MBRK- The company is meeting the sales forecast for its Moxatag launch.
John Thievon
Thank you, Faith and good morning everyone. Welcome to our call. The first quarter of 2009 was a productive one for MiddleBrook as we launched MOXATAG to trade and prepare for it's professional launch. We launched MOXATAG to healthcare professionals nationwide on March 16, 2009, while it is still very early in the launch there, indicators that we were making very good progress.
First I will run through some of the numbers and then I will share some of our findings in the field. For the first quarter of 2009, we produced revenue of $9 million, 7.5 million of which was from MOXATAG. As you can see from the net sales for MOXATAG we received solid support from our trade customers. Approximately 20,000 retail pharmacies participated in our order ship program to place a bottle of MOXATAG on the shelf in those pharmacies prior to professional promotion. This does not include pharmacies ordering independently of order ship programs.
And now that we have 300 sales reps and manager detailing healthcare professionals nationwide and driving prescriptions to pharmacies we expect distribution to increase. Keep in mind in accordance to IMS health about 40% of the annual prescription for strep throat are filled April through September. So, it’s a great time for our field force to be building awareness among healthcare professionals across the country and working to generate prescriptions for MOXATAG.
Our sales territories are align to maximize MOXATAG's market potential and our 271 sales reps and 30 district managers are detailing the physicians responsible for just over 40% of the oral solid respiratory antibiotic market for strep throat. According to IMS health national prescription audit weekly data approximately 3500 MOXATAG prescriptions have been filled as of April 24th was more than one quarter of those prescriptions filled in just one week the week ending April 24th.
This is inline with our expectations and we expect it to be a couple more months before MOXATAG prescriptions accelerate to significant levels on a weekly basis. We believe that the week over week gains we are seeing on the prescription numbers which averaged out to about 30% of the week or a positive sign. We also monitored the number of physicians writing MOXATAG and we know that new physicians are prescribing MOXATAG every week which is also a good sign.
In addition to tracking the weekly prescription numbers through IMS and prescriber data we are monitoring our check voucher program redemption rates. You may recall that we implemented this program to provide a $15 discount of the patients co-pay. This $15 savings is available at the cash register. These check vouchers are distributed to high prescribing physicians through our field sales force. Physicians can give them, to their patient along with their MOXATAG prescription. To-date about 30% of the prescription filled for MOXATAG have been accompanied by these $15 checks. We have recognized that this program has been valuable to patients thus far and we will continue to evaluate ways to keep the cost of MOXATAG affordable for all patients.
In terms of feedback in the field, I will share a few observations. Overall, comments from physicians and pharmacists are supportive with MOXATAG and its benefits which include a lower overall dose compared to conventional aminopenicillin therapies, patient convenience and compliance. On the physician front we are seeing fairly typical results in terms of rate of adoption.
In our experience it takes six or more details for a physician to change their prescribing habits and our high prescribing physicians are on about three week call cycle. So, we are just getting in front of these physicians for the second time in the last week or so. Of course, you will always have some early adopters and some that are more resistant to change.
Doctors have been writing amoxicillin for year's, so that’s a strong habit to overcome and we need to continue to deliver a solid sales message to remind doctors of MOXATAG’s significant advantages over the two to four times a day of amoxicillin. Accordingly, we are monitoring feedback very closely seeking out opportunities to accelerate our prescription results. While many pharmacists are on-board and fill 3500 prescription pharmacists represent an opportunity for us to provide education on MOXATAG’s benefits and availability.
In some cases, pharmacies called the physicians to say that the pharmacy doesn’t have MOXATAG on their show and would like the doctor to switch to a amoxicillin. Our sales reps are working diligently to resolve this issue by working with physicians office staff to ensure that the prescription is still with MOXATAG as you know there were no AB rated generic equipments in MOXATAG.
We are seeing that in some instances, the pharmacies actually have MOXATAG on the shelf but wasn’t aware that they had it. Keep in mind that a high volume pharmacy might have 10 to 15 pharmacists that work in the store on different shifts, so we need to make sure that we continue to call in the same pharmacist to increase pharmacist awareness of MOXATAG. Accordingly, our reps have increased the pharmacy calls. We are also seeing the pharmacies do not affect [ph] the MOXATAG on their shows and we are working to point out the benefits of stocking it and letting them know that the doctors are prescribing MOXATAG and will continue to do so, so they should bring in a bottle immediately.
