On August 7, 2018 Novelion Therapeutics Inc. (NASDAQ: NVLN), a biopharmaceutical company dedicated to developing and commercializing therapies for individuals living with rare diseases ("Novelion" or the "Company"), reported financial results for the second quarter and six months ended June 30, 2018 and provided an overview of business activities (Press release, QLT, AUG 7, 2018, View Source [SID1234528932]).
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Interim Chief Executive Officer Jeff Hackman commented, "Under our new leadership team, we are laser focused on maximizing the potential of our two commercial assets, enhancing our operational efficiencies by reducing costs, and fixing our capital structure issues so we can invest in the long-term opportunity of our valuable rare disease therapies.
"On the commercial front, we expect sequential revenue growth in the second half of this year, bolstered by stabilizing JUXTAPID sales in the U.S., and continued penetration of the Japan market, where there are more than 200 registered HoFH patients. We also expect initial contribution from the European launch of MYALEPTA (metreleptin) for both generalized lipodystrophy (GL) and partial lipodystrophy (PL), which represents the largest market for metreleptin in terms of treatable patients, a number of whom have already been identified through our pre-approval compassionate use program and are expected to be converted onto therapy, subject to pricing and reimbursement approvals, where required. Further, we believe that we can leverage the EU approval data package to support our plans to expand the U.S. label to include the PL indication and to file in additional markets, including Brazil. We want to thank Murray Stewart, M.D., our head of R&D, and his team, along with all the employees that supported the filing and approval, for achieving this important approval. We look forward to their work on expanding the metreleptin opportunity."
Business Highlights
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On July 31, Novelion announced that the European Commission (EC) granted marketing authorization for MYALEPTA, as an adjunct to diet, as a replacement therapy to treat the complications of leptin deficiency in lipodystrophy (LD) patients with confirmed congenital GL or acquired GL in adults and children 2 years of age and above; or with confirmed familial PL or acquired PL, in adults and children 12 years of age and above for whom standard treatments have failed to achieve adequate metabolic control. MYALEPTA is the first and only licensed treatment in Europe in these indications. Pricing and reimbursement negotiations with healthcare authorities have commenced and will be pursued on a country-by-country basis.
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In August, the Company submitted a marketing application for JUXTAPID in Brazil. While the Company currently recognizes sales for JUXTAPID in Brazil via the pre-approval named patient sales program, the Company is seeking formal marketing approval which, if successful, will open the door for product promotion and should also result in more predictable sales trends.
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JUXTAPID: Novelion reported net revenues of JUXTAPID of $16.3 million in the second quarter of 2018, $10.5 million, or 64%, of which were from prescriptions written in the U.S. and $0.8 million of which was royalty revenue from Amryt’s sales of JUXTAPID in the EMEA region.
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MYALEPT: Novelion reported net revenues of MYALEPT of $15.6 million in the second quarter of 2018, $12.5 million, or 80%, of which were from prescriptions written in the U.S.
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In June, clinical data from a metreleptin study assessing weight loss in overweight and obese adults with low leptin levels were featured in a poster presentation at the American Diabetes Association’s (ADA) 78th Scientific Sessions. These data support potential metreleptin pipeline opportunities.
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In July, Novelion’s Board of Directors appointed Mark Corrigan, M.D. as Executive Chair. Dr. Corrigan serves in a supervisory role to the Company’s management team and will continue to perform the traditional duties of Board Chair. In addition, Jeff Hackman was appointed interim chief executive officer.
Dr. Corrigan commented, "The first half of 2018 has been filled with important milestones. Having finalized Aegerion’s legal settlements earlier this year, our organization was pleased with the strong market receptivity of our continued launch of JUXTAPID in Japan, as well as the stabilization of our U.S. JUXTAPID franchise. More importantly, the MYALEPTA European approval creates a larger revenue opportunity for us than in the U.S. In addition to top-line growth, we intend to further our operational improvements with the goal of creating a pathway to sustainable positive cash flow and robust EBITDA growth. Given our progress on these initiatives, we intend to re-engage with the investor and analyst community, and we also plan to resume revenue guidance for 2019."
Second Quarter 2018 Financial Results
GAAP total net revenues for the second quarter of 2018 were $31.9 million compared to $40.9 million for the same period of 2017, primarily as a result of the timing of orders for both products in Brazil. The second quarter of 2017 benefitted from $8.1 million of Brazil revenues derived from the named patient sales program, whereas the second quarter of 2018 does not reflect any named patient sales in Brazil. The Company expects that marketing approval of its products, if achieved, in Brazil will support more predictable sales. Revenue growth of $2.0 million in other foreign markets more than offset the $0.7 million decrease in U.S. revenues. The second quarter of 2017 also benefitted from a one-time recognition of previously deferred revenue totaling $2.3 million, related to a change in method of revenue recognition for MYALEPT.
GAAP net revenues for JUXTAPID in the second quarter of 2018 were $16.3 million compared to $20.7 million for the same period in 2017. JUXTAPID revenues representing named patient sales in Brazil totaled $4.3 million in the second quarter of 2017, while there were no named patient sales
of JUXTAPID in Brazil in the second quarter of 2018. Growth of 8% in other foreign markets nearly offset the 5% decrease in U.S. revenues, where we continue to see stabilization of sales.
