EXHIBIT 99.3
On May 3, 2005, OSI Pharmaceuticals, Inc. (the "Company") held a webcast
conference call regarding its financial results for the quarter ended March 31,
2005 as well as an update on the Company's business. The following represents a
textual representation of certain portions of the transcript of the webcast
conference call consisting of remarks by Colin Goddard, Chief Executive Officer,
Gabriel Leung, Executive Vice President and President (OSI) Oncology, and Robert
L. Van Nostrand, Vice President and Chief Financial Officer of the Company.
OSI PHARMACEUTICALS, INC.
MAY 3, 2005
8:00 A.M. EST
[OPERATOR'S INTRODUCTION]
[COLIN GODDARD:]
Good morning everyone and welcome to our Quarterly call. Joining me today I have
Bob Van Nostrand and Gabe Leung. As you will be aware from our organizational
announcement of 21st April Bob is transitioning from his current role as CFO to
the newly created role of Chief Compliance Officer effective on 31st May, 2005
when Mike Atieh will assume the role of Executive Vice-President and Chief
Financial Officer. The change was part of a series of senior management and
Board changes that follow on from the commercial launch of Tarceva and the
recently announced acquisition of the minority interest shares in our diabetes
and obesity subsidiary, Prosidion. The changes reflect our total commitment to
strengthening and broadening the management team and board as we prepare for the
next stage of the company's growth. With Bob taking on the Chief Compliance
Officer role we have made a key change in our internal corporate governance
aligning with the internal audit and financial control aims of Sarbanes-Oxley
and in Mike we are adding a seasoned executive with considerable experience on
the commercial side of the Pharmaceutical business. Mike has formerly served as
head of government affairs, head of investor relations and treasurer of Merck
before moving over to Merck/MEDCO where he held a number of positions including
head of Sales and Business development prior to moving on to Dendrite
International as Senior Vice-President and Chief Financial Officer. He has most
recently served as an outside director on the OSI board and Chair of the Boards
Audit Committee. Effective May 1st, we announced the appointment of Kate
Stephenson to our Board of Directors and to the position of Chair of the Boards
Audit Committee. Kate is currently treasurer of Nortel and has, in that role,
acquired extensive experience on the corporate governance side and is well
qualified to assume this role.
This morning we will have Bob provide you a summary of the quarter's financials
before handing over to Gabe who will provide more color to the Tarceva launch. I
will then come back and discuss other aspects of the business, including the
other elements of our organizational changes, after which we will be happy to
take your questions. Firstly then, I'll pass you over to Bob who will provide a
summary on the quarterly numbers.
[BOB VAN NOSTRAND:]
Thank you Colin. Good morning everyone. Before I start with a review of our
financial results for our First Quarter ending March 31, 2005, I would like to
remind you that we will be making forward-looking statements relating to
financial results and clinical and regulatory developments on the call today.
These statements support the development of many events that are outside of
OSI's control and are subject to various risks that could cause the results to
differ materially from those expressed in any forward-looking statements. I
would refer you to our SEC filings for a detailed description of the risk
factors affecting our business.
[BOB VAN NOSTRAND DISCUSSES QUARTERLY INFORMATION.]
With more traction in Tarceva sales, we are tightening our total revenue
guidance for 2005 to be between $130 million and $170 million from our previous
guidance of $105-$170 million. We are maintaining our R&D and SG&A guidance of
$120-$130 million, and $90-100 million, respectively, and have also updated our
loss per share estimates for the year to range between $1.05 and $1.85. We
continue to target profitability by the end of 2006.
I will now hand over to Gabe who will provide some more detail on our progress
with Tarceva this quarter.
[GABE LEUNG:]
Thank you Bob. As Bob mentioned first quarter net sales of Tarceva recorded by
Genentech were $47.6 million up from the $13.3 million in the prior quarter
following the launch of the product on November 22nd, 2004. Our partner also
implemented a 15% price increase on April 5th, subsequent to the quarter,
raising the price to wholesalers for a 30 day supply of Tarceva in the U.S. to
$2,330 for the 150mg tablets, $2060 for the 100mg tablets and $750 for the 25mg
tablets. Genentech continues to run a tight inventory at the wholesalers and we
do not believe that either inventory or the pending price increase had any
material impact on these impressive first quarter sales numbers.
