Q1 2015 Theratechnologies Inc Earnings Call
Apr 14, 2015 AM EDT
TH.TO - Theratechnologies Inc
Q1 2015 Theratechnologies Inc Earnings Call
Apr 14, 2015 / 12:30PM GMT
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Corporate Participants
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* Denis Boucher
Theratechnologies Inc. - VP, IR
* Luc Tanguay
Theratechnologies Inc. - President, CEO, and Director
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Conference Call Participants
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* Doug Loe
Euro Pacific Canada - Analyst
* Andre Uddin
Mackie Research Capital Corporation - Analyst
* Neil Maruoka
Canaccord Genuity - Analyst
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Presentation
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Operator [1]
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Welcome to the Theratechnologies earnings conference call for the first quarter of 2015. (Operator Instructions) I would like to remind everyone that this conference call is being recorded today Tuesday, April 14, at 8:30 AM Eastern Time. And I would now like to turn the conference over to Mr. Denis Boucher. Mr. Boucher, please go ahead.
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Denis Boucher, Theratechnologies Inc. - VP, IR [2]
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Thank you and welcome. Mr. Luc Tanguay, President and Chief Executive Officer of Theratechnologies, will be the speaker on today's call. A Q&A period open exclusively to financial analysts will follow this presentation. Before Mr. Tanguay begins his remarks, I have been asked by Theratechnologies to read the following message regarding forward-looking statements.
I would like to remind everyone that Theratechnologies's 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 future events or developments. In preparing these forward-looking statements, several assumptions were made by Theratechnologies, and there are risks that results actually obtained by the Company will differ materially from those statements.
As a consequence the Company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on them. Theratechnologies refers current and potential investors to the forward-looking information section of its press release issued this morning and to its annual information form dated February 25, 2015, and the risk factors section therein, available at www.sedar.com under Theratechnologies public filings.
Forward-looking statements represent Theratechnologies's expectations as of April 14, 2015. 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, and Director [3]
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Thank you, Denis. Good morning, everyone, and thank you for being with us this morning. If one word could be used to describe the first quarter of 2015, it would be delivery. This resulted into sales growth, a new partner in Europe, and gaining approval in Canada. Ever since resuming production and distribution of EGRIFTA, we have been able to work on fundamentals and to really start benefiting from now being responsible for the commercialization of our product in the US.
So let me present our financial results for the first quarter. Consolidated revenue for the first three months of fiscal year 2015 amounted to CAD4,571,000, which were almost entirely generated from sales of EGRIFTA. This is compared to CAD1,672,000 for the same period of 2014.
This shows just how much regaining commercial rights to EGRIFTA has an impact on Theratechnologies. With the full sales contingent now in action in the US, sales are growing at a good pace. In fact, sales grew by 72% quarter over quarter -- and remember that our full sales force has been in the field only since the beginning of February. In fact, we will see the effect of our sales force only in the second quarter.
On a patient basis we estimate that in the last quarter, we were just a few patients shy of what is required to become EBITDA positive. I will come back to this point in just a moment.
For the first quarter of 2015, cost of sales came to CAD641,000 in comparison of CAD1,625,000 for the same period last year. The higher amount in 2014 can be explained by unallocated production cost of over CAD1 million, largely due to inventory write-downs related to manufacturing issues. There were no such unallocated production costs or write-downs in the first quarter of 2015. In fact, manufacturing is going as expected, and to date we have approximately 6 months of inventory ahead of us.
Sales and marketing expenses grew to CAD2,516,000 in the first quarter of 2015 compared to CAD1,379,000 for the same period of 2014. This is explained by the intensification of sales and marketing efforts in the US, but also by the inclusion of the amortization expense of the intangible asset value for the commercialization rights of EGRIFTA, which was CAD455,000 in Q1.
As for research and development and general and administrative expenses, we spent in the first three months of fiscal year 2015 comparable amounts to the same quarter of last year. As a result we recorded a net loss of CAD914,000, or only CAD0.01 a share for the first quarter of 2015 compared to a net loss of CAD3,534,000, or CAD0.06 a share for the same period last year.
It's also good to know that we increased our liquidities in the last quarter to CAD3,965,000, up from CAD3,178,000 at the end of the quarter -- last quarter, sorry. You will remember that when I announced the repatriation of EGRIFTA in the US, I mentioned that US operation could be EBITDA positive within the first year of activities. Last-quarter results show that, in fact, with an EBITDA standing at minus CAD59,000 for Q1, the whole Company could very well reach this goal soon.
