Exhibit 99.2
SAVIENT
PHARMACEUTICALS, INC.
Q3 2004 SAVIENT PHARMACEUTICALS, INC. EARNINGS CONFERENCE CALL
EVENT DATE: 2004-11-08T16:00:00 UTC
CORPORATE PARTICIPANTS:
DONALD WEINBERGER; WOLFE AXELROD WEINBERGER ASSOCIATES; INVESTOR RELATIONS
CHRISTOPHER CLEMENT; SAVIENT PHARMACEUTICALS, INC.; PRESIDENT AND CEO
LAWRENCE GYENES; SAVIENT PHARMACEUTICALS, INC.; CFO, SVP AND TREASURER
ZEB HOROWITZ; SAVIENT PHARMACEUTICALS, INC.; SVP, CMO
CONFERENCE PARTICIPANTS:
JASON ARYEH; JALAA EQUITIES; ANALYST
SERGIO WEINSTEIN; PSCGOD; ANALYST
OPERATOR
RICHARD MANSOURI; PARA PARTNERS; ANALYST
Presentation
Operator: Good morning and welcome to the Savient Pharmaceuticals Third Quarter
Earnings Release Conference Call. This call is being recorded.
At this time I would like to turn the call over to Mr. Don Weinberger. Please go
ahead.
Donald Weinberger: Thank you Jake. Good morning. I am Don Weinberger of the
Investor Relations firm of Wolfe Axelrod Weinberger Associates and I thank you
for joining us today.
Before I introduce Mr. Clement, please bear with me as I provide the requisite
"Safe Harbor" statement.
Statements in this discussion concerning our business outlook for the future
economic performance, product developments, anticipated profitability, revenues
expenses, earnings or other financial items. Statements concerning assumptions
made or expectations as to any future events, conditions, performance or other
matters are "forward-looking statements" as that term is defined under the
Federal Securities law. "Forward-looking statements" are subject to risks,
uncertainties and other factors that could cause actual results to differ
materially from those stated in such statements. Such risks, uncertainties and
factors include but are not limited to the timing of the introduction of a
generic version of Oxandrin(r), changes and delays in product and development
plans and schedules, development, introduction or consumer acceptance of
competing products, customer acceptance of new products, changes in pricing or
other actions by competitors patent zoned or licensed by us and our competitors
and general economic conditions as well as other risks detailed in our filings
with the Securities and Exchange Commission.
At this time, I would now like to introduce Christopher Clement, President and
Chief Executive Officer of Savient Pharmaceuticals. Chris please proceed.
Christopher Clement: Thank you Don. Good day to all and thank you for joining
us. I would first like to take you through the quarter we just completed and
then bring you up to date on several of our strategic initiatives. So let's go
right to the third quarter results.
The third quarter showed several good signs of a comeback from the disappointing
second quarter.
Earnings improved. Demand for Oxandrin(R) improved. Sales of Rosemont, our oral
liquid pharmaceutical business in the UK, also posted healthy year-over-year
gains. And finally, our clinical development programs to advance our two lead
drug candidates, Puricase(R) and Prosaptide are proceeding according to plan.
In the second quarter, we began the process of reducing wholesaler inventories
and the processing of our first returns of expired Oxandrin. This process
appears to have been completed here in the third quarter.
Total revenues for the third quarter were a little over $26 million, still down
from $34 million a year ago but up 50% from the immediately preceding quarter.
The shortfall from last year was due primarily from lower product sales.
Product sales from the third quarter were a bit over $24 million compared to $32
million a year ago. Sales of Oxandrin our largest selling brand were over $10
million but down from nearly $17 million last year. The decline in net product
sales was largely driven by the affects of returns of expired products and an
increase in reserves for future product returns.
In the third quarter we issued credits and increased returns reserves by nearly
$7 million. Since the first of this year, the credits and reserves for potential
product returns totaled over $11 million. We are carrying forward from the third
quarter reserves for future product returns of a little over $8 million.
