Raptor Pharmaceutical Corp. (NASDAQ:RPTP) Q2 2016 Results Earnings Conference Call August 4, 2016 4:30 PM ET
Kimberly Lee - VP, Corporate Strategy and Communications
Julie Anne Smith - President and CEO
Dave Happel - Chief Commercial Officer
Krishna Polu - Chief Medical Officer
Mike Smith - CFO
Joel Beatty - Citi
Welcome to the Raptor Pharmaceutical's Second First Quarter 2016 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold a brief question-and-answer session. As a reminder, this conference call is being recorded today, August the 4th, 2016.
I will now like to turn the call over to Dr. Kimberly Lee, Vice President of Corporate Strategy and Communications. Please go ahead.
Thank you, operator. Earlier today, Raptor issued a press release announcing our financial results for the second quarter 2016, which is available on our website at www.raptorpharma.com and through our SEC filings. A webcast of this call will be available on the Investors Relations section of our website for 90 days.
Before we begin, let me remind you that today's call will include forward-looking statements based on current expectations. Forward-looking statements made in this call may include, among others, geographic expansion and market growth of QUINSAIR, PROCYSBI, high point initiatives, financial guidance and forecast, estimated market opportunity, including potential for PROCYSBI for treatment of related onset nephropathic cystinosis patients, patients compliance and adherence, the market opportunity for QUINSAIR for the treatment of adult patients with cystic fibrosis and the potential for other indications; QUINSAIR's European and France, Canadian launches, and the projected impact in Raptor's revenue; the regulatory path for MP-376; the investigational form of QUINSAIR in the United States; and anticipated regulatory and clinical activities and timing for MP-376 for bronchiectasis or BE, in the US and other markets, as well as the potential market opportunities for those indications.
Such statements represent our judgment as of today, and may include among others risk related to Raptor's ongoing commercial and clinical programs. Please refer to our filings with the SEC, which are available from the SEC or on our website for information concerning the risk factors that could affect the company. Raptor expressly disclaims any intent or obligation to update any forward-looking statements except as required by law.
During this call, we will be discussing non-GAAP financial measures. For a reconciliation of these adjusted financial measures to the corresponding GAAP measures, please see today's press release which is available under the Investor Section on our website and through our SEC filings.
Joining me on today's call are members of our executive management team, including Julie Anne Smith, President and CEO; Dave Happel, Chief Commercial Officer; Dr. Krishna Polu, Chief Medical Officer; and Mike Smith, Chief Financial Officer.
I'll now like to turn the call over to our CEO, Julie Anne Smith.
Julie Anne Smith
Thank you, Kim. Good afternoon everyone, and thank you for joining us. I'm delighted to update you on our record breaking quarter with strong global net revenue growth driven by continuing robust patient demand for PROCYSBI. For the first time in our company's history we are generating revenue from two products due to QUINSAIR launch which is off to a terrific start in Europe.
In the second quarter Raptor's global net revenue was $32 million, a 37.3% increase compared to the same period in 2015. PROCYSBI contributed the majority of sales and grew well over 30% year-over-year. We generated sales from QUINSAIR substantially from two launched European countries and today we successfully added three additional countries from which we're generating revenue.
The cystic fibrosis communities’ response to QUINSAIR has exceeded our expectation in terms of prescriptions written and the feed of successful reimbursement decision. We believe the positive dynamics for both PROCYSBI and QUINSAIR, including sustained product update, strong patient demand and compliance will continue in both our existing and new geographies for the foreseeable future.
As such, I am pleased to announce that we are raising our 2016 net global revenue guidance to $125 million, $135 million, up from $115 million to $125 million. Notably, our operating expenses came in lower in the second quarter of 2016 compared to the first quarter and we remain on track to meet our lower operating expense guidance is for the year which we issued in May. We'll continue to prioritize our use of our capital as we advance our core asset in the clinic.
We finished our record breaking second quarter with a strong cash position of $124.2 million, which we believe, coupled with ongoing robust revenue generation could be sufficient to fund the company through 2018.
We believe there are several significant near term catalyst for the company which includes working towards advancing an NDA submission for MP376 in cystic fibrosis initiation of bronchiectasis study for MP376 and the data readout for our RP103 mitochondrial disease program.
I am excited about Raptor's business and I am proud of our outstanding team that delivered this record quarterly performance. We remain focused on enhancing shareholder value, driving top line growth and advancing our most promising clinical program.
