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Titan Pharmaceuticals, Inc. (NYSE:TTP)

Q2 2008 Earnings Call Transcript

August 12, 2008 10:30 am ET

Executives

Marc Rubin – President and CEO

Robert Farrell – EVP and CFO

Analysts

Ram Selvaraju – Rodman & Renshaw

Operator

Welcome to the Titan Pharmaceuticals second quarter 2008 financial results conference call. At this time all participants are in a listen-only mode. There will be a question-and-answer session following today's remarks. Please be advised that this call is being taped at the Company's request, and will be archived on the company's Web site for two weeks from today.

At this time I would like to turn the call over to Dr. Marc Rubin, President and CEO of Titan Pharmaceuticals. Please go ahead.

Marc Rubin

Thank you, operator, and thank you all for joining us this morning, and welcome to the Titan Pharmaceuticals call for the second quarter of 2008.

With me today is Bob Farrell, our Chief Financial Officer; Sunil Bhonsle our Chief Operating Officer; and Dr. Kate Beebe, Senior Vice President for Clinical Development and Medical Affairs.

Today we will provide you with an update of our second quarter 2008 financial results as well as some additional updates regarding our recent corporate and clinical developments.

As a reminder certain matters we will discuss today other than historical information, consist of forward-looking statements relating to, among other things, our expectations concerning our financial results, available cash, clinical programs, and regulatory strategies.

The forward-looking statements are not guarantees of future performance and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties are described in our annual report Form 10-K for the year ended December 31st, 2007, and subsequent SEC filings.

You are cautioned not to place undo reliance on these forward-looking statements, which speak only as of today. We undertake to take no obligation to update or revise the information provided in this call, whether as the result of new information, future events or circumstances or otherwise.

At the start I'm going to turn the call over to Bob to review our second quarter financial results, and following that update, I will provide you with some additional information on Probuphine Phase III clinical study results and also an overview of recent corporate developments and some of Titan's plans as we move forward. Bob?

Robert Farrell

Thank you, Marc, and hello everyone. For the second quarter, total operating expenses were $7.9 million, compared to $4 million for the second quarter of 2007. For the second quarter ended June 30, 2008, we reported a net loss of $7.7 million or $0.13 per share, compared with $3.5 million or $0.08 per share for the quarter ended June 30, 2007.

Research and development expenses totaled approximately $4.8 million in the second quarter of 2008, compared with approximately $2.6 million in the second quarter of 2007. R&D expenses increased primarily as a result of increased costs associated with the recently completed Phase III clinical trial of Probuphine, and additional trials in the Phase III development program for this product in the treatment of opiate addiction.

General and administrative expenses for the second quarter of 2008 were $3 million compared with $1.4 million in the second quarter of 2007. Our second quarter 2008 G&A expenses included a non-cash expense of $800,000 primarily related to stock option expenses, and a total of approximately $600,000 associated with the retirement of Dr. Bucalo, Titan's former Chairman.

Turning to our cash position, as of June 30, 2008, we had approximately $18.2 million in cash, cash equivalents, and short-term investments, compared with $30 million at December 31, 2007. These resources are focused on the development of Probuphine, and we believe our working capital is sufficient to fund our operations into the first quarter of 2009.

This concludes our financial report, and I'd like to turn the call back over to Marc.

Marc Rubin

Okay. Thank you, Bob. As many of you know, the past month or so has been a very busy one for us here at Titan, and I would like to use today's call as a way to provide you with more information, discuss updates, and outline some of our next steps and plans as we move forward.

First let me give you a brief update on Spheramine and Iloperidone. In early July, we announced that the initial analyses showed that Spheramine did not meet our Phase IIb clinical studies primary or secondary end points. Although there was a clinically meaningful improvement in the primary measure of the UPDRS off-score, this effect was seen in both arms.

In other words, the Spheramine treated arm and the sham surgery arm, and there was no significant difference seen after 12 months of follow-up. As a result, our partner Bayer Schering Pharma has decided not to continue the development of this product.

We, along with Bayer Schering Pharma and independent Parkinson's disease experts, have further reviewed the data and additional analyses of the data are still in progress. While we do not expect this to change any of the outcomes, we will give further updates if those analyses provide further insight.

We were both surprised and very disappointed by the announcement that Vanda received a "not approvable" letter for Iloperidone from the FDA. We do feel that Iloperidone could offer schizophrenia patients an important treatment option, and Vanda has stated that they plan to meet with the FDA to further understand the decision by the FDA and determine the next steps in this program. Titan has not incurred any expenses on this program in the recent past, and there are no ongoing costs to Titan associate with Iloperidone.

So now, I would like to turn to Probuphine and the very positive results from the recently completed Phase III study. As you know, Probuphine is our novel subcutaneous implant formulation designed using our ProNeura technology, to deliver six months of continuous non-fluctuating levels of buprenorphine.

