Progenics Pharmaceuticals Management Discusses Q3 2012 Results - Earnings Call Transcript

Progenics Pharmaceuticals (NASDAQ:PGNX)

Q3 2012 Earnings Call

November 08, 2012 8:30 am ET

Executives

Amy Martini - Executive Vice President and Co-Leader of Corporate & IR Practice

Mark R. Baker - Chief Executive Officer, Director, Member of Science & Technology Committee and Member of Strategy & External Technology Subcommittee

Angelo W. Lovallo - Principal Financial Officer, Principal Accounting Officer, Senior Executive Director and Treasurer

Analysts

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Alan Carr - Needham & Company, LLC, Research Division

Ryan Martins - Lazard Capital Markets LLC, Research Division

Christian Glennie - Edison Investment Research Limited

Operator

Good day, ladies and gentlemen, welcome to Progenics Pharmaceuticals Third Quarter 2012 Results Call. [Operator Instructions] As a reminder, this conference call is being recorded. Now I'll turn the conference over to Amy Martini. Please begin.

Amy Martini

Thank you, Tyrone, and thank you for joining our conference call today to discuss third quarter financial results and a business update. With me on the call today are Mark Baker, CEO; and joining us on the call for the first time, Angelo Lovallo, Senior Executive Director of Financial Reporting and Treasurer.

Before we begin, I will remind you that remarks made on this call that are not historical in nature, may be forward-looking statements, and they are subject to a number of risks and uncertainties. Our actual results may differ materially. Such remarks may include, but are not limited to, those involving regulatory actions related to various formulations of Relistor, our business and commercialization strategies and expectations of future growth, revenues and assessments of our competitive position.

We ask that you please refer to our quarterly report on Form 10-Q and other filings with the U.S. Securities and Exchange Commission for more information on the risks that could cause our actual results to differ. As a reminder, statements made today are as of November 8, 2012 only, and we undertake no obligation to update or revise them.

I'll now turn the call over to Chief Executive Officer, Mark Baker. Mark?

Mark R. Baker

Thank you, Amy, and good morning to everyone. Let me get right into an update on the regulatory and development status of subcutaneous Relistor for chronic use. In July, we received from the FDA a Complete Response Letter, following its review of an SNDA for subcutaneous Relistor for the treatment of opioid-induced constipation in adult patients with chronic non-cancer pain. We and colleagues from partner company Salix have since conducted an End-of-Review meeting with members of FDA's Gastroenterology division to gain clarity on the approval deficiency outlined in the CRL.

The CRL indicates a single approval deficiency related to the division's concern that there may be a risk associated with the chronic use of mu-opioid antagonists in patients who take opioids chronically for pain. Their concern is related to reports of signs and symptoms they believe may be caused by opioid withdrawal, for example, itching or piloerection or goosebumps, which was seen in a small number of patients. Progenics, reliant on data generated from validated assays and withdrawal administered during our clinical trials, does not believe that opioid withdrawal occurs when patients take Relistor.

The division's concern is that if it exists, opioid withdrawal could increase the risk of cardiovascular events in patients chronically taking Relistor. Baseline data from clinical trials of Relistor, including a year-long safety study and a review of that data by independent experts, we do not believe that there is an increase in cardiovascular events associated with the use of Relistor in this patient population.

In the End-of-Review meeting, the division communicated that in order to demonstrate that this risk does not exist, a very large, well-controlled chronic administration trial would be needed to assess the safety of Relistor prior to its gaining market approval for treatment of patients with OIC who are taking opioids for chronic non-cancer pain. In their discussions with the divisions, Salix expressed the view that the post-marketing clinical and pre-clinical data currently available for Relistor adequately demonstrated an appropriate and expected safety profile sufficient to permit the approval of the existing Relistor sNDA, and we agree with this assessment.

We plan to continue to work with FDA to generate a reasonable path forward for Relistor that can be agreed upon. While we can't definitively predict the duration of interactions with FDA regarding this matter, we are hopeful that a path forward will be determined during 2013.

In parallel, we expect Salix to file for marketing authorization in the European Union, to expand the subcutaneous Relistor label to include patients with chronic non-cancer pain, based on the existing data package. It is important to note that the CRL and recent discussions with FDA focused on subcutaneous Relistor for patients with chronic non-cancer pain. Regarding the oral formulation, Salix is continuing its development work but will not file the NDA this year. And we will be in discussions with FDA regarding the path forward for the oral formulation.

Turning our attention now to the already approved patient population, individuals with advanced illness. Relistor year-to-date global sales reported by our collaborators are $28 million, which represents a 53% increase over that period last year. Global sales reported by our collaborators for the third quarter were $4.9 million.

In the first and second quarters of this year, pre-filled syringes were introduced into the distribution channels, and Salix has told us that sales for those quarters reflected destocking[ph] . Now that the initial stocking of the pre-filled syringes is largely completed, third quarter reported sales were less as the distributors accessed that inventory. Salix has said that they see a growing trend in prescriptions and recently confirmed a current annualized run rate of $32 million and raised their estimate of peak year sales for sub-Q Relistor in the AI market. And as Salix announced yesterday, the FDA recently cleared an update to the advanced illness label.

