Dyax Corporation (NASDAQ:DYAX)
UBS Global Life Sciences Conference Call
September 20, 2012, 09:00 am ET
Gustav Christensen - President & CEO
Good morning and welcome to the second day to the 2012 UBS Life Sciences Conference. My name is [Natalia Medina] and I am happy to be your host for this session. Our next presenter will be Gustav Christensen, President and CEO of Dyax Corporation. A breakout session in [Julliard] will follow immediately after the presentation. Thank you.
Thank you very much Natalia and thank you for inviting us back. I believe this is my sixth UBS Conference running. So I am used to the UN Meetings in New York, but thank you for sitting in the Dyax presentation here early in the morning. Dyax is an emerging pharmaceutical company in the transition to become a profitable company really in a predictable period of time.
Before I move on to the presentation, I would to call your attention to the Safe Harbor statements. We are a public company and I will be making forward-looking statements. If you want to explore further some of the subjects you can check our SEC filings where all the information will be.
Now Dyax is a company that the old fashion way have built itself on its own proprietary technology phage display. Phage display has allowed us to discover and develop our own pharmaceutical product and built a product business that Dyax pharmaceutical business in the angioedema space that is a swelling disease space. We have an approved product and we have a pipeline.
But it has also allowed us to build a very successful licensing program where a large number of companies have taken license to our discovery technology and are using it in-house. It is a business that is generating about $15 million per year currently and have future upsides in forms of royalties and significant milestones. In some ways these are very different businesses, but they are also synergistic businesses. In that, both sides will have a significant number of milestones over the next 12 to 24 months; milestones that can build significant shareholder value and as such they are synergistic and that they help offset the inherent risk in each of the two businesses.
Now let’s first take a broad look at the at the Dyax angioedema business. KALBITOR; our product was approved two years ago and is a leading treatment of routine angioedema attacks. It’s making a significant difference in patient’s lives today. We have generated double-digit growth in sales quarter-over-quarter since we launched. It is an orphan market where we are just beginning to see it being developed and penetrated, so a lot of growth left.
We have plans to further expand beyond the US market, so partners outside the US. There are label expansion possibilities and we have new products I like to cover today. And important to notice that we are getting closer to turning the corner to profitability; we have guided that we will turn cash flow breakeven during 2013.
The license program is build around or set the goal standard phage display technology that is propriety to Dyax. Our licensees have taken over 70 product licenses, so take a specific license to each product they discover using our technology. It’s generating today a steady $15 million per year without royalties involved. And I just should mention that this cash flow has been an important part of helping us fund the pharmaceutical business; I mean help pay for the bills to develop our first pharmaceutical product. That is moving forward and the silent part pretend for significant royalties on product sales and/or milestones coming in, there is nine programs in Phase II and III from our partners. They address very significant markets in oncology, MS, cardiovascular disease, so several of those markets have blockbuster potential.
It’s also a top tier by a lot of the companies like Lilly, Amgen, Biogen Idec and Merck Serono. For those who are not familiar with hereditary angioedema, [Susie] here on this slide I think illustrates it. It’s a swelling disease that can attack you in the face or stomach, hands and feet. Susie is suffering from a plain facial attack. As you can see it’s painful and it’s debilitating. You could not go to school, you couldn't go to work and since typical patients will have 20 attacks per year, if they are not under treatment, and they last two to five days. Such patients will miss one to two months of work or school that means the socio economic cost are very high; (inaudible), you would be qualified for and its hard to hold the job, if you do not know which 30 or 60 days you are going to miss.
The treatments available to these patients historically have been steroids. Steroids lower the number attacks, but it does not treat them. Today, we have other choices, such as C1-esterase product available for prophylactic treatment and there are the on-demand current acute therapies that will reverse a swelling attack within hours.
I should mention one example of the patient, like Susie joined the army as a young teenager then the disease started. They had her, she did very well, went to Japan to Germany but the disease and the attacks got more and more frequent, they didn’t diagnose her right, that’s how she was seeking drug pain killers, that it was a psychological diseases problems, so they discharged her after 11 years. She was now finishing her you know the rest of degree in chance of her own life using KALBITOR and is looking forward to join the workforce. So we have three impacted patient’s lives.
