INVA
#Good afternoon, everyone, and thank you for joining us.
With me on the call today is <UNK> <UNK>, our Chief Executive Officer.
On today's call, <UNK> will review the highlights from the quarter, and I will review our financial results.
Following our comments, we will open up the call for questions.
Earlier today, Innoviva issued a press release announcing recent corporate developments and first quarter financial results.
A copy of the press release can be found on our website.
Before we get started, we would like to remind you that this conference call contains forward-looking statements regarding future events and the future performance of Innoviva.
Forward-looking statements include anticipated results and other statements regarding Innoviva's goals, plans, objectives, expectations, strategies, and beliefs.
These statements are based upon the information available to the Company today, and Innoviva assumes no obligation to update these statements as circumstances change.
Future events and actual results could differ materially from those projected in the Company's forward-looking statements.
Additional information concerning factors that could cause results to differ materially from our forward-looking statements are described in greater details in the Company's press release and Form 10-K for the year ended December 31, 2015, which is on file with the Securities and Exchange Commission, and Form 10-Q for the quarter ended March 31, 2016, to be filed with the Securities and Exchange Commission.
Additionally, adjusted EBITDA and adjusted cash EPS, two non-GAAP financial measures, will be discussed on this conference call.
A reconciliation to the most directly comparable GAAP financial measures can also be found in our press release.
I would now like to turn the call over to <UNK> <UNK>, our Chief Executive Officer.
<UNK>.
Thank you, Eric, and good afternoon, everybody.
Q1 2016 was another strong quarter for Innoviva, which included share and volume gains for both products, positive earnings and cash flow, and a continuation of our share repurchase program.
In particular, we are pleased with the performance of both BREO and ANORO in the US, where prescriptions and market share reached all-time highs.
According to IMS, BREO's TRx market share is almost 9% and ANORO was approximately 7%.
During the first quarter of the year, we saw an acceleration in BREO's market share growth, as the brand gained over 2 percentage points of TRx.
These market shares gains are largely due to improved collaboration productivity and to the successful work of the commercial teams in building BREO and ANORO towards becoming leading global respiratory franchises.
As discussed during our February results call, we expect to see quarter-over-quarter volatility in reported sales compared to the underlying TRx performance on an ongoing basis.
This volatility is related to a number of non-demand factors, such as changes in wholesaler inventory levels, customer mix, accounting reserve screwups, couponing levels, et cetera.
For example, during Q4 2015 this volatility produced a positive effect on revenues, with reported net sales outpacing prescription volume growth, while in Q1 prescription volume growth outpaced reported revenue growth.
As a result, we believe metrics that focus on underlying demand, such as TRx and NBRx prescriptions and changes in market share, are important analytical tools to consider in addition to quarterly revenues when assessing our progress of our medicines.
I'll now turn to our program updates.
RELVAR/BREO is our lead respiratory program, partnering with GSK for the treatment of patients with asthma and chronic obstructive pulmonary diseases, or COPD.
It is a combination inhaled respiratory medicine consisting of vilanterol, a long-acting beta2 agonist, or LABA, and fluticasone furoate, an inhaled corticosteroid, or ICS, both delivered in the ELLIPTA dry powder inhaler.
First quarter 2016 net sales for RELVAR/BREO were $161.9 million, up from $59.9 million in the first quarter of 2015 and from $154.7 million during Q4 2015.
According to GSK, this increase was driven by higher product volumes and market share, offset by seasonal channel inventory fluctuations.
Additionally, during our February call we noted that Q4 2015 revenues were favorably impacted by an accounting screwup booked by GSK that would not recur during Q1 2016.
According to IMS, TRx prescription volumes in the US increased significantly during Q1 compared to the fourth quarter of 2015, up approximately 37% quarter over quarter.
We believe this growth is primarily driven by further improvements in the US sales and marketing activities, the approval of the asthma indication earlier in 2015, and the continuation of the BREO asthma DTC campaign.
