Cadence Pharmaceuticals, Inc. Q2 2008 Earnings Call Transcript

Sep. 2.08 | About: Mallinckrodt PLC (MNK)

Cadence Pharmaceuticals, Inc. (CADX) Q2 2008 Earnings Call Transcript August 7, 2008 8:30 AM ET

Executives

Bill LaRue – SVP and CFO

Ted Schroeder – President and CEO

Jim Breitmeyer – EVP, Development and Chief Medical Officer

Analysts

Adam Cutler – Canaccord Adams

Charles Duncan – JMP Securities

Patty Bank – Pacific Growth

Operator

Good morning, and welcome to the Cadence Pharmaceuticals conference call. At this time, I’d like to inform you that this conference is being recorded and then all participants are in a listen-only mode. As a request of the company, we will open the conference up for questions and answers after the management presentation. (Operator instructions) Our first speaker is Bill LaRue, Senior Vice President and Chief Financial Officer of Cadence Pharmaceuticals. Go ahead, sir.

Bill LaRue

Good morning, everyone, and thank you for joining us today to review our second quarter financial results and ongoing clinical developments program. On the call with me today are Ted Schroeder, Cadence's President and CEO, and Dr. Jim Breitmeyer, the company's Executive Vice President and Chief Medical Officer.

Before we get started, I’d like to remind everyone that statements included in this conference call that are not a description of historical facts are forward-looking statements. Words such as believes, expects, anticipates, intends, plans, will, assuming, and potential, and similar expressions are intended to identify forward-looking statements and are based on our current beliefs and expectations.

Forward-looking statements include statements regarding the timeframes, in which we anticipate many applications seeking marketing approval of our product candidates and the timeframes in which we expect to complete enrollment and announce the results of clinical trials of our product candidates. The inclusion of forward-looking statements should not be regarded as a representation that any of our plans will be achieved. And our actual results may differ materially from those discussed during this call due to the risks and uncertainties inherent in our business.

These risks include without limitation the following. The FDA may require us to complete additional clinical, non-clinical, or other requirements prior to submitting NDAs for our product candidates, our clinical trials may produce negative or inconclusive results or maybe inconsistent with previously conducted clinical trials. The outcomes of our final analysis of data from our clinical trials may vary from the initial analysis, and the FDA may not agree with our interpretation of such results. Our clinical trial data may demonstrate that our product candidates lack sufficient therapeutic efficacy, or that adverse side effects are more prevalent or severe than anticipated. We may experience delays in completing important pre-commercialization manufacturing activities for our product candidates and may be required to perform additional preclinical or clinical testing prior to submitting or obtaining approval of NDAs. We may requires substantial additional funding to complete our development programs, and if approved, to successfully launch our product candidates. And we may not be able to raise sufficient capital when needed or at all. And all other risks detailed in our prior press releases and periodic public filings with the Securities and Exchange Commission.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement and we undertake no obligation to revise or update the information presented today. This caution is made under the Section 21E of the Private Securities Litigation Reform Act of 1995.

If anyone has not seen our press release issued earlier today, you can access it on our website at www.cadencepharm.com. Additionally, this conference call is being webcast through the company's website and will be archived there for future reference. Ted?

Ted Schroeder

Thank you, Bill, and good morning everyone and thank you for joining us this morning. In addition to reviewing our financial results for the second quarter of 2008, we’ll provide a brief recap of our ongoing clinical development program for our two product candidates, Acetavance and Omigard. Following the financial and clinical overviews, we’ll open the call for your questions.

During the second quarter of 2008, we continued to advance the clinical development programs for Acetavance, our proprietary intravenous formulation of acetaminophen for the treatment of pain and fever, and for Omigard, our topical antimicrobial gel for the prevention of catheter-related infections. We are particularly pleased with the outcome of our recent communications with the FDA with respect to our clinical development program for Acetavance and we look forward to moving ahead with preparations for submitting an NDA for this product candidate.

To briefly recap our recent announcements in clinical and regulatory guidance, on July 30, we announced that we received the FDA’s response to our request for advice regarding the Acetavance clinical development program. In its written response, the FDA indicated that two previously completed clinical efficacy trials, the Sinatra trial and post-operative orthopedic pain, and Study 302 in adult fever are sufficient to meet the pivotal clinical trial requirements for submission of an NDA.

