Santarus Inc. (SNTS)

Q1 2010 Earnings Call

April 06, 2010 05:00 pm ET

Executives

Martha Hough - VP, Finance and IR

Gerry Proehl - President and CEO

Debbie Crawford - SVP and CFO

Bill Denby - SVP of Commercial Operations

Analysts

Annabel Samimy - Thomas Weisel

Scott Henry - Roth Capital

David Amsellem - Piper Jaffrey

Ian Sanderson - Cowen and Company

Presentation

Operator

Welcome to the Santarus first quarter 2010 financial results conference call. At this time all participants are in a listen-only mode. Following management’s prepared remarks, we will hold a Q&A session. (Operator Instructions) As a reminder, this conference is being recorded May 6, 2010.

I would now like to turn the conference over to Ms. Martha Hough. Please go ahead, ma’am.

Martha Hough

Thank you, Marvin. Good afternoon and welcome to today’s call. This is Martha Hough, Vice President of Finance and Investor Relations. Joining me on the call today are Gerry Proehl, President and Chief Executive Officer; Debbie Crawford, Senior Vice President and Chief Financial Officer; and Bill Denby, Senior Vice President - Commercial Operations; Dr. David Ballard, Senior Vice President - Clinical Research and Medical Affairs is attending the DDW meeting and will not be available for today’s call.

Earlier today, Santarus issued a press release announcing our first quarter 2010 financial results. If you have not received a copy of our earnings news release, you can access it on our website at www.santarus.com. A replay of this call also is available on our website and can be found in the Investor Relations section for the next two weeks.

For today’s call, please keep in mind that risks and uncertainties involved in the company’s business may affect the matters referred to in 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 date of this live broadcast on May 6, 2010. Santarus undertakes no obligation to revise or update any forward-looking statements to reflect the events or circumstances after the date of this conference call.

I’d now like to turn the call over to Gerry Proehl. Gerry?

Gerry Proehl

Thank you, Martha and welcome to this afternoon’s call. We’re pleased to report that our solid top line growth in expense management resulted a net income of $3.3 million for the first quarter making this our fifth consecutive quarter profitability. Product related revenues increased 18% compared with the prior year period driven by 95% increasing GLUMETZA promotion revenue and 5% increase in ZEGERID net sales.

We also are pleased to report our first royalty revenue from the launch of ZEGERID OTC. We believe our commercial organization has done an excellent job with GLUMETZA as reflected by 28% growth in GLUMETZA total prescription versus the first quarter of 2009 and the growth in our promotion revenue to $8.8 million from $4.5 million reported in a prior year period.

Bill will add more color to the factors is resulting improved product sales in the first quarter. It would be an understatement to say we were disappointed with the April 14th, Delaware District Court ruling and we disagreed with the court’s opinion that the ascertain patterns covering our ZEGERID products are invalid due to obviousness. In response to the court’s decision we plan to file an appeal with the US Court of Appeals for the federal focus and we expect the power position in approximately 12 to 18 months although the timing to be shorter or longer than we estimate. The appeal will be heard by a three-judge panel with the decision based on a majority ruling. We will continue to explore our actions on ZEGERID while at the same time preparing for a launch of a generic version of ZEGERID.

In the meantime we remain focused on positions into our forward success. We will continue to actively promote Glumetza work with Merck consumer care support the launch of ZEGERID OTC as well as a fixed GlaxoSmithKline and Norgine as they work to advance in development and launch of ZEGERID through out the world. We are also focused on completing the budesonide MMX phase III studies for induction of remission of mild or moderate active ulcerative colitis and initiating the third phase III trial for rifamycin SV MMX in the treatment of travelers’ diarrhea.

Moreover we remain focused on executing on our business development strategies to bring in marketed and development stage products that will further diversify our product portfolio and positions into our continued growth and success for many years into the future.

Now let me get to more specifics on each of these topics. With regard to our ZEGERID plans at the appropriate time we will take the size of input actions to restructure the organization and launching authorized generic of ZEGERID. However until this occurred as an organization we are focused on maximizing the value of ZEGERID and regardless of what happens in ZEGERID we will continue promote GLUMETZA which has been an excellent growth product for Santarus and continue to gain prescriptions and market share in a very large diabetes market. We’ve established GLUMETZA as the clear leader in the branded metformin market and we look forward to growing prescriptions in the future.

Now I’d like to update you on our strategic partnerships. Schering-Plough Consumer HealthCare now also known as Merck Consumer Care has recently initiated significant consumer advertising campaign for ZEGERID OTC and we believe they are committed to making ZEGERID OTC a successful OTC product. We are reporting our first royalty revenues from ZEGERID OTC filing product shipments that began in late March. Many of you maybe have already seen television ads and store this place by Merck Consumer Care.

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