of this launch. In many of the institutions we still are in that process. But I would say probably in most we are squarely in stage two which is broadening physician utilization. You’ll see some numbers here on the following slides that at least for the hospital setting are pretty mind-blowing. The number of hospitals, the number of physicians that have adopted and have gotten experience with the product and then as we more fully penetrate and expand physician experience with the product, then the next step is increasing the number of doses for patients.
Most physicians when they begin to use the product and get that early experience we’ll start, we will call playing around with the product by using it one or maybe two vials in patients just to understand how it’s impacting that patient’s care in the OR and then the Post-analgesic care unit. And then as they gain comfort with the product, they then tend to put it in their standing orders and orders sets and you see the utilization expand from just that initial dose often given by anesthesia in the operating room onto the rest of the patients stay in the post-analgesic care (inaudible) in the ICUs. So we are not really focusing directly on stage 3 on this point, but we do expect to see continued growth of the product as we deep our penetration for patients over the course of the launch.
Here on slide 8. We’ve had over 1,800, almost 1,900 hospitals made positive formulary decisions for the product. That’s over 90% of the reviews that have been completed have decided to bring OFIRMEV in and place it on formulary. So at the end of June we’ve got almost 1,900. Now there have been nearly 3,200 accounts have actually ordered and gotten experience with the product and ultimately through the first 18 months of launch, we’ve distributed now over 3 million vials and estimate that somewhere between 1.2 and 1.5 million patients have been treated. Now that’s a number that would be maybe expected for a broad based retail product that you would go to the pharmacy and fill your prescription from your primary care physician. That is an astronomical number of patients to be getting a new product through the hospital setting. And we’re very proud of it and I think we’re maybe even more proud by the experience that physicians are having with the product.
All of our launch indicators are strong now and have been strengthening, particularly here in 2012. I mentioned the formulary wins. Not only are we doing well and continuing to add new formulary approvals each month despite it not being a priority for us. But the mix of those approvals range from the smallest rural community hospitals up to most of the major academic medical centers and large healthcare systems and the quality of that access has also been outstanding. And nearly three quarters of all the formulary decisions have been put the product on formulary either unrestricted or restricted to patients that cannot take oral medications which is how we’re promoting the product. We’re not promoting the product to replace oral Tylenol of course, but to be used while the patients are on IV therapy and three force of our formulary approvals would allow access in order to do that.
Now, I mentioned the experience with the product. We spoke last fall about the initial reactions of physicians being extremely positive and it was and our market research confirmed that. Periodically we will perform awareness trial and usage market research studies to better understand how much awareness there is for the product among our key constituents. And then also what is the nature of the experience they’re having with OFIRMEV both relative to their expectations as well as other products.
We just completed a second round of that ATU study in May. 98% of the physicians that were surveyed in this quantitative market research study reported that OFIRMEV’s efficacy met or exceeded their expectations and a very large portion of that 98% said that it significantly exceeded their expectations. Now this indeed is not your grandmother’s Tylenol. The IV formulation provides benefits both in speed and the amount of drug product that gets through the Cerebrospinal fluid, across the blood-brain barrier and creates an experience that most clinicians in a positive way are not expecting.
In fact, not only are they saying that it has exceeded their expectations, but in fact, another marker for that would be are they recommending it to their colleagues? Two thirds of those that were surveyed in this particular research study said that they’re not just likely to respond but they’re very likely to recommend to their colleagues. Again, a great indicator for the experience that they’ve having with the product.
So the sales have continued to accelerate through the first two quarters of 2012. That’s happening through really three major vectors. We’re continuing to see very, very nice growth and new customers as well as repeat customers. We grew our unique customer base by 17% quarter-over-quarter and the quarter ending in June to nearly 3,200 accounts. We’ve been consistently adding over 400 new customers under the fold each quarter since launch.
The frequency of which they’re ordering the product has also been increasing very, very consistently. Hospital reorder rates grew by 11% in Q2 over Q1. This is the number of weeks in a quarter that a hospital would place an order. Obviously some hospitals order multiple times within the week. We only count that as one order. So the maximum possible would be 13. So there is ultimately a feeling to the reorder rates. But we’re continuing to see that growth quite nicely and the average size of these, despite the fact that we have more customers, new customers and they are adding more frequently, they are also purchasing in larger volumes which is serving to accelerate our sales line.
The shape of the formulary of penetration, I think has been really, really steep here in the first part of 2011.You can see that the growth have stabilized over the last seven to eight months. We really began to shift our focus to driving pull-through at the end of Q3 and into Q4 of 2011 and we do expect to continue to add hospitals on to formulary, or affirmative on the hospital formularies for the coming months and we’ll ultimately fully penetrate our targeted institutions.