Buprenorphine is currently marketed as a sublingual formulation for the treatment of opiate addiction, and is sold mainly under the brand Suboxone, as well as Subutex. And these generated sales of approximately $350 million in the U.S. alone in 2007, and are estimated to be over $0.5 billion worldwide in 2008.

Two weeks ago we announced positive top-line Phase III clinical trial results for Probuphine. This Phase III study was a randomized, double-blind, placebo-controlled, multi-center trial. The study enrolled 163 patients across 18 sites, and the patients were randomized two to one to receive Probuphine and placebo, and then treated for 24 weeks.

We were very pleased to report that Probuphine showed a clinically meaningful and statistically significant difference over placebo, in illicit opioid use for both the primary and key secondary end points, which together represents the full six months of treatment. This was determined by analyses that the cumulative distribution function of the percentage of negative urines, which was the trial's primary efficacy end point, and one that is acceptable to the U.S. FDA.

This is a very rigorous analysis that takes into account the urine testing results of every study participant over time, and not just the average percent negative urines, which represent an average study patient. This was done in past studies and was part of the approval of sublingual buprenorphine.

In our Phase III study, as already reported, there was a statistically significant difference in the mean percent negative urines between Probuphine and the placebo treated arms. And more importantly, this difference increased in the last two months, compared to the first four months, once again emphasizing the importance of compliance to treatment.

Moreover, retention in treatment was clinically and statistically superior for Probuphine compared to placebo, with 66% of the Probuphine-randomized patients completing the six-month course, compared with 31% of the placebo patients completing the six-month course. We feel this is an important indicator of both patient acceptance, and ultimately efficacy, as predicted by excellent compliance.

We have just this week completed more data analyses, which include several important secondary end points, and I'm very pleased to inform you all that all of these continue to show the results are strongly positive for Probuphine and statistically significant, favoring the Probuphine arm. And these clinically meaningful results are present in virtually every evaluation.

Important secondary end points include the assessment of the opioid withdrawal symptoms using the clinician-rated, as well as the patient-rated assessments, which showed statistical significance in favor of Probuphine, with P values of 0.008 and 0.005, respectively.

This indicates the very effective control of withdrawal symptoms, one of the clinically meaningful and most important aspects of overcoming addiction, since it allows for re-engagement into the social fabric of everyday life.

In addition, patients treated with Probuphine had significantly lower self-reported opiate cravings over the entire study period, compared to placebo, and the P-value was 0.0006 for that measurement. Moreover, for these measures of opioid withdrawal and cravings, the data indicated that treatment response actually improves over time.

In other words, the longer the patient receives treatment, the better they do clinically. Looking at some measures of abstinence from illicit opioids, the data again clearly indicate that the longer patients continued treatment with Probuphine in the trial, the better of their chances of staying away from illicit opioids. This once again emphasizes the importance of compliance in achieving positive medical outcomes from Buprenorphine therapy.

We have conducted several additional analyses, which will be part of future scientific publications and will also be presented at the annual meeting of the International Society of Addiction Medicine, later in November of this year.

In thinking about what these data mean for the Probuphine program, it's important to note that, while Buprenorphine is fast becoming the gold standard for opioid addiction treatment, there are growing concerns about diversion, abuse, and patient compliance. There is a critical need for safe, effective treatment options for opioid addiction.

We believe that these positive results for Probuphine could represent an important advance in the treatment of opiate addiction, as our novel formulation and delivery may lead to a greater level of compliance, while minimizing Buprenorphine diversion and abuse, and ultimately providing an improved treatment option for patients and their physicians.

As a next step we are planning to meet with the FDA to discuss these data, and reconfirm the regulatory path forward for Probuphine. We are also very focused on establishing strategic partnerships for the Probuphine program that will help for the development and effective commercialization of this product. This is one of the primary corporate objectives for the next few months.

And we're pleased to see that companies are expressing a strong interest in learning more about Probuphine, and evaluating the potential opportunity for Probuphine's development and commercialization.

It is also important to note that we believe the success of Probuphine does validate the ProNeura long-term drug delivery technology, and our strategy moving forward will also include looking at other programs where long-term delivery of non-fluctuating blood levels of effective medicines can make a meaningful difference in effective therapy.

We will also be evaluating our early-stage non-clinical data, and assessing the potential for further development of Gallium moltolate and DITPA in a variety of disease settings. Overall, our strategy is to continue to progress our late-stage Probuphine program, utilizing our current resources and looking for appropriate partners to support this process, and to explore and ultimately grow and expand our opportunities for our other assets.

I want to thank you all for your continued support, and we look forward to updating you about our future progress. Thank you and we will now turn the call over for your questions. Operator?

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from the line of Ram Selvaraju from Rodman & Renshaw. Please proceed.

Ram Selvaraju – Rodman & Renshaw

Hi, thanks very much for taking my question. First of all, Marc, if you could just reiterate the P-values for me of the secondary analyses that you've conducted on the Phase III Probuphine trial?

