Aurobindo turns billion dollar pharmaceutical company
Hyderabad-based Aurobindo Pharma has joined the billion-dollar club of pharma fraternity as the company’s consolidated revenues registered a growth of 22.5% at Rs 4381.5 crore in the financial year ended March 31, 2011 as against Rs 3575.4 crore last year.
The company s net however, did not witness an upward momentum due to a dip in forex gains. Its net was at Rs 563.45 crore compared to Rs 563.4 crore in the previous year. “Though the sales have gone up, the company s margins have not expanded considerably. That is one of the reasons for net profit being flayed on a yearly basis.
Besides, this fiscal, the company’s forex gain was Rs 37 crore as against Rs 110 crore last year. We expect margins to improve in FY13 when its formulations business is expeted contribute about 70% of its gross sales, said Sarabjit Kaur Nangra, V-P (research), Angel Broking. The spurt in sales is led by growth in formulations business especially anti-retrovirals (ARVs).
Its formulations business clocked 30.8% growth at Rs 2423.1 crore compared to last financial year while ARV sales went up by 40% to Rs 693.6 crore. Currently, formulations sales constitute 57.3% of the company s gross sales. The company s sales in the US went up by 30.4% to Rs 1189.7 crore. In fact, the increased allocation to PEPFAR by the US augurs well for Aurobindo. US President’s Emergency Plan for AIDS Relief (PEPFAR) is the largest effort by any nation to combat a single disease. Aurobindo is one of the largest participants in PEPFAR. “The results are in line with our expectations.
Majority of the company’s ARV revenues come from PEPFAR. The net remains flat because the company s staff cost has gone up by 30% due to its SEZ becoming operational in AP. Besides, material cost also has gone up,” said Rahul Sharma, Analyst, Karvy Stock Broking.
The Company has filed and received approvals for a large number of products in various key therapeutic segments across several countries. As on March 31, 2011, the company filed 209 abbreviated new drug applications (ANDAs) in the US, of which 134 have been approved, including 32 tentative approvals . During FY 2011, the company filed 1270 formulations dossiers in other key regulated markets including multiple registrations in European Union.
Avanir Pharmaceuticals’ CEO Discusses F2Q11 Results – Earnings Call Transcript
Good afternoon. My name is Piya and I will be the conference operator today. At this time I would like to welcome everyone to the Avanir Pharmaceuticals fiscal 2011 second quarter conference call. (Operator Instructions)
Thank you. At this time I would like to turn the conference over to Mr. Ian Clement. Sir, you may begin.
Ian Clement
Thank you and good afternoon everybody. Joining me on today’s conference call are Keith Katkin, President and Chief Executive Officer, Bill Sibold, Chief Commercial Officer; Christine Ocampo, Vice President of Finance and Dr. Randall Kaye, Chief Medical Officer.
Earlier this afternoon Avanir issued a news release announcing the company’s results for fiscal 2011, second quarter and first six months. If you have not received this news release or if you would like to be added to the company’s distribution lists please call the investor relations of the company or you can sign up through the IR section of the company’s website.
Copies of news releases and SEC filings can also be found in the IR section of our website. There is always a gap, I would like to remind you that the statements made on the call represent our judgment as of today, May 9, 2011. Our remarks and responses to questions during this conference call may constitute forward-looking statements, including plans, expectations, and financial projections, all of which involve certain assumptions, risks, and uncertainties that are beyond our control and could cause actual results to differ materially from the expected results expressed in our forward-looking statements.
The company’s actual results may differ materially from the statements made during today’s call and the company undertakes no obligation to update any of these statements.
From an investor communications perspective we will be presenting an overview of the company at one meeting this month, tomorrow, Tuesday May 10th, we will present at the Bank of America/Merrill Lynch healthcare conference in Las Vegas, Nevada. A webcast of this presentation will be accessible through the investor relation section of our website.
With that said, I would now like to turn the call over to Keith.