You may also remember that we restructured the terms and timing of the initial $4 million payment due to EMD Serono on May 1, 2015, as part of our long-term obligation. This initial payment will now be $4,158,000 but will be paid in three unequal installments, the first being $500,000 in May; the second, $1,551,000 in August; and $2,117,000 in November.
Now let's have a look at other developments that have happened since the beginning of the year. A few weeks ago we announced the signing of an agreement with AOP Orphan Pharmaceuticals for the distribution of our product in Europe. At first the product will be available through a named patient sales program, but AOP will also seek to obtain regulatory approvals in individual European countries.
Our new partner is very enthusiastic, and it plans to start distribution of EGRIFTA under named patient sales program in the second half of 2015. We also received great news in Canada just a few days ago: the 1 milligram-vial presentation was approved by Health Canada, which means that all is in line for us to start commercialization in the next few months.
Our marketing team has been very active preparing for our Canadian launch, especially in terms of reimbursement from private payers. This segment of the market will be our immediate priority, as public payers will be addressed in a second phase.
Our commercial partner in Latin America is still expecting a decision from the Mexican authorities around midyear. The decision will be for the 2 milligram-vial presentation. This means that we will have to refile an application for the 1 milligram presentation, but our commercial partner informed us that this additional step should only take a couple of months. At this juncture I am confident more than ever that we have made the right decision to focus on maximizing our key asset, EGRIFTA, and to seek to maximize its potential in the US by regaining commercial rights in that territory.
With an EBITDA only a few thousand short of being positive in the first quarter, I have every reason to believe that the second quarter could make history for Theratechnologies. Early data from the second quarter show that sales are strongly growing, which should have a positive impact on the results that will be presented in July.
You will understand that with financial results going in the right direction, and with other markets about to be developed, that it is hard for me talk to be optimistic and enthusiastic about the future of Thera. While I recognize that there are still things to do, I think that we can be confident about what is coming next for our Company, and that we are now entering a new phase of our existence that will be both rewarding and exciting. So thank you for -- to be with us this morning, and I will now take questions from the financial analysts.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Doug Loe, Euro Pacific.
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Doug Loe, Euro Pacific Canada - Analyst [2]
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Congratulations on the strong quarter, and thanks for the commentary on early Q2 data. A couple of things for me -- related to EGRIFTA in this macro environment, just wondering, from the early feedback you had from your own marketing efforts and your US distribution partner, just what sort of challenges and opportunities you are running into on how to drive EGRIFTA sales even above what you are already seeing in Q2?
Historically, EGRIFTA has encountered issues with misdiagnosis or underdiagnosis of HIV lipodystrophy, and the price point for the drug has -- it's probably been a little bit of an issue with regard to reimbursement. So I'm just kind of wondering what sort of challenges you think you are going to encounter over the next several months to quarters as you try to ramp EGRIFTA prescription volumes up to Merck Serono's historic levels, and perhaps above? So that's the first thing. Maybe just sort of prioritize the challenges you are going to hit there going forward.
And then second of all, just wondering what early feedback you have from AOP in terms of the regulatory macro environment in Europe? My recollection was that European regulatory authorities were a bit cautious on approving a growth hormone releasing factor analog when -- considering some recent data on cardiovascular side effects for growth hormone itself. I was just wondering if you had any insights from clinical collaborators or from AOP on just how that macro environment is going to be addressed by them in Europe? And I'll leave it there. Thanks.
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Luc Tanguay, Theratechnologies Inc. - President, CEO, and Director [3]
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I'll start with AOP -- it will be faster, Doug. We have a -- as you know, we signed an agreement just a few weeks ago. We had since then a few conference calls, just to have things set up to be able to distribute the product as soon as possible in Europe under the NPS program.
They are going to use the Canadian presentation, so -- where we think to have our Canadian approval to make sure that we will be able to distributing with that formulation or this presentation. So we are all geared now to do that.
We have our first meeting with them next week, big meetings to discuss exactly what you were asking -- so in regards to regulatory, distribution, and so on. So I think I will keep my comments on that for the next conference call, if you don't mind, since we are going to have a much more detailed discussion with them next week.
For the strategy, I think what is important to understand is we position ourselves quite differently with EGRIFTA. As you know, we have only one product. 100% of the Company is behind the product. So we have to make sure that we'll have at all levels dedicated teams to cover all issues.
For example, reimbursement -- we have a team working on that. We have, of course, our full sales force now in place. We have our hub that is fully dedicated to EGRIFTA as well. So we have a very personalized approach with the physician and with the patients.