One bottle as you may recall contains 30 tablets which equates to three prescriptions. It is important to know that pharmacies can get a bottle of MOXATAG within 24 hours. Our marketing, trade, managed care and sales management teams are working together to provide our sales reps everything they need to continue our progress and address any issues that reps are facing in the field.
Before I move on to discussing our sporting the work of our field force, I will say that overall feedback from pharmacist and physicians in the field is positive and most value the benefit of MOXATAG. We are supported in the efforts of our national field sales force with the national wide marketing campaign and raising awareness of MOXATAG among our targeted healthcare professionals and in trade and manage care. Our advertising campaign and professional publications will reach about 90% of all primary care physicians and 73% of pharmacist at least once a month during 2009. Our direct mail and email campaign that physicians, pharmacist and managed care executives will further raise awareness for MOXATAG.
As recently announced we have also launched moxatag.com a comprehensive online resource for information about MOXATAG for patients, physicians and pharmacists. And we plan to have strong attendance at medical and other professions meetings at the national and regional levels.
On the managed care coverage front, I am pleased to report that MOXATAG is widely available through managed care providers resulting in access to roughly 297 million lives. Well that number may include some duplication, we have achieved coverage for approximately 92% of all covered commercial lives in the US a territory status for both pharmacy benefit managers and managed care organizations.
MOXATAG is currently covered in third tier with their prior authorization on only about 1% of all commercial lives covered. MOXATAG is also apparently covered by medicated 46 states. We will continue working to expand our managed care and Medicaid coverage and we expect our coverage to increase overtime. We have also discovered that there are significant regional plans with co-pays from MOXATAG between $6 and $20 making MOXATAG very attractive relative to price in different parts of the country.
KEFLEX remains an important element of our overall commercial strategy and we are starting to see a flattening of the KEFLEX 750 prescriptions declined and our goal is to increase these prescriptions over time. Our reps are detailing and sampling KEFLEX 750 in the second position and we believe we will deliver stronger KEFLEX 750 messages as our reps established better relationships and have more time in front of the physicians.
And on the business development front we are continuing to review opportunities both on in licensing and co-promotion fronts. That said everything is secondary to the success of MOXATAG which remains our primary focus.
With that I will now turn the call over to Dave for review of our financial results and our business outlook.
Dave Becker
Thanks, John, and good morning to everyone. For the first quarter of 2009, our total net revenues were $9 million compared to $2.4 million for the same quarter last year. The increase is driven by initial trade stocking orders related to the MOXATAG launch, which total $7.5 million. With respect to the prescription data for the 2009 first quarter which consisted basically of the last two weeks of March total MOXATAG prescriptions were about 650.
Net sales of our KEFLEX products total $1.5 million for the first quarter a $900,000 decrease or 37% decline when compared to the 2008 first quarter results. With respect to KEFLEX prescription data for the 2009 first quarter, total prescriptions were about 46,200 compared to 74,500 for the same quarter last year.
This 38% decline is primarily due to the decision to decrease the size of the contract sales force, starting back in November of 2007. Today our 271-person field sales force plus our 30 district sales managers are deployed within territories designed to maximize MOXATAG market potential. Its also important to remember that KEFLEX is now in secondary detail position behind MOXATAG.
At this point we have begun to notice of flattening out of the decline in the number of KEFLEX prescriptions and expect to be growing those prescriptions in the months to come. Gross margin on sales was $8.2 million or 91.6% of net sales for the 2009 first quarter.
During the prior year quarter the gross margin was $1.8 million or 74% of net sales and included $279,000 charge for obsolete inventory. The improvement in gross margin percentage reflects the higher overall gross margin rate on MOXATAG as compared to our KEFLEX products.
Research and development expenses were $1.9 million for the 2009 first quarter, compared to $3.7 million for the same quarter last year. The decrease in R&D expenses over the prior year quarter is primarily driven by the reduction in facility and personnel-related expenses. You will recall that in previous quarters, we recorded significant charges related to the unused space of our Maryland facilities as well as equipment sales. As a result, we have lower overall expenses in current quarters.
Selling, general and administrative expenses for the 2009 first quarter was $16.5 million versus 4.8 million in the prior year quarter. The $11.7 million increase in SG&A expense over the prior year quarter primarily relates to the hiring, training and the deployment of our field sales force, MOXATAG marketing program related to the launch including position samples as well as increases in stock-based compensation.