Marc Rubin

Yes, absolutely, Ram. One of the key ones in the objective and the subjective evaluation of opiate withdrawal, I was told I might have omitted one of the zeros, which is what happens when there are so many zeros in the P-value. But the P Value for those was 0.0008 – three zeros after the decimal point, for the so-called COWS [ph], and 0.0005 for the SAWS [ph].

Ram Selvaraju – Rodman & Renshaw

Okay. 0005. And then you had the .0006 P Value for the cravings that were lower over the entire course of the trial, right?

Marc Rubin

That's correct.

Ram Selvaraju – Rodman & Renshaw

Those are the only P-values that you have disclosed at this time from secondary analyses?

Marc Rubin

That's correct, Ram.

Ram Selvaraju – Rodman & Renshaw

Okay. And then I had some questions regarding your guidance for future R&D spend. Given the company's current cash position and the fact that you would essentially, only for the near-term at least, be continuing on simply with the development of Probuphine, what can we expect with regard to R&D spending over the next 12 months?

Marc Rubin

Yes, thanks, Ram, good question. Let me turn that over to Bob.

Robert Farrell

Sure, thank you, Ram. Ram, the company is currently spending about $6 million a quarter. That's our cash burn. And about three-quarters of that is R&D expense, the majority of which is primarily directed into our Probuphine program. So over the balance of this year, I would expect to see R&D spending in the neighborhood of about $4.5 million.

Ram Selvaraju – Rodman & Renshaw

Okay. Can you comment on the potential likelihood of a near-term financing, given the projection you've just stated, regarding the existing cash being sufficient to last through to the first quarter of 2009?

Robert Farrell

Sure, Ram. Let me say this, we are exploring all options that are available to us and all opportunities. But with the current share price where it is, the potential to raise cash is not something that we're putting as a priority. Our priority right now is focused on, as Marc said, partnering our Probuphine program. We think that the data from the Phase III study were excellent, and we should be able to find a partner, and hopefully do so before the cash becomes too much of a problem.

Ram Selvaraju – Rodman & Renshaw

Okay. And then a couple of housekeeping things. So this quarter in the G&A line, you had a couple of items relating to compensation. Now, these would not be recurring items? Can we assume that or not?

Robert Farrell

Yes, we can. In an effort to reduce expenses, we've reduced head count somewhat, and in connection with that, there were some stock option expenses and termination costs that will not be recurring, and additionally, the founder of the company, Dr. Bucalo retired, and in connection with his retirement there was both termination expenses that we booked in the quarter, as well as stock option compensation that was expensed as well. And that also would be non-recurring.

Ram Selvaraju – Rodman & Renshaw

So of the approximately $3 million in general and administrative costs for this current quarter, how much of that can be attributed to non-recurring items?

Robert Farrell

Approximately just about half of that amount.

Ram Selvaraju – Rodman & Renshaw

Half of that amount. So we could expect around $1.5 million to $2 million per quarter going forward in terms of G&A expense? Would that be reasonable?

Robert Farrell

Yes, that would be a pretty good estimate.

Ram Selvaraju – Rodman & Renshaw

And with respect to the partnering, Marc, perhaps you could provide some color on this, where you're in discussions and where you aim to be by the end of the year?

Marc Rubin

Sure, Ram, and we will, let me say at the outset, be updating all of you, as those discussions progress and evolve. But, as I said, we have been very pleased that the numbers of companies have expressed interest in Probuphine, actually before these data came out, but that's only been strengthened by this very positive data. There's also been some interest expressed in the ProNeura technology, as well as some of the earlier programs. So we're very pleased by these initial contacts, and we plan obviously to continue these discussions and expand the discussions, and we're optimistic that these are going to come to fruition in the not too distant future, towards certainly by the end of the year we hope.

Ram Selvaraju – Rodman & Renshaw

Okay. And so one potential licensing agreement could include not only partnering on Probuphine, but also on the entire ProNeura platform technology?

Marc Rubin

Well, I don't want to suggest one thing over another. I just want to say that we've been pleased there has been interest. The interest has primarily been focused on Probuphine, obviously, with these outstanding results. But there is also interest in learning more about our other programs.

Ram Selvaraju – Rodman & Renshaw

And can you disclose at this time whether or not this is looking like it could be a competitive process, i.e., that there would be more than one interested party?

Marc Rubin

Well, I can't really say more than I have, but we always anticipate, especially I think you know when you have a program, a Phase III program with excellent data like this, that there would be interest from numbers of parties that would set some sort of competition in motion.

Ram Selvaraju – Rodman & Renshaw

Okay. Thank you very much.

Marc Rubin

Thank you, Ram.

Operator

(Operator instructions)

Marc Rubin

Okay. If there are no further questions, then I want to thank you all again for your participation in this call, and thank you for your support, and we will continue to update you as more information comes through as we move forward. Thank you very much.

Operator

Ladies and gentlemen, this concludes the presentation, you may now disconnect. Good day.

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