Executives
Keith Katkin - President and CEO
Analysts
Alethia Young - Deutsche Bank
Question-And-Answer Session
Alethia Young - Deutsche Bank
Alethia Young here, one of the biotech analysts at Deutsche Bank. I’m very happy to have today Avanir Pharmaceuticals, Keith Katkin, President and CEO; and I have Ian Clements, Director of IR. Is that fair if we start it? Okay, and general [indiscernible] okay. So, I mean what I want to do today is you guys obviously are at kind of very interesting juncture and have a lot of stuffs coming up, concluding clinical stuff and also like business stuff coming up over the next 12 months. So just wanted to focus on, first just, quickly just kind of, give us a synopsis of what’s going on with the patent and the most recent update there and then we will dig a little bit more into your pipeline.
Keith Katkin
Great and would it helpful if I start with just a broad kind of an overview for everyone?
Alethia Young - Deutsche Bank
Yes, please do.
Keith Katkin
So, I’m Keith Katkin, President and CEO of Avanir. I should start with our forward-looking statement as I will be making statements that are forward-looking in nature, particularly around revenues, clinical programs, intellectual property, and then with other topics. So I would encourage everyone to look at our filings, our quarterly 10-Qs and annual 10-K available on our website or on the SEC’s website. So extremely excited to be here today. Thank you for the invitation.
2013 has really been a breakout year for Avanir, and we’re very excited about all the milestones that we are looking forward to in 2014. So why has 2013 been so fantastic for Avanir? At the start of the year we set our corporate vision that we wanted to become a leading CNS specialty company. And so to us that meant three things. It meant, first, a commercial franchise that could generate significant revenues and have a significant opportunity for continued growth. It meant that deep research pipeline, or development pipeline. And then third, it meant execution; execution commercially, execution by our development team and execution by our business development team as well.
And as we look back on 2013, we made significant progress in all of those areas. Commercially, our lead product, NUEDEXTA, which is the first and only FDA-approved product for the treatment of a condition called PseudoBulbar Affect, had record revenues, and we reported our fiscal year-end results. As of September 30, we’re at $92.1 million in the gross revenues. That was up over a 100% over the previous year.
And what’s really exciting about that is there’s still a tremendous number of PBA patients that benefit from the NUEDEXTA. We think that we are very minimally penetrated into the PBA universe and have significant opportunity for continued growth.
Second on our development pipeline; we made a lot of progress on our pipeline this year and will be unblinding data from our multiple sclerosis neuropathic pain study by the end of this year, so just within the next few weeks. We made great progress on our Alzheimer's program looking at agitation secondary to Alzheimer's disease.
And third, we enrolled our first patient in our Levodopa Induced Dyskinesia study in Parkinson's patients. And then finally we announced that we are going to initiate a Treatment-Resistant Depression study in 2014, given the pharmacology of dextromethorphan really lends itself to being a potential treatment for Treatment-Resistant Depression.
And then finally on the business development front, the team executed very well there, with in-licensing of AVP-825, which is a novel delivery system for Sumatriptan to treat migraines. And then we also signed a co-promote deal with Merck for their JANUVIA products, which really leverages our presence in long-term care. We’re very excited that one of the largest pharmaceutical companies in the world recognized our team’s expertise within the long-term care space, and that co-promote just kicked off on October 1.
So let me put all those together. It’s been a fantastic 2013 for Avanir. As we look forward to 2014, we look forward to continued growth in NUEDEXTA for the treatment of PBA. We look forward to really seeing the benefit of our sales team in the Merck co-promote arrangement. And then we are looking forward to data in three studies; our MS pain study, our agitation in Alzheimer’s study, and then also our Levodopa Induced Dyskinesia study. So a lot of exciting things on the horizon and a lot of value-creating milestones in the horizon as well.
Alethia Young - Deutsche Bank
Great, so for you guys, our friends on the webcast feel free to shoot me an e-mail if you want to ask Avanir questions. I’m at alethia.young@db.com. Just a quick one on what you were saying, just can you give us the catalyst timelines for the three trials.