The decision to take this price increase occurred after thorough analysis of
multiple factors, including long-term value and investment needs for the
product, the reimbursement and pricing environment, competitive conditions, and
the product's proven survival benefit. We believe this price to be fair as
Tarceva is at least 40 - 50% less expensive on a cost per month basis when
compared to other drugs approved for 2nd line non-small cell lung cancer
treatment, which are all conventional chemotherapy drugs. The oral route of
administration and favorable side effect profile of Tarceva is such that
additional infusion costs or supportive care costs often associated with
traditional chemotherapy do not apply for this agent further enhancing the
relative cost effectiveness of Tarceva. We, together with our partner Genentech,
will continue to monitor the market to ensure that Tarceva is priced fairly and
appropriately in the market.
Tarceva continues to make impressive in-roads on the oral EGFR inhibitor market
following launch. IMS data for the week ending April 22nd indicates that Tarceva
has a 90% share of new patient starts, a number that has been consistently north
of 85% for over two months. Using the
more traditional IMS datasets Tarceva has succeeded in capturing over 80% of new
scripts (a number that includes some refills as well as new patient starts) and
over 70% of total scripts. This has been achieved in just 5 months following
launch. In addition, the total number of weekly EGFR scripts since launch is
about 10% over the total number of scripts in the weeks prior to Tarceva
approval indicating that we have grown the overall market for the class during
these months. Remembering that IMS market data does not capture a full picture
of the market, we are pleased that the data reinforces that previously reported
by our partners Genentech using another service (Verispan) and is backed up by
survey data from Oncology Inc. This survey data looks at the use patterns for
Tarceva in NSCLC in the hands of oncologists. Using three month rolling data
effective for March (that is, January through March averages) Tarceva as a
single agent is already the leading treatment regimen used in the third line and
beyond setting (a 31% share) and is used more frequently than any other regimen
in the second line setting (an 18% share versus single-agent Taxotere 9% and
single-agent Alimta 14%). Going forward, we will continue to emphasize Tarceva's
survival advantage in second-line NSCLC. Our messages are focused on the fact
that Tarceva's efficacy profile is comparable to other second-line options,
while our favorable overall profile makes Tarceva a desirable alternative to
cytotoxic therapy for patients.
Commercial health plan coverage and reimbursement of Tarceva remains excellent.
The vast majority of commercial payers have already made coverage decisions on
Tarceva, which has resulted in more than 85% of those prescriptions being
approved right at the pharmacy. The reimbursement picture for Tarceva will
continue to get better with Medicare Part D coming on Board in January 2006.
In March, the Swiss health authority, Swissmedic, granted Tarceva its first ex -
U.S. approval for the treatment of patients with locally advanced or metastatic
non-small cell lung cancer (NSCLC) after failure of at least one prior
chemotherapy regimen. OSI earned approximately $83,000 in royalties from our
partner, Roche, for Tarceva product sales outside the U.S. In Switzerland,
Tarceva's price based on the exchange rate converts to about $3,498 and $2,976
for a 30 day supply of 150mg and 100mg, respectively. Our partners at Roche are
working closely with the European Health Authorities on the European Union
filing which was submitted in August 2004. As a reminder, the EU system does not
offer a "Fast Track Program" and therefore it typically takes about one year
from submission for the EU authorities to respond to a filing.
In addition to our activities in lung cancer, we announced the completion of our
sNDA submission for Tarceva in pancreatic cancer on May 2nd. Data from the PA.3
study, which is the basis for the sNDA filing, was reported at the ASCO GI
meeting in January. The data showed a 23.5% improvement in overall survival for
Tarceva plus gemcitabine versus gemcitabine plus placebo in front-line patients
with locally advanced or metastatic pancreatic cancer. Tarceva is the first
non-chemotherapy agent, and only the second drug ever, to demonstrate a survival
benefit in this disease setting. We would anticipate receiving rapid review for
this application and estimate approval by year-end, assuming a smooth and
successful review with the FDA. With limited available therapeutic choices in
pancreatic cancer we expect to achieve a strong market uptake in this setting.