On the positive front, prescription volumes for Oxandrin were down only 2% from
a year ago as we have now registered two successive quarters of growth since
reconfiguring and reinvigorating our sales organization at the beginning of this
year.
We grew prescriptions 3% in the second quarter and another 2% in the third
quarter. In fact, were it not for the nearly $7 million in reserves for the
return of expired products, we would have approached the prior year levels of
product sales and total revenues both of which suffered from the re-entry of a
generic competitor to our other U.S. brand, Delatestryl(R), in the first quarter
of this year.
On another positive note, sales of our UK-based oral liquid pharmaceutical
products grew 27% in U.S. dollars and 14% in pounds sterling.
On the expense side. Total operating expenses in the third quarter were just shy
of $30 million as compared to nearly $31 million a year ago.
Prior year costs included the completion of toxicology studies for Prosaptide
and the expense for the production of clinical supplies for both Puricase and
Prosaptide.
General and administrative costs were also down in the third quarter despite the
continuing burden for the costs of complying with certain provisions of the
Sarbanes-Oxley Act.
On the negative side, the costs of product sales increased despite lower sales
volumes due to the first year operating costs and a continuation of validation
efforts to qualify our new Israeli manufacturing operation as well as certain
reserves for excess inventories and contractual commitments primarily resulting
from the unexpected re-entry of a generic form of Delatestryl.
The aforementioned events net to a loss of $4.5 million or seven cents per share
in the third quarter compared to a gain of seven cents last year, but up
significantly from the 53 cents we lost in the second quarter of this year.
Equally important, our cash position of nearly $25 million remains up from about
$23 million at the beginning of the year.
Next, I'll provide an update on several of our strategic initiatives. As you are
well aware, we continue to believe that the market has significantly undervalued
the key assets of our company. We continue to work with our outside advisors,
UBS Investment Bank, to ensure that we are taking the appropriate steps today to
realize the improvement in valuation tomorrow.
We continue to expect generic competition for our top selling drug, Oxandrin. It
was that threat and the lack of an immediate revenue replacement opportunity,
coupled with the further realization that our assets were seriously undervalued,
that prompted the change in strategic direction we communicated to you last
July. We outlined three primary initiatives.
The first of these initiatives is the potential sale of our Israeli biologics
business. Early in the fourth quarter we circulated a "Confidential Information
Memorandum" to a number of interested parties. There's likely to be a future
need for additional biologics manufacturing capacity for those companies
committed to this area as evidenced by the several initial expressions of
interest we have received thus far.
We are meeting with and making available to these interested parties additional
diligence materials. The process is going smoothly and is on schedule for
completion in the first half of next year.
Next we are taking steps to enhance the value of our free-standing UK-based oral
liquid pharmaceutical business called Rosemont. We acquired this business just
two years ago. We paid $104 million for the business which continues to exceed
our expectations. To further enhance the value of Rosemont, we completed earlier
this year several modifications to the UK-based manufacturing facility to
prepare it for the manufacture of products for the U.S. market. The product,
Soltamax, is an oral liquid form of cancer treatment drug tamoxifen. We believe
that the time and expense to open up access to the U.S. market to significantly
enhance the value of our investment in this business as we create new
opportunities to bring a multitude of already developed and marketed product
formulations to the U.S. either alone or with strategic partners.
In addition, we are exploring the entry of certain Rosemont products into
additional European markets through potential strategic partners.
Lastly, we are increasingly excited by the potential of our two lead drug
candidates, Puricase for the treatment of refractory gout and Prosaptide for the
treatment of HIV or AIDS related neuropathic pain.
Each of these product candidates focuses on a serious unmet medical need. We
recognize however that the marketplace has attributed little or potentially
negative value to the development expense streams for these projects.
With the results of our Phase II clinical trials only month away, we will have
the opportunity to share the promise that each drug candidate might hold.
