Call Start: 8:30 January 1, 0000 8:49 AM ET
Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX)
Q1 2020 Earnings Conference Call
May 7, 2020 8:30 AM ET
Melissa Downs - Head, IR
Ann MacDougall - Interim Chair of the Board
David Mims - Interim CEO & CFO
Asha Das - CMO
Bryce Tenbarge - SVP, Commercial
Conference Call Participants
Ladies and gentlemen, thank you for standing by and welcome to the Progenics Pharmaceuticals First Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. [Operator instructions].
I would now like to hand the conference over to your host for today Ms. Melissa Downs, Head of Investor Relations. Please go ahead.
Thank you, Brandi. On behalf of Progenics team, thank you for joining our conference call to review our first quarter 2020 financial results and provide a business update. During the call today are Ann MacDougall, Interim Chair of the Board; and David Mims, Interim CEO, Interim CFO and Board Member. We will also be joined by Dr. Asha Das, Chief Medical Officer; and Bryce Tenbarge, Senior Vice President of Commercial during the Q&A.
Before we begin, I'll remind you that remarks made on this call that are not historical in nature may be forward-looking statements and 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 associated with the COVID-19 pandemic, those involving regulatory actions, clinical development and other matters related to our prostate cancer pipeline, AZEDRA, RELISTOR, and our other product candidates; our business and commercialization strategies; and expectations of future growth, revenues and assessments of our competitive position and our proposed merger with Lantheus Holdings.
Please see our most recent forms 10-Q, 10-K and other filings with the U.S. Securities and Exchange Commission for additional information on the risks that could cause our actual results to differ. As a reminder, statements we make today are as of May 7, 2020 only.
I will now turn the call over to our Interim Chair, Ann MacDougall. Ann?
Thank you, Melissa, and good morning to everyone joining this call. We hope everyone listening today and their families are staying safe and healthy during this unprecedented time driven by the COVID-19 pandemic. The pandemic has impacted almost all aspects of our daily lives and we want to recognize and thank the healthcare professionals and other special service workers across the country who are working tirelessly for our collective benefit.
While Progenics has seen an impact on its operation, we've still been able to move forward on our commercial clinical development and organizational goal. David will provide more color during his business update.
I wanted to begin today by discussing our proposed merger with Lantheus Holdings. The reconstituted Board of Directors and I continue to believe that the proposed with Lantheus under the revised February 2020 terms represents the best pathway forward to maximize long-term shareholder value.
The amended merger term was the culmination of our independent and thorough evaluation of the business prospects and operations of Progenics both as a standalone company and in combination with Lantheus.
We believe this combination allows Progenics to leverage Lantheus' longstanding expertise in complex manufacturing, supply chain and commercial excellence to bring the potential of Progenics AZEDRA, PyL, and our complementary PSMA-targeted portfolio to the next level. The proposed merger would create a stronger combined platform that offers an innovative and diversified diagnostics and therapeutics portfolio.
It also gives our shareholders the opportunity to participate in the future potential upside provided in the revised terms negotiated by the board. Under the amended terms Lantheus will acquire all of the issued and outstanding share of Progenics common stock at a fixed exchange ratio, and Progenics' shareholders will receive 0.31% of the share of Lantheus common stock for every Progenics share. This is an increase for the 0.2502 exchange ratio under the original agreement. In addition, Progenics' shareholders will receive a non-tradable contingent value right or CVR payable in up to two separate cash payments based on future PyL commercial performance subject to the terms and conditions of the CVR agreement to be entered into at closing.
As a result of these revisions, former Progenics' stockholder aggregate ownership stake will increase to approximately 40% of the combined company up from approximately 35% under the original agreement terms.
Dr. Gérard Ber and Mr. Heinz now two current members of Progenics board will join the combined company board upon closing. Both Dr. Ber and Mr. Mäusli bring extensive experience in developing and commercializing radiopharmaceuticals, most recently at the radiopharmaceutical company, advanced accelerator application now part of Novartis. They will also bring deep manufacturing, operating, finance, and compliance experience to the Lantheus board.
Lantheus shares our belief in the long-term growth potential of our product portfolio and pipeline and together we have the resources and capabilities to further unlock its value through this combination. The board and I feel strongly that this is the best direction for the company and its pipeline.