Keith Katkin
Thank Ian, and thank you for joining us on the conference call today. During today’s call I would like to discuss recent achievements and provide an overview of our business. I will then hand the call over to Bill Sibold who will comment on the launch of NUEDEXTA, the commercial potential moving forward and why he found it a compelling opportunity to join Avanir.
Christine will then follow with an update on the quarter’s financial results that were released earlier today. Finally, Randall will then discuss our clinical plans for AVP-923, I will then conclude with an update on our key upcoming milestones and events.
Second quarter of 2011 marked another exciting busy and successful period for Avanir. Before adjusting the launch of NUEDEXTA I would like to take a moment to highlight a couple of other recent corporate highlights.
First, as we transition from a development stage company to an integrated commercial stage biopharmaceutical company ensuring we have the right talent in place is a key imperative for us. In the first few months of calendar 2011 we made a couple of important additions to the senior management team. This morning we announced Elona Kogan, has been appointed in the position of Vice President of Legal Affairs. Elona’s legal, regulatory and business expertise will be a valuable asset to our organization.
Promotion of Greg Flesher to the critical role of Chief Business Officer will help position Avanir to grow into a successful CNS company. Greg’s broad pharmaceutical background in business development, sales and marketing and research and development provide strong foundation to achieve this growth through an increased focus on business development and product lifecycle management.
In April, I was delighted that we were able to announce the appointment of Bill Sibold to the position Chief Commercial Officer. Previously, Bill was responsible for leading a $2.8 billion franchise and the management of over 800 people in the commercial organization of Biogen Idec. His proven ability to build and lead cross functional teams to drive growth, to develop and launch new products further enhances our already strong commercial leadership team.
Second, the filing of an IND application with the FDA for AVP-923 for the treatment of central neuropathic pain in patients with multiple sclerosis underscores our commitment to the continued development of AVP-923 for additional indications. Third, the recently announced PRISM registry, the largest ever observational study in PBA will allow us to further assess the prevalence of PBA across multiple underlying neurologic conditions and PBA’s impact on quality of life.
Moving on to the launch of NUEDEXTA, I believe we are off to a promising start as we build and develop a market for the first and only FDA approved treatment for patients living with PBA. We are measuring our success across a number of variables from a broad perspective including both quantitative and qualitative measures. We agree prescription data is trending in a positive direction and demonstrating overall continued growth. Awareness of PBA and NUEDEXTA are critical to the long term success of our business. Market research shows that awareness is growing through such activities as field sales force interactions, peer to peer speaker programs and advertising.
As expected our data demonstrates that call frequency makes a difference. Doctors called on more than once since the launch of NUEDEXTA are three times more likely to have prescribed NUEDEXTA than doctors called on just one time. From a qualitative perspective anecdotally we continue to hear success stories from physicians and patients. Many of these success stories from physicians have highlighted the life changing benefit NUEDEXTA has brought to their patients.
For example, a neurologist recently prescribed NUEDEXTA to a multiple sclerosis patient. The patient was complaining of excessive crying, both the patient and the caregiver had “reached the end of their road” and the patient was pretty much house bound. Two weeks after starting treatment the patient and caregiver are so happy with the results that they are able to leave the house again.
A physician was keen to share this story with the sales representative as he wanted to let us know that Avanir had “hit a home run” with NUEDEXTA. The patient a 20 something year old male had a TBI traumatic brain injury from a motorcycle accident. Whenever the physician would see the patient and simply ask him how he was doing the patient would immediately go into an episode of loud uncontrollable line, the doctor said the crying was so loud that his medical staff would actually come to the exam room to see if everything was okay. The doctor said he had tried everything but no treatments were working.
The patient’s mother recently called the doctor to say that they could no longer manage caring for the sun because his behavior was causing too much destruction in their household. Having just heard of NUEDEXTA the doctor told the mother there was something brand new he would like to try. He immediately placed the patient on NUEDEXTA and after approximately 10 days of therapy the mother reported that no episodes had occurred during the last four days.
