Æterna Zentaris Inc. - Shareholder/Analyst Call

| About: AEterna Zentaris, (AEZS)
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AEterna Zentaris, Inc. (NASDAQ:AEZS) April 25, 2013 4:30 PM ET

Executives

Paul Burroughs - Director of Communications

David Alan Dodd - Chief Executive Officer and President

Analysts

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

George B. Zavoico - MLV & Co LLC, Research Division

Operator

Good afternoon. My name is Simon and I will be your conference operator today. At this time, I would like to welcome everyone to the introductory conference call by new Aeterna Zentaris' President and CEO, David Dodd. [Operator Instructions].

I will now turn the call over to Mr. Paul Burroughs, Director of Communications. Please go ahead, sir.

Paul Burroughs

Thank you, Simon. Good afternoon, everyone, and welcome to this introductory conference call by new President and CEO, David A. Dodd. With us also is Dennis Turpin, Senior Vice President and CFO.

Please take note that during the call, we may be making forward-looking statements regarding future events and the performance of Aeterna Zentaris that involve risks and uncertainties that could cause actual events and results to differ materially. These risks are described in further detail in the company's press releases and reports filed with the U.S. and Canadian securities regulatory authorities.

These forward-looking statements represent the company's judgment as of today, Thursday, April 25, 2013, and the company disclaims any intent or obligation to update these forward-looking statements, unless we are required to do so by applicable law or by Securities Regulatory Authority. However, we may choose to update and if we do so, we will disseminate the updates to the investing public.

It's now my pleasure to introduce the new President and CEO of Aeterna Zentaris, David A. Dodd.

David Alan Dodd

Thank you, Paul. Everyone, I'm delighted to speak with you today providing this introductory call to me as the new President and CEO of Aeterna Zentaris. A more comprehensive call will occur on May 8. At that time, other key staff will be available to answer any detailed questions you may have. My goal today is to provide you an opportunity to understand my business philosophy and operating approach. In addition, I'll share my thoughts as I conclude 2 weeks with the company.

Previously, my background has been distributed to publicly, and most of you may have reviewed it and all. Without going into any great details basically, I come from executive and general management in the pharmaceuticals and life sciences industries. I've had the pleasure of leading large organizations as divisions of major competitors, as well as leading standalone public and private companies. I've had the challenges and pleasures of dealing with significant challenges regarding sustainability, related to performance, compliance, financing and growth options. And yet, I've been fortunate in all instances to work with outstanding staff, advisers and boards of directors, all of whom have contributed to achievements toward outstanding success in developing shareholder value, career growth options for our employees, and especially, improved health options for people worldwide.

I'm indeed delighted to join this company, Aeterna Zentaris. And my primary motivation for doing so has been, and each of these very important to me, the current pipeline, especially the near-term opportunities. Products, such as our 130 and 108, as well as other developmental programs. The motivated, engaged and competitive staff that I've met over the last 2 weeks, regardless of disappointments, they're focused on achieving success and building sustainable shareholder value. And the opportunity to be a part of developing a highly competitive, sustainable company, delivering consistent shareholder value, career growth opportunities and enhancing lives worldwide.

Our focus here will be on achieving growth and profitability through the successful development and commercialization of our rich pipeline, augmented by corporate and business development initiatives.

I spent the past 2 weeks with our teams, jointly getting to know one another, seeking input and ideas, working to establish highly engaged in a rewarding environment. I've shared what I would consider my incoming vision with all employees, the values that I personally hold regarding building shareholder value, staff development and the successful portfolio in business development. And I've shared my plans with all employees regarding my focus during the next several months. We all recognize here the critical importance of credibility among our shareholders, credibility among the investment community, credibility among our partners, and most of all, credibility among ourselves. We're demonstrating a disciplined approach in performance, right first time, on time, when committed. These are all going to become daily core operating principles for our focus.

I'd be happy to go into any details you have -- your questions that you have. And at this time, I'll turn it over to the operator who'll provide you instructions.