Keith Katkin
Absolutely; so the central neuropathic pain in multiple sclerosis that actually will be used in the next couple of weeks before the end of calendar year 2013; for agitation in Alzheimer’s study and our Levodopa Induced Dyskinesia and Parkinson’s patients, I would expect that data in the second half of calendar 2014. And we also expect to enroll our first patient in our Treatment-Resistant Depression program in the second half of Calendar 2014 as well.
Alethia Young - Deutsche Bank
Okay great. Just on the ANDA phase, just give us a kind of a two to three minutes summary of what’s going on to the relative speed, kind of where we have stand and where we are going.
Keith Katkin
Absolutely; we do have a number of generic filers, Paragraph IV filers against our patents. We have five in total. We’ve settled with three of the other five filers. Now remaining two, we did go to court with that -- we’d court date for a week in September and a day in October. The final briefs were filed on November 15th and our 30 month stay is up on December 30th of this year.
So the good news regarding the trial is, it’s in Delaware, which is known to be a brand friendly court system. Our judge who is overseeing the trial, he has demonstrated that when the facts are in favor of the brand, he is more than happy to rule in favor of the brand and has done so in majority of cases. And we’re looking forward to the outcome. We’re very confident about our intellectual property and fully expect that we’ll prevail in the ongoing litigation.
Alethia Young - Deutsche Bank
Great so what can tell us about kind of the expected timeline toward the outcome?
Keith Katkin
Yes, so as I mentioned the 30 month stay ends on December 30th. If you look at the judge’s track record, he usually rules about two to three months after the final bates are due so in our case of final bates were due on November 15th. So I can’t exact -- January 15th if it would be at the short end and February 15th if he was little bit on longer end. He is known to be acutely aware of timelines and our expectation is that if it did go pass December 30th, then we hope that he would file an injunction to not allow the drugs [ph] to launch. If not obviously we would see going.
Alethia Young - Deutsche Bank
Okay so sort of around the first quarter we’ll learn something probably about the?
Keith Katkin
Yes, keeping in mind, this is the Federal Judicial System and…
Alethia Young - Deutsche Bank
You can blame it on my math. So I guess just big picture and I have to ask this, like if you don’t succeed like does your strategy change or what is the strategy?
Keith Katkin
Sure, I think, we were very fortunate as a company because we not only have NUEDEXTA which is our product for suitable [indiscernible] but we have a second generation product which referred to as AVP-786 and that’s a different technology. It’s a deuterated form of dextromethorphan. And based upon that compound, we fully expect that we’re going, as we advance all of our clinical programs and whether it’s neuropathic pain whether it’s an Alzheimer’s, whether movement disorders, we plan on advancing our entire clinical program using the second generation compound, AVP-786.
So if something were to go wrong, which we don’t expect, we still have the same robust development pipeline that we have right now and we have it with a compound that we think has the opportunity to even provide better clinical and safety outcome in our existing product right now.
Alethia Young - Deutsche Bank
So what the deuterate dex, what does the patent date on that patent timeline?
Keith Katkin
So deuterated dextromethorphan has a composition of mega [ph] patents. They expire in composition of mega [ph] patent expires in 2030 and that’s for any pattern term extension that maybe afforded to the program.
Alethia Young - Deutsche Bank
Okay so it’s kind of like a strategic free call option.
Keith Katkin
Exactly.
Alethia Young - Deutsche Bank
Okay got it. And also on your program in MDD as far as with deuterated dex, how did you come up with that target, like what was the kind of the general thought there?
Keith Katkin
So, this was an endeavor by our two scientific officers, neurologists, who is a trained neurologist, and he was always infatuated by the pharmacology of dextromethorphan. If you look at dextromethorphan at a pharmacological level, a lot of the people talk about the fact it is an NMDA receptor antagonist or sigma-1 agonist but what was often overlooked is its impact on serotonin and also norepinephrine and both of those are well described pathways for the treatment of depression.
