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AMAG Pharmaceuticals Inc (AMAG)
Q2Â 2020 Earnings Call
Aug 6, 2020, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the AMAG Pharmaceuticals Second Quarter 2020 Earnings Call. [Operator Instructions] It is now my pleasure to turn today's call over to Ms. Rushmie Nofsinger, Vice President of Corporate Affairs and Investor Relations. You may begin your conference.
Rushmie Nofsinger -- Executive Director of Corporate Communications & Alliance Engagement
Thank you, Regina. Good morning, and welcome to the AMAG Pharmaceuticals conference call to discuss our second quarter 2020 financial results. Earlier this morning, we issued a press release. For those of you who don't have a copy, you can access it in the Investors section of our website at www.amagpharma.com. Please be reminded that remarks made during this call may include forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
We want to emphasize that these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those discussed in such forward-looking statements. Please refer to our 2019 Form 10-K, our Form 10-Qs and eight-Ks, including our upcoming Form 10-Q for the quarter ended June 30, 2020 as well as statements included in our presentation materials, for a full review of the risks and uncertainties associated with our business.
On today's call, we will discuss certain non-GAAP financial measures with respect to our performance. We use these non-GAAP measures for financial and operational decision-making and as a means to evaluate our performance because we believe they better represent the ongoing economics of our business. The definitions of our non-GAAP measures are set forth in our earnings release, which was filed with the SEC today. Copies may be obtained at sec.gov and in the Investors section of our website. We are conducting today's earnings call with participants in different locations given the COVID-19 pandemic. So we ask that you please bear with us if there are any technical issues. We do have a team and process in place to handle issues should they arise
Today, we are focusing our prepared remarks on the progress we are making against our strategic evolution to become a focused biotech company. We will have comments from Scott Myers, our President and CEO, Tony Casciano, our Chief Operating Officer; and Brian Piekos, our Chief Financial Officer. After their brief upfront comments, we're looking forward to opening the line for Q&A. With that, I will turn the call over to Scott.
Scott D. Myers -- President and Chief Executive Officer
Thanks, Rushmie. Good morning. And thanks to everyone for joining us today. Since our last call on May 11, we've been making a great deal of progress on key milestones, all the while managing the business through the COVID-19 pandemic. You can see some of the headway we've made recently here on this slide. We'll talk about these accomplishments throughout this morning's call. Our Board of Directors and executive team are fully committed to our company's evolution. It's an exciting time to be in AMAG and shape the future of this company and continue to help to meet the unmet medical needs of our patients.
The changes we are driving are multifaceted and requires to take a holistic view at our people, our products, the capabilities and culture of our company. Since I joined as the CEO in late April, we have been building our management team to drive our evolution. We made some organizational changes in June to help us further unlock potential in our people and our products. Some of these changes included appointing Tony Casciano as our Chief Operating Officer. This morning, we shared that Brian Piekos has been promoted to the role of our Chief Financial Officer. I'm greatly appreciative of the leadership and business partnership that Brian brings to our team, and I'm thrilled to have him serve as our CFO and further contribute on our management team as we drive AMAG's evolution.
Our company is focused on advancing assets with the highest potential and probability of success, which includes developing ciraparantag, also referred to as AMAG-977. It's an exciting development program that's exploring how ciraparantag could reverse the effect of direct oral anticoagulants or low molecular weight heparin. We believe ciraparantag could offer a new treatment option for physicians searching for a broad spectrum reversal agent. In July, we announced that we entered into an exclusive licensing agreement with Norgine to develop and commercialize ciraparantag across Europe, Australia and New Zealand. This agreement provide us with a total of USD30 million up for upfront consideration, and we also will receive up to $260 million in development and commercial milestones, together with very attractive escalating double-digit royalties. Norgine is also committed to contribute 1/3 of the out-of-pocket cost for our Phase III clinical development program.
