Affymax Management Discusses Q3 2012 Results - Earnings Call Transcript

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Affymax (AFFY)

Q3 2012 Earnings Call

November 08, 2012 4:30 pm ET

Executives

Sylvia Wheeler - Vice President of Corporate Communications

John A. Orwin - Chief Executive Officer and Director

Jeffrey H. Knapp - Chief Commercial Officer

Herbert C. Cross - Chief Financial Officer

Anne-Marie Duliege - Chief Medical Officer

Analysts

M. Ian Somaiya - Piper Jaffray Companies, Research Division

Christopher J. Raymond - Robert W. Baird & Co. Incorporated, Research Division

Joel D. Sendek - Stifel, Nicolaus & Co., Inc., Research Division

Ed Arce - McNicoll, Lewis & Vlak LLC, Research Division

Presentation

Operator

Good day, everyone, and welcome to Affymax's Conference Call. This call is being recorded. At this time, I would now like to turn the call over to Sylvia Wheeler, Vice President of Corporate Communications for Affymax. Ms. Wheeler, please go ahead.

Sylvia Wheeler

Thank you. And good afternoon. Welcome to our Third Quarter 2012 Financial Results Call. Leading today's call is John Orwin, Chief Executive Officer of Affymax. And joining us on the call today are Jeff Knapp, our Chief Commercial Officer; and Herb Cross, our Chief Financial Officer.

Before turning the call over to John, I remind you that we will be making forward-looking statements. Our actual results may differ materially from the results described, in particular, with respect to our financial forecast, our time lines, our commercial expectations and collaboration with Takeda. We also include non-GAAP financial measures in our call and encourage you to review our press release and the risk factors in our most recent quarterly report on Form 10-Q.

I will now turn the call over to John.

John A. Orwin

Thank you, Sylvia. Good afternoon, everyone, and thank you for joining us today as we share our continued excitement and progress in this first full quarter from actualizing [ph] OMONTYS. As we anticipated, we believe once-monthly OMONTYS is being received as an attractive ESA alternative in the dialysis market, and we're excited to provide access to this new treatment option to dialysis providers and, importantly, their patients. We are very pleased with our progress thus far, and we believe we have the right teams and infrastructure in place supporting the product through our marketing and sales organizations, in addition to those on the medical affairs side who are helping centers with conversion.

I'd like to take a few moments to highlight our significant commercial accomplishments since launch. At the beginning of July, approximately 3 months following approval, we secured a product-specific Q-code to facilitate timely reimbursement. Around the same time, we successfully deployed a well-trained and experienced field-based team of approximately 80 sales professionals. Shortly thereafter, we secured a supply agreement with Fresenius Medical Care North America, the largest dialysis provider in the United States which represents approximately 35% of the $2 billion net ESA market in the U.S. Fresenius is well underway in gaining clinical and operational experience with converting centers to OMONTYS, and we believe that they are pleased with their overall experience so far. We look forward to potentially expanding our relationship with Fresenius for the longer-term broader contract in the future.

Importantly, we are excited to report that we now have supply agreements with 4 of the 6 medium dialysis providers, 2 new agreements since our last call. In the remaining market segment, we have seen good progress with early penetration within small chains and independent dialysis providers. Approximately 4 months into active promotion, we are very pleased with the number of contracts we signed and the number of customers that are in the process of evaluating the conversion of their patients to OMONTYS. Based on initial customer feedback, we are optimistic that we will see significant continued market penetration in 2013.

I will now ask Jeff to review additional details on our commercial progress. Jeff?

Jeffrey H. Knapp

Thank you, John. And good afternoon, everyone.

We continue to be very pleased with the progress we're making on the commercial front, with established relationships across all segments of the dialysis market.

In the third quarter, OMONTYS generated approximately $15 million in net sales, which are gross sales less discounts and rebates. With a sales organization now fully deployed into the field at the end of June and a Q-code in effect on July 1, we saw a significant increase in utilization in the third quarter. The skill and experience of our field sales force was quickly evident and their outreach has generated significant interest in trial and conversion to OMONTYS.

Additionally, as John will detail later on in the call, I would like to recognize our field-based medical affairs organization for their outstanding work helping dialysis centers with the conversion process. We now have customers who are reordering and in their second, third and even fourth month of treating patients with OMONTYS.

Before going into greater detail on our customer progress, I am pleased to report that CMS has issued a permanent J-code for OMONTYS effective January 1, 2013. While the Q-code supported the efficient reimbursement of OMONTYS shortly after launch, the permanent J-code should help close any remaining gaps with payers who have remained with the miscellaneous code.

Now let me spend a few moments discussing details by customer segment. In the large dialysis organization segment, we entered into a supply agreement with Fresenius North America for our corporate initiatives that runs through April of 2013. Fresenius today is treating approximately 10,000 patients in this program. It is our expectation that they will proceed to treat these patients under our existing supply agreement until this agreement ends or we execute a new agreement.

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