I can't comment because I don't currently own shares. Later today SeekingAlpha will release the CC: transcript which I will post on the board.
_______________________________________ AEterna Zentaris beats by $0.37, misses on revenue May 9 2016, 17:32 ET | About: AEterna Zentaris, Inc. (AEZS) | By: Mohit Manghnani, SA News Editor Contact this editor with comments or a news tip
Aeterna Zentaris' (AEZS) CEO David Dodd on Q1 2016 Results - Earnings Call Transcript
May 10, 2016 10:59 AM ET| About: AEterna Zentaris, Inc. (AEZS) SA Transcripts SA Transcripts?Follow(13,863 followers)
Aeterna Zentaris, Inc. (NASDAQ:AEZS)
Q1 2016 Earnings Conference Call
May 10, 2016 08:30 A.M. ET
Executives
Brooke Geiger - Associate Director of Communications and Administration
David A. Dodd - Chairman, President, and CEO
Genevieve Lemaire - Interim VP of Finance and CAO
Jude Dinges - SVP and CCO
Richard Sachse - SVP, Chief Scientific Officer and Chief Medical Officer
Analysts
Jason Kolbert - Maxim Group
Operator
Greetings and welcome to the Aeterna Zentaris First Quarter 2016 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder this conference is being recorded. It is now my pleasure to introduce your host Ms. Brooke Geiger, for Aeterna Zentaris. Thank you Ms. Geiger. You may begin.
Brooke Geiger
Thank you, Melissa. Good morning and welcome, everyone. I am Brooke Geiger, Associate Director of Communications and Administration of Aeterna Zentaris. I am the leader of today’s call. With me are David Dodd, our Chairman, President and CEO; Genevieve Lemaire, our Vice President of Finance and Chief Accounting Officer; Jude Dinges, our Chief Commercial Officer; and Richard Sachse, our Chief Scientific Officer and Chief Medical Officer.
Please take note that during this call, we will be making forward-looking statements regarding future events and the performance of Aeterna Zentaris that involve risks and uncertainties that could cause actual events and results to differ materially. These risks are described in further detail in the Company's press releases and reports filed with the U.S. and Canadian securities regulatory authorities.
These forward-looking statements represent the Company's judgment as of today, Tuesday, May 10, 2016 and the Company disclaims any intent or obligation to update these forward-looking statements unless we’re required to do so by applicable law or by securities regulatory authority. However, we may choose to update, and if we do so, we will disseminate the updates to the investing public.
It is now my pleasure to introduce the Chairman, President, and CEO of Aeterna Zentaris, Mr. David Dodd.
David A. Dodd
Good morning and thank you for joining us. Today I would like to report that our pivotal Phase 3 programs for Macrilen and Zoptrex are on track. That our co-promotion commission revenue is showing a favorable trend and then our financial condition is solid and just as anticipated. In other words we are on track across the Board. We ended the quarter with $33 million of unrestricted cash. We held our share count at just below 10 million common shares.
We believe that our average monthly cash burn rate during the remainder of 2016 will be approximately $2.8 million. As a result I am very comfortable with our financial position. As noted in our press release, we still expect to complete the pivotal Phase 3 Zoptrex trial in Q3 of 2016 and report top line results by year-end. The continued progress of this trial supports meeting those target dates. We also feel very confident that the confirmatory Phase 3 clinical trial of Macrilen is on schedule.
Since we announced in the fourth quarter of last year, the startup patient recruitment for the study which will consist of approximately 30 sites in a minimum of 110 patients, our CRO has opened approximately 20 sites and has enrolled approximately 30 patients. The pace of recruitment is accelerating, confirming our expectation that the confirmatory study will be concluded in Q3 of 2016, also with top-line results being reported as soon as possible following trial conclusion.
Now I want to provide the deeper dive into commercial operations that I had mentioned during our last call. First, let me talk about Saizen starting with a little history. As you know Saizen is a recombinant human growth hormone registered in the U.S. for the treatment of growth hormone deficiency in children and adults. Recall that this market in the U.S. is approximately $1.6 billion in annual sales consisting of six competitors. We concluded a co-promotion agreement with EMD Serono in May of last year and began promotion of the product late last July. So we have been promoting Saizen for about nine months.