So we are very focused, and we have seen the result of that in reimbursement. Up to now we have a very, very high rate of reimbursement with our product because we have a personalized approach, and we take care of each patient. If they have issues, we try to solve that. And we have success doing that.
What is different also, maybe, is the positioning of the product -- the messaging that we are using. And if you go on corporate presentation, you will see we want to highlight the benefit of treating VAT. This is an important -- our drug is not just a cosmetic drug. It takes care of a very serious issue, and we want to highlight that to physician and patient.
So we have an approach that is a little bit different than what have been used in the past. And we think we are going to have success with that. And we are seeing that today in the growth of the patient base.
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Doug Loe, Euro Pacific Canada - Analyst [4]
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That's great feedback. Thanks very much.
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Operator [5]
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Andre Uddin, Mackie Research Capital.
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Andre Uddin, Mackie Research Capital Corporation - Analyst [6]
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Good morning, Luc. Just actually wanted to find out where the patient numbers are for EGRIFTA right now?
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Luc Tanguay, Theratechnologies Inc. - President, CEO, and Director [7]
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As you know, we don't have the real prescription. What we are seeing, of course, is what the pharmacies are buying. And I mentioned in the past -- and if you go on our corporate presentation, you will see that we need 650 patients to be breakeven in terms of EBITDA. And I think we are very close to that in the last quarter, and it's still growing. So it's really going in the right direction.
If you look at some funny numbers that are available on Bloomberg, we are probably around 130 or 140 script per week. Those are underestimated by -- we estimate -- by 20%. So it means that today we should be over 650 patients. That's what we can see for now. As you know, I don't provide any guidance for Q2, but I feel positive about being able to make history for Thera in the quarter.
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Andre Uddin, Mackie Research Capital Corporation - Analyst [8]
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All right. Thank you.
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Operator [9]
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Neil Maruoka, Canaccord Genuity.
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Neil Maruoka, Canaccord Genuity - Analyst [10]
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Hi, Luc. Maybe just a follow-up on Andre's question. I think last quarter you had said that there's 800 patients that were in the process of applying to get on EGRIFTA. Can you describe how that number -- I know it's only been a couple of months, but can you describe how that number has evolved; how many patients have been able to get on EGRIFTA and be approved for reimbursement; and maybe how many more have moved into that process?
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Luc Tanguay, Theratechnologies Inc. - President, CEO, and Director [11]
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Okay. Things I could say is this number have grown significantly. We are probably 25% more patients today than what I mentioned last quarter. So we should be close to 1,000 patients today in the process.
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Neil Maruoka, Canaccord Genuity - Analyst [12]
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Okay. And that includes -- net of the patients who have been improved to move on to EGRIFTA?
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Luc Tanguay, Theratechnologies Inc. - President, CEO, and Director [13]
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You mean the ones that are already on the drug, do you mean? That's what you mean?
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Neil Maruoka, Canaccord Genuity - Analyst [14]
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Yes -- over the last two months has been approved to move on to the drug?
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Luc Tanguay, Theratechnologies Inc. - President, CEO, and Director [15]
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We estimate it's taking approximately a month and a half from the time of the prescription to being approved by insurance company. So today we should be close to the number I mentioned last quarter when I mentioned the number of patients in the system. So we should be close to 800 patients -- between -- estimate is between 700 to 800 patients today.
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Neil Maruoka, Canaccord Genuity - Analyst [16]
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Okay. Perfect. And just a question on the quarter: your R&D expenses seem to be a bit lower than what we had expected. Can you talk about where you see the expenses for those two trials going over the next few quarters and how long those expenses should remain at that level?
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Luc Tanguay, Theratechnologies Inc. - President, CEO, and Director [17]
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I think what we have seen in the first quarter is a real economy. We didn't spend as much as expected, probably because of the number of patients in the study didn't increase as much as we thought for that quarter.
But I think we will stay in line for the next quarter. It will increase; and we hope it will, because it means that there will be more patients into both of those studies, so it should increase. But what we save in the first quarter should stay there.
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Neil Maruoka, Canaccord Genuity - Analyst [18]
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Okay. Great. Thank you.
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Operator [19]
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(Operator Instructions) There are no further questions at this time. Mr. Boucher, I'll turn to call back over to you.
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Denis Boucher, Theratechnologies Inc. - VP, IR [20]
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Thank you very much. As there are no further questions, this concludes our conference call for our first-quarter financial results this morning. I would like to thank everyone for being on the call. Have a very pleasant day.
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Operator [21]
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Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
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