Feedback like this not only serves as tremendous motivation for all of our employees but furthers our passion and belief that there is a tremendous need for NEUDEXTA which is the first and only FDA approved treatment of PBA and confirms our belief that there is a significant market opportunity for NUEDEXTA in PBA.
As there has been a high level of interest in prescription data we thought we would share IMS data for the past quarter as well. In January when we were loading the distribution channels and not yet actively promoting NUEDEXTA to physicians, a total of 50 prescriptions were written all of which were new prescriptions.
In February, when physician promotion commenced on February 7, a total 323 prescriptions were written of which 295 were new prescriptions, and for March, our first full month promoting NUEDEXTA a total 846 prescriptions were written of which 710 were new prescriptions. Thus for the quarter we had a total 1219 prescriptions, of which 1055 were new prescriptions which we believe represent new patients on NUEDEXTA therapy.
Looking to April, we do not have the monthly data at this time, however, the weekly data for the four weeks ending Friday, April 29th, showed almost 1,100 total prescriptions and nearly 800 new prescriptions. I am pleased that despite the fact, in April, many of our core neurologist-prescribing physicians were at the American Academy of Neurology Meeting in Honolulu, we continue to see positive trends in the prescription numbers for NEUDEXTA. In addition, over 10% of our field sales force were also at the AAN Meeting in Honolulu.
On the payer front, we continue to make progress. One of our imperatives for the launch is to ensure wide access to NEUDEXTA. We have a team of eight account managers who are focused on working with Medicare Part D, Medicaid and commercial plan providers. We have already negotiated contracts with a number of managed care organization including two of the three largest pharmacy benefit managers, Medco and Express Scripts. We believe we are on track to establish favorable formulary replacement with a wide number of plans by the end of this calendar year.
As of May 6, approximately 24% of insured lives were covered on tier 2. We remain focused on increasing the portion of patients with tier 2 access as the lower copays associated with tier 2 should allow more patients to afford their prescriptions.
To-date, approximately 60% of prescriptions have been filled under commercial plans and about 25% from Medicare Part D. What is encouraging about the split is that so many prescriptions are being filled under Medicare Part D, despite the fact that 70% of lives covered Medicare Part D require a letter of medical necessity for a patient to receive therapy, and the copay is relatively high compared to commercial plans. This has been the default status of NEUDEXTA on several large Med D plans prior to formulary reviews and contracting discussions.
Our managed care team is working diligently to improve reimbursement on Medicare Part D plans with a goal of securing preferred formulary placement by January 2012.
Turning to patient awareness, one of the main thrust of our efforts involves working closely with patient advocacy groups. In March, we held a very successful patient advocacy summit where seven advocacy groups were in attendance. These groups represented patients across the MS, ALS, brain injury, stroke, Parkinson’s and Alzheimer’s communities. The advocacy groups shared ideas for educating patients and family members about PBA and we expect many helpful, educational programs to be created over the coming year in support of our goal of increasing awareness and diagnosis.
As a couple of examples from the meeting, the National MS Society recently released a learn-online program called Uncontrollable Laughing and Crying, which is available on the website and on YouTube. The National Stroke Association has developed a patient brochure on PBA after stroke which will be available in the next few weeks.
Finally, we’ve been actively participating in scientific conferences where we continue to present data from our star clinical trial and findings from additional studies conducted by Avanir and third parties.
With that update on our operations, I will now ask Bill Sibold to say a few words. Bill?
William Sibold
Thanks Keith and hello everybody. I’m thrilled to be joining Avanir at such an exciting time. The launch of NUEDEXTA represents a significant opportunity for the company and most importantly patients and their caregivers and loved ones.
NUEDEXTA is a highly differentiated product. It work well, it works fast and does not have the additional burdens of black box warning or REMS programs. In addition to PBA which itself represent the large market opportunity, NUEDEXTA has many potential follow on indications to grow into so the future is very promising. I’m a strong believer in symptomatic therapy while focusing on the underlying neurological disease is critical, focusing on the patient’s overall wellbeing is an important treatment goal. I’ve spent many years in the MS field and have seen firsthand the number of issues these patients experience.
