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Santarus, Inc. (SNTS)

Q4 2009 Earnings Call Transcript

March 3, 2010 5:00 pm ET

Executives

Martha Hough – VP, Finance and IR

Gerry Proehl – President and CEO

Debbie Crawford – SVP, CFO, Treasurer and Secretary

Bill Denby – SVP, Commercial Operations

David Ballard – SVP, Clinical Research and Medical Affairs

Analysts

Scott Henry – Roth Capital

Ian Sanderson – Cowen and Company

Aaron Mishel – Thomas Weisel

Presentation

Operator

Welcome to the Santarus fourth quarter 2009 financial results conference call. At this time all participants are in a listen-only mode. Following management’s prepared remarks, we will hold a Q&A session. (Operator instructions) As a reminder, this conference is being recorded March 3, 2010. I would now like to turn the conference over to Martha Hough. Please go ahead, ma’am.

Martha Hough

Thank you, Casey. Good afternoon and welcome to today’s call. This is Martha Hough, Vice President of Finance and Investor Relations. Joining me on the call today are Gerry Proehl, President and Chief Executive Officer; Debbie Crawford, Senior Vice President, Chief Financial Officer, Treasurer and Secretary; Bill Denby, Senior Vice President of Commercial Operations; and Dr. David Ballard, Senior Vice President, Clinical Research and Medical Affairs.

Earlier today, Santarus issued a press release announcing our fourth quarter and full year 2009 financial results. If you have not received a copy of our earnings news release, you can access it on our website at www.santarus.com. A replay of this call also is available on our website and can be found in the Investor Relations section for the next two weeks.

For today’s call, please keep in mind that risks and uncertainties involved in the company’s business may affect the matters referred to in forward-looking statements made by management during today’s call. As a result, the company’s performance may differ from those expressed in or indicated by such forward-looking statements, which are qualified in their entirety by the cautionary statements contained in the press release and the company’s Securities and Exchange Commission filings.

The content of this conference call contains time sensitive information that is accurate only as of the date of this live broadcast, March 3, 2010. Santarus undertakes no obligation to revise or update any forward-looking statements to reflect the events or circumstances after the date of this conference call.

I’d now like to turn the call over to Gerry Proehl. Gerry?

Gerry Proehl

Thank you, Martha. And welcome to this afternoon’s call. We’re very pleased to report a strong fourth quarter financial performance and our first full year of profitability. The past year has been truly gratifying for all of us at Santarus, as we made significant progress towards our goal becoming a premier specialty biopharmaceutical company.

Fourth quarter total revenues were $62.4 million, which includes a $20 million milestone for the approval of ZEGERID OTC. Our quarterly product-related revenues increased 12% from the prior year period and we reported net income of $24.5 million versus a net loss of $10.2 million in the fourth quarter of 2008.

Our full year results were equally impressive. Total revenues were $172.5 million, including product-related revenues of $142.9 million, up 29% from 2008. Net income was $32.1 million, well above our outlook for the year and versus a net loss of $18.5 million in 2008. We ended 2009 with $93.9 million in cash, cash equivalents and short-term investments. Our strong balance sheet provides us with the ability to pursue opportunities to augment our product portfolio with additional marketed or development-stage products.

Let me update you on our business and review some highlights. We expect that shipments of ZEGERID OTC capsules will commence in late March and be available on retail stores in April, following FDA approval last December. Schering-Plough consumer healthcare is preparing for a significant consumer advertising campaign to launch ZEGERID OTC, which we believe will increase planned awareness and help to educate consumers about ZEGERID features and benefits.

December was a good month for us from a regulatory standpoint as we also received FDA approval for our dual buffer immediate release omeprazole tablet. In a slightly unusual move, the FDA approved our NDA without a trade name. We have submitted an NDA supplement requesting approval of a product name that includes our ZEGERID brand name. The PDUFA date for the NDA supplement is June 2010.

As an update on our strategic agreements outside of the US, last October we granted Norgine exclusive rights to develop, manufacture and commercialize prescription ZEGERID products in specified Western, Central and Eastern Europe European markets. Norgine is a leading European specialty pharmaceutical company that is focused on GI products and has a commercial presence in major European markets.

We received a $2.5 million upfront payment from Norgine, and we may be entitled to receive up to an additional $10 million in contingent milestones. We also received tier royalties ranging from the mid to high teens on net sales of any products sold under the license agreement.

Under our ex-US license agreement with GlaxoSmithKline, as of the end of 2009, GSK had submitted the regulatory approval in Mexico, Brazil, Ecuador, Colombia, Kenya and Uganda. Additional submissions are planned in Latin America and Africa this year. GSK also has committed a clinical trial application in China, which is similar to an IND application in the US, and plans to initiate clinical studies there.

Santarus will receive tier royalties from the mid-teens to the mid-20s on net sale of licensed products sold by GSK. We believe this agreement will potentially provide future royalty revenue from high growth emerging markets. According to IMS data, the markets covered under our license agreement with GSK had PPI sales of approximately $2.8 billion for the 12 months ending September 30, 2009 and had grown 22% over the prior 12 months.

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