There are approximately 32,000 newly diagnosed cases of pancreatic cancer in the
U.S. each year.
As Bob has mentioned we have agreed with our partners to an ongoing investment
in the global development plan. As part of this plan, we are working with the
FDA on finalizing protocol development in which patients with stage IIIb and IV
NSCLC and available tissue sample will first be treated with front-line therapy.
Patients benefiting from front-line therapy will then be randomized to either
Tarceva or placebo, while those progressing will be randomized to either Tarceva
or chemotherapy. In addition to providing an opportunity for label expansion to
the front-line setting, this important study will allow us to track patients
through the treatment paradigm while assessing their tumors for a host of
markers that may impact treatment choices in the future. Our partners at Roche
will be responsible for the conduct of this trial.
We also agreed that a Tarceva Phase III trial adjuvant program in NSCLC is a key
component to our ongoing development plans and the OSI team will be responsible
for the conduct of this trial. Elsewhere in the program, an 800 patients ex-US.
Phase III study of Tarceva in women with ovarian cancer is close to initiation.
The randomized study will evaluate carbo/taxol treatment followed by Tarceva vs.
placebo in a maintenance setting and we continue to explore Tarceva use in
combination with other targeted therapies, including Avastin.
April's edition of the Journal of Clinical Oncology featured results from a
Phase II trial evaluating Tarceva in combination with Avastin for patients with
recurrent NSCLC. Data showed that median overall survival for the 34 patients
treated was 12.6 months, with progression-free survival of 6.2 months. Data on
Avastin /Tarceva in Renal cell will also be updated amongst more than 30
abstracts accepted for presentation at the upcoming ASCO meeting on Tarceva.
These abstracts include studies on the EGFR mutation status, EGFR wild-type
status and overall EGFR expression status of tumor specimens obtained in both
the BR.21 NSCLC Phase III trial and the PA.3 pancreatic cancer trial. We
anticipate that results from all these studies will shed further light on the
question of whether it is possible, or even appropriate, to select sub-sets of
lung cancer patients for therapy with Tarceva using the available, but
unvalidated methodologies such as immunohistochemistry (IHC). Additional
abstracts include an ex.US Phase II study evaluating the efficacy and safety of
Tarceva in first-line, unselected patients with advanced non-small cell lung
cancer, a Phase II study of Tarceva in patients over 70 years of age with
previously untreated advanced NSCLC, the analysis of symptom benefits from the
BR.21 study and the exploratory phase II dose to rash study. We would also like
to congratulate Dr. Malcolm Moore from the NCIC and Principal Investigator on
the Tarceva pancreatic PA.3 trial. Dr. Moore's presentation on the PA.3 trial is
abstract #1 at ASCO.
At this year's Annual Meeting of the American Association for Cancer Research
(AACR), which was held two weeks ago, there were several abstracts presented on
behalf of the Company which included data from a comparative clinical trial on
the effects of smoking on the pharmacokinetics of Tarceva in healthy (non-cancer
patients) smokers and non-smokers. Data from the study were consistent with the
hypothesis that smoking results in a reduction in the blood levels of Tarceva
following dosing of the drug. The Company intends to pursue studies in cancer
patients in order to further explore whether an increase in Tarceva dose in
smokers will result in enhanced clinical benefit.
With that I'll hand it back to Colin
[COLIN GODDARD:]
Thanks, Gabe. Moving beyond Tarceva, in April and subsequent to the quarter, we
completed a stock-for-stock exchange resulting in the acquisition of all
minority interest shares of the Company's UK-based diabetes and obesity
subsidiary, Prosidion Limited. We continue to be encouraged by the progress of
our DP-IV program, where PSN-9301 is currently undergoing a Phase II trial and
with the progress of our late stage pre-clinical pipeline in diabetes. We are
close to signing an additional licensee to our DP-IV patent estate further
validating this piece of IP. We therefore considered it prudent to secure the
minority interest shares at this time. The acquisition of the outstanding 2.7%
of Prosidion shares was accomplished through the issuance of approximately
85,000 new shares of OSIP which represents a 0.17% dilution.