Our remaining clinical development program for Acetavance includes ongoing clinical trials evaluating pediatric pharmacokinetics known as Study 102; adult safety, Study 351; and pediatric safety, Study 352. As stated last week, we currently anticipate completing enrollment in Study 351 later this quarter and completing enrollment in studies 102 and 352 in the fourth quarter of this year. Assuming the successful completion of our clinical development plan and manufacturing development activities for Acetavance, we currently expect to submit an NDA for Acetavance in the second quarter of 2009.

Turning briefly to our clinical program for Omigard, during the second quarter of 2008, we completed patient enrollment in our Phase 3 clinical trial of this product candidate for the prevention of catheter-related infections. And we expect to report topline data from this data known as the CLIRS trial in the fourth quarter of 2008. Assuming successful completion of this study, we currently expect to file an NDA for Omigard in the second quarter of 2009.

With that, I’ll turn the call back to Bill for an overview of our second quarter financial results.

Bill LaRue

Thanks Ted. For the second quarter of 2008, we reported a net loss of $15.6 million or $0.41 per share compared to a net loss of $14.9 million or $0.52 per share in the second quarter of 2007. For the six months ended June 30, 2008, we reported a net loss of $29.3 million or $0.83 per share compared to a net loss of $24.5 million or $0.86 per share for the six months ended June 30, 2007. As of June 30, 2008, we held cash and cash equivalents of $78.1 million, including the net proceeds from a registered direct offering of approximately 9.2 million shares of Cadence common stock, which was completed in the first quarter of 2008.

For the second quarter ended June 30, 2008, total operating expenses were $15.6 million, a decrease of $110,000 from the same period in 2007. This decrease includes a $1 million reduction in research and development costs, primarily due to reduced clinical trial activity for Omigard, as our CLIRS trials completed enrollment in April 2008 and reduced pre-commercialization manufacturing charges for Acetavance due to facility improvement charges in 2007 that would not incur in 2008.

This reduction was partially offset by increases of $500,000 in general and administrative expenses, primarily from personnel-related costs, including $300,000 of stock-based compensation and $500,000 in marketing expenses as we prepare for the potential commercialization of both of our product candidates.

For the six months ended June 30, 2008, our operating expenses were $29.3 million, an increase of $3.3 million from the $26 million reported for the same period in 2007. This increase was due to a $1.2 million increase in research and development cost and a $1.3 million increase in general and administrative expenses. These increases were primarily due to personnel-related costs, including increases in stock-based compensation of $300,000 in research and development and $700,000 in general and administrative.

In addition, marketing expenses increased $700,000 during the six months of 2008 compared to the same period in 2007, as we prepare for the potential commercialization of our product candidates. Ted?

Ted Schroeder

Thanks, Bill. For the remainder of 2008, we remain focused on completing our clinical development programs for Acetavance and Omigard. We expect to achieve several milestones later this year, including the completion of patient enrollment in our remaining ongoing safety and PK studies in adults and children, and announcing topline results from our Omigard Phase III CLIRS trial in the fourth quarter.

We are also working to complete important pre-commercialization manufacturing development activities for both product candidates that will be required to support our anticipated NDA submissions for Acetavance and Omigard in the second quarter of 2009.

With that, I would like to turn the call back to the operator and open the lines for your questions. Operator?

Question-and-Answer Session

Operator

Thank you, Mr. Schroeder. (Operator instructions) We will take our first question from Adam Cutler from Canaccord Adams.

Adam Cutler – Canaccord Adams

Hi, thanks for taking the question. Now that we have clarity on the timing of both of your prospective NDAs, I’m wondering if you can just share with us at what point you will start preparing in terms of building your sales and marketing infrastructure. And then I guess another question, I know you are always on the lookout for new products and lately you’ve understandably focused on Acetavance and Omigard, but maybe you can give us an update on where things stand on in business development efforts.

Ted Schroeder

Sure, Adam. Let me talk to the commercialization activities first. Our intention is to begin building the management team to support the sales force as we move past the NDA filing with a goal of having kind of sales force identified and reps ready to go about approval in 2010. So, we’re not quite ready to start that effort just yet, but we will once we submit the application for both Acetavance and Omigard. As you’ll recall, we intend to build a sales force in the 150 to 200 sales rep size that will allow us to penetrate about 80% of the market opportunity, approximately 1,800 to 2,000 acute care hospitals in the US. And we think that will be a substantially better effort than Bristol put behind the launch of IV acetaminophen in Europe. So we think from there we can expect rapid and broad adoption of the product. As far as business development activities, we have a number – we have identified a number of exciting opportunities that we’re pursuing. We’re in early stages of diligence trying to understand the risk profile, the chances of success, and the regulatory path forward. As you know, we’ve been in this pre-revenue stage fairly concentrated on products that are in the general risk profile of our two current candidates. So, while we’ve had opportunities to do transactions, we’ve decided for strategic reasons not do those transactions because they were either earlier stage and riskier programs or they were in therapeutic categories that were inherently riskier. I think as we move toward NDA filings and revenues, our strategic intent around product acquisitions will broaden. But – so I wouldn’t promise that there is a transaction in the offing, but we are remaining opportunistic and are prepared to execute a transaction for the right opportunity with the right risk profile.

