EXHIBIT 99.1
CUBIST PHARMACEUTICALS, INC. (CBST)
September 17, 2002, 10:00 am CT
Moderator: Tom Dietz
Operator: At this time I would like to welcome everyone to the
Pacific Growth Equities conference with Cubist
Pharmaceuticals. All lines have been placed on mute to
prevent any background noise.
After the speaker's remarks there will be a question and
answer period. If you would like to ask a question during
this time simply press star then the number 1 on your
telephone key pad. If you would like to withdraw your
question press the pound key.
Thank you I would now like to turn the call over to Dr.
Tom Dietz. Mr. Dietz you may proceed.
Tom Dietz: Thank you welcome to all of you on today's conference
call. I'm Tom Dietz. I'm the Director of Research here at
Pacific Growth Equities and the Head of the Biotechnology
Research Team.
We're pleased to have on today's call several of the
members of Cubist Pharmaceuticals senior management team.
On this morning's call will be Dr. Scott Rocklage,
Chariman and CEO, Mike Bonney, President and COO, Tom
Shea, CFO, Oliver Fetzer, Sr. VP of Business Development
and Jennifer LaVin, the Senior Director of Corporate
Communications. Welcome to the Company.
As a brief background Cubist is a late-state emerging
pharmaceutical company focused in the anti-infective
space. Cubist's current market cap is approximately $140
million. The company had cash of approximately $195
million as of the end of Q2 of which debt is approximately
$165 million.
Pacific Growth Equities estimates for Cubist's 2002 fiscal
year burn is $83 million. The Company's lead product is
Cidecin(R). It's a cidal antibiotic being developed for
serious Gram-positive infections.
Cidecin(R) produced positive Phase III data in two
double-blind placebo controlled international Phase III
trials in complicated skin and soft tissue infections, but
did not achieve success in studies in community-acquired
pneumonia.
Recently Gilead Sciences and Cubist parted company for a
European marketing distribution deal and a number of
questions are being asked about the viability of
Cidecin(R) and Cubist plus the unsuccessful cap study and
the Gilead deal termination.
Cubist's management has been kind enough today to offer
their time to answer questions regarding these topics. I'd
like to start with a few questions from my team and then
open the call up for the other conference call
participants.
Scott thank you again for your team being available this
morning.
Scott Rocklage: You bet.
Tom Dietz: My questions start out with three broad areas. The first
is and I'll ask these and let you answer after each one
rather than going through all three. The first
is could you explain in greater detail why Gilead and
Cubist's parted company.
Why did they chose not to go forward with a single
indication filing in Europe when Cubist made the decision
to do so in the United States and now in Europe, and could
you put that answer in light of any Cubist's discussions
with European regulatory authorities and the competition.
Scott Rocklage: Sure. Really the whole Gilead alliance was driven
initially by the ability to align the Cidecin(R)product
profile with the marketplace in which the current Gilead
products in Europe, in this case AmBisome(R), was focused.
As we began looking at the Cidecin(R) package post SST and
cap clinical trial news, we understood from market
research that there was a change in sales force target
audience.
This change was driven by the fact that there was a
significant increase in perceived value of the drug by
surgeons and Gilead did not have a force that's directed
towards the surgical area nor was considering investing in
that particular area.
So that's one set of issues. The second set of issues
related to regulatory issues which were focused on which
are the potential rapporteur countries for a product like
this and we looked at the UK, we looked at Sweden and we
looked at France, because Gilead has experience with and
significant loyalty to France.
And our perception was that France embraced the product in
general but desired more clinical data and it was also our
perception that Sweden and the UK response was much more
accepting than the French response.
But Gilead was unwilling to really consider rapporteur
countries other than France and that led to a potential
delay in filing if we kept it in the form of a
partnership.
So the consequence of that, we decided together to do
what's best for Cidecin(R) and the respective companies,
and Cubist wanted to regain both strategic and operational
control in Europe.
So we're in a position now where we can repartner the
European rights potentially down the road but we have
committed to filing the European NDA ourselves and not
look for a partner in that process.
Tom Dietz: Well, considering Gilead's commitment in the beginning and
the dollars that were put into Cubist, why would they now
be willing to relinquish that with no rights back to them
for having paid money but having done nothing at this
point?
Scott Rocklage: Well, the money that were invested today were
based upon upfront money and then of course milestones
that we achieved along the way, so those were obligated
according to the contract.
But in order for Gilead to successfully market this drug
in their view they would want to go ahead and use France
as a rapporteur. We certainly didn't want to commit to
that and they would have to invest in a sales force that's
not their current target focus.
