Q2 2013 Thera Technologies Earnings Conference Call
Jul 10, 2013 AM EDT
TH.TO - Theratechnologies Inc
Q2 2013 Thera Technologies Earnings Conference Call
Jul 10, 2013 / 12:30PM GMT
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Corporate Participants
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* Denis Boucher
NATIONAL Public Relations - IR
* Luc Tanguay
Theratechnologies Inc. - President, CEO
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Conference Call Participants
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* Philippa Flint
Bloom Burton & Co. - Analyst
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Presentation
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Operator [1]
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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Theratechnologies' earnings conference call for the second quarter of 2013.
At this time all participants are in a listen-only mode. Following the presentation we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (Operator Instructions) I would now like to remind everyone that this conference call is being recorded today, Wednesday, July 10, at 8.30 AM Eastern Time.
Now I would like to turn the conference over to Denis Boucher from NATIONAL Public Relations. Mr. Boucher, you may go ahead, sir.
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Denis Boucher, NATIONAL Public Relations - IR [2]
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Thank you very much, and welcome. The speaker on today's call include Luke Tanguay, President and Chief Executive Officer of Theratechnologies. His presentation will be followed by a Q&A period, which will be open exclusively to financial analysts. Christian Marsolais, Senior Vice President, Scientific Affairs and Alliances, and Marie-Noel Colussi, Vice President, Finance, will also be available to answer questions of more technical nature.
Before we start I've been asked by Theratechnologies to read the following message regarding forward-looking statements. I would like to remind everyone that Theratechnologies' remarks today may contain forward-looking statements about its current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements, or other forward future events or developments. Several assumptions were made by Theratechnologies in preparing these forward-looking statements, and there are risks that actual results will differ materially from those contemplated by the forward-looking statements. As a result the Company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on these forward-looking statements.
Theratechnologies refers current and potential investors to the Risk Factors section (technical difficulty) report on Form 20F dated February 26, 2013, available at www.sedar.com and at www.sec.gov under Theratechnologies' public filings. Forward-looking statements represent Theratechnologies' expectations as of July 9, 2013. Except as may be required by securities laws, Theratechnologies does not undertake any obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.
I would now like to turn the conference over to Mr. Tanguay.
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Luc Tanguay, Theratechnologies Inc. - President, CEO [3]
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Thank you, Denis. Good morning, everyone, and thank you for joining us this morning for this analyst conference call.
First let me start with some financial highlights. Royalties for the second quarter of 2013 stood at CAD872,000 compared to CAD731,000 in 2012. It is important to note that royalty figures for the second quarter of 2013 are for the months of March, April, and May, whereas for 2012 figures were for January, February, and March. For the six-month period between December 12 and May 13, royalties stood at CAD1.756 million compared to CAD1.572 million for the six-month period from October 2011 to March 2012.
As for sales of goods, they represented CAD996,000 in the last quarter compared to CAD856,000 for the same quarter last year. Despite an increase in royalties and sales of goods, total revenues were down in the last quarter compared to the same quarter last year, due to a decrease of CAD606,000 in the amortization of the upfront payment received from EMD Serono which, as you already know, is a non-cash item. As a consequence, total revenues in the second quarter of 2013 are down CAD325,000, reaching CAD2.331 million, compared to CAD2.656 million in the second quarter of 2012.
Cost of sales was higher in the second quarter of 2013 compared to the same period last year. It amounted to CAD1.065 million compared to CAD692,000 in 2012. This is a reflection of product sales increase and expenses associated with actions taken to remedy the production issues experienced earlier this year. Without this unexpected and nonrecurring factor we would have recorded a positive gross margin once again.
Fortunately, the manufacturing issues that resulted in production being suspended earlier this year have been identified and corrective measures implemented. This allowed production to resume in late May. And unless an objection raised by the FDA, we expect to start distributing the new product batches around the end of August. In the meantime, existing inventory is being used to meet the market demand.
Other expenses including R&D activities, selling and market developments, and general and administrative costs were down 20% to CAD2.766 million compared to a total of CAD3.461 million for the same quarter last year. Figures comparing the first semester of 2013 to the same period last year show an even more important decrease of 26%. They amounted to CAD5.250 million in the first semester of 2013, whereas they stood at CAD7.[078] million in the first semester of 2012.
As a result we recorded a net loss of CAD1.382 million for the second quarter of 2013 compared to a loss of CAD1.417 million in 2012. For the six-month period we recorded a profit of CAD478,000 compared to a net loss of CAD8.9 million in 2012.
Use of cash for the second quarter of 2013 amounted to CAD4.071 million including the one-time fee of CAD1.8 million related to the amended lease agreement. This compared to CAD4.440 million for the same period last year. For the six-month period the use of cash amounted to CAD6.955 million including the CAD1.8 million mentioned previously, compared to CAD12.369 million for the first semester of 2012.
As of May 31, 2013, liquidities -- including cash, bonds, tax credits, and grants receivable -- amounted to CAD13.726 million. Based on the result I have just described, we are still targeting to become cast neutral sometime in 2014.
This leads me to give you a brief update on where we stand in terms of regulatory approval in markets other than the US, as well as other factors important to our Company and shareholders. As you know, our commercial partner in Latin America received a letter from the regulator in Colombia stating that it could not recommend EGRIFTA due to a lack of long-term efficacy and safety studies.