Since the US asthma launch in May 2015, IMS reports that BREO TRx and new-to-brand growth have outperformed the LABA ICS market an average compound weekly growth by approximately 2.4% and 2.1%, respectively, through the end of Q1.
We also remain confident in the growth potential for BREO, due to continued strength in new-to-brand prescription performance.
For example, according to IMS, in the week ending April 15 new-to-brand market share increased to 14.8% overall and to 27.1% for pulmonologists.
As we have previously mentioned, we believe that new-to-brand market share is an important forward-looking indicator of the potential growth trajectory of these products.
As a result, we believe BREO is well positioned for a solid year in 2016.
Our second program, ANORO, is a combination dual bronchodilator medicine for the treatment of COPD, consisting of the LABA vilanterol and a long-acting muscarinic antagonist, or LAMA, umeclidinium.
Total net sales for ANORO during the first quarter of 2016 were approximately $48.1 million, compared to $17.7 million in the first quarter of 2015 and to $45.4 million in the fourth quarter.
Sales of ANORO were driven by higher TRx prescription volumes of approximately 23% in the US market, offset by seasonal reductions in distribution channel inventories compared to the fourth quarter.
Overall, we remain optimistic about the long-term potential for both products and look forward to the upcoming clinical study results in the Salford Lung Study of RELVAR in COPD.
Finally, on a personnel note, last week we made a filing that George Abercrombie, our Senior Vice President and Chief Commercial Officer, announced that he was retiring.
I am pleased to let you know that we will be updating this filing shortly to reflect that George will remain with Innoviva in his current capacity.
I'm extremely pleased with this outcome, as George and his organization have contributed significantly to the positive improvement in our relationship with GSK.
Now, I will turn the call back to Eric, to review our first quarter 2016 financial results.
Eric.
Thanks, <UNK>.
We are starting 2016 with a good first quarter in terms of financial performance.
Total revenues included $27.4 million in royalties earned, a 171% increase over the first quarter of 2015, offset by $3.2 million of net non-cash amortization expenses and other revenues.
Royalty revenues included $24.3 million for BREO and $3.1 million for ANORO.
The positive impact of currency movements between the fourth quarter of 2015 and the first quarter of 2016 on our revenues from non-US markets was slightly less than 1%, overall.
The long-term growth trend in our royalty revenues remained strongly positive in the first quarter.
Looking at the prior seven quarters, on average our royalties earned have grown at a compound rate of approximately 36%, which reinforces our confidence in the prospects of the Company for 2016.
Total operating expenses in the first quarter of 2016 were $6.6 million, compared to $6.2 million in the first quarter of 2015, representing a slight increase in expenses, mostly associated with customary public company activities in the first quarter of the year.
On an annual basis, we maintain our guidance level for operating expenses of R&D and G&A costs before stock-based compensation accruals in a range of between $18 million and $20 million.
During the first quarter of 2016, we repurchased approximately $25.4 million of common stock, at an average price of $10.35 per share.
Since the start of the $150 million repurchase program, we've now repurchased a total of $50.2 million of stock.
We continued to generate positive and growing cash flow from our operations in the first quarter of 2016.
Income from operations increased to $17.5 million, compared to $0.7 million in the first quarter of 2015.
And adjusted EBITDA more than tripled, to reach $22.9 million, compared to $6.2 million in the first quarter of 2015.
Looking forward, we are initiating the reporting of adjusted cash EPS, which we believe provides useful information about a company's core operating performance and cash return on investment.
For the first quarter of 2016, our adjusted cash EPS was $0.09 per share, up significantly compared to an adjusted cash EPS of negative $0.05 per share in the first quarter of 2015.
Cash, cash equivalents, short-term investments, and marketable securities totaled $168.2 million as of March 31, 2016.
Additionally, we had $27.4 million of royalty receivables from GSK at the end of the first quarter, which puts us in a strong liquidity position for the remainder of 2016.