We're excited about this license agreement because we believe it reflects the emerging value that exists in our pipeline. We will continue to explore ex U.S. business development opportunities to help us further unlock the value of this pipeline. Last month, we also completed the divestment of our Women's Health assets. This allows us to reduce operating expenses as we focus on our marketed assets and our pipeline. We also announced another change to our portfolio this morning, we have stopped the AMAG-423 Phase IIb/IIIa trial based on the recommendation of an independent review board. The small patient population made this a difficult trial to enroll. Then when the COVID-19 pandemic began earlier this year, we were forced to pause all trial-related activities. Given this pause forced by COVID-19, we made the decision to conduct an interim analysis to help validate the assumptions from the original study, which was completed in 2007.
The Data and Safety Monitoring Board, or DSMB, an independent group of physicians and statisticians convened to provide analysis and advice on this trial, and they conducted the interim analysis. AMAG remains blinded to this actual data. In July, the DSMB came back with unanimous recommendation to stop the trial. It is important to note that there were no safety concerns raised by their analysis. However, the data did indicate that there is a low likelihood that future enrollment would demonstrate a benefit of AMAG-423 in women with severe preeclampsia. It was this data that led to their recommendation to stop the trial. We have accepted the DSMB's recommendation and have stopped the trial. We're in the process of winding down the trial and addressing contractual obligations and ancillary contracts associated with the trial.
As we work closely with the key stakeholders to close out the trial, I want to share our gratitude to everyone who played a role in the AMAG-423 trial, especially the patients and their families who made the choice to enroll. slide, slide please. As we have reached many accomplishments in a short period of time, we have done it during the COVID-19 pandemic. We have navigated the COVID-19 pandemic by following a few key principles. First, protect the health of our employees. Next, to do our part to stop the spread of COVID-19 and support our customers and providers by allowing them to focus on direct patient care. All of us are proud of this approach we've taken during the pandemic and our team's ability to evolve and execute in a rapidly changing environment.
Now as states and municipalities take steps to reopen, we are keeping the same guiding principles at the forefront as we prepare to allow our field force to return to a limited number of in-person engagements if they and providers are comfortable doing so. These returns will be based on public health data and in accordance with the standards from institutions and offices. We are also requiring all field-based personnel to participate in mandatory safety training to help ensure the health and safety of our workforce and those with whom they interact. We will remain flexible with our teams and continue to prioritize their health and safety as they continue to utilize technology for virtual engagements or make the voluntary choice to return to in-person engagements.
In addition to our field teams, our corporate functions have been working remotely since March and remain virtual today. Our supply chains have remained intact throughout the entire pandemic, and as we shared in our May call, we continue to believe that COVID-19 will not materially impact our ability to supply the market for the foreseeable future. We continue to work diligently with our suppliers to ensure that our products continue to remain available to our patients and our providers. We've also been able to continue our regulatory interactions during the pandemic. Now I'd like to share an update on how we are working with the FDA to retain patient access to Makena. slide six, please. On our Q1 call, we shared that the FDA had not yet completed their review of our product, and it would be premature to hold a meeting. In a recent call with the FDA, the agency indicated that they need more time to review information pertinent to Makena.
Given the complexity of the issue and the competing and ongoing priorities, we are not surprised that they need additional time for their review. They haven't yet indicated a time in which they plan on continuing the discussions. It's important for everyone to remember that any decision regarding Makena also affects the commercial availability of five additional FDA-approved generics that are currently on the market. We continue to educate the market through our MSL team and our commercial team continues to promote Makena on label.
In anticipation of future discussions with the FDA regarding Makena, we plan to generate supporting data on the efficacy of the product. We have proposed to conduct a retrospective study using secondary data sources and a prospective primary data collection study. Both of these studies would support further defining the patient populations that most benefit from 17P. The retrospective study would aim to use real-world data to evaluate the effectiveness of 17P in predictors of benefit in women with a singleton pregnancy with the history of a spontaneous preterm birth. While we are awaiting further discussions with the FDA, we have decided to initiate the first part of the retrospective study, which will be important in evaluating the baseline characteristics in patients overall and by treatment status those being treated versus untreated.
We believe this is optimal, feasible, timely and informative way to confirm clinical benefit. Our research indicates that the FDA is increasingly relying upon real-world data or known as RWD and real-world evidence known as RWE, to inform regulatory decisions on medical products across a range of indications when assessing their safety and effectiveness, both with original as well as supplemental approvals that led to the label expansions. While a placebo-controlled randomized trial will traditionally be the design utilized to confirm clinical benefit following the accelerated approval, FDA has shown a willingness to consider alternative approaches to support regulatory decision-making for other therapies.