With the completion of this transaction and the continuing evolution of the
business to a more commercial footing we have implemented a series of
organizational changes including the CFO and board changes I discussed in my
opening comments. We will continue to operate two focused business teams around
our efforts in the oncology and diabetes/obesity arenas. Gabe Leung has assumed
the role of Executive Vice President and President of (OSI) Oncology expanding
his responsibility to include operational oversight of oncology R&D in addition
to the oncology business. Dr. Anker Lundemose has assumed the role of Executive
Vice President of (OSI) Prosidion our diabetes/obesity business. Additionally, a
new Pharmaceutical Development and Technical Operations Group, covering
regulatory affairs, drug safety, CMC, quality assurance, toxicology and
pharmacokinetics areas has been formed under the leadership of Bob Simon, who we
have promoted to Executive Vice President. This change allow us to better meet
these needs for both business teams. Each business team will continue to have
separate commercial, clinical and research and development efforts. We also
announced that Dr. Nicole Onetto, the Company's former Chief Medical Officer
left the Company on May 2nd to pursue other interests. Dr. Pablo Cagnoni, who
was recently appointed to the newly created position of Vice President of
Medical Affairs and Translational Research, will serve as the senior medical
officer for oncology clinical development on an interim basis pending
recruitment of a Head of Clinical Oncology. Dr. Karsten Witt will be responsible
for Drug Safety on a company-wide basis. Over in the UK, Dr. Jonathan Rachman
has joined the Company as Vice President of Clinical Development for (OSI)
Prosidion.
I would like to comment briefly on some recent developments in our pipeline
before opening up the line for questions. On the oncology side, in this past
quarter, the (OSI) Oncology team initiated a Phase I clinical study of OSI-930,
the first drug candidate to emerge from the Company's de novo cancer research
efforts over the last several years. The OSI-930 project is focused on the
identification of dual c-kit/VEGFR or KDR inhibitors. In April 2005, we also
announced that our patent application covering claims for OSI-930 received a
Notice of Allowance by the United States Patent and Trademark Office. The
resulting patent will cover the compound, compositions containing the compound,
and methods of treating cancer with the compound. The issuance of this patent
provides protection of OSI-930 until 2024.
The c-kit/KDR project has also advanced a second agent from the program, OSI-817
which is currently on IND-track. Both OSI-930 and OSI-817 are designed to
simultaneously target cancer cell proliferation and blood vessel growth, or
angiogenesis. We anticipate moving both candidates through the early stages of
development before selecting one of the two candidates for full clinical
development in cancer patients.
On the diabetes front, our (OSI) Prosidion team initiated a Phase II
proof-of-concept and dose range finding study for our Dipeptidyl Peptidase-IV
(DP-IV) inhibitor, PSN9301. In addition, we have two other small molecule drug
candidates targeting glucokinase activation (PSN105) and glycogen phosphorylase
inhibition (PSN357) which are both in late pre-clinical development and are
scheduled to enter Phase I clinical trials over the next two quarters. A second
glucokinase activator, PSN010 is scheduled to enter Phase I before the end of
the year, where, as with our kit/KDR program in oncology, we will likely adopt a
pick-the-winner strategy.
In summary, we have completed a very busy quarter. In its first full quarter of
sales, our partner, Genentech, reported $47.6 million in U.S. net sales for
Tarceva which translated into a solidly profitable first quarter for our share
of the joint business - contributing $11.7 million toward our overall revenues
of $19.1 million. We continue to manage our R&D and SG&A expenses in line with
our previous guidance. On the basis of this and continued progress, we have
updated our corporate 2005 revenue and earnings guidance to revenues of $130-170
million and a loss of $1.05 - $1.85 per share, respectively. We have taken steps
to organize the business optimally for continued growth and success and were
pleased with the pipeline progress this quarter which included initiation of a
Phase II trial for our DP-IV inhibitor PSN9301 and the initiation of clinical
development for our c-kit/KDR inhibitor OSI-930. We look forward to continued
progress through the year and, with that closing summary, I am happy to turn it
over to question.
[OPERATOR PROVIDES INSTRUCTIONS AS TO HOW QUESTIONS MAY BE ASKED.]
[MANAGEMENT RESPONDS TO QUESTIONS AND CONCLUDES THE WEBCAST CONFERENCE CALL.]