We do recognize that this process has been longer than expected with the recent rescheduling of the vote. However, we're still fully committed to building shareholder value through this transaction. The rescheduling of the special meetings for both sets of shareholders to June 16 is intended to allow Progenics and Lantheus the time necessary to respond to the pandemic and its efforts to -- effect on each company's business and on the combined entity. The two teams have continued to plan for the integration of the companies in advance of the potential transaction closing to ensure that the transfer of our pipeline remains on schedule along with ongoing development.
In parallel with the transaction and as part of our fiduciary responsibility, we are engaged in scenario planning in the event we -- bear with me one second, remain a standalone company. This includes continuing our CEO search and also tracking the selection of very high quality candidates, as well as evaluating financing alternatives.
Turning to the upcoming vote, further details about the time, location, and record date for the special meetings will be announced soon. We strongly encourage all shareholders to vote at our virtual meeting as the transaction requires a high threshold to pass. We really do need your support. We look forward to continuing this dialogue and our engagement with our shareholders through this process.
I will now turn the call over to David for a business and financial review of the quarter. David?
Thank you, Ann.
I'd like to echo Ann's comments to thank our healthcare professionals and essential workers across the country who are working tirelessly during the COVID-19 pandemic.
We are excited about the proposed merger with Lantheus and the potential future value creation a combined company can deliver to the shareholders.
Now to our update on the first quarter of 2012 and recent events. First on PyL, our PSMA-targeted PET imaging agent that enables visualization of both bone and soft tissue metastasis in patients with locally advanced with current and/or metastatic prostate cancer. Our team has worked especially hard to advance our preparations to file a new drug application with the U.S. Food and Drug Administration following the positive Condor study results in December. Our pre-NDA meetings with the agency were supportive and our Condor and OSPREY trial data will serve as the basis of our application.
We're pleased that we remain on track to complete our submission in the early part of the third quarter of 2020 with the goal of bringing PyL to the market in 2021. Our team continues to move forward with the commercial launch preparation for PyL including securing sufficient manufacturing capacity within the various networks of existing cyclotrons to optimize future commercial use.
The team is also hosting a series of advisory board meetings with key opinion leaders in order to gain their insights on the future use of the product. Due to the limitations of conventional imaging in prostate cancer, we believe there is an increased need for diagnostics to support the detection and localization of prostate cancer metastasis and recurrence and facilitate appropriate targeted treatment. PyL has demonstrated the potential to detect prostate cancer non-invasively and reliably and better informs physicians during the treatment planning with the ultimate goal of improving the disease management of one of the most prevalent and growing forms of cancer in the U.S. for men.
There have already been publications highlighting the impact PyL has had on the therapeutic management of patients, such as the article published last year in the Journal of Nuclear Medicine showing 87% of men have had their treatment plan changed by utilizing PyL. Consistent with published literature, our recent data from both OSPREY and Condor have also demonstrated comparable impact of PyL on physician's decisions on patient treatment planning. Collectively, these data should appeal to their payors and guideline committee such as the National Comprehensive Cancer Network. With increased usage of PET imaging agents to help your community is particularly excited by the PSMA binding specificity of PyL compared to other launched PET imaging agents.
In general, 18F-labeled PSMA agents such as PyL offer important advantages over Gallium 68-labeled agents including 100 production capacity from the use of a cyclotron and higher image resolution due to the intrinsic physical properties of 18F. This coupled with a longer half life of 18F of 110 minutes versus 68 minutes for Gallium-68 allows for a wider geographical product distribution which is particularly important given the large number of medical centers that treat prostate cancer patients.
PyL is also complemented by our artificial intelligence platform that is currently in development which has the potential to improve the diagnostic performance as well as speed and reproducibility of image reads providing increased commercial potential. We look forward to advancing these important commercial efforts to ensure a smooth and robust product rollout pending regulatory approval.
As Ann mentioned, Progenics' operations have been impacted by the COVID-19 pandemic and resulting conditions as many others are experiencing within our industry and beyond. Our efforts have been focused on mitigating this impact on our business, preserving the integrity of our ongoing clinical study for 1095 and diligently managing our capital. These initiatives have been made in alignment with government, regulatory and public health recommendations and regional mandates.