PBA is a prevalent yet often not discussed problem for MS patients. And looking ahead at our development pipeline, pain for MS suffers is a highly prevalent problem and has the potential to represent the next indication for NUEDEXTA. Between the existing large PBA population in ALS, MS, stroke, dementia and TBI, and potential future indications, I believe that Avanir and NUEDEXTA are extremely well-positioned for long term sustainable growth.
Of course success is predicated on having the right team and I believe AVANIR has one of the most talented and experienced team that I’ve had the pleasure of working with. It is the other major reason that I joined Avanir. I have been impressed with what has already been accomplished by this team and I am excited by what we will achieve together.
My observations of launch thus far are very favorable. We are building a market which takes time and we are making great progress. Until NUEDEXTA was launched in the middle of February, PBA was not on the radar of most physicians managing these at risk patients. Each day, PBA awareness is growing and more patients are benefiting from NUEDEXTA. I look forward to reporting this continued progress on future calls.
I will now hand the call over to Christine to address our financial results. Christine?
Christine Ocampo
Thanks Bill, and good afternoon everyone. My comments today will cover our financial results for the second quarter and first six months of fiscal 2011. In addition to the results summarized in the press release issued earlier this afternoon, you can find additional information in our upcoming 2011 quarterly report on Form 10-Q.
All figures discussed today are approximate. First I’ll address the financial results for the second quarter of fiscal 2011. We reported total net revenues for the three months ended March 31, 2011 of $1.4 million as compared to $1 million for the comparable period in fiscal 2010. The increase from prior year was primarily due to net product revenue from sales of NUEDEXTA.
Gross sales of NUEDEXTA were $505,000; net sales of NUEDEXTA were $462,000, total NUEDEXTA net shipments were $3.1 million and deferred NUEDEXTA revenue was $2.6 million. Gross margin on the sales of NUEDEXTA was 93% excluding an inventory reserve charge of $82,000.
Finished goods inventory consist of batches that were manufactured in 2010 to obtain FDA approval, this product is currently being sold to wholesalers and it’s scheduled to expire in 2012. Wholesalers generally will not purchase product within 12 months of expiration. As such, we recorded an inventory write down for the estimated amount of product that may not be shipped due to short dating.
NUEDEXTA revenue is recognized using a deferred revenue recognition model. NUEDEXTA cap full shipments to wholesalers are initially recorded as deferred revenue and later recognized as revenue when the product has left the distribution channel and is no longer subject to right of return. This effectively represent reported and user prescriptions and non retail shipments of NUEDEXTA capital.
Research and Development expenses were $2.5 million for the quarter ended March 31, 2011, compared with $3.8 million for the same period in the prior year. R&D expense decreased for the fiscal 2011 second year was primarily due to reduced expense with respective clinical trials.
Selling, General and Administrative expenses of $13.3 million for the fiscal second quarter of 2011 increased from $3.6 million for the corresponding period of the prior year. The increase was primarily due to an increase in expenses related to the commercialization activities surrounding NUEDEXTA.
Total operating expenses for the quarter were $15.8 million compared with $7.4 million for the comparable quarter in 2010. For the three months ended March 31, 2011 and 2010 the company reported $951,000 and $665,000 respectively of stock based compensation expense.
Our net loss for the second quarter of fiscal 2011 was $14.5 million or $0.12 per share compared with a net loss of $6.4 or $0.08 per share for the same quarter in 2010. These increases in our net loss during 2011 were primarily due to significant increase on our sales and marketing expenditures as a result of our preparation for the commercialization of NUEDEXTA.
Now, turning to the year-to-date results. Total revenue for the first six months of fiscal 2011 totaled $3.3 million compared to a $2.5 million, a 31% increase for the first six months of fiscal 2011. Cost of product sales for the first six months of 2011 was $114,000 compared with zero reported for the first six months of fiscal 2010.