Looking beyond Relistor to our pipeline products, since our last quarterly call with you, we achieved an on-time start of the PSMA ADC Phase II study of up to 75 patients with metastatic castration-resistant prostate cancer. This is an open-label, multi-centered trial to assess anti-tumor activity as measured by PSA, circulating tumor cells, bone, visceral and nodal metastasis, and pain as well as tolerability and safety. We already have a half dozen sites open and expected enrollment could be complete by the end of 2013.

Later today, positive Phase I data updated since ASCO in June will be the subject of an oral presentation and a plenary session at the EORTC-NCI-AACR symposium in Dublin. The organizers plan to post an audio recording following the investigator's presentation. So if you're interested, you can check their website later on at ecco-org.eu.

With that, I'll turn the call over to our Treasurer, Angelo Lovallo, for a discussion of our financial results. Angelo?

Angelo W. Lovallo

Thanks, Mark. You can read details of our financials in the press release we issued this morning and in our 10-Q. But let me provide you now with some brief highlights beyond those Mark has already discussed.

Cash and securities at the end of the second quarter were $44.3 million, reflecting cash used for the quarter of $6.7 million. We reported a net loss for the third quarter of $11.3 million or $0.33 per share compared to a net loss of $11.4 million or $0.34 per share in the third quarter of 2011. Net loss for the 9 months of 2012 was $35.1 million or $1.04 per share compared to net income of $21.1 million or $0.63 per share for the first 9 months of 2011.

Recall that the 2011 results included recognition of an upfront payment and reimbursement revenue from the Salix collaboration. Third quarter revenue was $1.1 million, down $4.7 million from the corresponding 2011 period. Revenue for the first 3 quarters of 2012 was $5.2 million compared to $82.6 million in 2011. Again, this is related to the 2011 recognition of revenue from the Salix collaboration.

We recognized $728,000 in royalty income on Relistor sales during the third quarter of 2012, down $0.9 million from the previous quarter. First 9 months 2012 royalty income was $4.2 million, which compares to $1.8 million in royalty income for the first 9 months of 2011.

The Year-to-date expenses related to R&D and G&A have decreased, as compared to the corresponding period last year, while clinical trial expenses increased on the third quarter, reflecting PSMA ADC clinical activity. At the end of the third quarter this year, company-wide headcount was reduced by about 1/3 as compared to September 30, 2011.

I'll now turn the call back to Mark.

Mark R. Baker

Thanks, Angelo. While I'm disappointed that we don't yet have clarity on the path forward with Relistor, I am confident that a resolution with the FDA can be achieved. I'm pleased to see that commercial efforts with Relistor in the advanced illness market continue to bear fruit, with a strong increase in year-over-year sales and a rising trend in scripts. You see we've been managing the company toward bringing down the burn, and now you see this showing up in our financial statements as reduced expenditures. We are continuing to focus our attention on the task at hand, advancing the development of innovative medicines.

And with that, let's take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] First question is from Brian Klein of Stifel, Nicolaus.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Regarding the Relistor, the next potential trial that might be required, can you give additional color in terms of exactly how large of a trial are they anticipating, and how long would they like patients to be treated?

Mark R. Baker

So we're in discussions with the FDA on those very topics, and so I don't have details on that for you now. They have been looking for a large trial as we mentioned in our comments, and obviously, we're in discussions with them about how to properly size the trial and the proper length.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

And so while your discussions are going on with the FDA, is Salix also preparing to run this trial? Or is the clinical development plan on hold until there's a clear pathway?

Mark R. Baker

No, I don't see that at all. Salix remains very active in the development of both the sub-Q and the oral, the development plans for the multi-dose pen are moving ahead well on the sub-Q, and I see them making substantial investments in oral and preparing for clinical trials when the appropriate path is received -- is reached with the FDA. So they -- I think both in their words and in their deeds seem to be moving ahead well.

Brian Klein - Stifel, Nicolaus & Co., Inc., Research Division

Great. And then lastly, you mentioned that the discussions are ongoing with the FDA, but it's unclear to me what is going to sway the FDA to change their opinion? As far as I can see it, it looks like you have one position, and the FDA has the other position, but the FDA holds all the power. How do you anticipate being able to sway them to your point of view?

Mark R. Baker

Well, I think it's an interactive process. Certainly, I've seen the FDA willing to change from their initial position. So I don't see it quite that too black and white. But it is true that the regulators make the decision, so we're going to have to work with the regulators here to come up with a solution that satisfies their concerns. And, obviously, we need to be -- have them and need to be communicating our view, which is that these risks are not present in Relistor in order to give them the confidence to prove a path forward that they feel comfortable with. So it's an interactive process. I've seen the FDA be open to our thoughts and open to possible outcomes, and it's just going to take time to work it through.

Operator

Your next question is from Alan Carr of Needham & Company.

Alan Carr - Needham & Company, LLC, Research Division

So I'd like to get a better sense of the concern around here on cardiovascular. Can you clarify me -- for me, if there were any cardiovascular signals or just say, theoretical concern over cardiovascular signals? And if there was something in there with respective to cardiovascular, was it just a slight imbalance or no imbalance whatsoever? I -- can you clarify that for me?