Our initial promotion efforts were hampered because frankly it took us longer than anticipated to obtain the list of provider targets that we required. A validated list of target providers is essential to efficient promotional efforts. The list contains the names and addresses of healthcare providers who have prescribed Saizen or similar brands in the past. We use the list to direct ourselves representatives promotional activities.
Since commencing our promotion of Saizen we have been in a continuous process of refining the list with our sales reps. From the very beginning our goal has been to have a list of a minimum of 1000 targets. The original list providers hadn’t been validated for several years. We work with EMD Serono to obtain additional targets as quickly as possible. We now have over 800, a number which begins to match our promotional capacity. We continued to identify additional targets and our goal remains to have approximately 1000 validated targets to remove your actively selling Saizen and to achieve consistent sales growth.
Nevertheless, the first quarter was a strong one for our promotion of Saizen. Our sales team exceeded their new patient start baseline by over 66% during the first quarter and new patient starts in that quarter, first quarter increased 88% over the fourth quarter. Clearly while we have a long way to go, we are moving in the right direction. We are paid by EMD Serono based on the number of new patients starts we generate during a quarter in excess of an agreed upon baseline. The payment to us is significant. We have a real incentive to promote the product and our sales force is aware and have been taking advantage of the opportunity.
APIFINY presents us with another very promising opportunity. We began promoting this product last December with a small pilot team. During January and especially February we trained our entire sales force on the product and lost a full scale promotional effort in late February. We have begun to generate commission revenue although only a small amount today. The reason why we are so excited about APIFINY is that it is the only cancer specific non-PSA blood test for the evaluation of the risk of prostate cancer. As such it is an important adjunct to the traditional PSA test. We’re also very excited that as we recently announced we will become the exclusive promoter of APIFINY in the United States effective as of June 1st.
Similar to the presenting process we are using for Saizen, our representatives are prioritizing APIFINY targets in each of our territories. It will take a while for physicians to adopt APIFINY to assist with the evaluation of prostate cancer. We are confident that they will and that when they do that we believe that the product will be very successful. Our commission structure for APIFINY is different from that of our other two co-promotions because there is no base line. We are paid for every APIFINY test order. We feel that with this new expanded exclusive agreement we have significant revenue opportunity to pursue as we develop the acceptance of APIFINY in the market.
The third product we promote EstroGel is somewhat of a disappointment. Our promotional metrics, average sales calls per day, and average sample to prescription ratio for example are right on target. As we mentioned in the last quarter's call during 2015 we increased prescriptions for EstroGel within our territories by 17.4% compared to a decline for our competitive brands. We remain very proud of achieving such success. However the unit volume I presume is generated during the first quarter did not exceed the base line and consequently we are no commission.
At the end of 2015 a major national pharmacy benefit manager moved EstroGel to its excluded medications list while adding a single competitive product to its preferred alternative category of its formulary. This action along with an overall downward trend in EstroGel replacement therapy prescriptions undoubtedly resulted in the loss of prescriptions. EstroGel may be added to the formulary of another pharmacy benefit manager effective late in the second quarter enabling us perhaps to regain some lost ground. However, we are carefully evaluating whether it makes sense to continue promoting EstroGel under the current circumstances. Despite the continued commitment of our representatives we are analyzing whether we could be more productive by consolidating promotional activities to Saizen and APIFINY.
Maintaining a sales force is an essential part of our strategy to transform Aeterna Zentaris to commercially operating specialty biopharmacuetical company. We do not believe it is practical for a company of our size to sustain itself solely on a portfolio of internally derived products. Development takes too long, cost too much money, and entails too much risk. Fortunately we believe there are plenty of under promoted products throughout the industry. The challenge is in being able to successfully acquire in license of such products and a reasonable investment that would allow us to build value through dedicated promotions.
We continue to evaluate many such opportunities looking for products that fit our areas of therapeutic interest, our capabilities, and that are available on what we consider to be reasonable economic terms. Last year we evaluated several that we believed fit very nicely with our portfolio but we are unable to acquire them because of our financial situation. Most often potential products are often in a process that resembles in our auction. When we participate in the process to acquire a new product, the fact that we have deployed a sales force enhances our credibility. Companies disposing of a product want assurance that the in-licensing or acquiring company can quickly commercialize the product providing an attractive ongoing sales royalty as part of the transaction. We have that credibility although it comes at a cost.