At this point, I'd like to turn the call over to Dave.
Thanks, Julie. I am pleased to report an excellent second quarter for 2016, with record PROCYSBI sales and an impressive commercial launch of QUINSAIR in Europe, which has exceeded expectations.
Raptor's net global sales reached $32 million in the second quarter, which represents year-over-year growth of 37.3%. PROCYSBI accounted for the majority of the total revenue, driven by a 36% year-over-year increase in patient demand.
In the US, our treated market share for PROCYSBI rose to 66% with a compliance rate of approximately 90%. PROCYSBI US revenues grew 31% and patient demand as measured by quantity product shipped achieved 24% year-over-year growth, while the number of active shipping patients increased 29% over the same period. We continue to see robust demand from both specific [ph] and conversions and treatment naïve patients across all age groups;
In Europe, PROCYSBI's penetration continues to narrow the trend and adoption rate, experienced in US, revenues grew 54% year-over-year and patient demand grew 52%. Patients are now receiving PROCYSBI in 12 countries throughout Europe, Middle East and Africa, including new patients in France, Spain, Iceland and United Arab Emirates.
We continue to make progress with country reimbursement authorities in key markets in the EMEA region with the potential to announce sales in some additional new markets before year end.
In Latin America, we continue our steady progress in making PROCYSBI available to more cystinosis patients in Brazil and we are pleased to have shipped PROCYSBI to our first patient in Colombia.
Moving to QUINSAIR, I am extremely excited that we are now providing to access to QUINSAIR in five European countries which represents approximately one quarter of the market of adult living with CF since our launch in April.
We continue to hear category play positive feedback on QUINSAIR as it enters to CF market, being a highly differentiated inhaled antibiotic and their first inhaled quinolone with twice daily administration, room temperature storage and a short administration time.
QUINSAIR's differentiated profile combined with the CF communities’ enthusiasm and our teams execution has translated into a launch that has exceed the pace that Cayston set in terms of revenue and unit fold through the first few months according to IMS data.
QUINSAIR's net price is in the range of 3000 to €3500 per monthly cycle which is on par with Gilead Cayston. Our sequential country launches continue and we remain on target to achieve reimbursement in the majority of European countries by the end of 2017.
I will now hand the call over to Krishna for an update on our clinical development activities.
Thanks, Dave. First let me provide you with an update on our MP-376 program. On the regulatory front the award of QIDP designation for MP-376 received earlier in the year highlights the significant unmet need for treating pseudomonas aeruginosa in a number of indications, namely CF, BE, as well as the importance of developing new treatments for NTM.
The QIDP designation for MP-376 and CF, BE and NTM underscores the FDA's commitment to advancing therapies that address tough-to-treat pathogens. All three of these indications represent promising opportunities for the development of MP-376, in particular for BE and NTM to debilitating for which there are no approved treatment.
With the regard to the CF opportunity for MP-376 in the US, we had a meeting with the FDA in the second quarter in which the agency requested additional information pertinent to the existing completed clinical trial. We submitted their response to the FDAs request and anticipate additional discussions with the FDA prior to an NDA submission. We continue to make advancement towards an NDA filing and we'll update you further when our regulatory discussions have been completed.
Turning to BE, we plan to initiate a clinical study for MP-376 later this year. We have prioritized BE as our most promising near term expansion indication because of the demonstrated activity of other inhaled quinolone's in this population against pseudomonas, and based on a good understanding of the relevant clinical endpoints needed to support regulatory approval.
For PROCYSBI, we announced in March that Heath Canada has accepted for review a new drug submission with prior year review status. We received notice from Health Canada that it is seeking additional information to complete its review. We intend to submit to a response to Health Canada in a timely fashion and expected the timeline review of our NDS will re-commence when Health Canada accepts our response. As a reminder, there are no approved therapy for pseudomonas in Canada.
Our late onset cystinosis screening efforts in partnership with the Marshall Clinic continue to advance in order to identify previously un-diagnosed cystinosis patient. Today the Electronic Health Record of 600,000 patients under 30 years of age from the Marshall Clinic healthcare system have been screened within renal and extra renal criteria for cystinosis.