But we are squarely focused on driving pull-through, which you can see on this slide, which shows not only very nice growth through 2011, but a fairly rapid acceleration into 2012.This is happening not only as we work through the formulary access challenges, but often what we are seeing is hospitals gaining early experience. The Pharmacy departments which act as the primary gatekeepers and the managers of the pharmacy budget are seeing the impact, hearing about the impact from their physician colleagues, seeing it in their own trade utilization evaluations and study of their performing in their institutions and a rational promotion by our representatives and used by physicians, all allowing for pharmacies to begin to relax some of the controls that they had on early in the launch and allow for greater utilization, which is not only good for us, but I think it’s having a very positive impact on the institutions themselves beyond the positive impact that it’s having for patients. So I mentioned the growth in new customers. It’s primarily growth in sticky customers or repeat customers. We’ve seen pretty stable base, the single order accounts, the accounts in Q2 that were single order are different than the ones in previous quarters. So that’s representative of bringing new customers on board. But we are not only growing at 17% in our customer base, our repeat customers are growing Q2 over Q1 at 21%. I mentioned the order of frequency which has kept at 13 for a quarter measure. We’ve had continual growth in through Q2 of 2012.We did have a flat period from Q4 of ‘11 to Q1 in 2012.
That was primarily related to the supply disruption that occurred in late January of this year as we switched our supply chain from a US based plan to a European based plan and that disrupted the supply chain for about two weeks and of course then they couldn’t get the product. They weren’t able to increase their order frequency. However, the order sizes obviously did increase as they were allowed access. Had quite a nice stable supply through our supply chain through the remaining part of the year and don’t anticipate any future challenges on that front. The average order size as I mentioned has also been growing very, very consistently. You can see the straight line set has been very, very tight for this on a weekly basis. We now have surpassed an average order size of north of 80 vials for each order placed. And just to give you some sense for what that means, I think in the abstract it may not mean a whole lot to you, but here on slide 16, this is maybe an easier metric to get one’s mind around. Among the hospitals of which we are on formulary, meaning we have the ability to go in and promote the use of the product, those that have been on formulary for now a year and half as well as those who have been on formulary for the last two weeks to 30 days, inclusive of all formulary hospitals, we are now getting about one out of 10 post-operative patients being placed on the front at some point during their stay in the hospital. So that’s a really fantastic penetration for an enormous patient base. For frame of reference, across the US for all hospitals, there’s probably somewhere between 30 to 45 million surgical procedures performed every year in hospitals and the ambulatory surgical centers. That’s an enormous denominator to penetrate in those of which we’re on formulary. We’re now getting one out of 10.
Now this is Richard’s slide that he introduced me which -- sold in the first 18 months of launch. The comparison group are the recent hospital product launches, those that are launched within five years of OFIRMEV’s launch. We did also add in Cubison because it’s so well recognized. It launched a little earlier than that. But we’re fully nine times the penetration in units or doses delivered in the hospitals, in the average hospital product launch. So I do agree with the introduction and thank you for that. But even on a dollar basis, you can see we are priced at sometimes one tenth or even one hundredth of many of the products that have been launched at $10, roughly a little more than $10 per dose. And despite that fact we’re still seeing top tier sales growth performance among hospital product launches launched over the last 60 months.
So we’re really, really proud of this. We’re quite pleased with the acceleration we’ve seen through the first six months of the year and that’s left us in a good position to continue that growth, not only throughout the rest of the year but for the ongoing lifecycle of the year. I’ll leave the financials up here. Yu can see them for yourselves and wrap up our presentation there and certainly open it up for any questions that you may have.
Are you guys considering, one in licensing your product for your sales force or otherwise bringing in additional organizations that (inaudible) partner up with you?
Yeah, it’s a good question. We are very actively looking for products to bring into the portfolio. We’re primarily looking at launch products that our sales force could leverage. We think that they’ve got plenty of capacity to sell additional products. Of course any product that we would bring in the gross margin would effectively drop right to the bottom line. So it would be quite synergistic for the company. That is our model. We’re evaluating everything from licensing products through co-promotion opportunities and we do think that bringing in some additional products in would not only help with the financial infrastructure, but also would help with synergies with OFIRMEV. OFIRMEV, as you know, is and can be used and promoted throughout the hospitals and almost every department in the hospital. So any product that we would really look at that is in the hospital or to be promoted in the hospital would be a great fit in addition to OFIRMEV. We’re not actively searching co-promotion partners to help with OFIRMEV, almost the reverse of that. We are considering opportunities where we can use our experienced sales force, those that have had so much success with penetrating and launching with OFIRMEV to help accelerate the sales for other products.
What is your IP for (inaudible)?
So we have two patents, one with the pediatric extension will take us the formulation patent through mid 2018 and a process patent which will extend with the pediatric extension to the end of 2021. We are in the middle of paragraph four, filing law suits right now so I can’t speak in too much detail about it. But we’re quite confident obviously in our patent infrastructure. This is an incredibly difficult product to formulate and produce and we’ve got great support from our contract manufacturers. We currently have in our partnership with both Baxter and Bristol-Myers, the two largest – in fact, by orders of magnitude the two largest manufacturers. And it’s very, very difficult as we’ve experienced in our own right with launch to manufacture the product. So we’re quite confident in the length of those and we think right now is a good time to be expanding our product portfolio, not only to leverage this launch that we’ve had but to expand the foundation, ultimately give us the platform for building the company with development products. I think that might be just a tieback to the previous question, but we’re not focusing on right now bringing in either mid or late stage clinical development products. We’re focused exclusively on expanding our sales force infrastructure and leveraging that.
That $91 million cash, is that enough to carry you through a proper load?
Yes. So the question was whether the $91 million that’s shown here at the end of June is enough to reach cash flow break even is our expectation and it is our business plan to get the cash flow break even with the cash that we have.
Any more questions? Thank you very much.
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