To summarize our commercial performance continues to improve and is promising. Our two pivotal Phase 3 studies are on track and our financial condition is solid. We will continue our efforts to make our commercial operations profitable by finding products that fit our portfolio while rationalizing our product mix. I look forward to reporting on our progress next quarter. Now I will turn the call over to Genevieve Lemaire, our Vice President of Finance and Chief Accounting Officer who will provide more information about our first quarter financial results.
Genevieve Lemaire
Thank you David and good morning everyone. I will be providing a brief summary of some of the financial highlights for the first quarter. Most of what I will be covering has been presented in more detail in our condensed interim consolidated financial statement and MD&A for the first quarter which were filed yesterday.
From an operating expense standpoint, our main operating activities during the first quarter included ongoing efforts associated with our clinical development initiatives, as well as to a lesser extent with our commercial operations and general and administrative activities. Total operating expenses amounted to approximately $7.2 million for the quarter ended March 31, 2016, downwards from 9.6 million in the prior year quarter, representing a 25%.
Our total R&D costs in this quarter were approximately 3.7 million as compared to our approximately 4.5 million in the first quarter of 2015. The reduction in R&D expenses of approximately 0.8 million is mainly attributable to a lower comparative third party cost. The decrease in third party cost is mainly attributable to the fact that the number of patient in active treatment in a clinical trial of Zoptrex was lower in the first quarter of 2016 as compared to the same period in 2015. This is in line with our expectation as we are coming closer to the end of the clinical trials.
The overall decrease in R&D cost is also explained by lower employee compensation and benefit cost. A substantial portion of this decrease is due to the realization of cost savings in connection with our efforts to stream line our R&D activities and to increase our commercial operation and flexibility by reducing our R&D staff.
Our pivotal Phase 3 trial of Zoptrex and our Phase 3 program for Macrilen continued to be the primary drivers of our third-party R&D expenses for the first quarter as compared to the same period last year. We are still comfortable with our estimate that for 2016 our total R&D cost will range between $19 million and $20 million.
Switching now to our G&A expenses, during the quarter ended March 31, 2016 G&A expenses totaled approximately $1.9 million compared to $3.4 million in the first quarter of 2015. This reduction of $1.5 million quarter-over-quarter resulted from the recording in the prior quarter of severance transaction cost allocated to warrants in connection with the completion of our March 2016 offering. For 2016 we still believe that G&A cost will range between 6 million and 7 million which excludes any restructuring programs and transaction cost that we could incur in relation to a potential financing activity.
From a commercial operation standpoint, we continued during the quarter to incur cost related to our contract sales force and our old management staffing support of co-promotion agreement for EstroGel, Saizen, and APIFINY. Selling expenses during the quarter of 2016 were approximately $1.7 million and were essentially unchanged compared to selling expenses during the same period in 2015. We are also comfortable with our estimate that total selling cost in 2016 will range between $7 million and $8 million.
We reported net finance income of approximately $3.3 million in the first quarter of 2016 as compared to net finance cost of approximately 100,000 during the first quarter of 2015. The variance is mainly attributable to a decrease of approximately 2.8 million and the fair value of our liability which resulted from the periodic mark-to-market valuation of our outstanding warrants as well as a terrible swing in type of foreign currency exchange rate.
From a cash flow standpoint we use approximately $8.8 million of cash in operation in the first quarter of 2016 compared to approximately 10.2 million in the same period in 2015. We use less cash in the first quarter of 2016 than in the prior year quarter primarily because our net loss from operation declined by approximately 2.5 million on a quarter-over-quarter basis.
During the first quarter of 2016, our monthly cash flows using operations was approximately 2.9 million which is slightly above the upper end of the range we estimated last quarter. Our use of cash in operation during the first quarter is typically ired [ph] that in the remaining of the year because of onetime annual expenses that are paid in January. We now expect that our average monthly cash flow used in operation will range between 2.7 million and 2.9 million in 2016.