This is a group of patients of ours; you will see they take all shapes and forms and there goes male and female, this disease does not discriminate, these aren’t race or ethnic or other hostiles. KALBITOR got approved for patients 16 years and older. It was the first subcutaneous treatment approved in the U.S. and it got approved for all attack locations right away because we included every attack location in our clinical trials including (inaudible) and the extremities of hands and feet which is tougher to resolve.
Our clinical trials proved that it worked significantly after four hours and it was sustained after 24; means the attack is not recurring. We had a consistent safety profile. We have a reminisce in form of a peer doctor related letting them know that there is hypersensitivity possibility for KALBITOR. So how big is the market opportunity for HAE? If you look at the literature and prevalence data there is probably 10,000 patients in the US, there could be more. The HAE association has identified 6,500 patients, so let’s take that number for now. If you look at that then there is 30% of those 6s500 patients set out today receiving modern therapy; that also means that 70% are yet to go on modern therapy, so there is a lot of growth last for Dyax and the other products.
This is looking a bit like a dog bone, but let take you through it; if you start from the left you will see that we have a sales team working with allergists and immunologists and this the market where you will find the patient one by one, you put on them on treatment one by one. They have suffered from this disease from many years and when get on tact like this you don’t go to the doctor most of the time you hide in your own house, because you don’t want to go out. The doctor had no treatment for you either, so going there just meant pain killers or steroids that doesn’t treat the attack, so you learn to hide, they suffer from depression, anxiety and they didn’t have a very good life.
So you have to find them and you have to remind doctors who may have seen the patient, call them back in, we will then help them get diagnosed in terms of supporting the out of pocket cost for diagnostic tests and should they decide to prescribe KALBITOR we send those for the KALBITOR access program and get them into KALBITOR Care which I will talk to you about, because we have build the second to none patient focus program in this market.
We also last quarter started a genetic counseling program. Why did we do that because many families don’t really understand what it means to have a familiar disease? So we pay for the first counseling session for family.
What we saw the first 25 families through; those 25 sessions identified over 200 potential family members who suffers from HAE who have not yet been diagnosed. So it's our hope that we both help the families. We also help ourselves identify and finding new patients moving forward.
Moving on to the KALBITOR Care that I had mentioned. We are small company focused on HAE. This is what we do. So when we launched KALBITOR, we said there is HAE treatment and then there is on-demand HAE treatment with KALBITOR Care.
We will be the company for this [CEO] endowed refocus on hereditary angioedema patients, focused on their problems, their needs, how to serve them and how to help the doctors treat them and how to help the doctors be involved in the treatment plan for these patients. I just want to mention a few things we have done.
So beyond what everyone does, as script goes in, you verify reimbursement with the insurance carriers. You organize shipments; you call the patients; that’s all standard. We have built the best patient support program there is. 85% of our patients have private insurance. 94% of those have no copay. We help them with that. The 15% remaining patients have various government programs. Most of those have low copays.
Those who do not, we have money given granted through a foundation which take applications and help patients who have financial needs to be able to afford treatment.
We also give free products obviously to patients who do not have insurance and we help these patients through the foundation find insurance, so they can get financial support, so they can afford the insurance. So this system has worked very, very well and is fined tune for HAE.
We also initially shift products for treatment in doctor’s office and ERs. We found out that many of these patients because they suffer from depression and anxiety and when they have an attack the anxiety level goes really high.
So they wanted the drug at their home. They could then like hemophiliacs take the product to the emergency room and get treatment. When a hemophiliac has an acute bleed, it takes (inaudible) with him to the emergency room or her and get treatment. In our case it’s same thing.
We then found out that many of them really don’t like to leave home looking like this, and they have many years of bad experience in the emergency room where they didn’t believe they had hereditary angioedema. They saw you must have eaten something you had an allergic reaction to her.
They would treat them with antihistamines. They would treat them with them (inaudible). They would remove appendixes in some of these patients and realize they made a mistake later. So they had a history of bad experiences in the ERs. So we started the KALBITOR home infusion service.
We hooked up at Walgreen’s home infusion service program that their business is to give drugs at home to patients who are on various [biological] treatments. In our case we set up an acute treatment system, most of these are scheduled treatments.
So we put incentives in place with Walgreen’s for them to be there within the hour and the vast majority certainly within two hours. Now why were those numbers important to us? Because in disease you have a prodrome like people who have migraines, I suffer from migraines as a kid.