And combining the need for that investment and the new
economic model that resulted as a consequence of not
having the community-acquired pneumonia data available as
part of the launch and ultimately as a bridge to other
indications such as Nosocomial Pneumonia, and the fact
that there was tremendous success being enjoyed by Gilead
with tenofovir.
They wanted to commit to drill down in those areas of
antivirals and not make the investment in going into a new
area of antibacterials that they couldn't appropriately
leverage with the current sales force.
So it was the combination of all of these issues that lead
to us mutually to decide to do what's best for Cidecin(R)
and not to continue to just leave the collaboration
hanging and wait for some new data down the road and then
try to reengage Gilead.
We felt it was more appropriate to move forward and
develop the compound - develop the regulatory package
ourselves, get it filed and determine the best
commercialization strategy with a partner who is willing
to commit to that process.
Tom Dietz: And you have participated or members of your team in
meetings with regulatory authorities in Europe?
Scott Rocklage: We participated in the co-meetings with Gilead in both
France and Sweden and have held our own meetings with the
UK authorities.
Tom Dietz: Okay, so in regards to complicated skin and soft tissue,
can we break on to that and talk about why you think a
single indication is supported by the FDA? How did they
communicate that to you and is there any single indication
anti-infective precedent approvals that you can point to,
and I guess as part of that, is there anywhere that
Cubist's NDA filing and registration strategy varies from
a standard for anti-infectives?
Scott Rocklage: Well, let me deal with that one first perhaps in that, as
you know, all antibiotic trials are based upon proving
non-inferiority. That is a statistical goal that's
mandated by the FDA but that has certain statistical
requirements associated with that.
The FDA has changed some of those statistical requirements
over time, actually even in the course of a particular
development programs and more recently they've become more
flexible with some of those statistical requirements.
So our plan is for the development of this drug is in
concert with what the FDA requires for antibiotic trials.
There's nothing that significantly differs from what you
consider to be the standard in this area.
Have any other products been approved on one indication?
The most recent example of that would be Cancidas, the
anti-fungal from Merck that's an IV delivered drug that
was approved a little over a year, year and a half ago for
refractor aspergillosis.
And so that was an example of that, and if you go back to
the original Zithromax approval for Pfizer, that was also
based upon respiratory tract only and expanded over time.
So there's been a couple of examples, one historical and
one quite recent.
In terms of what's going into the NDA package, there will
be over 1200 patients included in the safety database.
They'll be Phase I special population studies that we've
spoken of in the past that range in everything from
studying how Cidecin(R) may or may not interact with other
drugs, how does
Cidecin(R) perform in an arena of compromise renal hepatic
function, how does Cidecin(R) perform when patients are
elderly or when they're obese and others, as well as Phase
II supportive studies and the Phase II bacteremia study.
The Phase III pivotal trials for efficacy and complicated
skin and soft tissue as well as the classical microbiology
manufacturing and risk benefit analysis sections.
So that's the primary content of the NDA. We're on track
for an end of year 2002 filing and do not foresee any
changes to that plan at this current time.
Tom Dietz: And two points, the first part of that question was how
did the FDA communicate to you regarding the support for
the filing?
Scott Rocklage: At the time that we ended up going back to the FDA after
community-acquired pneumonia results when we followed up
with them, we asked the question--was the safety database
of enough dimension to allow for the evaluation of safety
and what's the feeling from the agency regarding filing on
complicated soft tissue with the supported data that I
just outlined.
The feedback from the agency both in terms of verbal
feedback and written feedback was affirmative that the
safety database was going to be of a dimension to allow
for the evaluation of safety and the risk benefit analysis
appeared to be in balance to evaluate the efficacy of the
drug around complicated skin and soft tissue combined with
the supportive studies that I just mentioned.
Tom Dietz: Okay great. A third area that's really been brought up
here is as it relates to Cubist's balance sheet, you know,
our model for Cubist has you ending fiscal year '02 with
approximately $150 million in cash and we're anticipating
that the fiscal year '03 burn rate's going to increase due
to launch costs for Cidecin(R) and a lack of Gilead
milestones.
There's an argument being made that Cubist may be in a
position of either gaining approval for Cidecin(R) in late
'03 but lacking the cash resources for launch or on the
other hand Cidecin(R) not gaining immediate regulatory
approval and the Company lacking resources to move the
pipeline forward.
Can you walk us through whether the Company has - what
your plans are to address those concerns?
Scott Rocklage: Yes we will. Our current burn is approximately $20 million
per quarter in 2002 and our end of year cash projections
is approximately $150 million. We are currently building a
2003 operating plan that would yield north of $75 million
to $80 million on the balance sheet at the end of year
2003.