This increase compared to our previous guidance is mainly explained by a lower sales commission revenue than expected. We ended the quarter with a comfortable level of unrestricted cash and cash equivalents of approximately 33 million. And now I’ll turn the call back to David who will entertain questions.
David A. Dodd
Thank you, Genevieve. My colleagues and I will now answer your questions. I am therefore turning the call over to the operator for instructions on the question-and-answer period.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions]. Our first question comes from the line of Jason Kolbert with Maxim Group. Please proceed with your question.
Jason Kolbert
Hi David, very exciting time as you start to approach these major inflection points. I wonder if you could talk a little bit about the dynamics of both Zoptrex and Macrilen trials, how are they enrolling, how will the data be processed, how do you think you’ll release the top line data at a medical conference? And then while I commend your efforts to built the sales force and commercialize the product. Can you talk a little bit about partnering interest on both products and if you could just talk a little bit also about kind of the Macrilen dynamic bringing this product back into the marketplace and what it is going to take to kind of get KOL acceptance of a paradigm shifting technology? Thanks.
David A. Dodd
Sure. Thank you Jason, thank you for all of your comprehensive questions. I will try to walk through each of them. Let me first start by addressing the status of the clinical trials and then if we have any further insight necessary then I will call upon Richard Sachse. But as you may recall the Zoptrex trial became a fully enrolled trial as of the end of June of last year. So at this time period there is no more dosing underway for the patients and all, they’ve all gone through the cycles, and we are literally the number of events are being monitored. We believe that the conclusion in terms of the achievement of approximately 384 they are about events will occur. It is on track to occur in the third quarter. So that will be this summer. Shortly thereafter it will not be in conjunction with the medical conference but as soon as we have the information after the database lockdown, the quality review, all of the stuff that is normal in any such clinical program we will then announce the top line results and all.
Similarly with Macrilen, because the nature of that clinical program as you recall is a patient receives either one dose of Macrilen, there is a washout period then is administered the insulin tolerance test or it’s a crossover process for the patient or vice versa and all, so it not an extended type of trial. So again we believe and anticipate in conjunction with our CRO that, that trial will be completed this summer also. And similarly not in conjunction with any medical meeting but we will announce the top line results as soon as they are available. We anticipate all of that to be done probably at the latest and by the early part of fourth quarter. So that’s why we say year-end.
But certainly with Zoptrex, it’s all about the occurrence of the events. And as you recall the overall survival is the primary end point. So that’s how we are working on that. For both products we have initiated a process of developing relationships with the key opinion leaders, with the leaders in their field and all. In each clinical program we’re fortunate that be it gynaecological oncologist who are highly respected and involved both from a clinical and a clinical research perspective, we have those participating in our program.
Similarly we have, we feel we have some of the leading endocrinologist in the field of dealing with pituitary disorders in our Macrilen trial. We recently attended the Endocrinology Society trial in Boston in April. Our team was there, interacted with a number of KOLs as well as investigators in it. Our takeaway is that people are very excited and anticipating Macrilen due to the as you point out the disruptive nature and the advantages that this will provide to both the endocrinologist as well as to the patient who has to be evaluated and be confirmed for growth hormone deficiency. In our case adult growth hormone deficiency and all. So, we believe there is a high expectation and that will result in very rapid penetration and uptake in utilization and adoption following an approval of the product in commercial launch.
With Zoptrex, again it will be released. We have a rather comprehensive program of developing and working with key opinion leaders in gynaecologic oncology. Our team will be in attendance at the upcoming ASCO meeting, interacting with some will be investigators who have been participating in the trials others are key opinion leaders who we have started going back to last year of developing relationships with in anticipation. I will say that for Zoptrex we held off of putting any real focus on this until we got to the final interim review by the date of the safety monitoring board. We just had a termination from the resource management let's see what occurs there, be prepared which we were, and then following that October event we have focused rather significantly.
In that regard we have recently implemented our first activity in the area of medical science liaisons, developing relationships, working with them. Without naming the individual and putting him on the hot seat I will say that the number one identified key opinion leader in endometrial cancer therapy is working with us, he is very interested in the product and seeing the adoption of it. We identified them through a multiplicative process as you might imagine of that.