And now, I'd like to turn the call over to <UNK> for final closing comments.
Thanks, Eric.
In summary, we had a very positive first quarter of 2016, with increased prescription volumes, higher market share, and continued optimization of commercial efforts for both products.
As a result, we remain optimistic about the long-term potential of our product portfolio.
Our primary focus in 2016 remains the optimization of the commercial success and global rollout of BREO and ANORO and believe that both products have significant untapped commercial potential.
There are many exciting developments happening here, and we remain optimistic about the future prospects of the Company.
I'd now like to turn the call over to the conference facilitator and open the call for questions.
So, to the first part of your question, I think we're feeling pretty good today about BREO and the trajectory of the scrips.
As you take a look at the underlying demand, which is really our primary focus as opposed to the actual revenue dollars each quarter, we had a pretty strong quarter.
As I think I mentioned earlier, we were up 37% in terms of TRx scrip growth from this quarter, looking back to Q4.
So, the underlying trends are very solid.
We've been picking up market share at a rate of about 2% to 2.5% depending upon your starting date here of Q4 to the end of Q1.
And so, we continue to see nice gains across there.
We mentioned some of the big growth factors that are happening there.
One very big important point ---+ I mentioned this last quarter and I will highlight it again ---+ is quite a bit of improvement happening in GSK's US sales and marketing operations.
That group is really performing well, and I think that is a big piece of what's happening.
In addition to that, of course, DTC started here in Q4.
As you know, DTC takes several months to really come up to speed.
And so, we're just starting to see the full impact of that now.
We expect that to continue to deliver here, going forward.
Asthma was launched less than a year ago.
So, I would put asthma very much into the early stages of launch.
There also is sort of a treatment paradigm that a lot of doctors follow, which is, by getting comfortable in asthma they get comfortable in COPD.
So, it's certainly possible that we could see some halo effect from that.
Additionally, recently there was an approval for the open triple.
So, this is a combination of BREO on top of INCRUSE.
That is a detail that GSK is doing now.
And again, we would expect to see additional growth from that.
So, overall, the fundamentals of the market look pretty good.
The execution of the sales and marketing teams is really kicking into gear here.
And I would add on top that at the steering committee level, at the leadership level, the relationship with GSK, the teams have been quite productive and have really implemented a number of important changes in a variety of areas.
So, we look forward here with a fair degree of confidence.
Finally, you had asked about the conversion of new-to-brand scrips into TRx's.
This is a very important metric for us.
If you look historically, you're going to see to date that the NBRx market share, the new-to-brand market share, is converting into TRx market share in the six- to 12-month time frame.
Today, the NBRx is more than double where we are with TRx.
And so, again, one would assume, if history repeats itself, that implies a significant amount of growth, looking forward.
And then, potentially even a little-farther-looking-forward metric is where you look at the market share for NBRx's with pulmonologists, which is again significantly higher than the new-to-brand, in general.
So, all of our indicators here suggest that we have quite a bit of runway left in front of us here.
I think the final piece I would add, patient feedback on BREO and the device has been very, very good.
Andrew Witty noted it on his last call.
We hear very, very good things about the patient experience with the medicine.
So, overall, I think we feel very good.
The second part of your question was with regard to ANORO and STIOLTO.
The message I have around ANORO and STIOLTO I think is very similar to what I've mentioned the last couple of quarters.
This has been much more of a physician education oriented effort I think probably than I certainly had anticipated off of the start.
The standard treatment paradigm frequently for many doctors is to start on a single-agent LAMA.
And education is pretty important to help them understand the benefits of going from that idea of starting out a LAMA to starting with a LAMA/LABA.
So, that has been probably a little slower than I had initially anticipated.
If you look at the relative market shares of STIOLTO and ANORO, looking at the date from launch, you're going to see very similar trajectories.