Puricase results should be available in the first quarter of next year and
Prosaptide results should be available in the third quarter of next year.
With the results of those studies in hand, we can better assess our options for
continuing their development alone or in partnership with others.
As we pursue the potential sale of our biologics business, we continue to
evaluate the options for maximizing the value of our oral liquid pharmaceutical
and specialty pharmaceutical businesses.
The three initiatives I have reiterated today are important to unlocking the
value of Savient's underappreciated assets. But equally important is the team we
are assembling to carry out the strategy for enhancing shareholder value.
This past quarter we added as our Chief Financial Officer, Larry Gyenes who has
joined me on this call today. Larry has over 30 years experience in financial
and operational roles including CFO of two public companies and nearly 20 years
experience in the pharmaceutical industry.
Larry joins our relatively new but highly experienced management team including
Dr. Dov Kanner our Chief Technical Officer; Dr. Zeb Horowitz our Chief Medical
Officer and Philip Yachmetz our Secretary and General Counsel.
Early in the fourth quarter, we took some tough but necessary actions to better
align our resources, both human and financial, with the direction that we are
going. We announced that we were reducing our workforce by nine percent. A few
of these reductions would be offset by the addition of personnel in areas of
critical strategic importance. The net effect of these reductions and add backs
will be to save the company over $2.8 million per year with a one-time fourth
quarter charge of $1.3 million. Depending upon the success of our drug
development efforts, we will make further additions to the teams responsible for
drug development and regulatory affairs.
We believe that the bad news is behind us. We have a well defined and hopefully
an increasingly understood path ahead of us with clearly stated and easily
measured near term milestones. Successful achievement of those milestones should
advance the company and further ensure the unlocking of value in Savient's
underappreciated assets. Thank you and now I'd be very happy to answer any of
your questions. Operator you may open up the phone line.
Q&A Session
Operator: Thank you Mr. Clement. Today's question and answer session will be
conducted electronically. If you would like to ask a question you may do so by
simply pressing the star key followed by digit one your touchtone telephone. If
you are using a speakerphone, please make sure your mute function has been
turned off to allow our signal to reach our equipment. Once again, star one to
ask a question and we'll pause for just a moment.
And we do have a question from Richard Mansouri, Para Partners.
Richard Mansouri: Yes, good morning.
Christopher Clement: Hi Richard.
Richard Mansouri: Couple of questions. One, you make reference in the press
release to having distributed this confidential information memorandum and are
encouraged by initial expressions of interest. I was wondering does this imply
that you've got theoretically multiple parties who could be interested? That's
my first question and the second question, I'm wondering if you could discuss a
little bit more the timing and potential market size for oral Tamoxifen or
liquid Tamoxifen in the United States?
Christopher Clement: OK let me start out with the confidential information
memorandum. Yes, that has gone out and we do have multiple expressions of
interest. So as I'd mentioned, we are very encouraged by where we are at this
particular point in time. Relative to - let me just stay on that for a minute.
We did communicate also that we believe that we would be in a position to
conclude that transaction during the first half of 2005 and we're still on that
timetable. Relative to the market for Tamoxifen, this is a market that there are
a number of generic products in the marketplace so it has suffered generic
erosion, but there is no oral liquid product that's out there today. So the
current market size is somewhere between $85 to $100 million including all of
the generics that are out there. Tamoxifen continues to be widely used in the
treatment of breast cancer and we think that having an oral liquid formulation
will certainly find its niche in that particular marketplace.
Richard Mansouri: Great, I appreciate it and just since I have you just one last
question. Regarding Puricase, will you now say that you expect to have the
results first quarter of next year. My understanding previously was that you
might have had the results you know late this year. Should we interpret that as
a negative?
Christopher Clement: No I would not interpret it as a negative. Everything that
we've talked about thus far is on target. There's been no further delays and in
fact the process as you know this is an open label clinical trial. We're able to
track real time the results of this product. So no, there's nothing that's
really changed relative to the progress - the completion of that Phase II
clinical trial.