So we are anticipating certainly focus on the completion. We do anticipate certainly for Macrilen that upon approval there will be a very rapid adoption of this product and a basically a displacement of the insulin tolerance test. We have modeled based upon different labeling outlooks and all. On Zoptrex what the opportunity in penetration might be and the adoption there that is something which we continue to refine, we continue to work on the access reimbursement processing area with that. But obviously we are working with a number of outside resources to put as much into that and be prepared as strongly as possible.
I’ll just also say as you know later this year the IND will be filed and clinical program will start in China by Sinopharm A-Think. I’ll just simply comment with hopefully more to come but we are having increased interest in geographic rights for Zoptrex as we approach the timing of completion of the trial and discussions, negotiations are under way in that regard for other geographic areas as well as additional increase still coming in that we would like to meet with. And we have really ramped up in this regard on that product.
It is not unusual, the closer one gets to the completion in the announcement. There is anticipation that and people hedging that they would like to be a partner on this. This is a product again for which today there is no approved FDA therapy for stage three and four endometrial cancer. We would be the first of such in the United States. And again as I have said we have modeled it, continue to model it, and we obviously are excited about both products. It’s a rarity when a rep can walk into an office and say that this is the only or the first FDA approved for this treatment area and all and our team may very well have the likelihood and the reality of being able to do that with two products. So that is where we are, hope that answers all the questions. I tried to remember how you outlined them, if I didn’t just ask me and I’ll it over to either Jude or Richard.
Jason Kolbert
You answered them masterfully, thank you. Just for Jude, help me understand kind of the rapid uptake profile. I mean particularly on Zoptrex when you look at what it is going to take to commercialize it, have you identified kind of hyper scribing or facilities of expertise and with your existing sales force you have a kind of a plan to target and launch, help me understand how you are thinking about the market?
Jude Dinges
And so as you might imagine there are not tens of thousands of gynaecological oncologist in the U.S. It is more like a couple of thousand and when you really narrow it down there is a large volume of those patients end up seeing under a thousand physicians. So it’s a very reachable audience and they are located in the centers that you would expect; Sloan Kettering, MD Anderson, etc. So we are very confident we are going to be able to cover the market with a sales force of somewhere around 30 reps. And we’re still working the details out on that but we believe we have a very powerful message with this product because it will be the only FDA approved therapy for these patients. So late stage patients and that’s a very powerful message that we’ll be able to give if we get approval. And we’re very certain that these doctors are looking for products that has an approved label and indication. And so the coverage will not be an issue. We are currently looking at all aspects of the commercial plan including pricing and distribution, etc. But the coverage itself is pretty straight forward. They are in the major medical centers and we will be able to cover them.
Yes, on Macrilen again to be able to have a sales representative say it’s the only approved product or drug in this case to stimulate the pituitary gland with Macrilen is a very powerful statement. You don’t get that very often in our industry, usually its big companies in big development programs. But to be able to say you have the only one that’s approved is very powerful and we’re excited.
Now the market is much smaller than Zoptrex for example. But it is a very powerful statement. The KOLs that are involved with adult growth hormone deficiency, all are aware of Macrilen and enthusiastically interested in its approval. We know that because many are enrolled in our studies and are also the authors of the endo guidelines on diagnosis and treatment of growth hormone deficiency. So we’re very excited about small product but we’re very excited about it and we believe we can cover that whole market with roughly 20 to 25 reps.
Jason Kolbert
Got it, thank you so much. Really appreciate the update. Congratulations guys on the progress.
David A. Dodd
Thank you.
Operator
Thank you. [Operator Instructions]. Mr. Dodd it appears we have no other questions. I would like to turn the floor back to you for final remarks.
David A. Dodd
Thank you. And I thank Jason because his questions were broad enough I think we are able to cover everything which is good. Thank you.
But thank you all for your continued support of interest as we continue to transform Aeterna Zentaris. We look forward to updating you regarding our further progress, obviously when we discuss second quarter 2016 results. So we wish you a good day and thank you again for your support.
Operator
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!
AEterna Zentaris (NASDAQ:AEZS): Q1 EPS of -$0.37 beats by $0.37.
News 
Market Data 
Discover 