Total operating expenses for the first six months of 2011 were $29.7 million versus $13.8 million for the comparable period in fiscal 2010. For the first six months ended March 31, 2011 and 2010 the company reported $1.8 million and $1.4 million respectively of stock based compensation expense. Net loss for the first six months of fiscal 2011 was $26.6 million or $0.23 per share compared with $11.3 million or $0.14 per share for the comparable period in fiscal 2010.
As of March 31, 2011, Avanir had total cash, cash equivalents and short term restricted investments in marketable securities of $105.1 million. We continue to expect total operating expenses in fiscal 2011 to be between $75 and $85 million. As previously indicated, we plan to provide more guidance on revenue once the company has more established run rate with respect to NUEDEXTA sale.
With that summary of our financial results I’d like to turn the call over to Randall. Randall?
Kaye Randall
Thanks Christine and good afternoon everyone. We continue to be active and productive in our clinical research and medical affairs departments. Recently we presented data on both PBA and NUEDEXTA at the American Academy of Neurology Meeting in Honolulu, both the poster presentation on PBA prevalence and the podium presentation highlighting data on onset of action of NUEDEXTA were well attended and generated terrific discussions, we were delighted that in April we filed and IND application with the FDA for AVP-923 for the treatment of central neuropathic pain in patients with multiple sclerosis.
The 30-day FDA commentary period has now passed and we are now progressing to next steps in this trial. We have selected our CRO and are moving forward with site selection activities. It is our intent to enroll the first patient before the end of this calendar year. The objectives of the study are to evaluate the safety, tolerability and efficacy of the three dose levels of AVP-923 capsules for the treatment of central neuropathic pain in the population of patients with MS.
As you know, AVP-932 is a six-dose combination of dextromethorphan and quinidine. This trial is a multicenter, randomized, double-blind, placebo-controlled four-arm parallel study. Eligible patients will be randomized to receive one of the three dose levels of AVP-923. And these will contain either 45 milligrams of dextromethorphan, or DM, and 10 milligrams of quinidine, or Q; 30 milligrams of DM and 10 of Q; 20 milligrams of DM and 10 of Q or placebo; is being administered daily for 12 weeks.
The primary efficacy endpoint is the pain rating scale that is obtained from daily patient diaries. Secondary endpoints include measures of the fatigue and disability, impact of MS on daily lives, sleep quality, cognition and depression. Safety will be assessed by monitoring adverse events, clinical lab tests, ECGs, physical examinations and vital signs.
The filing of this IND represents the next step in our plan to broadly develop AVP-923 for conditions of the central nervous system with high unmet medical need. We expect to enroll approximately 400 patients at 65 centers, both in the U.S. and internationally.
As we announced a few days ago, we have also initiated plans for a patient registry to further quantify the prevalence and quality of life impact of PBA. I am very excited about the PRISM registry because this will ultimately be the largest PBA clinical registry ever performed. Among other things, the registry will allow us to assess the prevalence of PBA across the at-risk populations and evaluate the relationship between pseudobulbar affect and its impact on quality of life. Additionally, collecting data across multiple sites in the United States will ultimately allow participating investigators to compare the incidence of PBA within their practice to both regional and national numbers.
The objectives of the PRISM registry are to define the prevalence of PBA in patients with associated underlying neurologic conditions, including ALS, MS, Parkinson’s, stroke, traumatic brain injury and Alzheimer’s disease. We anticipate recruiting 10,000 patients who have an underlying neurologic condition into the registry across approximately 500 sites in the United States. We expect to begin recruiting sites and enrolling patients later this month and overall enrolment is expected to take at least six months. The data collected should serve as the basis for medical meeting presentations, peer review publications and educational content.
Finally, it’s worth mentioning that we’ve had a higher number of interactions with physicians who are interested in our investigator initiated studies program. This interest is indicative of the unique mechanism of action of NUEDEXTA and its many potential therapeutic applications.