Adam Cutler – Canaccord Adams

Great, thanks. And actually just one follow-up question if I may. When Study 304 reads out, how do you handle that in terms of any interaction with the FDA? I mean, obviously the recent news is that the FDA doesn’t need that data to accept your NDA. But assuming that study is positive, would you try to include it in the NDA? And if it’s negative, does there need to be any further discussion with the FDA around that study?

Ted Schroeder

I’ll let Jim Breitmeyer, our Chief Medical Officer, answer that question.

Jim Breitmeyer

Adam, this is Jim. We don’t anticipate that the outcome of three or four, whatever it is, would require a specific interaction with the FDA. They would clear that it’s not required for the NDA. It has at most a supportive role in the package and don’t anticipate that any specific interaction with them would be necessary, whatever the outcome might be.

Adam Cutler – Canaccord Adams

Okay. But assuming that it is positive, is that something you would include in the NDA?

Ted Schroeder

I think that it is – the data will be in the NDA in any case. All of the safety data that’s available to us from well controlled studies is going into the NDA, anything that’s available at the time of submission.

Adam Cutler – Canaccord Adams

Okay. Thanks.

Operator

Moving on, we’ll take our next question from Charles Duncan, JMP Securities.

Charles Duncan – JMP Securities

Good morning, gentlemen, and thanks for taking my question. First of all, congratulations on successful completion of what must have been a tough negotiation with the FDA. Could you characterize the interaction with the FDA recently? I know the outcome is pretty positive, but how did you get to the point that you are at?

Ted Schroeder

Jim, do you want to take that one?

Jim Breitmeyer

Sure. This is Jim, Charles. Good morning. I think that this particular division, one way I characterize is that they are operating in a fairly formal mode. And that is that they want to communicate with material passing in between the two parties in writing. Having said that, what we feel is that we correctly ascertained that the agency’s primary concern surrounding the repeated dose administration of IV acetaminophen was around its safety and that there were potential – that there were things about administering the drug over, in particular several days that they didn’t know yet. And so, we believe that one of the key success factors in our recent interactions with them is that we correctly understood what type of safety concerns that they would have – potential safety concerns, because we think the drug is an extraordinarily safe drug. We understood their potential concerns and that we addressed them in a spot-on fashion.

Charles Duncan – JMP Securities

Okay. That’s helpful. The second question I have is regarding the market opportunity. I know that everyone is comparing relative to European launch of the drug. But could you help me understand if there are any differences in the medical practice or the treatment of patients post-surgically? Do they get to hang out longer, if you will, in the institution there for the exposed IV pain meds longer in Europe, or is it roughly equivalent, or are there other significant differences that perhaps (inaudible) that the market in the States is perhaps even larger?

Ted Schroeder

Yes. I don’t think there is a dramatic difference in length of stay. I think that we – from Bristol-Myers Squibb, they indicate that the average IV acetaminophen patient receive six doses over 48 hours. So, that would indicate to me one full day of dosing and then a half for the next day. By that point of move [ph], they generally take medication by mouth, so they are either switched to oral medications or discharged. So, we don’t anticipate a different length of stay or number of doses in the US. I think the major difference of how the US may be a bigger opportunity than Europe is that there is far less competition in the US. In Europe, you not only have all the opioids that are available in the US, but you also have IV Tramadol, which is not available, which is widely used. That’s more of a mild opioid. So it’s not the same potency of, say, Demerol – or excuse me, Morphine or Fentanyl.

Also in Europe there are many more non-steroidal anti-inflammatory drugs on the market. Depending on the country, there are as many as six available. And then you also have the IV COX-2 inhibitor paracoxib on the market in Europe. So there are more choices. Therefore, it makes it harder to cut through the noise and through physician preference for their analgesic of choice. In the US, of course, you only have opioids and you only have, at this point, a single NSAID on the market, and that’s it. So we do think that the ability to compare share of voice is greater for us. We think there is a better opportunity to launch in a cohesive fashion across the US as opposed to the one country at a time approach that Bristol has used in Europe to become the market leader.