This plan would include a Cubist's led launch of
Cidecin(R) in the U.S. as is the strategy for the launch
of the drug, potential partnerships for Cidecin(R) in
Europe and Asia and possible expansion or addition of
research fields like the deal with Novartis.
We have enough cash to launch Cidecin(R) and our operating
plan does not require any additional financings until
after the Cidecin(R) U.S. launch.
Tom Dietz: And does that include moving the additional programs in
the pipeline like your CAB-175 forward?
Scott Rocklage: That includes moving both pipeline preclinical, late
preclinical, early clinical programs forward throughout
2003 as well, both OCTX as well as CAB-175 will be fully
funded under the plan I just outlined to you.
Tom Dietz: Great.
Scott Rocklage: As far as other issues associated with the financial
structure of the Company, the debt structure is a
convertible debt that's based upon $39 million note due in
2005 and $165 million convert due in October 2008.
Tom Dietz: Great Paul can you open up the call to questions?
Operator: Yes sir at this time I would like to remind everyone in
order to ask a question please press star then the number
1 on your telephone key pad. One moment please for your
first question.
There are no questions at this time Dr. Dietz.
Tom Dietz: Okay Scott I have a few more questions here. Can you walk
us through the market research that you did that indicated
that formulary committee members and physicians did not
view a single indication label as a deterrent to putting
Cidecin(R) on formulary or using the drug in clinical
practice.
Scott Rocklage: Yes we'd be happy to do that and I'm going to ask Mike
Bonney who coordinated those efforts to speak to that
issue.
Michael Bonney: Hi Tom its Mike. We went out soon after the results of the
first community-acquired pneumonia trial were in and spoke
with a group of both infectious disease specialists as
well as PharmDs who have formulary committee
responsibility and put to them the profile of the drug
based on the filing data that Scott's already articulated
and asked them what their reaction would be from a
formulary standpoint.
We also tested other profiles that included a profile with
the community-acquired pneumonia etcetera and what we
found was that there was very little
change in their perspective in terms of which formularies
this product would go on or how it would be reserved on
the formulary, if at all, based on this negative CAP
result.
The user community clearly communicated that they did not
see this as a drug for community-acquired pneumonia but
rather a drug for serious Gram-positive infections in the
hospital.
So with the combination of that information plus the
feedback from the agency that Scott's already articulated
we put our heads down on the task of assembling the NDA
and getting it ready for filing by the end of this year.
Tom Dietz: Maybe you can take off from that comment and tell us a
little bit about what you think the product labeling might
read for here and what kinds of information might either,
you know, increase or decrease in the medium market
opportunity for Cidecin(R).
Michael Bonney: The label will be for complicated skin and skin structure
infections with a host of Gram-positive organisms--primary
among them are both methicillin sensitive and methicillin
resistant staph plus a number of strep species that also
cause serious skin and soft tissue infection.
What we're really going to be focusing on from a launch
standpoint is that will be consistent with the label is
focusing this drug as a staph drug to replace vancomycin.
As you know vancomycin is the staph drug that is used now
in almost 2 million patients a year in the U.S. and this
label will line up very nicely against vancomycin in the
treatment of staph infections.
Remember as well that this label that we're applying for
at the end of this year is not the end of the development
of the label for this drug. We have an on-going trial
looking at patients with both endocarditis and bacteremia,
as well as an ongoing trial looking at head-to-head with
linezolid looking at patients with vancomycin-resistant
enterococci.
As these trials come to completion and are successful we
will be supplementing the label with indications in
endocarditis as well as VRE.
Tom Dietz: Sure considering that Cidecin's(R) price point is likely
to be significantly higher than vancomycin, what do you
think will be the key selling points in order to convince
physicians to move from vanco to Cidecin(R)?
Michael Bonney: Well I think the first thing you have to understand Tom is
that there is not great satisfaction with vancomycin in
the marketplace today. It is used because it is the most
effective agent physicians have to treat in particular
MRSA but its performance is not great.
So I think that, you know, it has become a habit for house
staff to cover MRSA empirically but again the performance
is not great for this drug and that comes back loud and
clear every time you talk to physicians.
I think the key selling message is for Cidecin(R) versus
vancomycin are very simple. Cidecin(R) is a cidal drug
that is safe to use in the treatment of staph infection.
It also provides convenience for the staff in the hospital
because it is dosed only once a day.
Scott Rocklage: And a follow on to that would be related to your question
regarding price. Clearly at the end of the day we haven't
set price for this drug at this point in time but it will
be higher than vancomycin. We can commit to that.
And what we know about the performance of Cidecin(R) to
date is that we have some time based messages that
currently are being investigated to see whether they can
be tuned into pharmacoeconomic story.