And so as he endeavored to continuous understanding to speak with clinicians out there and also go through all of our existing clinical data from the study, he realized three things; one, the pharmacology supports the use of dextromethorphan in treatment resistant depression; two, if you go back to our clinical studies our control studies in PBA where we actually measured the depression of the secondary endpoint, we actually saw some very interesting signals there in those studies; and three, based on his conversation with clinicians, treating clinicians in the universe and based on those clinical observations, he got very favorable comments from clinicians as well about that experience. So we take that totality of data and we’re very excited about the potential for dextromethorphan and deuterated dextromethorphan in treatment resistant depression.
Alethia Young - Deutsche Bank
And just give an overview on the trial design?
Keith Katkin
So, we haven’t progressed the trial design yet. We think that we got a good sense of what it’s going to look like, but I don’t think we’ll be prepared to fully talk about the trial design until probably first half of the next year.
Alethia Young - Deutsche Bank
Okay and so you got meetings with the FDA with all the pre-work and.
Keith Katkin
On treatment resistant depression, the pathway there is pretty well defined. Actually, there are number of group products. So we have done our homework, we know all the studies that are out there. We know the study designs that are expected by the FDA and so obviously an important step will be, we’re going to start that program with the AVP-786. So an important first step will be filing the IND for 786, which will happen early next or first half of next year as part of IND filing obviously the protocol for the treatment resistant depression study will be included in that as well.
Alethia Young - Deutsche Bank
So would you think about further expansion like indication opportunities with 786?
Keith Katkin
Well, if you look at our plans right now and obviously it’s all pending clinical data, you see a lot of potential buckets emerging for 786. So you see there’s mood and behavior disorder like agitation and Alzheimer’s. You see the neuropathic pain area as well like central neuropathic pain and multiple sclerosis, or even diabetic peripheral neuropathic pain, which we believe is a larger market opportunity and assuming that we get positive data in the neuropathic pain and multiple sclerosis patients, that combined with our earlier clinical data in diabetic peripheral neuropathic pain will likely move that program forward in diabetic peripheral neuropathic pain.
So we got the mood and behavior disorders of which there's a number of indications, but we're starting with agitation, Alzheimer's. We've got the neuropathic pain which we expect to advance in diabetic peripheral neuropathic pain. Then you have this movement disorder bucket as well, in which for example, levodopa and dyskinesias in Parkinsons. So there's a number of additional indications in each of those buckets, but we've identified those three along with treatment resistant depression as the ones that have highest unmet medical need that can benefit the greatest number of patients out there but also that can create significant value for our shareholders as well.
Alethia Young - Deutsche Bank
Great, you keep giving me good segways, but just into the pain study in multiple sclerosis, kind of give us, give us the overview of the trial design and then just what your expectation would be of good data there?
Keith Katkin
Absolutely, so it's a phase 2 study for the treatment of central neuropathic pain in patients with multiple sclerosis, that's approximately 200 patients in a four arm study. So we're looking at three different doses of dextromethorphan combined with quinidine versus placebo. And so in terms of expectations regarding our study, they're really two fold, one primary end of the study is looking at the PK, PD relationship, looking at the higher amounts of dextromethorphan, the improvements in pain and we fully expect that we'll see a statistically significant outcome there.
Second and arguably even more important outcome of the study is that we can see a clinically meaningful benefit in any of the treatment arms versus placebo. And if we see that, that combined with the primary end point will give us dose selection to move into a phase 3 study with AVP-786, and we expect that that study would be in diabetic peripheral neuropathic pain.
Alethia Young - Deutsche Bank
So as far as the secondary, you've a lot of secondary endpoints in this prime study and just kind of, I’m sure they all are important but just give us a little bit of context on the ones, that are the most interesting and probably commit to post compelling differentiated case.