I think the other – the key difference in practice is that in the US the surgeon will play a somewhat larger role in selecting therapy. And that difference is in Europe, the anesthetist generally manages the patient’s pain from pre-op through to the surgical floor and discharge, wherein the US, the anesthesiologist hands off care of the patient after the PACU. Now, they do prescribe orders that go to the floor and often the surgeon will adopt those orders, but a good percentage of our marketing effort will be spent on educating the surgeons on the benefit of multi-modal analgesia in the role that Acetavance places the foundation of a multi-modal approach to provide less side effects and superior pain control for the patients.

Charles Duncan – JMP Securities

Okay. And then with regard to manufacturing scale of activities, can you give us any – give us some sense as to if there is any execution risk in those activities? Are there any kind of dating items that you’d be looking for completing, or it’s just things that need to be done like validation work?

Ted Schroeder

Yes. It’s cheaply stability work. And so, the risk in there really isn’t an approvability risk. It’s really a dating risk, Charles. So you run the risk that your stability reflects what your dating is on your commercial product. So, if you don’t have adequate stability, you could wind up with short data product, which can be a challenge in stocking. However, I would say that the Bristol product on the market today has 24 months of stability – 24 months of dating, and they actually have stability for a longer period of that. So we are highly confident that we will have adequate dating at launch and then we’ll be able to supplement that dating to actually get longer shelf life for the product over time.

Charles Duncan – JMP Securities

Okay, thanks a lot, Ted and Jim, for that added information.

Ted Schroeder

You bet. Thanks, Charles.

Operator

Moving on, we’ll take our next question from Patty Bank with Pacific Growth.

Patty Bank – Pacific Growth

Good morning. Just a follow-up on the manufacturing question. Two things there. This is going through Baxter if I remember. Is there any requirement for a separate inspection for this product, or do we assume that because their facility is already inspected at that time [ph]? And then also, are we going to hear about any of the pieces kind of along the way on the manufacturing side or do we just assume that no news is good news, and when you get the NDA and that it’s all done?

Ted Schroeder

Yes. So, to answer the manufacturing questions, in – my understanding is on – from the inspectability of the plant, it is an FDA inspected plant. Of course, this is a new product being manufactured in that plant. And so the FDA always has the option to inspect the plant and we’re operating, as is Baxter, on the assumption that there will be a pre-approval inspection, but I don’t think there has to be. So we will wait to see what the FDA decides to do prior to approval, but our anticipation is that there will be a pre-approval inspection. Regarding updates on the manufacturing, when you put the product on stability, it kind of sits there. And it’s not one of these processes where you are doing constant sampling it, there is a protocol in for a period of time. And so I don’t anticipate that you will hear much about that until we submit the NDA.

Patty Bank – Pacific Growth

And then just one other thing on the marketing side, can you remind me any of the pieces of data, whether what you are generating or have generated, or even European, whether there’s anything there that you could use in terms of opioid-sparing impact?

Ted Schroeder

Well, sure. In pretty consistently across trials, both the BMS trials and in investigator-led studies, there is an opioid sparing effect when IV acetaminophen is used to baseline therapy. And clearly physicians recognize that as a benefit. So while we don’t anticipate a specific label that reflects opioid-sparing, the data will support that indeed that approach allows the physician to administer less opioid. And I think it’s important to point out that in most of the controlled trials that have been completed, the opioids were available to the patients through patient-controlled analgesia. So this was an – these weren’t the physicians deciding to administer less opioid, these are patients actually administering less opioid themselves. And I think those are pretty powerful data, and physicians recognize the benefit. It’s also something that they are used to doing every day when they prescribe Vicodin or Darvocet or Percocet, which are all a combination of acetaminophen plus an opioid. And those tablets were designed specifically for that reason to decrease the opioid burden and increase pain control. And so we – this is really the same approach, but with the flexibility of IV administration.

Patty Bank – Pacific Growth

Okay. So you won’t have a label most likely, but you will have support of marketing studies that you can use the doctors?

Ted Schroeder

Yes, and the data will be available in the pivotal trial.

Patty Bank – Pacific Growth

Great. Thanks.

Operator

(Operator instructions) At this time, there are no further questions. I’ll turn the conference back to Mr. Schroeder.

Ted Schroeder

Well, thank you. And thanks to each of the participants. Appreciate your time this morning and your insightful questions and we look forward to following up in the months ahead. Have a great day.

Operator

Thank you. That will conclude today’s conference. We thank you for your participation. At this time, our phone audience may now disconnect.

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