PDL BioPharma Inc. (PDLI)

Q2 2012 Results Earnings Call

August 2, 2012 4:30 PM ET


John McLaughlin – President and CEO

Bruce Tomlinson – Chief Financial Officer


Roy Buchanan – JMP Securities

John – RBC Capital Markets

Phil Nadeau – Cowen & Company



Good afternoon. And welcome to the PDL BioPharma's Second Quarter 2012 Earnings Conference Call. Today's call is being recorded.

For opening remarks and introductions, I would now like to turn the call over to Jennifer Williams.

Jennifer Williams

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Thank you all for joining us today. I'd like to first point out that there is a slide presentation associated with today's earnings call and you'll see that in the Investor Relations section of the PDL website which you'll find at pdl.com.

Before we begin, let me remind you that the information we will cover today contains forward-looking statements regarding our financial performance and other matters, and our actual results may differ materially from those expressed or implied in the forward-looking statements.

Factors that may cause differences between current expectations and actual results are described in our filings with the Securities and Exchange Commission, copies of which may be obtained in the Investor Section on our website at pdl.com.

The forward-looking statements made during this conference call should be considered accurate only as of the date of this call, and although we may elect to update forward-looking statements from time-to-time in the future, we specifically disclaim any duty or obligation to do so, even as new information becomes available or other events occur in the future.

I'll now turn the call over to John McLaughlin, President and CEO of PDL BioPharma.

John McLaughlin

Thank you Jennifer and good afternoon everyone. Also with me today is Bruce Tomlinson, our Chief Financial Officer. As always in this call, I'll provide a summary of recent events, and then Bruce will review our quarterly financial results.

I'd like to begin on slide number three with an overview of our newest royalty stream. In June of this year, Genentech and Roche have notified that Pertuzumab, which is being sold under the brand name Perjeta, is a licensed product under our license agreement. Genentech and Roche set a price of $5,900 per month, higher than most expectations on Wall Street and wants Perjeta one business day after its approval.

This is a very exciting therapy, approved in combination with Herceptin and chemotherapy for the first line treatment of women with HER2-Positive Metastatic Breast Cancer. In the pivotal trial, Perjeta, Herceptin and chemo showed a 6.1 month improvement in progression free survival, compared to patients receiving only Herceptin and chemo.

Recently, Genentech and Roche announced that Perjeta also met its secondary endpoint of overall survival in this trial. They have said that the precise value will be disclosed before the end of the year.

In addition, Perjeta is being studied in the Phase-III trial in the adjuvant setting. Please recall that Phase-II data, which shows patients on Perjeta, Herceptin, and Chemo in the adjuvant setting had a pathological complete response or PCR of 45.8%, compared to 29% for those HER-2 Positive breast cancer patients receiving only Herceptin and chemotherapy. Genentech and Roche have guided that they believe the annual peak sales of Perjeta will exceed $1 billion.

There has been significant attention in the press and on Wall Street with respect to two other licensed antibodies, both targeting beta-amyloid, although in different manners, and both being studied to determine if they could slow the progression of Alzheimer's disease, in patients with mild to moderate symptoms. These antibodies are of bapineuzumab, being developed by Pfizer and J&J, and solanezumab being developed by Eli Lilly.

Unfortunately for patients with Alzheimer's disease, it was recently reported that the first of the two U.S. bapineuzumab trials did not meet its endpoint. This was the trial studying patients with an allele known as ApoE4, and for which (inaudible) was held, based on various analyses of the Phase-II Bapi data, that shows better results in its non-ApoE4 carriers.

On Tuesday of this week, Pfizer disclosed that analysis is underway of the second U.S. Phase-III trial studying Alzheimer's patients, who do not carry the ApoE4 allele. Pfizer said during its earnings call, that these data will be presented in September. It is also possible if Pfizer, and or J&J will take a top line release of this data, sooner than that.

With respect to solanezumab, Lilly has stated that the data from its two Phase 3 trials will be disclosed in the second half of 2012, with many expecting some disclosure at one or both of the Alzheimer conferences at the beginning and end of October. Lilly has disclosed that it has enrolled apoE4 and non-apoE4 carriers in its trials and that it intends to stratify such patients in its statistical analysis. We have no information on the number of apoE4 and non-apoE4 carriers in their trials.

To be clear, most Wall Street analysts attach a low probability of success to either the BAPI or SOLA trials, but also agree that each would be a several $1 billion blockbuster drug integrate to meet its product profile in the Phase 3 trials and be approved.

In early July, we entered into a transaction with Merus Labs and before discussing the specifics of the transaction, it may be useful to review on slide number four why are we considering such transactions.

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