Keith Katkin
Yes. Well, certainly is in the pain study. So first and foremost our interest is demonstrating that and the benefit in pain but we were fortunate in our PBA studies, which enrolled patients with PBA secondary to AMS and MS. We saw a lot of interesting signals in that study and so we decided that we’d look at some of those signals here in this study. So while the studies have been designed around any of these secondary end points, we think it will give us the opportunity to confirm whether or not we saw a signal which could actually take us down a completely different development path or an additional development path for 786. So in terms of the one that are of high interest to us in the community, fatigue is one. Fatigue is a big problem for patients with multiple sclerosis. So if we saw a benefit there, the secondary endpoint, that would obviously be of great interest to the community. Second is cognitive deficits from patients with multiple sclerosis. It’s quite prevalent for patients with MS, and just to the extent that we saw a benefit there, that would be fantastic for these patients. And the third one is spasticity. So call it a movement disorder. Again we saw some interesting signals in our PBA study. So very interested to see if I would see those data pan out here in the well-controlled phase 2 study as well.
Alethia Young - Deutsche Bank
So, that's by the end of the year, right.
Keith Katkin
By the end of the year.
Alethia Young - Deutsche Bank
I guess one thing I always talked about is that, you have a lot of information encrypted in prior studies you've done with NUEDEXTA. So I guess how did you make the case for the pain drug with what you've seen historically in the NUEDEXTA trial?
Keith Katkin
So it's interesting. So if you think back about dextromethorphan, when it was first discovered back 40 or 50 years ago by Big Pharma, it was actually to be a synthetic opiod, so non addictive opiod. Problem is no one can ever figure how to deliver dextromethorphan to the brain, because it was rapidly metabolized by the human body. So when you think back to the roots of the product it really was as a pain product. And so whenever we’ve had the opportunity through our clinical programs, we’ve always looked at pain as an endpoint.
So going back there was an open label phase 2 study and patients with diabetic peripheral neuropathic pain, in which we saw a definitive response on reduction in pain in that study. That led us to looking at pain as a secondary endpoint in our PBA studies with patients with multiple sclerosis. In the first study was of a significant reduction in pain, even though the study wasn't powered to look at pain in patients with MS. And then in our pivotal phase 3 study, in PBA looking at pain in MS patients there, once again we saw a very strong trend towards a benefit in pain, and on the SF36 which is a quality of life scale, there's a bodily pain subscale and we nearly achieved statistically significance in that subscale.
So you take that and then arguably the most, the most definitive data that we have is a large well controlled phase 3 program in diabetic peripheral neuropathic pain, and this was done a number of years ago, using a different dose formulation of dextromethorphan and quinedine, but that study was under an SPA with the FDA, had just shy of 400 patients in three arms. We achieved the primary endpoint in that study with strong statistical significance. We also achieved statistical significance on five of the secondary end points. And so that's the most definitive data. So there's no doubt in our mind that 786 and 923 work in pain. The question is as designing the right clinical studies which demonstrate that treatment effect.
Alethia Young - Deutsche Bank
In your pivotal, was the secondary endpoint correct?
Keith Katkin
No, in the -- we actually had a phase 3 study in diabetic peripheral neuropathic pain. So this is going back a number of years. The study was kicked off in 2005, was unblinded in 2007, and as I mentioned about 400 patients, but specifically looking at diabetic peripheral neuropathic pain and achieve the primary endpoint and five of the seven secondary endpoints with both dose arms.
Alethia Young - Deutsche Bank
Okay, great. Well, one thing I would think I probably could stand to learn a lot more about is kind of 825 and you’re in-licensing there. So maybe can you describe the technology to it?
Keith Katkin
Absolutely, so AVP-825 is our recently in-licensed product for migraine. And what it is, it’s a novel delivery system for sumatriptan. So, many of you may know, sumatriptan is the gold standard for the treatment of migraines. However, even though it’s a gold standard, it does have some limitations. Currently, it can be delivered orally, in which it takes a long time for a treatment effect to be observed. It can be delivered via injection, in which case it hurts, and there is, I want to call it triptan side effects associated with it, this chest tightening that you get or it can delivered nasally, in which cases with most nasal devices you only get minimum absorption and you wind up swallowing most of the drug in the gut [ph].