In conclusion, while we wait for our next discussion with the agency, there are a few key reasons to be encouraged by where things stand at this point.The FDA is not rushing to any decisions at the moment. AMAG is demonstrating its commitment to patients in 17P by initiating the first steps of additional data generation. We remain ready to collaborate with the agency as soon as their team is ready to do so and utilization of Makena has remained steady and providers continue to prescribe it during these unprecedented times. We're pleased with the durability of Makena during the COVID-19 pandemic.
Now I'm going to turn the call over to Tony, who will share more of the progress of our portfolio during the COVID-19 pandemic. Tony?
Anthony Casciano -- Executive Vice President, Chief Operating Officer
Thank you, Scott, and good morning, everybody. Over the next couple of slide s, I'll share revenue performance in the quarter for both Makena and Feraheme. Due to the timing of the pandemic in the quarter, which has impacted our products in different ways, I'll share some additional data to help illustrate how we're viewing the underlying health of our brands. We do not intend on sharing this level of information on future calls, but thought it might help provide some insights as you think about the back half of the year and the updated full year guidance we provided today.
So let's start with Makena on slide seven. On the left-hand side of the slide, you'll see that revenue in the quarter was below Q2 of last year, primarily due to the volume decreases we observed immediately following the Q4 2019 advisory committee. These monthly volumes have since stabilized. And in fact, volumes are relatively stable in the quarter despite the pandemic, as illustrated on the right-hand side of the slide. Worth noting, Makena auto-injector market share grew in the quarter to 66%, as we continue to ensure patients and healthcare providers have access to this important therapy. While ex factory volume was relatively stable and market share grew during the quarter, we did see some softening of Makena patient enrollments in the quarter. Specifically following our field restructuring in May and have incorporated these trends into our Q3 expectations and our full year guidance.
Turning to slide eight, on Feraheme. You'll see that revenue in the quarter was below Q2 2019, and this was primarily due to COVID-related impacts. As we signaled on our Q1 earnings call, we saw a disproportionate impact to Feraheme in early April, with some leading indicators of a recovery as we exited the month. We're happy to report, as illustrated on the right-hand of the slide that these early indicators translated into a strong recovery over the quarter with sequential monthly growth, an all-time highs in ex factory volume and market share in the month of June.
This strong ex factory performance in June was driven by a combination of the IV iron market recovery, market share gains and some inventory normalization at the wholesalers. So some positive momentum with Feraheme as we enter the back half of the year. And with that, I'll turn it over to Brian for an update on Q2 financial results and how we're positioned to return to the guidance that we announced this morning. Brian?
Brian Piekos -- Interim Chief Financial Officer
Thanks, Tony. I'm glad to join everyone on today's call. As both Scott and Tony highlighted, we're making progress against our 2020 goals and strategic evolution. Here on slide nine, you can see financial results for the second quarter of 2020 compared to the same period last year. Tony walked through the revenue performance, and I'll provide some color on expenses and an accounting error impacting Makena revenue in prior periods. As further discussed in the press release, the financials referenced this morning have been adjusted to correct immaterial errors to Makena revenue in prior periods. Between 2016 and 2019, Makena's gross net adjustments were understated by a total of $6.3 million. The error identified by us in mid-May relates to the timely recognition of certain governmental rebates.
We and our auditors are still reviewing our prior period financial statements and the potential impact on our internal controls. Therefore, the historical financials in today's release are preliminary and may be updated in the 10-Q. To prevent this error from recurring, during the second quarter, we enhanced our controls around the timely recognition of governmental rebates. Turning back to second quarter's performance. Operating expenses declined $44 million compared to the second quarter of 2019. Our research and development expenses for the quarter were lower due to COVID-related delays in clinical trial activities and the 2019 Vyleesi-related NDA spend did not recur. SG&A spend declined by almost 50%, driven by our decisions to divest the Women's Health business and reduce the size of the organization by approximately 1/3. As Scott shared, we have adapted our business to operate during the COVID-19 pandemic.