Mark R. Baker

So, Alan, as you know, we have several data sets regarding the sub-Q. We have the clinical trials, 2 Phase III clinical trials, which were placebo-controlled. We have the long-term safety study, which was not a controlled trial but consisted only of the active arm. And we believe as we look at that data that we see no imbalance. Yesterday on Salix's call, Dr. Bill Forbes, who's Head of Development there, indicated that he, after independent reviews, saw only 3 cardiovascular events. So I don't -- certainly don't want to put words in the FDA's mouth, but we do see this as a theoretical concern by the FDA, not triggered by our data, but triggered by their concern that opioid withdrawal could lead to an increase in cardiovascular events and asking us to provide them with additional clinical data, so that they can be confident that, that is not the case. And they are seeing this and have said to us they see this as a class effect with mu-opioid receptors.

Alan Carr - Needham & Company, LLC, Research Division

So why -- or actually, did they request a trial like this a few years ago when you began your long-term safety trial? Why didn't they request a double-blinded trial then?

Mark R. Baker

They did not. The structure of the long-term safety study was discussed with the agency by us and Wyeth, our partner at the time. And the protocol that we followed was a protocol that they had seen. So this is a new view from the FDA, a recent view, and it seems to have arisen only at the very end of the review of our sNDA.

Operator

Our next question is from Ryan Martins of Lazard Capital Markets.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Can you confirm, is the FDA specifically here asking for a cardiovascular outcome study? Is that what they're asking for?

Mark R. Baker

They're asking, as we said, yes, for a study that would be a very large controlled study that would focus on cardiovascular events.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And in the post marketing surveillance, obviously, there's an update now that's in the process on the label for opioid withdrawal. I mean, what's the magnitude of the opioid withdrawal cases you've seen in the post-marketing surveillance?

Mark R. Baker

It's just a very few cases. As I mentioned in my remarks, with symptoms -- signs and symptoms such as itching, piloerection. So the numbers are quite small. Those signs and symptoms could be related to other conditions the patient has or could be a symptom of withdrawal. We -- I believe it's -- that not a sign of withdrawal. And we look to the validated assays, which we included in these trials of focusing on withdrawal, which indicated that there was no withdrawal in these trials.

Ryan Martins - Lazard Capital Markets LLC, Research Division

And, obviously, the mental group has added on to avoid the cross [indiscernible] into the blood-brain barrier with the central opioid receptors. Is there -- I mean, is there some other drug that does cross the blood-brain barrier that may be leading to any kind of opioid withdrawal?

Mark R. Baker

Well, there are several mu-opioid antagonists which are on the market which do cross the blood-brain barrier, yes.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And what is the actual link that the FDA is worried about between opioid withdrawal and eventual cardiovascular outcome?

Mark R. Baker

They express it as a concern that if there is opioid withdrawal, this could increase the cardiovascular risk. They do not have a mechanism of action that they believe causes it. They say it's a concern, and they're looking for additional data. So I don't think there's any link that they found. They are asking us to demonstrate that no link exists.

Ryan Martins - Lazard Capital Markets LLC, Research Division

So given what they've been asking you, this discussion has been specifically on the subcutaneous version. As you think about the oral version, you have your Phase III data -- the Phase III study that you did. Obviously, Salix has said yes there, that they would require a few more studies for -- yes, they said there'd be some additional clinical work required, even if they decided to just focus on the oral version. Does that preclude an outcome study in case they do go to focus on just the oral version? Or would that still be a part of the requirement? Or is it specific only to the sub-Q version?

Mark R. Baker

Well, the discussions have been about the sub-Q. But it has obvious implication with -- the discussions with the FDA have been about the sub-Q. But it has obvious implications for the oral. And so I think what was said on the sales call yesterday, and I agree with, is that it's likely that we're going to need an additional clinical trial of the oral, and Salix is preparing for that possibility. What that trial will be, we will want to work out with the FDA. And so we'll be in discussions with the FDA about that as well.

Ryan Martins - Lazard Capital Markets LLC, Research Division

Okay. And how does your agreement with Salix -- is there any provisions relating to additional trials and a cost that'll be borne by either party? Is there any changes to the agreement in that event?

Mark R. Baker

No, no changes to the agreement. Salix has agreed to pay all of the costs of development and commercialization. So that would not be an expense that we would bear, but that would be Salix expense.

Operator

[Operator Instructions] Our next question is from Christian Glennie with Edison Investment.

Christian Glennie - Edison Investment Research Limited

Just -- could you clarify, I think, you mentioned earlier, that in your discussions with the FDA, they're very clear that it's a class effect and not compound specific?

Mark R. Baker

The FDA has mentioned to us that they consider this to be a class issue, yes.

Operator

There are no further questions at this time. I'd like to turn the call over to management for any closing remarks.

Amy Martini

Thank you, Tyrone, and thank you to everyone on behalf of Progenics' management team for joining us today. Have a good day.

Operator

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.

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