Net interest income for the 2009 first quarter totaled approximately $256,000 versus approximately $125,000 during the same quarter last year. The increase in investment income is the result of higher invested cash balances offset by lower investment yields.
The final result is a net loss for the 2009 first quarter of $10 million or $0.12 per common share. This compares to a net loss of $13.8 million or $0.26 per common share during the prior year quarter. As you know, the September 2008 EGI financing resulted in the issuance of 30.3 million new common shares. And such shares were outstanding for the entire first quarter. In the prior year first quarter, there were approximately 53.3 million shares outstanding.
Now, let's move on to the balance sheet and here you will note several major changes when compared to the quarter ended December 31st of 2008.
We started the first quarter with combined cash and marketable securities balance of $74.7 million and ended with $55.4 million at March 31st of 2009. The decrease is due primarily to the increase in selling, general and administrative expenses, but it's important to note that because of the MOXATAG launch, our accounts receivables balance increased from $426,000 at December 31, 2008 to $9.5 million at March 31, 2009.
As it is typical in the pharmaceutical industry, we extended payment terms from 30 days to 90 days on initial launch orders. Therefore, we anticipate collection on these initial orders to occur during the second quarter.
Our inventories totaled $2.4 million at March 31 2009, resulting in a $2 million increase over the December 31, 2008 balance. As you would expect, our MOXATAG inventories increased due to the commercial launch of the product.
With respect to KEFLEX and as previously disclosed, we would notify by our supplier that they would be shutting down operations by the end of January of 2009. This resulted in us making a one-time order of KEFLEX inventory to ensure sufficient quantities to meet future sales demand for at least the next 18 months. We physically received that inventory during the first quarter, yet we are allowed to pay for that inventory in quarterly installments throughout 2009. We are now in the process of evaluating another contract manufacture to meet our future KEFLEX sales demand.
Our net property, plant and equipment balance was $8.6 million at March 31, 2009 compared to $4.2 million at December 31, 2008. A $4.4 million increase is driven by our automobile fleet leases for our sales force and sales managers. We are required to account for our fleet leases as capital leases and as such the present value of the lease payments must be set up as an asset with an offsetting obligation in current and long-term liabilities.
In addition, to the fleet lease liability our balances of accrued expenses and other current liabilities increased as a result of accruals for sales related liabilities such as product returns and co-pay check redemptions.
That concludes my review of the first quarter financial results. And at this point I will provide our business outlook for 2009.
As I mentioned we ended the first quarter with approximately $55.4 million in cash and marketable securities. And as a reminder our accounts receivable balance at March 31, 2009 totaled $9.5 million. As previously disclosed we expect our 2009 combined net sales for MOXATAG and KEFLEX to be in excess of $40 million. This assumes continual week-over-week growth of MOXATAG prescriptions and no generic approval and launch of an equivalent to our KEFLEX 750 milligram product.
With respect to prescription volumes we continue to expect that more than 50% of the MOXATAG prescriptions will be filled during the calendar fourth quarter of 2009. This is due to partly to seasonality but importantly the amount of time involved in changing prescriber habits. With that in mind we believe that our second quarter net sales will be under $2 million and pre-dominantly comprise of KEFLEX sales as sufficient levels of MOXATAG inventory are now in the channel and it will take sometime for those levels to be reduced to prescription fall through.
At $190,000 per representative, our field sales force is expected to cost about $51 million on an annualized basis. That's a fully burden number which includes all expenses incurred in the field as well as the cost of our district sales management and physician samples. With a significant investment in our sales force our targeted marketing campaign, product development in general and administrative expenses, we currently estimate that our total operating expenses will range between $93 million and $100 million for 2009. And keep in mind that, that includes approximately $5 million of non-cash expenses for stock options, depreciation and amortization.
Assuming FDA agreement with our clinical protocol, our current product development plan suggest that we will spend sufficient enough to advance KEFLEX process project to be prepared for patient enrolment into Phase III clinical trials during 2010. Future spending on this program is dependent upon the useful launch of MOXATAG and adequate financial resources.
And finally our current plan suggests that, if we hit our targets we could achieve operating profitability sometime in 2010.
That concludes our 2009 business outlook and at this point I will open the call up for questions.
