Santarus Inc. (SNTS)

Q2 2010 Earnings Call

August 2, 2010 5:00 PM ET


Martha Hough – Vice President, Finance and IR

Gerry Proehl – President and CEO

Debbie Crawford – SVP, Chief Financial Officer, Treasurer and Secretary

Dr. David Ballard – SVP, Clinical Research and Medical Affairs

Bill Denby – SVP, Commercial Operations


Scott Henry – Roth Capital

Annabel Samimy – Stifel Nicolaus

David Amsellem – Piper Jaffray

Ian Sanderson – Cowen and Company



Welcome to the Santarus Second Quarter 2010 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks we’ll hold a Q&A session. (Operator Instructions)

As a reminder, this conference is being recorded August 2, 2010. I would now like to turn the conference over to Martha Hough. Please go ahead, ma’am.

Martha Hough

Thank you, Casey. 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, Chief Financial Officer, Treasurer and Secretary; and Dr. David Ballard, Senior Vice President, Clinical Research and Medical Affairs; Bill Denby, Senior Vice President, Commercial Operations, will also join us for today’s question-and-answer session.

Earlier today Santarus issued a press release announcing our second quarter 2010 financial results. If you have not received a copy of our earnings release, you can access it on our website at A replay of this call will also be 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 August 2, 2010. Santarus undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call.

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

Gerry Proehl

Thank you, Martha, and welcome to this afternoon’s call. We’ve responded to Par Pharmaceutical’s launch of its generic version of ZEGERID Capsules by launching our own authorized generic version of ZEGERID’s Capsules, restructuring our organization and ceasing promotion of ZEGERID prescription products. This decision was necessary but difficult because we had to let go many talented high-performing employees.

Today, we are reporting strong second quarter financial results with net income of $6 million on total revenue of $41.7 million. Product-related revenue increased 22%, compared with the prior year period and our cash position as of June 30th was $99.1 million.

We are focused on effectively managing our business and successfully promoting GLUMETZA. We believe that by calling on physicians who are high decile prescribers of drugs for patients with type 2 diabetes, our current group of 110 sales representatives will be able to provide promotional coverage for GLUMETZA at a level equal to or slightly better than we did with our larger sales organization.

As an update on GLUMETZA 500 milligram recall that was announced in mid-June, Depomed has informed us that they expect to recommence shipping GLUMETZA 500 milligram product by mid-August, assuming Depomed’s current testing and re-supply activities are successful.

The 1000-milligram tablet was not impacted by the recall. As a result of focusing our promotion on the 1000-milligram product, we’ve seen continued strong new prescription trends with this dosage strength.

We expect to be profitable in 2010, assuming that GLUMETZA 500 milligram shipments resume by mid-August as expected and excluding one-time charges associated with our generic launch in the organizational restructuring cost, which we expect to record in 2010 third quarter. We also expect to achieve modest profitability in the 2010 fourth quarter.

Regarding the ZEGERID patent litigation, we filed an appeal to the U.S. Court of Appeals for the Federal Circuit in late May in response to the U.S. Delaware District Court’s decision that the asserted patents covering our ZEGERID products are invalid due to obviousness.

Last week, we filed our initial brief for the appeal. The appeal will be heard by a three-judge panel with the decision based on a majority ruling. We expect the appellate decision in approximately 12 to 18 months from the filing of the appeal in late May, although the timing could be shorter or longer than we estimate.

As for our GI development products, we now plan to announce topline data from the U.S. and EU budesonide MMX Phase III clinical studies for ulcerative colitis in September and we are currently enrolling patients in our first rifamycin SV MMX Phase III clinical study for travelers’ diarrhea at centers in Mexico and Guatemala. David Ballard will provide more information about both of these programs later in the call.

Now, I’ll turn the call over to Debbie Crawford to discuss our financial performance. Deb?

Debbie Crawford

Thank you, Gerry. I’m pleased to report strong results for our sixth consecutive quarter of profitability. For the second quarter of 2010, total revenues were $41.7 million, up 16% compared with the prior year period.

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