Question-and-Answer Session

Operator

[Operator Instructions] And your first question comes from the line of Joe Pantginis with Roth Capital Partners.

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

I guess a couple of questions, even though it's still very early in your tenure obviously. I guess the first question is anytime you have a management change, the types of questions you would get is, what kind of strategic review are you looking at for the company here with regard to the current pipeline? Obviously, you said that's one of the reasons you joined the company, was the strength and the depth of the pipeline across various stages. So I just wanted to get a sense of how you'd be looking to look to either accelerate programs, maybe put some programs on the back burner or overall, how you'd look to address that, and then I have a quick follow-up.

David Alan Dodd

Okay, good. It's an excellent question. I think anyone stepping into a new position, as you indicate, would want to at the very least, validate and confirm for themselves that the current focus, the current pipeline, the current priorities that have been set, is in fact, felt to be appropriate and all. We are no different. And so, yes, we will be -- we don't anticipate any major changes as I have looked at this and looked at it prior to coming in and looked at the opportunities. Undoubtedly, there will probably be some modifications of focus. Personally, I'm a strong believer in determining and deciding where you want to drive forward and making and ensuring that you have the resources allocated there properly. At times, that requires you to revisit some other programs and all. Doesn't necessarily mean you stop them but we -- undoubtedly, we'll be looking at our priorities, our resource allocation and focus, and we'll be doing that starting very soon, as you might imagine.

Joseph Pantginis - Roth Capital Partners, LLC, Research Division

And I guess, maybe a little bit looking at the past year because obviously, some of the things you've discussed is value creation, the pipeline and then linking to your strategic review that you just discussed. Based on where you've been, maybe can you provide some examples or an example of some of the value creation that you have given shareholders?

David Alan Dodd

Sure. In several ways, I will try not to go too long and all. But I have had the opportunity of stepping into several different types of situations, which all required, ultimately, how do we improve our progress, our value delivery and all. That has at times included stepping in and launching a new pharmaceutical operation built around worn-out, tired brand of generics and all without any R&D dollars allocated to them. In that instance, it became more a focus from initially, a commercialization standpoint and then, beginning to fund developments through clinical studies and all, and then going forward into a few tweaks, I'll call it, just to better differentiate products and look for little areas of exclusivity. The other end of the spectrum would be where I have stepped in, for instance in Serologicals, and ultimately, we sold off the original business that it represented, 80% of all of our revenues, and had been the foundation of the company. We divested that entirely in an entirely new direction, building a tremendous amount of value and building a new company and doing that literally in a matter of a few years and all. And so in each instance I -- it has included and involved reviewing the portfolio, reviewing where we stood, as an operating company, and the challenges that we have. In some instances, it dealt with we needed to be able to move very quickly. To move very quickly, in that case, meant to us that we needed to move out of regulated products and more into research-based products and all, research reagents, life science tools, et cetera. That way we could move more quickly, we need to look at higher growth segments and develop growth opportunities with improved margins and all. And so based upon the individual, somewhat unique situation one is dealing with and the parameters around it, guide somewhat your thinking and one's thinking. What I have never done and, in fact, incapable of doing, is coming in and saying I have the answer, I've already figured it out, or even at a point down the road saying, I have the answer. In all instances, I believe very strongly in working with the team because as I found out in almost 2 weeks, there are always -- I mean, this company very similar, there are a lot of good ideas. And people throughout the company and all, sometimes for whatever reasons, they may not have stepped up to the plate before, they may have been more focused on simply doing their jobs and all. Part of my job is to engage people and allow them opportunities to open up and give me their thoughts and all, and then help drive us to a growth progress.

Operator

Your next question comes from the line of Ren Benjamin [ph] with Burrell & Company [ph].