From this approximately 250 patients have been identified fitting the pre-specified criteria and upon review their medical history these patients will be further evaluated by clinical specimen including ocular exam and laboratory; and genetic testing. This clinical assessment will enable confirmation of any diagnosis of cystinosis in patients who could then be referred for genetic counseling and treatment with cysteine to clean therapy as early at the beginning of 2017.
The potential impact of this project is far reaching. The results could expand the current estimated prevalence of the disease and identify a mechanism that could be applied to healthcare systems and clinical practice leading to the identification of previously un-diagnosed cystinosis patients benefiting them through earlier disease detection and intervention. We plan to provide further updates as become available.
Turning to our potential expansion indications for RP103, our mitochondrial disease program is ongoing following the second preplanned interim analysis in 12 subject. We plan to complete an assessment in 25 patients for the primary endpoint and expect to complete patient enrollment and report top line results in the first of 2017.
I'll now turn the call over to Mike.
Thank you, Krishna, and good afternoon everyone. As Julie noted earlier today we reported another quarter of strong financial performance. In the second quarter Raptor's global net revenue increased over 37% year-over-year to $32 million from $23.3 million for the same period in 2015. This increase was due primarily to an increase in patient demand and sales for our cornerstone orphan product PROCYSBI.
The quarter also included contribution from European sales of QUINSAIR for the first time. We're very happy to report that given the accelerating performance of our commercial franchisers we are now raising our full year 2016 net revenue guidance range by $10 million to a range of $125 million to $135 million.
Our initial QUINSAIR sales have exceeded our expectations, but now we are still early in the launch – early stages of the launch and do not plan to breakout our product sales on a quarterly basis until we are at a mature stage.
Cost of sales in the second quarter came in at $4.9 million, compared to $2.6 million for the second quarter in 2015. Cost of sales include the cost of products sold, inventory reserves, product shipping and handling, as well as amortization of product approval milestones, and royalties owe to our partners. The increase was due higher quarterly sales year-over-year, leading to higher direct cost and royalty expenses in 2016.
Research and development expense were $15.7 million in the second quarter of 2016 compared to a $11.9 million for the second quarter in the prior year. The increased expense was for the three month period ended June 30, 2016 was primarily due to activity supporting the launch of QUINSAIR in Europe and related to the preparation of a potential NDA filing for QUINSAIR in cystic fibrosis indication in the United States.
Selling, general and administrative expenses or SG&A were $20.9 million for the second quarter of 2016, compared to $17.8 million for the same period in the prior year. The increase in SG&A expenses was primarily a result of increased personal cost and promotional support for our worldwide commercial operations of both PROCYSBI and QUINSAIR in Europe.
GAAP net loss in the second quarter of 2016 was $14 million or $0.16 per share, compared to a net loss of $13.9 million or $0.17 per share in the second quarter f 2015.
On a non-GAAP basis, excluding non-cash expenses, such as stock comp, amortization and charges related to in process R&D to our QUINSAIR acquisition, net loss for the second quarter was $11.3 million or $0.13 per share. This compares to a non-GAAP net loss for the second quarter of 2015 of $9.6 million or $0.12 per share.
As of the end of the quarter we had a $124.2 million in cash and cash equivalents. As we communicated to the investor world earlier, we are currently pursuing several non-dilutive fund raising initiatives, that coupled with our current cash balance could extend our cash position beyond the end of the 2018 year.
At this time I will ask the operator to begin our Q&A session.
[Operator Instructions] Our first question comes from Joseph Schwartz from Leerink Partners. Your line is open.
Hi, everyone. Thanks for taking the question. This is Dagon dialing in for Joe. Congratulations on a very strong quarter and the upside to the guidance as well. Just two quick questions from me for QUINSAIR actually. So with the first official quarter in the bag what are some physician feedback, as well as patient feedback that you guys have been getting regards to the uptake. And do you see that the real load efficacy has been favorable similar to what the clinical trial data had showed?
And the second question is with regards to a recent announcement from DSJ with regards to the warning of lower quinolone, so how does this impact if any your strategy of utilizing a MP376 into BE, as well as NTM later on? Thank you.
Hi, Dagon. This is Dave. I'll handle the first part and maybe part of the second before turning it over to Krishna. With regard to the qualitative feedback that have received from physicians, patients and the CF community in general for QUINSAIR it’s been extremely positive.
The product has a very unique profile that is a significant option, particularly for adult patients who may have exhausted their previous inhaled antibiotic options. And the feedback I think you can see in what we just reported that it has exceeded the pace that Cayston set several years ago when it launched.