Our medical science liaison team is working with a number of these physicians to identify and facilitate the submission of some of the most promising of proposals.
With that update on clinical research and medical affairs activities I’d like to hand the call back over to Keith now.
Keith Katkin
Thanks Randall. A few comments in closing before we open the call to questions. With a strong balance sheet, a high performing commercial team, and a clinical development team with a track record of proven success, our priorities for the next 12 months are clear. First, the continued focus on a successful launch of NUEDEXTA in PBA. We are executing on key launch activities and have made significant progress in a short period of time. Performance metrics are moving in a positive direction, our team is excited, and most importantly we are hearing stories of how NUEDEXTA is positively impacting patient’s lives.
Second, the enrollment of the first patient into the new clinical study for AVP-923 for the treatment of central neuropathic pain, multiple sclerosis, third the initiation and completion of a PRISM registry, and finally advancing the European filing of NUEDEXTA in PBA. We believe, we’re delivering on these imperatives will create substantial value for our shareholders.
Pharmaceuticals
Liisa Bayko, an analyst at JMP Group Inc.’s JMP Securities, earned the No. 1 ranking in the pharmaceutical sector in the Best on the Street survey by focusing on the industry’s science side. She picks stocks, she says, after identifying diseases that are primed for significant advances in treatment and then finding companies that are best positioned to take advantage.
Such was the case with Pharmasset Inc., Ms. Bayko’s top-performing pick in 2010. She concluded that the company’s experimental drugs were poised to do what current hepatitis C treatments couldn’t: prevent the virus from developing resistance to therapy. Ms. Bayko entered 2010 with a buy rating on Pharmasset and kept it there all year. Shares more than doubled on the year.
Ms. Bayko’s research led her to another high-performing pick, Ardea Biosciences Inc. Ardea has a gout treatment called lesinurad under development that could provide a major improvement when combined with a current drug, she says. Yet investors were concerned that lesinurad could cause kidney problems, dimming its prospects for approval.
Ms. Bayko’s study suggested the fears were overstated. She recommended buying Ardea throughout 2010, and shares returned 86% for the year. In January of this year, Ardea issued positive top-line results from a Phase II study on lesinurad.
The science-first approach follows from Ms. Bayko’s background. The 39-year-old is a medical biophysicist by training who worked for Monsanto Co.’s Searle drug unit before entering finance. She realized during graduate school at the University of Toronto that she preferred talking about her laboratory’s work with fellow researchers to doing the actual experiments. “That’s why what I do now is a good fit,” she says.
Not all of Ms. Bayko’s picks worked out. In September, she put a buy on Trius Therapeutics Inc. She considered the stock a value after reviewing the clinical-trial data for its experimental treatment for antibiotic-resistant bacteria, but shares fell 13.7% through the end of the year.
Ms. Bayko says the stock was hurt because Trius wasn’t going to be able to provide any Phase III clinical-trial data on its antibiotic, torezolid, until the beginning of 2012. She says the drug’s Phase II data show promise, and she still recommends buying Trius shares. The stock has rebounded somewhat this year.
Overall, Ms. Bayko says investors will need to be more selective when choosing where to make their bets this year. Stocks, she says, can’t benefit generally like they did in 2010 after the health-care overhaul turned out to be less onerous than feared. And, she adds, many enjoyed big gains last year that will be tough to match.
Both Pharmasset and Ardea remain key picks for Ms. Bayko in 2011. Though Pharmasset surged last year, shares could jump even further as the company releases more data about its hepatitis C pipeline, Ms. Bayko says.
Ms. Bayko is also excited about the potential of a class of therapies known as Janus kinase, or JAK, inhibitors, to treat a range of diseases, from rheumatoid arthritis to psoriasis and even cancer. Two of her favorite stocks for this year, Incyte Corp. and YM BioSciences Inc., are working on such therapies.