And so why we’re excited about 825 is it’s a novel delivery system for sumatriptan. So what it is, it’s a small little device and we actually call it an exhaler. So there is a little capsule powder of sumatriptan. You pierce the powder, you put one part in your nose the other part in the mouth and you just blow, which is why we call it an exhaler. And when you blow, what it does is that it pushes the powder into your nasal cavity. And the way the technology works is your soft pallet in the back of your throat closes and it traps all the powder right in your nose.
And so what that allows for, it allows for very good dispersion of the sumatriptan powder in the nose and we see that reflected in the PK curves within the clinical studies. And because of that we see a very attractive clinical profile for the product. We see very fast onset of action, where we see a separation from placebo in as little as 15 minutes and a statistically significant difference at 30 minutes.
We see minimal side effects and actually in our studies none of the typical triptan effects, like chest tightening were observed. And then finally convenience, and it’s a very small exhaling device. Keep it in your jacket pocket, in your purse, in your desk, and if you feel migraine coming on, you get quick access and we saw a very high level of patient satisfaction in the clinical studies that were conducted with the product. So we really think with this little device what we’re really transforming the clinical profile of sumatriptan and then we can bring relief to many migraine patients that are out there suffering right now.
Alethia Young - Deutsche Bank
And actually like a launch that’s coming out relatively soon in this, right can you tell us the timelines of those?
Keith Katkin
Yes, so we’re very fortunate to be able to in-license the asset. We expect to file the NDA in the first quarter of 2014 and then we have a standard 10 month review time by the FDA. We could have approval towards the end of 2014, early ’15. So our plan is to leverage our existing sales force for PBA, of which we’ve got a long term care sales force and also a retail sales force. That retail sales force already calls on 90% the neurologists, that generate sort of -- the neurologists that generate 90% of the migraine scripts in the universe.
So what we’ll be doing is we’ll be expanding that retail sales force to call on the high writing primary care doctors, which will mean about a doubling of the sales force, of taking it from about 72 representatives to 150, and with doubling of that sales force, we think that we can call on all of the high potential doctors within the migraine space and that led us to put out revenue expectations for 825. We think with a very modest penetration, less than 5%, we can generate between $150 million and $200 million in revenues for 825. So we’re excited to leverage our commercial infrastructure. We think it’s a great addition to our commercial team. And we know it’s in great hands with our development team right now moving it through FDA.
Alethia Young - Deutsche Bank
And so, I guess I had originally thought when I spoke to you guys long time ago that maybe perhaps migraines would be treated by general practitioners. But it seems like that’s slightly different. So maybe you can explain that to us, that dynamic and like why you think you’ll be successful calling on neurologists versus general practitioners?
Keith Katkin
Yes, so definitely general practitioners or primary care doctors play an important role in migraine treatment. So, the way that we have done our market segmentation and actually I think this is where a lot of launches have previously fallen short in the migraine space, is companies have just resourced their teams to focus on neurologists. And neurologists only account for about 25% to 30% of all the migraine prescriptions in the U.S.. The remainder is, a majority are written by primary care doctors. So, we’ll be able to call on the neurologists that are responsible for writing 90% of the scripts through neurology but if that sales force expansion, that additional about 80 representatives, that are going to allow us to get the right reach to primary care, of general practitioners and that’s really what’s going to allow us to make 825 a very commercially meaningful product.
Alethia Young - Deutsche Bank
Great, so are there any questions in the audience? I have a couple more questions for you, not PBA but have to ask. Just give us a little more color on like what your strategies for making further in roads there? You say -- you kind of showed the chart and the run rate. It seems like there is a lot more to go. So just kind of give us a feel for that over the next 12 months.