And what's important to note about that is that the competitive climate was significantly less when the case been launch as opposed to what QUINSAIR is achieving at this time. So patients and families and clinicians and the CF community in general have very warmly embraced QUINSAIR. With regard to the guidance from the FDA on fluoroquinolone, let Krishna address it - take that one.
Yes. So the discussion that FDA has been having in the – including a advisory committee in the last year was really focused on benefit risk assessment in non-life threatening infections which quinolones maybe use like caliectasis [ph] and that’s really where there are questions and maybe sort of – and that’s really where the discussion lie.
You know life threatening infections like pseudomonas in CF or in bronchiectasis or in patients with nontuberculous mycobacteria, we don’t believe that the issues that they really highlighted really apply, because these life threatening infections, we don’t believe that it affects our thinking on either development requirement to advance programs moving forward.
And just to add to what Dave mentioned, and speaking to commission who are in Europe and their interest in QUINSAIR they like many of attributes of inhaled levofloxacin including broad spectrum nature of the antibiotic, the twice daily administration and the fact that it provides them another tool - in an otherwise limited set tool to treat this life threatening issue.
Just a quick follow up, can you confirm if you have had any communication with the FDA since the announcement for fluoroquinolone?
Yes. As we mentioned in the prepared remarks' we did have a discussion with FDA in the second quarter about our program in CF, but we haven’t had any specific discussions related to their concerns about safety, nor have they raised them to us.
Okay, great. Thank you so much.
Thank you. And our next question comes from Joel Beatty from Citi. Your line is open.
Hi, thanks for taking the questions. First is around the cystic fibrosis program, what the key points of discussions with the FDA and getting that sales [ph] up. And then second question is once you get the cystic fibrosis program underway, how closely could BE program follow? Thank you.
Julie Anne Smith
Hi, Joel. We still continue to believe that there is very solid basis for the FDA to approve the MP376 for cystic fibrosis on a basis of the trials that have already been connected, as the EMA and Health Canada have done. As we noted we have a initiated a dialogue the FDA around 600 data package and as a result of that initial very collaborative discussion, they raised a question having to do with one of the previous conducted trials.
We responded to that question and we're not go into any more detail about the discussion which have been highly technical in nature. But I will say that assuming that we're successful, we intend to submit an NDA this year and are preparing to do that and making very good progress toward doing so.
Great. Thank you.
Thank you. [Operator Instructions] And our next question comes from [indiscernible] from Cowen and Company. Your line is open.
Hi, this is Alex on for Rich. Just a couple of questions on the revenue guidance, will you be providing any further breakdown of net revenues to the contribution of PROCYSBI versus QUINSAIR what are there your quarterly numbers or your yearly guidance?
Julie Anne Smith
Hi, Alex. Given that we're in a launch year for QUINSAIR and we have a full quarter of launch, we believe that there may be some initial lumpiness in the initial months of the launch and therefore have opted not give any QUINSAIR guidance this year.
What I will say and we have in the past talked about PROCYSBI and we now can say that we believe PROCYSBI will grow annually more than 30% and we're very pleased with overall with the underlying commercial metrics and demands that we see supporting both products.
Now with respect to breaking our products contribution in the future, certainly if products contribute - revenue contribution becomes material than we'll break that out and it’s something that we'll consider for example next year.
Great. Thanks, Julie. And then once other question for your RP103 program, any details on the interim book that you took?
I think we might have commented on this briefly in the last call as well. But the interim data suggest that we - essentially this study should continue as planned and to continue collect data through completion and this will allow us to further asses the efficacy effect for RP103. And so we look forward to announcing what those results look like in the first half of next year.
Okay. Thanks for taking my questions.
Thank you. And our final question comes from Liisa Bayko from JMP Securities. Your line is open. Liisa, you have to make sure your phone is on mute. There are no further questions at this time. I would now like to turn the call back to Julie for concluding remark.
Julie Anne Smith
Thanks, Sashay. And thank you everyone. We are continuing strong sales of PROCYSBI and the launch of QUINSAIR in Europe. This is shaping up to be a highly successful year for Raptor. I am very proud of our team and what our company has achieved so far. And we look forward to updating you on your progress next quarter. If you have further questions or need additional information, please feel free to contact myself or Kim Lee. Thank you all for joining the call. And have a good evening.
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