GAAP net revenues for MYALEPT in the second quarter of 2018 were $15.6 million compared to $20.2 million for the same period in 2017. MYALEPT revenues representing named patient sales in Brazil totaled $3.8 million in the second quarter of 2017, while there were no named patient sales of MYALEPT in Brazil in the second quarter of 2018. As mentioned previously, MYALEPT revenues of $20.2 million in the second quarter of 2017 included a one-time recognition of previously deferred revenue of $2.3 million. Excluding this effect, U.S. revenues were virtually unchanged compared to the comparable period of the prior year, while MYALEPT revenues in foreign markets other than Brazil more than doubled from $1.5 million to $3.2 million in the same timeframe.
GAAP total operating expenses for the second quarter of 2018 were $34.1 million compared to total operating expenses of $38.4 million for the same period in 2017. GAAP SG&A expenses were $23.7 million in the second quarter of 2018 compared to $26.5 million for the same period in 2017. GAAP R&D expenses were $10.4 million in the second quarter of 2018 compared to $10.8 million for the same period in 2017.
On a pro forma basis, during the second quarter of 2018, SG&A expenses were $21.7 million compared to $25.1 million for the same period in 2017. The 14% decrease in pro forma SG&A expenses in the second quarter of 2018 compared with the same period in 2017 was primarily related to cost reduction programs initiated in early 2018. Additionally, there were no restructuring charges incurred during the second quarter of 2018, compared to $1.0 million in restructuring charges incurred during the second quarter of 2017, related to the consolidation of similar positions during the integration of the business subsequent to the acquisition of Aegerion.
On a pro forma basis, during the second quarter of 2018, R&D expenses decreased 5% to $10.2 million compared to $10.7 million for the same period in 2017, reflecting cost savings initiatives.
GAAP net loss in the second quarter of 2018 was $31.3 million compared to GAAP net loss of $21.4 million during the same period in 2017.
On a pro forma basis, net loss in the second quarter of 2018 was $11.1 million, compared to a net loss of $1.4 million for the same period in 2017.
First Six Months of 2018 Financial Results
GAAP total net revenues for the first six months of 2018 were $59.4 million compared to $70.9 million for the same period of 2017, primarily as a result of timing of orders for both products in Brazil. The first six months of 2017 benefitted from $10.9 million of Brazil sales derived from the named patient sales program, whereas named patient sales in Brazil totaled $1.2 million in the first six months of 2018. Growth of $5.2 million, or 45%, in other foreign markets offset the $4.7 million, or 10% decrease in U.S. revenues, excluding the impact of the one-time deferred revenue recognition in 2017.
GAAP net revenues for JUXTAPID for the first six months of 2018 were $29.6 million compared to $36.7 million in same period in 2017. JUXTAPID revenues totaled $5.9 million in Brazil in the first half of 2017, whereas there were no named patient sales of JUXTAPID in the first half of 2018. Revenue growth of $1.7 million, or 19%, in other foreign markets helped offset the $2.8 million, or
13%, decrease in U.S. revenues in the most recent six month period compared to the comparable period of 2017.
GAAP net revenues for MYALEPT for the first six months of 2018 were $29.8 million compared to $34.1 million for the same period in 2017. MYALEPT revenues in Brazil totaled $5.0 million in the first half of the prior year compared to $1.2 million in the first half of 2018. Excluding the impact of the $2.3 million deferred revenue recognition in 2017, U.S. sales of MYALEPT declined $1.8 million, or 7%, which was more than offset by the growth in foreign markets other than Brazil where MYALEPT revenues more than doubled from $2.8 million in the first half of 2017 to $6.3 million in the same period of 2018.
GAAP total operating expenses for the first six months of 2018 were $69.6 million compared to total operating expenses of $73.6 million for the same period in 2017. GAAP SG&A expenses were $47.4 million in the first six months of 2018 compared to $51.0 million for the same period in 2017. GAAP R&D expenses were $22.1 million for the first six months of 2018 compared to $20.1 million for the same period in 2017.
On a pro forma basis, for the first six months of 2018, SG&A expenses decreased 10% to $43.3 million compared to $48.0 million for the same period in 2017 primarily as a result of cost reduction programs initiated in early 2018. There were no restructuring charges in the first six months of 2018, compared with restructuring charges of $2.5 million for the same period in 2017 which were related to the consolidation of similar positions during the integration of the business subsequent to the acquisition of Aegerion.
On a pro forma basis, for the first six months of 2018, R&D expenses increased 11% to $21.8 million compared to $19.7 million for the same period in 2017 due to increased clinical activity, partially offset by cost savings initiatives.
GAAP net loss for the first six months of 2018 was $64.1 million compared to GAAP net loss of $52.4 million during the same period in 2017.
Net loss on a pro forma basis for the first six months of 2018 was $24.7 million, compared to $10.1 million for the same period in 2017.
As of June 30, 2018, the Company’s consolidated unrestricted cash balance was $40.0 million, compared to $55.4 million at December 31, 2017. As of June 30, 2018, there were 18.9 million shares outstanding. Consolidated debt principal is $345.0 million, reflecting the amount of aggregate convertible and term loan debt issued by subsidiary Aegerion.