In this case they have 60 minutes to 90 minutes where they know an attack is coming. There is a little crinkling, a little swelling under the arm, they have it at a particular place and they know it’s coming, and then the attack starts and evolves pretty slowly when it starts.
We accepted patients up to eight hours into the attack in our phase III and our results were still very robust. But you like to treat earlier, so less fluid has leaked into their tissue. So it’s easier to reverse the attack and that's how it works, when this attack starts, the fluids leaks out of the vascular system into the tissue because plasma kallikrein bradykinin has been mediated.
Then the treatment will stop those factors and the fluids will start bleeding, absorb back in and it takes time. So an attack lasts two to five days. So that's how we set up the nerve system and today more than half of our patients are choosing this. What we are seeing also of course is that the less hurdles there is for treatment the higher percent of the attack patients treat.
So when we say there is a range of treatments per year the patients who have the least hurdle to overcome treat to highest percentage of the attacks. Just we talk about the genetic counseling, also I want to mention we are the first company who came out at the beginning of this year with an application for iPhone and HAE Attack Tracker allows the patients to track the attacks to characterize and fulfill them and see that with their doctor.
So they hopefully overtime can get a sense for trigger, patterns in the attacks and better understand them. Now this patient focus has allowed to steadily grow sales quarter-over-quarter every quarter since we started. We had $9.2 million in sales in the second quarter. We also grown the patient number to have significant over 500 treating patients now on KALBITOR, 800 plus patients for product placed.
The pace that set out treating six to nine attacks on the average in our forecasting models but we're seeing now that those who have the home infusion system the easiest access to the treatment are treating the highest percentage so again indication and moving patients to the best system that serves them and by the way it serves them in other way.
A doctor does not know when the patient has an attack if he is not informed. If you self administrator and go to the ER, they don’t know. So the home visiting nurse is writing a report which she gets to the doctor. So now the doctor is involved in the treatment knows there was an attack, knows the product was administered and how it works.
So far this is truly the best treatment plan for a patient and a doctor. Long-term maybe also for the payer because the payer will know that the patient that was subscribed for, is a patient who gets the treatment, remember this is a familiar disease with the product that costs multiple thousands dollars.
Now, the other change have taken place in the angioedema’s phase is the shift in treatment paradigm. A group of American and European and other doctors around the world got together last year in Italy and agreed on treatment guidelines. They look at the current prophylactic treatments and the current acute treatments and the conclusions was since prophylactic treatment do not totally prevent all attacks, you still require treatments doe all acute attacks breakthrough attacks on which you will actually get them and it has to be admitted as a IV Push twice a week.
They looked at the acute (inaudible), it stops the attacks quickly, it administrator at the onset and only at the onset of an attack. So their recommendation is that any newly diagnosed patients should be started on acute on-demand therapy and only move to prophylactic should they not be able to be managed well enough on acute.
So our plan to grow the business is of course to keep growing the HAE market by keep educating doctors, finding patients to keep focusing on making it easier for the patient and the doctor to treat and given them more and more control over the treatment plan.
And lastly of course, pushing and driving diagnosis of new patient as well as a shift in how to treat these patients. You should not need to be treated twice per week if you have 12 attacks a year. You should get treated on-demand when they happen.
Now moving on to how we expand the angioedema business, we are making partnerships around the world and I just want to focus on one. Japan is one-third of US, number of people are 100 million people and they do not lot like plasma drive products because of the HIV scandals with Factor 8 during the 90s.
So one of the C1 esterase inhibitor has been available for long time in Japan but is really not being used. So there is a very good market opportunity for our partner CMIC. They just have an open labeled 10 patient study to do this all and they will file in ’13 and they expect to have approval in ‘14.
And we stand to see 20% to 24% royalty based upon sales levels. We also plan to expand in other ways. Today, people who suffer from recurring swelling attacks, they first get treated as if it is an allergic attack and for the majority it is. So they could get treated by antihistamines but for those who do not respond to antihistamines you try to titrate up for those, you give it every day if it still doesn’t help. Most doctors will inform the allergist who will send a blood sampling for diagnostic test of C1 C4 esterase and see if they have low levels or low functioning C1 C4. And if they do they have type one or type two hereditary angioedema.