Unknown Analyst

Can you just share a little bit more regarding the details as regarding your vision. You mentioned that you've spoken of the management, you've laid out your vision and I know you, in broad brush strokes, mentioned you want to focus on growth and moving the pipeline forward. But maybe if we can dig in a little bit deeper and even bring in your past positions to help us understand where this growth could be coming from, what other sort of business development ideas we could be looking at? Is diagnostics an area you might want to go? Can you just give us some more clarity or some more details as to where we might be going?

David Alan Dodd

Certainly. I presented to all employees a very specific statement outlining my thoughts. Coming into this company, a vision statement, if one wants, and in that I'm attempting to reflect what I would foresee that we would all be happy to have as a company in the future. And this would then drive our activities, our areas of focus and all. I'll step through this. I decided to wait and see if I was asked about it, but it's fine, thank you. I see a company where we are all dedicated to serving the needs of patients, shareholders and employees, through the successful development and commercialization of novel differentiated products that enhance and save lives, delivering consistent growth and development of shareowner value, led by a highly motivated engaged staff in demonstrating an external competitive focus throughout the company. Finally, earning a reputation for demonstrating the highest quality and discipline in the areas of product development, clinical execution, business development, alliance management and commercialization. Now let me step through and break it down to you and tie it to my own background as you would ask and all. As you may know, I bring a strong many years and successful experience at doing -- engaging in business development, corporate development, buying things, selling things, building things, stepping into situations that were on their last breath from a financing standpoint. And as I've always said, having a great plan, but not having the ability or know-how or access to be able to finance it doesn't help really anyone. And so all of those elements end up coming to play. And I think we certainly, as a company, should always be thinking of shareholder value. People part with their invest -- with their money, their hard-earned cash in order to support us. And in fact, employees part with their greatest investment and value, and that's themselves. So I sincerely believe in this element of that is one of our key parameters and focus. And then certainly, patients and all. Now delivering consistent growth and development shareholder value, as I've spoken about in the last 2 weeks, is absolutely critical. It doesn't mean every quarter is smooth and in the right direction and all. We all know that never occurs. But it's the mindset that we want to create, that we want to continue to build a valuable enterprise here. A highly motivated and engaged staff is the difference between having someone show up, do a job, collect a paycheck and someone who is really seeking to figure out ways of innovation, enhanced quality, customer focus, competitiveness, et cetera. And so when I look at those, I think historically, we have been focused with some success of utilizing our assets to bring in more cash, to fund some of our projects and all. I think in addition to the way we've been doing it, we can augment it through activities and perhaps, begin to think about, in addition to bringing cash in, perhaps we could bring in products. Perhaps we could bring in some products that complement the direction we're trying to go in and move us forward faster into becoming an operating company. And for me, an operating company is a company that's generating cash and can begin to stand on its own, as opposed to a company that's incorporated and operating by raising cash and spending cash and then needing this to raise more cash. And so, we will be focused on looking for opportunities to find partnerships, to find assets, to bring things in that can move us forward more quickly. I'm not basically interested in seeing us become more diversified, in going into areas. As you know, our project 130 is initially target -- although it's in NDA as an oral diagnostic in the manner in which it will be used. The classic diagnostics marketplace, in which I worked many years ago at Abbott Diagnostics and all, I don't foresee that as being a direction we would pursue. And unless we made a much greater strategic decision as a company in what we wanted to be. So my focus in activities will be positioned more towards, are there opportunities utilizing our internal assets and developments and programs, as well as external activities can move us forward more quickly and more successfully, and put us out there at a different stage of operations more quickly.

Unknown Analyst

Yes, it does and I guess just another question. Any thoughts regarding a consolidation of the company. Right now, you have offices in different continents. Where will you be spending the majority of your time going forward?