While disappointing, we believe that we should focus our efforts and energy on the pending approvals in Mexico and Brazil, where the regulatory review process is currently underway. Those two countries represent the lion's share of potential patient markets in Latin America.
Our file in Brazil has been progressing, and we now have confirmation from Brazilian authorities that they will be conducting a confirmatory audit in September regarding corrective measures to manufacturing issues that were raised by Anvisa.
The Mexican submission is also moving ahead. In fact, we have answered all questions from the regulators and we are now waiting for a decision.
As for Argentina, we expect Sanofi to refile a submission for EGRIFTA in the second half of 2013 to incorporate the new EGRIFTA presentation which was introduced in the US last October. In Venezuela amendments to the submission were required by authorities; and once those changes have been made by Sanofi the file will be resubmitted.
As for Canada, we recently announced that a hearing will be held on August 23 in front of a scientific advisory committee whose mandate will be to submit a report to Health Canada and make a recommendation as to whether EGRIFTA's file should be reinstated at the stage it was at before receiving a Notice of Non-compliance-Withdrawal.
In Europe, where we gained country control over the refiling process and commercial rights after terminating our agreement with Ferrer, since then we have been very active with KOLs, patient groups, and regulators. We have scheduled official meeting with regulatory authorities to give us a better understanding of how we can pursue our objective to refiling Europe centrally or in certain European countries. As we said before, we want to assess the likelihood of success before making a final decision as to whether we will resubmit or not.
While we continue on the commercialization path of EGRIFTA, we are actively pursuing opportunities on ensuring to develop this unique product to its fullest potential. In addition to Europe, Canada, and Latin America, other markets which are heavily inclined to follow this lead of the US in the approval of new prescription drugs could represent an interesting target for growth potential.
In this regard, and as I mentioned during our last annual meeting, I am currently working with my team on mid- and long-term strategic plan which will be submitted to the Board in the next few months. As we do this, we are maintaining focus on expenditures, thus moving closer every day to becoming cash neutral. So thank you, and I will now take questions from financial analysts.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Philippa Flint, Bloom Burton.
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Philippa Flint, Bloom Burton & Co. - Analyst [2]
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Thank you very much. Good morning, Luc. A couple of questions. Can you talk a little bit -- with the manufacturing, in your prepared comments you indicated that unless the FDA objects you plan to distribute the product by the end of August, now that you have restarted manufacturing. Can you talk about the FDA involvement? Do you have to make a submission or --?
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Luc Tanguay, Theratechnologies Inc. - President, CEO [3]
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No, no, no. It's a good question. In fact, when we do corrective measure we have to file documentation to the FDA. It's called a CBE-30. So they look at it, and they have 30 days to make comments. And if there's no comments, which we don't believe, then we can proceed with the liberation of the lots, the batches.
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Philippa Flint, Bloom Burton & Co. - Analyst [4]
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So have you changed the process?
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Luc Tanguay, Theratechnologies Inc. - President, CEO [5]
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Minor corrections, so it's very minor.
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Philippa Flint, Bloom Burton & Co. - Analyst [6]
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Okay. Then can you talk a little bit about how EGRIFTA is doing in the US and your relationship with Serono -- if and how they are promoting it?
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Luc Tanguay, Theratechnologies Inc. - President, CEO [7]
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Can you be a little bit more specific in your question, Philippa?
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Philippa Flint, Bloom Burton & Co. - Analyst [8]
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Well, sales don't seem to be going up. So, are they focused on the product at all? How are they promoting it? Are they promoting it?
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Luc Tanguay, Theratechnologies Inc. - President, CEO [9]
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I see what you mean. Yes, they still do a promotion of the product. They have still a salesforce involved in it, same salesforce than last year in the process.
They have a marketing plan. They are doing local promotion, national promotion.
I don't really agree with you that sales are not progressing. If you look at the last two quarters, quarter-over-quarter we have increases in sales. We will see what next -- summer is a more active period for our drug; that's what we have seen in the last two years. We will see what will happen during the summertime.
No, they are still doing effort as they used to do in the last two years.
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Philippa Flint, Bloom Burton & Co. - Analyst [10]
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Okay, thank you. Finally, on the EU, can you talk about the timing of meetings that you are scheduling and when we will get a final decision?
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Luc Tanguay, Theratechnologies Inc. - President, CEO [11]
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It starts from now to probably September, October. So we have several meetings scheduled, and it will be during the summertime and some, maybe one or two of them, are in the fall.
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Philippa Flint, Bloom Burton & Co. - Analyst [12]
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I see. So do you think you'll make a decision by year-end?
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Luc Tanguay, Theratechnologies Inc. - President, CEO [13]
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That's our target, yes. You're right.
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Philippa Flint, Bloom Burton & Co. - Analyst [14]
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Okay, great. Thank you very much.
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Operator [15]
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(Operator Instructions) Mr. Boucher, it appears we have no questions at this time. I will be turning the conference back to you, sir.
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Denis Boucher, NATIONAL Public Relations - IR [16]
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Thank you very much. I'd like to thank everyone for participating on today's conference call. I wish you a very good day. Thank you.
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Operator [17]
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Ladies and gentlemen, this does conclude the conference call for today. We thank you all for your participation. Thank you and have a great day, everyone.
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