In the first quarter of 2020, we generated $1.4 million in AZEDRA sales. While we did see an uptick in quarterly sales for AZEDRA, currently many of the multidisciplinary treatment centers that serve pheochromocytoma or paraganglioma patients have now closed or have limited external visitors to ensure the safety of patients and healthcare providers. These restrictions include visits from the field-based sales team for AZEDRA directly affectingly our ability to maintain our product launched initiatives. We expect that AZEDRA sales will increase through the COVID-19 pandemic until center restrictions are lifted and patients can regain access to centers for treatment. That said, we're continuing to receive and process request for both the symmetry and therapeutic doses.
For our PSMA-targeted pipeline clinical programs, our focus has been insuring the safety of the patients, physicians and hospital staff involved in the Phase 2 ARROW trial of 1095 in combination with enzalutamide in chemotherapy-naive patients with metastatic castration-resistant prostate cancer. Recall that 1095 is a small molecule radiotherapeutic designed to selectively bind to the extracellular domain of PSMA, a protein that is highly expressed on prostate cancer cells.
With the removal of the Center for Probe Development and Commercialization import alert, we have been able to open 11 clinical sites in the U.S. along with six sites in Canada to help support expected increased enrollment in the trial. As a result of the pandemic and out of an abundance of caution Progenics has implemented a pause in new patient enrolment for the trial for several months. For patients who are active and have been randomized for the study, they will continue to receive treatment does and will be monitored for safety and efficacy in a manner that is permissible by each clinical site.
In light of the challenges that we face during the COVID crisis, we have made a difficult decision to curtail promotional standing and furlough a portion of the clinical, commercial and medical employees as we continue to assess emerging market conditions.
Before I close, I do want to comment on financial results for the quarter. You can review the details of our financials in the press release we issued this morning and in the 10-Q that we will file later today. I would like to focus on a few key line items.
First quarter revenue totaled $6.2 million, up from $4.3 million in the first quarter of 2019 reflecting RELISTOR royalty income of $4.8 million and $1.4 million of AZEDRA sales. Research and development expenses decreased by $2 million compared to the corresponding prior year period, resulting primarily from lower clinical trial costs and cost of transition the AZEDRA manufacturing site in the 2019 period.
Selling, general, and administrative expenses is increased by $1.3 million compared to the corresponding prior year period, primarily attributable to legal and advisory fees associated with the execution of the amended merger agreement with Lantheus.
We also recorded non-cash adjustments of $300,000 to changes in the fair value estimates of the contingent consideration liability and recognized interest expense of $900,000 related to the RELISTOR royalty-backed loan.
Net loss for the first quarter was $16.8 million or $0.19 per diluted share compared to a net loss of $18.7 million or $0.22 per diluted share in the corresponding 2019 period. We ended the quarter with cash and cash equivalents of $29.5 million, a decrease of $12.5 million compared to cash and cash equivalents as of December 31, 2019 reflecting primarily cash used for operating expenses and capital expenditures partially offset by the receipt of $10 million RELISTOR sales milestone.
We believe that with the current cash available, the $10 million bridge loan from Lantheus is part of the renegotiated merger terms, and considering our current cash burn as adjusted for COVID-19 impact, we believe we have cash available to fund operations until September 2020. This guidance does not reflect any financing alternatives we are contemplating should we remain a standalone company.
During the many uncertainties driven by the COVID-19 pandemic, our company remains focused on advancing our corporate and development initiatives across our PSMA-targeted portfolio, including the on-time regulatory submission of PyL and Phase 2 study of 1095. We plan to provide any additional updates related to the business impact from COVID when necessary.
I want to thank the entire Progenics team for their dedication through this period and continued efforts on behalf of our cancer patients in need. We look forward to keeping everyone up-to-date on our developments.
I'll now turn the call over to the operator for your questions.
And there are no questions at this time.
Okay. Look, I would like to thank everyone for joining us on our call today. I would like to remind you that our special meeting, which is a virtual meeting, is on June 16 and we would like to encourage shareholders to vote for the transaction. And we do have a high bar to pass this merger, as Ann mentioned, so we do need your support in this transaction.
Thank you for your support. And please stay safe and healthy. Good-bye.
Thank you. And this concludes today's conference call. You may now disconnect.