Santarus, Inc. (SNTS)
Business Update Conference Call
December 22, 2011 10:00 am ET
Martha Hough - VP, Finance and IR
Gerry Proehl - Director, President & CEO
Mike Step - SVP, Corporate Development
Bill Denby - SVP, Commercial Operations
Debbie Crawford - SVP, CFO, Treasurer and Secretary
Frank Pinkerton - SunTrust
Scott Henry - ROTH Capital
Traver Davis - Piper Jaffray
Seth Hamot - RRH Capital Management Inc.
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Thank you, Christie. This is Martha Hough, Vice President of Finance and Investor Relations. Thank you for participating in today’s call. Joining me on the call today are Gerry Proehl, President and Chief Executive Officer and Mike Step, Senior Vice President, Corporate Development; Bill Denby, Senior Vice President, Commercial Operations; and Debbie Crawford, Senior Vice President and Chief Financial Officer will join us for today’s question-and-answer.
Yesterday after the close of the market, Santarus issued a press release announcing an exclusive licenses agreement for FENOGLIDE and introducing our 2012 financial outlook.
The press release is available on our website at www.santarus.com. A replay of this call also will be available on our website and can be found in the Investor Relations section for the next two weeks.
Please keep in mind that risks and uncertainties involved in the company’s business may affect the matters referred to in the 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 day of this live broadcast, December 22, 2011. Santarus undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.
I’ll now turn the call over to Gerry Proehl.
Thank you, Martha, and my thanks to everyone for joining us this morning. I am pleased to announce our exclusive licensing of FENOGLIDE tablets for the US market. This agreement adds a fourth commercial product to grow our revenues and support our objective of using our cash to diversify our product offering. FENOGLIDE fits well with our type II diabetes franchise, is an FDA approved fenofibrate drug used as an adjunct to diet to treat high cholesterol which is a frequent co-morbid conditions in patients with type II diabetes.
Our analysis is in the case, there is a significant overlap between the physicians who are prescriptions with FENOGLIDE and the physicians we call on for GLUMETZA and CYCLOSET which will allow us to further leverage our sales force. Additionally an assessment of the past sales of FENOGLIDE indicate that it’s a promotionally sensitive product. We've already assumed distribution for FENOGLIDE. We are currently in the process of implementing our previously announced sales force expansion and our full deal sales force of about 150 reps will begin promoting FENOGLIDE in the first quarter of 2012. I will now ask Mike Step to provide some background on FENOGLIDE and our licensing agreement. Mike?
Thanks Gerry. I am happy to be speaking to you this morning about what we expect to be an attractive commercial asset for Santarus. FENOGLIDE as indicated has an adjunct to diet to reduce elevated LDLC, total cholesterol, triglycerides and apolipoprotein. It’s also FDA approved to increase HDLC in adult patients with primary hyperlipidemia or mixed dyslipidemia. By way of background FENOGLIDE was developed by LifeCycle Pharma of Denmark which is now known as Veloxis Pharmaceuticals and was approved by the FDA in August of 2007.
In 2007 LifeCycle licensed the North American rights to FENOGLIDE to Sciele Pharma and in February of 2008 Sciele launched the product in the United States. In August of 2008 LifeCycle sold the North American royalty interest for FENOGLIDE to Cowen Healthcare Royalty Partners. After Shionogi Pharma acquired Sciele they continued to promote FENOGLIDE until August of 2010 at which time their license agreement was terminated and North American rights to FENOGLIDE were returned to Cowen Healthcare Royalty Partners. According to IMS Health peak sales of FENOGLIDE were approximately $23 million for the 12 months ended August 31, 2010 when Shionogi ended its promotion of the product.
Cowen Healthcare Royalty partners subsequently formed Shore Therapeutics as an operating company to commercialize FENOGLIDE through a small part-time contract sales force while seeking a new partner. For the 12 months ended October 31st, 2011 IMF Health reported total FENOGLIDE sales of $8.7 million. With regards to our transaction we have entered into an exclusive license agreement with Shore Therapeutics to commercialize FENOGLIDE tablets in the United States in two dosage strengths, a 40mg and a 120 mg.
Under the terms of the agreement Santarus is responsible for all commercial manufacturing and regulatory activities for FENOGLIDE. We will pay Shore an $11 million upfront fee and we will also pay Shore tiered royalties on net sales of FENOGLIDE as follows, a 5% royalty on net sales up to $10 million beginning in 2013, a 20% on net sales between $10 million and $20 million and 25% on net sales above $20 million. We are obligated to pay Shore a one-time success-based milestones of $2 million if a calendar year net sales exceed, or equal to or exceed $20 million and $3 million if calendar year net sales equal or exceed $30 million. The license agreement will remain in effect until Santarus ceases to commercialize FENOGLIDE in United States subject to the termination provisions that are outlined in the 8-K that Santarus filed yesterday with the Securities and Exchange Commission. I will now turn it back to Gerry.