Richard Mansouri: OK good. Thank you everyone.
Operator: I would like to remind you, it's star one if you have a question.
And now we'll take a question from Jason Aryeh with Jalaa Equities.
Jason Aryeh: Good morning, Chris.
Christopher Clement: Good morning, Jason.
Jason Aryeh: Can you quantify for us exactly not only what the investment in the
Israeli facility has been by Savient but then do you expect to recoup all of
that investment in just the facility alone and then I guess the more important
question is, can you try to quantify for us the value of the add-ons per se to
the facility as far as the small drugs that are being sold with it and I believe
the rights and the partnership agreement with TEVA to the human growth hormone
product?
Christopher Clement: I'll do my best to try and answer your question here Jason.
First of all, let me start out by saying the assets as they're on the books
right now for building of the facility in Israel is in the range of $60 million-
this is $60 million. Now I think as I've articulated before that we think the
best way to maximize the value of the asset would be to sell not only the
facility but some of the products that are manufactured there as well. If you
look at the products that are manufactured going through the Israeli business
let's say total revenue is somewhere in the range of around $20 million. So I
think you know that's kind of what we're looking at in terms of that particular
business because the value of those hard assets as well as the--
Jason Aryeh: So 20 on top of the 60?
Christopher Clement: Well the 60 is what we put into building the facility and
20 is the revenues that are being manufactured there.
Jason Aryeh: Is there any reason to believe that we would not receive every bit
of the 60? Did we overspend for the product that we got out of the facility - or
I mean what's your feeling on that?
Christopher Clement: My part - I can't answer that question Jason. As I said,
we're in the process of getting - determining the levels of interest in the
business and this is a process that has to work its way through so I'm not in a
position to answer your question.
Jason Aryeh: Regarding Rosemont, you had in the press release obviously you have
done a seemingly terrific job of enhancing the value of Rosemont. I guess its
just unclear when you talk about options out for the facility are you - would
you consider a sale of Rosemont? Obviously I realize it's cash flow positive and
clearly helps the base business but would you consider other alternatives other
than expanding revenue growth out of it by expanding to the U.S. et cetera?
Christopher Clement: Right now we believe you're absolutely right. We're very
pleased with the performance of Rosemont. They continue to do extremely well in
the UK domestic market and if you go back to when the company first acquired
Rosemont, one of the objectives there was to not only continue the growth of
Rosemont in the UK but to expand the capabilities for this company outside of
the U.S. and we feel that we're now enhancing value of Rosemont by adding
additional markets so we've completed the work necessary in the UK to make it
FDA acceptable for manufacturing for the U.S. and we'll be proceeding with that
and we also believe that there are opportunities for Rosemont outside of the UK
in other European markets. So, at this particular point in time, we think that
this is one area where we'll continue to build value and enhance the value of
Rosemont by exploiting these markets, both in the U.S. and in Europe.
Jason Aryeh: OK. And my last question on Puricase. Obviously, as you said, it's
an open-label trial. Can you discuss - I mean would - I would assume that the
trial would be stopped if there was a significant antibody toxicity issue. Can
you speak to what you're seeing because I think everybody believes that the drug
is very efficacious? But can you specifically talk to antibody toxicity
concerns?
Christopher Clement: Well, what I'm going to do here, Jason, is I'm going to let
Dr. Zeb Horowitz address that question for you.
Zeb Horowitz: Yes, I can't answer specifically about antibodies. I can tell you
that the emerging safety profile looks very much like it would allow us to meet
with the FDA for an end of Phase II meeting and present a plan for a Phase III
program. There's nothing in the safety profile to date that would prevent us
from moving forward.
Jason Aryeh: OK. And Dr. Horowitz, who within the company is looking at the
competitive position for Puricase? And maybe you can speak to it a little bit,
not only in competitive with the one product, really, that's on the market now,
but as far as other company's pipeline products, where do you see Puricase
fitting in to the competitive landscape going forward?