David Alan Dodd

Well, if I wanted to be humorous, I'd probably say on an airplane. But it is a challenge and I've-- maybe it will be helpful, I've dealt with this challenge before. I've had locations all over the place. I mean, from Melbourne, Australia to Beijing to Dundee, Scotland, Glasgow, Edinburgh and Germany and all. And it does sort of pull you in many different ways as you're probably suggesting and all. I -- we have no current plans or I have no imminent announcement to make that we are consolidating all into Charleston, South Carolina, for instance. I only say that since I hail from South Carolina but I don't mean it, seriously. But it is an issue and one that will be part of our ongoing discussions and review. Personally, my -- as I've done before is, people that know me, I will be working from each location and whatever that means, and what I mean by that is wherever we are, I have historically focused and realized it's important to be where one's staff is. It's important to be around in person to not only be there to do one's own work, but to answer questions on a daily basis. People are always asking, what is it we're trying to become? How are we going to try to become it? What's going to happen with this new person in the leadership position? And ultimately, what's it going to mean to me? I realize that and take all those questions very seriously. So I have set up offices, it's easy because I can work in a cubicle or a conference room, but I will be working out of each location. I will work on a continuous calendar of that, my first day, if not -- I think, actually the day before my first day I circulated to my senior -- to the senior staff, a calendar that goes through the end of the summer of what I anticipate where I'll be and when and how I'll be operating out. So the first step will really be that and then certainly the first step is to get to know the organization, understand how we're using and allocating our resources and looking for, are these the best, as well as feasible best, I'll call it, options. Sometimes on paper, what seems to make sense may have other implications when it's attempted to be put into practice or if it is put in practice. I've consolidated a lot of organizations in the past and in some instances, I've kept what I originally thought was a very inefficient situation open. I remember, in one situation, we had a company in Cambridge, small group of 7 people in Cambridge, U.K. and it makes so much sense just to tell them to move to Dundee, Scotland until the world's largest pharmaceutical company, there was the major customer pointed out that there was one employee there that had the magic thumb on being able to develop certain elements of cell lines and it was clear, she was never going to relocate. After a reassessment, I thanked her for telling me that. And was very proud to have a group in Cambridge as we develop that business and all. So I'll look at it comprehensively. It is a real issue, I recognize that. I also think it's not my #1 priority, but it is -- it is important and I will be working out of the different locations. And just basically, to add to it, we have approximately today, we have 88 employees, 12 here in Québec city, 6 in New Jersey -- does that include me? I don't know, but I think I'm #7 now, and then 70 in Frankfurt, so we would have 89 then.

Operator

[Operator Instructions] And your next question comes from the line of George Zavoico with MLV & Co.

George B. Zavoico - MLV & Co LLC, Research Division

A question regarding a little bit about your background, seems to be weighed, perhaps, toward products that already on the market and sales. Could you reveal a little bit about your experience on your previous positions on companies or challenges that you've had regarding research and development pipelines that haven't reached commercialization yet or even to regulatory...

David Alan Dodd

Sure. In each of my instances, probably, what's reflected in background, you talk about products and their owner. But in each one of those situations, we had products in development. Sometimes it was simply a -- I'll call it a minor modification of an existing product and then following through what the requisite, clinical programs to develop them. Sometimes it might have been following a 505, B2 type pathway and all. But I have been involved with products -- I've had the opportunity to be involved with products that were in development that went through the pipeline, effects are being won, the print face being another one. Today, Abbott will be selling over $1 billion this year of AndroGel. That was a product that I obtained the rights to while it was still in the development stage prior to being submitted to the FDA. But I knew the product, I knew the compound. I was most interested in it and brought it in and certainly never, never had a business plan that said it was going to sell as much as it has. I'd like to say that I have, but didn't, I probably thought it would do $100 million, it's doing over $1 billion now. So numerous products, I could go on on products that had gone off the patent, took the compound, partnered with people such as Biovail, came back out with a product called, Orioval [ph] which ended up selling even though it had only 3 years exclusivity and in that short period, its peak sales sold more than the Orudis, which had been the original key to growth and product type of things. So have done a number of things with products, either how is it called, making them dance, giving them life. If you look at the history and I've always used the history and development of I'll call it, life cycle management, of naproxen sodium as an ideal business case. Centex brought it out. They brought it out with -- it was Naprosyn, they had 1 indication and if you look at the life of that compound in the marketplace, how it continued to be enhanced through either new indications, new modifications, coming out with essentially as anaprox and all, focused differently and all and then certainly, ultimately, as an OTC type product. And so I've used that many times in sort of coaching people and product teams early in their careers about don't do -- never walk away and think that the value of that molecule or that compound is only through that first long stone when you lose exclusivity. The job for all of us is how do we continue to enhance the value in the marketplace. Certainly the patients, but to shareholders, by keeping it going and all. And so there have been a number of products of those that I've just talked, spoken about, that we -- that are brought forth and all. Some in the women's healthcare, some in psychiatry, some in GI, the numerous products from the market today, all of which I was associated with when they were in the different stages of development.