We have been able to demonstrate that we have a shorter
time to cure and also a shorter time to reduce patients'
elevated temperatures to normal than comparative drugs in
our trials.
This information could easily translate into
pharmacoeconomic advantages and we're in the process of
pulling that data together so that there's strong support
for the drug price itself being more expensive let's say
than vancomycin, but still at the end of the day you're
reducing morbidity/mortality in these patients and costs
associated with their care.
So actually by paying more for daptomycin one can see a
story developing where you actually save money in the
hospital setting along the way. That is the goal and we
think we can get to that goal.
Tom Dietz: Do you think there's any inhibition from - that might be
caused by the CAP results and other companies that are
saying that you'll have difficulty either in the approval
process or on the market because of the CAP trials data?
Scott Rocklage: Well we think that feedback from regulatory authorities
and ultimate users of the drug probably has more value in
terms of those kinds of questions than what competitors
might say.
And when we talk to regulatory authorities as we've
outlined here we've found nothing to date but embracement
for continuing on with this process of
filing the NDA because they feel like this drug is needed
in the marketplace from a purely regulatory perspective.
On a market perspective in addition to the work that Mike
outlined and we performed in the spring of this year, we
continue to do significant market research in this area,
not talking to ten physicians but talking to significant
numbers of physicians to really get a sense of what is the
level of excitement about including this drug in
(unintelligible) with physician's treating this serious
life threatening disease.
We present to those physicians in this market research
study the product profile that's going to be based upon
the package label. What we find is incredible embracement
of the product based upon that profile combining the data
that's provided clinically, the microbiology spectrum and
the safety that we've been able to demonstrate to date.
So when we talk to our true audience that is regulatory
authorities first and then ultimate consumers of the drug,
we find that we have incredible support to move forward
with alacrity on getting this drug to the marketplace and
that's the Company's plan.
Tom Dietz: Okay the Company indicated that the preclinical package
for Cidecin(R) was complete somewhere around the middle of
2000 and data from the second skin and soft tissue study
was completed I believe in October of last year.
Can you give us some sense of what's been going on since
then and also some - just give us some sense of where you
are in terms of the manufacturing of the product.
Scott Rocklage: Sure the completion of our announcement of the results
from the second complicated skin and soft tissue study
last year only begins the process of completing the
analysis and writing the formal what's called Clinical
Study Reports.
In addition to that we were completing the analysis of the
two CAP trials. Those final Clinical Study Reports weren't
completed until late July this year. Contemporaneously
with those activities we were completing the Phase I
special populations' studies I mentioned earlier as well
as the reports associated therewith, the Phase II reports.
And then compiling these reports into integrated summaries
of safety and integrated summaries of efficacy as required
for a formal NDA. Those are the activities that have been
going on for the last few months.
With regarding manufacturing - activities on manufacturing
have been in the role of validating the manufacturing
process and that's the CMC section that it obviously is
critical to the ultimate approval of the drug.
So we're still on track for the fourth quarter filing
based upon all of those activities being managed
aggressively and the whole NDA team being focused on
making that happen.
Tom Dietz: Terrific. You have a compassionate use program for the
drug as well. Can you tell us who's been requesting drug,
for what indications and how have things worked out for
these patients?
Scott Rocklage: Well this emergency use program that we've had to date is
a non-advertised, non-marketed program that basically
comes about as a consequence of physicians that know about
the potential performance of daptomycin and then
make requests to us for certain kinds of patients that
they feel dapto might be appropriate for.
We've received roughly 30 to 40 calls from physicians
under this "emergency use" access.
Most of those have come in the form of linezolid or
Zyvox-resistant VREs, some small number of
linezolid-resistant staph as well.
We've provided Cidecin(R) to about half of those emergency
requests to date and we are currently expanding the
program to a more formal treatment use protocol that
actually is under review with FDA which would allow us to
collect additional data in a more formal manner that will
ultimately be used in regulatory filings and publications.
We ultimately will consider whether this kind of program
makes sense in Europe as well.
Tom Dietz: Terrific that's the end of the questions that I have. I'm
wondering if you'd like to add anything additional that we
may not have touched on that you think is important from
your perspective regarding Cidecin(R)and U.S. and Europe.
Scott Rocklage: No Tom I think that we've hit on all the core issues.
Tom Dietz: Great well first of all thank you to the management team.
Thank you for all the conference call participants. Feel
free to follow up with either the company or myself and
you can contact me directly or through one of your sales
reps.
Again thank you very much for everyone's participation
this morning.
Operator: Thank you all for participating. This concludes today's
conference call, you may now disconnect.
END