Keith Katkin
Absolutely. So as I mentioned our fiscal year ended on September 30th. We did approximately $92.1 million in gross revenues for the year ended September 30th. I’m happy to say that as we sit here today looking at our recent prescription trends, we're running about $120 million in gross revenue, so very commercially meaningful amount of revenues.
Looking at the quarter ending September 30th, the quarter-over-quarter growth in total business is about 12% sequentially, which we're very happy with. And then if you look at this quarter to date, so the first seven weeks of the fourth quarter, we're looking at just about 10% on a quarter-over-quarter basis. So we're still seeing a very good momentum in the business. Additionally as we look forward, we completed a sales force reorganization in the July, August timeframe. And what that has allowed us do is increase our sales force size, with a stronger focus on the retail setting.
So we had always seen tremendous success within the long term care setting, but it was at the sacrifice of retail. So as we went through this expansion and realignment earlier this year, the real focus on retail. And so as we look forward over the next 12 months, we expect we'll continue to see success in long term care. We're really looking to see a spark in retail. And with the additional resources that we're putting in retail, we think that that will become a meaningful contributor to the growth in the overall business.
And what's really nice is and I eluded to this earlier, if you look at the penetration into PBA by segment, so if you look at long term care we estimate there's about 100,000 patients in long term care that suffer from minor to severe PBA. As I sit here today, only about 10,000 patients are being treated. So only about 10% penetration, so we still have tremendous growth opportunity in long term care, but if you switch to retail, we have had 1.7 million patients that have PBA from the retail setting under the care of their general practitioner, of their neurologist, of their psychiatrist and there we only got 5,000 patients that are on therapy. So less than 1% penetrated. So we’ve got tremendous growth in both segments, which for us is really a great position to be in, because we really believe that we continue to grow NUEDEXTA for PBA for years to come.
Alethia Young - Deutsche Bank
Just a matter of time in the retail space, with lack of education and not making the call or is it the doctors don't want to treat or they don't know about the disease or?
Keith Katkin
I think it's prioritizing really. So you take for example a patient that has multiple sclerosis and if they come in, they may be coming in because they have MS flare. And so the doctors can be focused on cooling off the flare, the first question isn't going to be, are you having these uncontrolled episodes of laughing or crying. And so our goal and our focus of our retail team is really to get in there and make PBA a priority for the doctors and make sure that in that five minutes, in that seven minutes that they have with the patients or patient’s care giver that they ask that question. And we found when they engage in that dialog, when they ask that question, they’re surprised at how often they see it. And so we're changing behavior, we know as we look back even over the last year PBA is becoming a much more part of the vernacular and then how positions are approaching, but we also know we still have a long way to go and that's why we expanded our sales team and that’s why we’re going to keep focus on this. And that's why believe there is still tremendous opportunity for growth.
Alethia Young - Deutsche Bank
Great, a question for you, just on big picture. Like your vision of the Company around that 12 to 18 months, you have a lot of leverage in the model it seems to me. Just lay it out for us.
Keith Katkin
Absolutely. Extraordinarily excited about the next 12 to 18 months for the Company. I think as I started, as we look back at 2013, 2013 has just been a fantastic year for Avanir, but as I look forward another 12 months, the milestones that we have, the ability to help patients and the value creating events are equivalent to what we have seen in 2013. So seeing the continued growth of PBA and helping patients with PBA throughout the United States and Europe, we’re going to talk about our European approval but also within Europe as well.
Clinical data, three programs with MS pain, agitation and Alzheimer's and levodopa and dyskinesia and Parkinson's patients, these are all hugely meaningful and if were to get positive data in anyone of those, it would be great for patients and great for shareholders, and if we're successful in getting positive data in more than one, then I think we'll be extraordinarily well situated for the future.
Alethia Young - Deutsche Bank
Keith, Ian thanks for making the trip from the West Cost.
Keith Katkin
Thank you for having us.
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