ANORO on a weeks-from-launch curve looks slightly higher than STIOLTO but I would say they're both fairly similar, overall.
So, this is probably going to be a little bit longer-term effort in terms of building that brand perhaps than I had initially thought, given some of the characteristics of the product.
So, I would call that more of a focus on physician education, particular focus on primary care doctors.
So, more work to do on ANORO, probably more confidence on BREO ---+ is the summary.
I don't have a great metric for you on that one.
That is not a piece of information that we have.
As you probably recall, INCRUSE is GSK's product.
And so, we have less visibility to what's happening there.
I will say that I am and have been a long-time supporter of INCRUSE, because one of the frequent pieces of feedback that you would hear doing market research on patients who were taking SPIRIVA, which is the single-agent LAMA from BI, was that even though many patients were taking it primarily to deal with shortness of breath, many of them were still feeling shortness of breath.
That was one of the primary complaints on that.
And so, it's not unexpected that patients on single-agent LAMAs would progress in their therapeutic needs.
And a very logical next step for a patient going from a single-agent LAMA would be to go to ANORO, where you have a combination LAMA/LABA medicine which is going to provide statistically superior bronchodialation.
And if a patient is already comfortable and familiar with the ELLIPTA device and likes the ELLIPTA device ---+ and as I mentioned, all of the feedback I have seen on that has been very positive ---+ the next logical step would be to maintain the same device and go ahead and step up to ANORO there.
So,we have always assumed that that would be beneficial, in terms of long-term growth prospects for ANORO.
And it could potentially facilitate the further uptake of BREO, as well, as I mentioned, with the open triple.
That is, again, adding BREO on top of INCRUSE.
And so, as that promotional effort continues to get additional exposure and doctor education, we think that that could drive additional sales of BREO, as well.
So, I wish I could give you some really hard metrics.
Those are not something I have a lot of visibility towards.
But we have always looked at INCRUSE as facilitating the uptake of our products here, and it's something that would be very important in the overall portfolio.
So, as you probably know, there are two studies out there.
There's a lung function one, which will be reading out this year.
The primary focus of that is on FEV1.
Our best understanding of the regulatory requirements is that that potentially will be sufficient outside the US, potentially.
Inside the US, the guidance that we've been operating under is that an exacerbation study was required.
And so, that would be with ---+ adding impact.
[Through] that impact right now is currently anticipated to finish up late next year.
So, the best possible expectation, I would say, would be what we've heard from the FDA, which is we need both of those studies.
Whether that ultimately proves to be true or not, we'll have to wait and see.
But I operate under the assumption that, historically, the respiratory division has been pretty predictable in terms of what they were looking for.
So, the impact study, the way it's designed is to compare the closed triple versus BREO and versus ANORO.
The study is towered so there's roughly twice as many patients on BREO as there are on ANORO.
And that was to account for the expectation that the addition of steroids would probably provide a little additional exacerbations coverage relative to medicines that did not have steroids.
And if you were just to go back and look at a guidance of multiple therapeutic classes, you're going to see that you would need to show superiority on both arms.
So, that would be a successful study if you showed an exacerbation benefit on both of the arms.
Whether that ultimately is required or not is hard to say.
I'm just ---+ let's say the expectation that you would need to show superiority and an exacerbation benefit versus BREO and versus ANORO is our going-in expectation on that.
So, we'll have to see how that all shakes out.
I think there is some additional data that came in subsequent to starting this study, which potentially adds some additional wrinkle to it, which is the results of the FLAME study run by Novartis, where they showed the LAMA/LABAs have a pretty significant impact on exacerbations.
And as a result, it's possible that the closed triple versus ANORO arm could be a little tougher comparison that we had initially anticipated.
But we'll have to wait and see what the data looks like.
I don't remember the exact numbers, but you're right.
But again, I don't recall the numbers, actually.
All right.
Thank you very much, Operator.
And thanks, everyone, for joining the call.
Have a good day.