George B. Zavoico - MLV & Co LLC, Research Division

Okay, that's good. In that regard, again about your research and development capabilities. I noticed the bulk of your employees and the bulk of the research in fact all of your research pretty much, except for clinical research, is done in Frankfurt. You, again, had also been pretty much head of R&D, as well as head of the company. Is Jorgen staying on in any way on in an advisory capacity? Are you going to be naming a Head of Preclinical Research or a Head of Research or Chief Scientific Officer? Are these -- I mean, I'm not asking you to name anybody now, of course but Is this the kind of stuff that you're thinking about to provide leadership in Frankfurt?

David Alan Dodd

Well, the answer is yes, yes. Jorgen is working with me in a transition period right now, so it's a brief transition period but he is assisting me. We have relationships in different partnerships and all, some of which have been built upon some long-term relationships that he's had. So he is working with me to do the old passing of the baton and transition, those things. You're absolutely right. He also fulfilled the role as the VP of R&D. We have to address that, and obviously, recognize that before my first day and all. So, yes, we will be looking at how to provide the -- not only the leadership we need from a corporate standpoint, but more importantly, that the team needs and wants in Germany. I mean, this is a question that -- or an issue that was brought up to me consistently as I spoke with -- last week, I had the pleasure of speaking with every department head. There was 1 on vacation but every department head based in Frankfurt, as well as other members of the staff that I had time to meet with. And as you might imagine, the issue of on-site leadership, R&D leadership also, especially, just as you outlined, is a very important issue now. It's fortunate, I've spent many years working, involved within -- in the European region and with a lot of R&D people. I'm not and never have been, and I don't say that either with pride or with shame, I'm not an R&D person and all, but I've always worked exceedingly well because without the continuous development, enhancement of one's portfolio, you run out of steam. And we all know stories in the industry of great companies until that one big product ran out and sometimes, all they do is acquire another company and all. But the challenge we have is to continue to keep a vibrant portfolio moving and all. And that's a lot obviously, easier said than done. But in the course of my years with Solvay, with Abbott, with Bristol Myers Squibb, et cetera, with Wyeth and all, I have had a lot of interactions and great interactions working in, spending time in, specifically, in Europe. I spent 3 out of 4 weeks there for 5 years in one instance and in another instance I spent another 3 out of 4 weeks over a 5-year period and all. In that process, I've developed a lot of contacts, either with recruiters or with R&D people, good people and all. So you're right, we have that challenge, not only in terms of the one spot but this is part of the sort of review. How do we optimize or improve, enhance our performance, our operations? And I don't think you do it once and fix it and walk away, because things change and all. It's a continuous, not every day, but it's part of our job as executives for this company is to be on top of these things. And so this is a very important issue and that one will be addressed and is being addressed.

Operator

There are no further questions at this time. Mr. Dodd, I turn the call over to you.

David Alan Dodd

Okay, thank you. I do appreciate it. And I appreciate everybody's interest in this introductory call. We certainly look forward to updating you with our colleagues on May 8 and all, and even more so, we appreciate your continuous support and interest in Aeterna Zentaris. And we look forward to keeping you updated as we grow and build the company. Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

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