Our second quarter results indicate that our core business remains intact. Providers and patients recognize that Feraheme and Makena are important treatments and are working to ensure patients have access to these treatments during the pandemic. Based on the trends we're seeing exiting the second quarter and the strength of the business, we are reassuring full year 2020 guidance. On a consolidated basis, we expect total revenue for the year to come in between $225 million and $255 million leading to an adjusted EBITDA range of negative $5 million to positive $20 million. Our full year revenue guidance range balances the ongoing risks related to COVID and our May restructuring with the strong performance that we produced in the second half of the quarter. The adjusted EBITDA guidance reflects additional delayed R&D spend due to COVID and confirmation that with the Women's Health divestiture and associated organizational restructuring completed, we'll return to positive EBITDA for the second half of the year.
Now I'll turn the call back to Scott to provide an update on our goals and objectives before we turn it over for Q&A.
Scott D. Myers -- President and Chief Executive Officer
Thanks, Brian. Here on slide 11, you can see the progress we've been making against our 2020 goals. And as you can see, it's been a very busy 100 days, my first 100 days here as part of the management team. We spoke about many of our recent accomplishments this morning, and I'll quickly recap these here. We divested the Women's Health assets to align with our company's new strategic direction. We completed an exclusive licensing agreement with Norgine for ciraparantag, we continued to drive growth at Feraheme and saw strong recovery amid the pandemic. Makena continues to remain available for patients.
We are initiating a retrospective data analysis as part of our commitment to generate additional data on efficacy and our field teams continue to promote and educate on the product. And as we've stopped the AMAG-423 trial following the recommendation from the DSMB, ciraparantag is the key priority for this company. In recent months, amid the COVID-19 pandemic, we have made steps to advance preparations for the Phase IIb studies in healthy volunteers. As a reminder, these studies will confirm the proposed dose of ciraparantag to be used in the Phase III program, and we will use the coagulometer. We have progressed training for our company's clinical operations team to use the coagulometer in the Phase IIb study.
Additionally, Perosphere Technologies initiated the final study in a multi-site validation study in support of their investigational device exemption, or IDE. Successful completion of the study will enable Perosphere to submit the IDE to the FDA for review. These are key milestones on the assets journey into Phase III and we'll be sharing more detailed progress later in this year. These recent achievements have set us up to reissue guidance, which includes our projection that we'll return to EBITDA positive for the second half of this year. We are building momentum, which will carry us carry our company forward in the back half of 2020 and beyond as we continue to evolve into a focused biotech light company. With that, I'll now ask the operator to open the line for Q&A.
Questions and Answers:
Operator
[Operator Instructions] Our first question will come from the line of Ami Fadia with Leerink.
Ami Fadia -- Leerink -- Analyst
Good morning, thanks for my question, Congratulations on all the progress that's being made at the company. I've got three questions. Firstly, on ciraparantag. Thank you for the update. When do we when do you think we will be able to complete the study and the mix, the IDE application to the FDA, by when do we get that update? And from there on, can you lay out some rough time lines on by when we might be able to have a Phase IIb completion? Secondly, on Feraheme, if you could remind us on your agreement with Sandoz and the likelihood of a generic being approved by the FDA. And thirdly, just on the 2022 convert, as you restructure the company, how do you plan to address the convert?
Scott D. Myers -- President and Chief Executive Officer
Thanks, Ami, for all the questions. This is great. So with regard to ciraparantag, we are on track, as we've set out in the clinical development plan. That should that IDE should be submitted in late third quarter or early fourth quarter, so by the end of the year, and we should based on the time frame for review, we would hear back to that and our plan would be to start the Phase IIb directly after that. So end of the year, early next year, end of 2020, early 2021 on the Phase IIb. And that trial in this kind of trial setting, the time from dosing to response is very short. So we would expect to have that fulsome data by mid next year.
I would say anything related to clinical trials that I'm sure you've seen in your other coverage companies, COVID plays a role in that. So we are holding to our plan right now, and that plan seems reasonable and feasible. But we'll update you as we know more at the back half of the year on the IDE. With regard to Feraheme, we have no further information on the generic. As of right now, we assume they might be working on it, but we don't know. There's been no communication on that, and we haven't heard anything from the agency. So we are plowing ahead business as usual. And...