Zeb Horowitz: I'll answer that question this way. We, in the U.S. are designated
orphan indication, which means that our sales have to be directed to a specified
population, which gives us seven years of exclusivity for a drug of that class.
That population is specifically those who have gout that is refractory to
conventional therapy, which is basically allopurinol or inpatients who are
intolerant of allopurinol.
And that population today has very little option for therapy. Looking forward
with new products on the market such as TAP's product ...
Jason Aryeh: Right.
Zeb Horowitz: ... that we are seeing a much more immediate and dramatic lowering
of uric acid, which remains very low throughout our dosing interval. And I could
see this, similar to what's done in cancer with induction therapy, where our
patients might use our product for a year or so or longer to, in an attempt to
remove the uric acid stored throughout the body, and so, maintain a low uric
acid level. And after that's done, perhaps the patients would move onto a drug
such as Febuxistat. There's no reason that combination therapy couldn't be used
at the same time, although we're not studying that.
Jason Aryeh: So, Dr. Horowitz, do you feel that the orphan designation, from a
competitive perspective, really protects Puricase's market from these kind of
next generation allopurinol?
Zeb Horowitz: No, no, it doesn't do that. It only - the exclusivity specifically
is for drugs of the same class. What protects the value of the product, in the
long run, is its dramatic efficacy. There is no other - no xanthine oxidase
inhibitor - that is, no drug that prevents the formation of uric acid has the
potential over the short period of time to create observable disease modifying
effects, which is what we hope to be able to demonstrate in our Phase III
program.
Jason Aryeh: OK. Great. And obviously, you're comparing that to some of the mid
and later stage gout products that are in the clinic.
Zeb Horowitz: To anything ...
Christopher Clement: To anything that's out there, Jason.
Jason Aryeh: OK. Wonderful. Thank you, gentlemen.
Christopher Clement: Thank you.
Operator: Now moving onto Sergio Weinstein with PSCGOD.
Sergio Weinstein: Good day. I want to ask, please, do you have any plans to
launch the human growth in the U.S.? I'm asking because I know that the pill of
Nobonobif was withdrawn and you basically win - won this case. And I wonder why
do you delay this launch? Thank you.
Christopher Clement: OK. OK. Thank you for the question. No, we are not delaying
the launch at all. We have a partner in the U.S. market for human growth hormone
and that is Teva. And Teva is planning to launch human growth hormone before the
end of this year. So, we, from the time that the decision was reached on the
legal issue, Teva has been working to look at the market, to get their company
ready for market introduction and for making product supplies available. But
Teva will launch the product in the U.S. and they will launch it before the end
of this year.
Sergio Weinstein: And banking into the consideration that we are basically one
month - one-and-a-half month before year-end, what impact do you expect this to
be on your sales, because I suppose that Teva announce you what amount of
material to prepare for this launch because there are no inventory in the market
and - at least, I think so. At least, the first stages you have to be well
prepared for a certain amount of supply.
Christopher Clement: Well, I - yes. I think that because it is an
end-of-the-year launch for human growth hormone, that the effect on this year
will certainly be negligible. But I suggest that if you had any questions around
the market, potential size, sales, those types of things, that you would be
better placed to discuss those with Teva.
Sergio Weinstein: OK. Thank you.
Christopher Clement: Thank you.
Operator: And one final reminder, if you have a question, star one. Mr. Clement,
there are no further questions. We'll turn it back to you for some closing
remarks.
Christopher Clement: Thank you, operator. Thank you very much, everyone, for
participating and, as we continue to execute against our strategic plan, we
will, of course, continue to communicate with you as developments occur. Once
again, thank you very much. Good day.
Operator: If you access the replay for today's call, you may do so by dialing
888-203-1112 or international, 719-457-0820 with the passcode of 864474. This
concludes today's conference. Thank you for your participation. You all may have
a nice day.