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Edited Transcript of INSY earnings conference call or presentation 3-Aug-17 12:30pm GMT

Phoenix Aug 6, 2017 (Thomson StreetEvents) -- Edited Transcript of INSYS Therapeutics Inc earnings conference call or presentation Thursday, August 3, 2017 at 12:30:00pm GMT

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* Darryl S. Baker

* Lisa Wilson

INSYS Therapeutics, Inc. - President, CEO & Director

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* Ashley Ryu

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Q2 2017 Insys Therapeutics Earnings Conference Call. (Operator Instructions) As a reminder, this call will be recorded.

I would now like to introduce your host for today's conference, Ms. Lisa Wilson with Investor Relations. You may begin.

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Lisa Wilson, [2]

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Thank you, Katherine. Welcome to the Insys Therapeutics Second Quarter 2017 Earnings Call. This is Lisa Wilson, Investor Relations for Insys. With me on today's call are Insys President and Chief Executive Officer, Saeed Motahari; and Chief Financial Officer, Darryl Baker.

This morning, the company issued a press release detailing financial results for the second quarter ended June 30, 2017. This can be accessed through the Investor Relations section of the Insys website at insysrx.com, and you can also access the webcast of this call from there.

Before we get started, I would like to remind everyone that all statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance are considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Insys management as of today and involve risks and uncertainties, including those noted in this morning's press release and Insys' filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Insys specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.

A telephone replay of the call will be available shortly after completion for 1 week. You'll find the dial-in information in today's press release. The archived webcast will be available for 1 year on the company's website, insysrx.com.

For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 3, 2017. Since then, Insys may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings.

And with that, I'll turn the call over to Insys President and Chief Executive Officer, Saeed Motahari.

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Saeed Motahari, INSYS Therapeutics, Inc. - President, CEO & Director [3]

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Thank you, Lisa. Good morning, everyone, and thank you for joining our call today. I'm pleased to report that we are making progress on our business objectives and I'm encouraged by the opportunities we have in front of us.

We recently announced that the company's Chief Financial Officer, Darryl Baker, planned to retire and that Andrew Long has been appointed as his successor. I would like to thank Darryl for his years of services to the company and turn to call over to him to review our second quarter financial results.

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Darryl S. Baker, INSYS Therapeutics, Inc. - CFO [4]

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Thank you, Saeed. We reported net revenue of $42.6 million for the second quarter of 2017, a decrease compared to $69.2 million in the prior year quarter. As expected, Subsys prescriptions remained soft during the quarter as we continue to be impacted by the decline in the overall TIRF market. Gross margin was 91% for the second quarter of both 2017 and 2016.

Sales and marketing expenses totaled $13.3 million in Q2 of 2017 compared to $19.7 million in Q2 of 2016. As a percentage of revenue, sales and marketing expense increased to 31% compared to 28% in the prior year quarter.

R&D expense was $14.1 million during Q2 of 2017 compared to $22.9 million in the second quarter of 2016. The decrease reflects the timing of expenditures on new product development projects.

General and administrative expense increased to $17.1 million for the second quarter of 2017 compared to $13.9 million in the second quarter of 2016. Charges related to litigation award and government settlements were $4.5 million for the second quarter of 2017 and represent an estimated potential settlement with the State of Illinois.

Net loss for the second quarter of 2017 was $8.2 million or a loss of $0.11 per basic and diluted share compared to net income of $6 million or $0.08 per basic and diluted share during the second quarter of 2016.

Non-GAAP adjusted net income per diluted share was $0.03 compared to non-GAAP adjusted net income of $0.13 per diluted share during the second quarters of 2017 and 2016, respectively.

And with that, I'm going to turn the call back to Saeed. Saeed?

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Saeed Motahari, INSYS Therapeutics, Inc. - President, CEO & Director [5]

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Thanks, Darryl. On our last call, I laid out 4 priorities that we believe are imperative for us to reach our long-term objectives, and today, I would like to share with you the progress we have made against each of these.

As a reminder, these priorities are: Resolving the DOJ and other investigation; stabilizing the performance of Subsys; successfully launching Syndros, which is now underway; and finally, advancing our pipelines of product candidates across 2 broad platforms, sublingual spray and cannabinoids.

Starting with the status of ongoing government investigation. We have seen and will continue to cooperate with DOJ and relevant authorities. The timing related to this resolution is out of our -- is a matter of -- outside of our control. Our focus is to continue to show our commitment and comply with the laws and regulations that govern our products and business practices, and highlight the steps that we have taken to enhance our compliance processes and procedures and making compliance a seamless part of our culture. We continue to engage in discussions with DOJ and resolving these investigations remains a top priority for us.

Turning to Subsys. While the second quarter finished relatively strong, we have noticed recent softness in July versus June, which we're addressing with several initiatives that I would like to share with you. These initiatives are: Improving managed care access, increasing patient adherence, and educating physicians and patients on how to effectively discuss and manage breakthrough cancer pain.

I am encouraged by the recent success that we have had to increased managed access to Subsys. As of this month, Subsys will be included in the commercial formulary of one of the largest PBM that, until now, has excluded the product. Beginning in 2018, Subsys would be placed as the preferred TIRF product on the commercial formularies of 2 top PBMs, as well as one of the top national commercial insurance companies.

Furthermore, Subsys will be added to the formularies of the 2 top Medicare Part D accounts. We are also having positive conversations with other payers and are hopeful of opportunity to be included in additional formularies in 2018. We are encouraged by these recent wins and their potential positive impact in 2018 and view them as expression of confidence by the payers to our commitment to improved patient care.

With regard to improving patient adherence, during the second quarter, we launched a new program to educate patients who have been prescribed Subsys and are currently [with] on the factors that can increase patient adherence rate, such as proper administration of Subsys. We expect to complete the rollout by the fourth quarter of this year.

Finally, we continue to educate clinician and patients on breakthrough cancer pain. We are encouraged by the fact that 46% of the new Subsys patients are not initiated by oncologists and this percentage of business continues to increase.

Turning to Syndros. On Monday of this week, we successfully launched Syndros, our oral dronabinol product for the treatment of chemotherapy-induced nausea and vomiting in patients who have not adequately responded to conventional antiemetic treatment and AIDS-related anorexia. We believe Syndros will be an important treatment option, offering prescribers a meaningfully differentiated product, as it is the only oral solution product available that offers convenient, flexible dosing as well as high bioavailability and good absorption.

In our initial phase of launch, our sales force is targeting the concentrated universe of appropriate health care providers who currently prescribe dronabinol to educate them on the distinct benefit of Syndros. Syndros is now available to most of the major wholesalers for the retail pharmacy ordering and through the specially pharmacy networks to ensure that the patients get access to the product when prescribed.

Our efforts will payers to ensure managed care access for Syndros have also started, and we're encouraged by their initial response. We have good access to commercialize at launch and expect access for both commercial and Medicare Part D to accelerate in 2018.

Consistent with other recent CII launches, we anticipate a slow uptake for Syndros, but we remain confident...


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