Ami Fadia -- Leerink -- Analyst
2022 convert?
Scott D. Myers -- President and Chief Executive Officer
Yes. Brian, do you want to handle this one?
Brian Piekos -- Interim Chief Financial Officer
Yes, sure, Scott. So over the last few months, we've continued to have discussions with shareholders and the convert holders on refinancing approaches. As I said before, we've been really focused on getting the Women's Health divestiture behind us. The organizational change is important to reshape the financial profile of the company. With those tasks behind us and a cash flow positive forecast, we are discussing with our advisors kind of available financing alternatives and time lines to try and find the optimal refinancing approach ahead of the 2022 maturity.
Ami Fadia -- Leerink -- Analyst
And Brian, just a quick follow-up. With regards to the restatements, when do you expect to be able to file the Q?
Brian Piekos -- Interim Chief Financial Officer
Yes. We're working expeditiously with the auditors. The control side is difficult and we're working quickly through that. Certainly are aiming to get the Q filed on time, but these things are complex and difficult.
Ami Fadia -- Leerink -- Analyst
Great, thank you.
Brian Piekos -- Interim Chief Financial Officer
Thank you.
Operator
[Operator Instructions] Your next question will come from the line of Douglas Tsao with HCW.
Douglas Tsao -- HCW -- Analyst
Hi, good morning. Thanks for taking the questions. Just maybe on Makena, just curious in terms of what you saw in terms of trends during the quarter and how we should think about it for the rest of the year. Just it sounds like obviously, the quarter showed some really good resilience. Just April sounds like there was a lot of continuation of therapy. How should we think about was there sort of an impact in terms of new enrollments during May and maybe the early part of June? And how does that affect the revenue trajectory as we go through the rest of the year? And how are enrollments going in the early part of July?
Scott D. Myers -- President and Chief Executive Officer
Yes. Doug, thanks for the question. I'm going to have Tony address that question. Tony, you'll pick that up?
Anthony Casciano -- Executive Vice President, Chief Operating Officer
Yes, sure. Good question. So I think, firstly, let's just maybe clarify. So the graphic that we had shared was ex factory volumes. So in there, obviously, can be inventory movement as there sometimes is. And just to be clear, there wasn't a lot of movement, but from a month-to-month perspective, a day or two here or there. So we did see a slight build in March, a slight build in April. And then we saw slight givebacks in both May and June. So demand underlying demand was pretty stable actually as you went month-to-month.
What we signaled on the call in the forward comments was the fact that we did see a little bit of a softening in our enrollments as we exited the quarter, primarily after the restructuring that we had rolled out in early to mid-May. Now I just want to point out that patient enrollments is not a super sophisticated forecasting tool, so it's not 100%, but it did factor into how we're looking at the third quarter in particular because that dip we saw in May, we do think plays out in dispenses and actual product shift in the third quarter. And we wanted to highlight that for you as you're thinking about the second half of the year. So hopefully, that answers your question. And then there was the July in there. It's probably premature to talk about July. I can tell you that June, we did have a bit of a rebound in patient enrollments. And the team is working hard to stabilize that further.
Douglas Tsao -- HCW -- Analyst
Okay, excellent.
Operator
And I will now turn the call back over to Scott for any closing remarks.
Scott D. Myers -- President and Chief Executive Officer
I want to thank everyone again for during this pandemic being so involved and supportive of AMAG. It's been a very interesting time. We know we still have a lot of work to do. We are committed to building upon the progress that we've made recently, and we'll do this by staying focused on our key priorities and executing accordingly. We look forward to helping investors gain a deeper understanding of the value we believe exists in the company. I look forward to continuing to engage with investors to share our progress over the coming months. This concludes today's call. Thank you.
Operator
[Operator Closing Remarks].
Duration: 26 minutes
Call participants:
Rushmie Nofsinger -- Executive Director of Corporate Communications & Alliance Engagement
Scott D. Myers -- President and Chief Executive Officer
Anthony Casciano -- Executive Vice President, Chief Operating Officer
Brian Piekos -- Interim Chief Financial Officer
Ami Fadia -- Leerink -- Analyst
Douglas Tsao -- HCW -- Analyst