But there is no test for those who do not have low levels or do not respond to antihistamines. So we are developing a laboratory test that can help identify that the plasma kallikrein pathway is activated and these attacks are mediated by plasma kallikrein, which is a target we stop. When we can do that and we have functioning test in the labs we will validate it next year, this will allow a doctor to identify such idiopathic angioedema patient as that called as having a plasma kallikrein driven angioedema attack. You can then direct appropriate treatment to them and we can also start label expansion studies either for KALBITOR or DX-2930 which I would like to just spend a second on; this is our second generation product.
KALBITOR is a short acting small protein that is ideally suited for acute attacks. Our technology allows us as I just mentioned earlier to develop fully human monoclonal antibodies. So we have developed plasma kallikrein specific fully human monoclonal antibodies with a very long half life. So you could block plasma kallikrein by two shots per months. We will file an IND; it is expected to file an IND mid 2013 for this product. We believe if you look at a product that would have two subcu injections per month versus a current treatment of two IV post per week, a much small significant number of patients could be beneficially treated with such a prophylactic treatment. So we are very excited about this product that can be a game changing product for patients both in the U.S. and around the world.
The drivers for KALBITOR of course is keep focusing on the patient and growing sales, work with the new recommendation and guidelines that says you should treat first with acute and only if you can manage to be shift to prophylactic; new opening up of foreign markets over the next couple of years and the multiple programs to expand the current market that we just talked about.
Now moving onto the Dyax license program, as I said, it generates about $15 million per year today; I have spend the last couple of years; it does so as to fund the research, some companies want us to use our libraries to discover the antibodies to whatever biologic target they are interested in. Others take a library license and do it in-house and of course there are small milestones as they discover and move these products through various stages of development.
So where are we today with this program? If you look at the programs in defined preclinical candidate states, Phase I, Phase II and Phase III we have 36 such products moving. There are nine products in Phase II and III, so this is truly a multiple shots on goal strategy, a risk diversification strategy. We will get 2% to 3% royalty on sales which is not necessarily a large number, but on large drugs it’s a significant number; on many products it becomes a really significant revenue stream.
The phage display library patents runs through 2024; I just want to mention that if you use our technology to discover your product, you will pay royalty for 10 years after commercialization. That means you will discover this product in 2020 using our library and the product will get approved in 2030; we will receive royalties from 2030 to 2040. This is unlike the PDL citation where they have a patent cliff where we will stop; that’s not how our licensing system works.
If you look at the two leading compounds in Phase III, its in-clone Eli Lilly compounds. The (inaudible) being the biggest. There is six clinical programs moving ahead in five different indications; combined they have over 5,000 patients in them, gastric cancer and breast cancer hepatocellular, colorectal all major indications and if you look at the timeline, this is the ClinicalTrials.gov estimated last patient in [trial B]. You add whatever time its takes from the last patient to be treated so you have top line data, you will see that from the end of this year to ‘14 we are going to have at least have half a dozen reroutes of Phase 3 trails for which we stand to receive 2% to 3% royalty should they work and should they get approved.
So I talked about the number of milestones both on the product side. Here the number very significant milestones on the licensing program side. So if a product works and gets filed in ‘13 get approved in ‘14, we would receive our first royalties towards end of ‘14 assuming these products works.
Our cash position in the end of the second quarter was $38.6 million; we have guided the KALBITOR sales with $36 million to $40 million this year. We are on track to hit that for sure. And we have top line revenue guidance of $50 million to $54 million.
We have also guided that we will reach cash flow breakeven during 2013 as a company. So in summary, what are the drivers for gross for Dyax? It is of course to keep growing the KALBITOR sales, to get the commercialization going in KALBITOR outside the US which Japan being a really excited possibility starting in ’14, to maximize the life cycle of KALBITOR we have a higher concentration product coming out and there is a possibility as we talked about for label expansion.
And of course to expand the franchise beyond HAE into idiopathic angioedema using that laboratory test or the diagnostic assay as well as the exciting second generation product DX-2930.
And the licensing program will grow by itself. It doesn't cost us anything. These are major biopharmaceuticals companies that are spending a very large amount about money developing these products and for those that works we stand to receive major benefits down the road.
So with that, I think I am basically just about running out of time. I thank you for sitting and listening and I believe there will be a breakout session for those who may have follow-up questions. Thank you very much.
[No Q&A session for this event]
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