Penwest Pharmaceuticals Co. (PPCO)
Q2 2010 Earnings Call
August 4, 2010 11:00 am ET
Jennifer Good - President and CEO
Frank Muscolo - Corporate Controller and CAO
Gregg Gilbert - Bank of America/Merrill Lynch
Previous Statements by PPCO
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The matters discussed herein contain forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties which may cause the actual results in future periods to be materially different from any other future performance suggested herein.
For this purpose, any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. Without limiting to the foregoing, the words believes, anticipates, plans, expects, intends, potential, appears, estimates, projects, targets, may, could and similar expressions are intended to identify forward-looking statements.
Important factors that could cause results to differ materially include the following: the timing of clinical trials such as the Phase IIa clinical trials referenced above and risks related to patient enrollment, risks relating to the commercial success of Opana ER, including our reliance on Endo Pharmaceuticals Incorporated for the commercial success of Opana ER, risks of generic competition, and risks at Opana ER will not generate the revenues anticipated, the need for capital, regulatory risks relating to drugs in development, including the timing and outcome of regulatory submissions and regulatory actions with respect to A0001, whether the results of clinical trials will be indicative of the results of future clinical trials and will warrant further clinical trials, warrant submission of an application for regulatory approval of or warrant of the regulatory approval of the product that is subject to the trial, whether the patents and patent applications owned by us will protect the company's products and technology, actual and potential competitions, and other risks as set forth under the caption Risk Factors in Penwest's quarterly report Form 10-Q filed with the Securities and Exchange Commission on May 10, 2010, which risk factors are incorporated herein by reference.
The forward-looking statements contained in this press release speak only as of the date of the statements made. Penwest disclaims any intention or obligation to update any forward-looking statements. And these statements should not be relied upon as representing the company's estimates or views as of any dates subsequent to the date of this release. TIMERx is a registered trademark of Penwest. All other trademarks referenced herein are the property of their respective owners.
I will now turn the call over to Jennifer Good, President and CEO of Penwest.
Good morning. Welcome to our review and discussion of Penwest's results for the three and six months ended June 30, 2010. Joining me on the call today is Frank Muscolo, our Corporate Controller and Chief Accounting Officer.
I will review our second quarter performance, provide a business update and review our corporate priorities. Frank will then review the financial results for the quarter and first half of 2010. And we will then open up the call to your questions.
For the second quarter of 2010, we reported record revenue and earnings for Penwest. Our revenues increased 159% year-over-year, and we reported net income of $0.26 per share. The strong quarterly earnings performance was driven by $13.6 million of revenue as well as a 28% reduction in our total operating expenses, as we continued to tightly manage our costs.
Our strong earnings this quarter were coupled with the three settlements of our outstanding Opana patent litigation. During the quarter, Penwest and Endo entered into agreements with Barr, Impax and Sandoz to settle this litigation.
Under our settlement agreement with Impax who has first-to-file status on the majority of the strengths of the product, Impax can begin marketing a generic version of Opana ER beginning on January 1, 2013. As a result of Impax's first-to-file status on these strengths, all other generic challengers cannot launch these strengths until 180 days after Impax launches.
Also, as a reminder, Actavis was first to file on the 7.5 milligram and 15 milligram strengths, and we had previously settled our litigation with them, allowing for a launch of these strengths in July 2011.
We believe these settlements remove a key uncertainty in our business and maximize the value of Opana ER for our shareholders.
I would now like to discuss the progress we've made in the business during the quarter. As many of you know, we had a new Board elected in June at our Annual Meeting. And we have detailed the corporate priorities adopted by the Board in our earnings release issued this morning. As I review the components of our business, I will discuss how each of the priorities impact the current business.
Let me begin with Opana ER, which is marketed in the U.S. by our partner, Endo. Opana ER continued to perform well in the market during the quarter. For the second quarter of 2010, we recorded royalty revenue from this product of $12.3 million. Net sales of Opana ER for the second quarter of 2010 were $56.6 million compared with $40.2 million in the second quarter of 2009, representing an increase of 41% in net sales.
Underlying demand for the product has remained strong, with IMS reporting TRx growth of 28% over the second quarter of last year. Endo continued to increase the share of Opana ER in the marketplace, and the overall pain market itself has experienced nice growth in the first half of this year.