Nordion Executive Insights: Physician Coverage, Enrollment

On Wednesday, Nordion, Inc. (NYSE:NDZ) reported its second quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared.

Physician Coverage

Lennox Gibbs – TD Newcrest: The TheraSphere guidance, what assumptions are you making with respect to physician coverage through the back half of the year?

Steve M. West – CEO: Was that physician coverage, did you say?

Lennox Gibbs – TD Newcrest: Yes, just, I guess the personnel issues?

Steve M. West – CEO: It’s a rather unusual situation what I guess you kind of characterize is the nature of the business, where you have and we have established key opinion leaders who have high-volume of patients through their institutions and now they’ve for various reasons either moved away from those institutions or are away. So, there is two components for this, one is, those key opinion leaders are still very much tied to TheraSphere, that’s the product that they use, so I don’t see any issues there. Secondly, where they’ve vacated some of the institutions, it’s clear that we need to widen the base of interventional radiologists across our accounts that use TheraSphere. Historically, Lennox, I guess we have engaged key opinion leaders who have taken the product and used it in patients. What we need to do is make sure that when their volumes have got so high is to be so important for our overall revenue is that we ensure that some of their colleagues are equally capable and trained to use the product, and so that’s why we have been putting these new programs in place, including the preceptor program to ensure that we widen the base of interventional radiologists use in the product. So, net, net those doses that we lost are lost. They are most likely both patients were treated with standard transarterial chemoembolization as TheraSphere is used very often in combination with other therapies, and those patients just didn’t get TheraSphere. We’ve no reason to believe that there was a substitution for another radioembolic product. I hope that answers your question.

Lennox Gibbs – TD Newcrest: Then a broader question, so you’ve had softer than expected commercial sales now for two quarters, and is also seen slower than expected enrollment in the STOP-HCC trial, do those trends concern you at all that the real world addressable market may not be as big or perhaps as accessible as you originally anticipated, and if not why not?

Steve M. West – CEO: No, Lennox I don’t have those concerns. In fact, with sort of 15%, 16% continued growth in Europe and United States, I think the market is actually very robust, and if you actually take away those for (indiscernible) accounts, our growth is of actually above market rate growth. So, we’ve been experiencing, as we mentioned, 23% in a quarter and 35% year-to-date. So, we actually continue to see new adoption. As you know, historically we focused on North America. We are resourcing and starting up in Europe and the growth frankly in Asia just in terms of incidence is huge. In fact, whether it’s – in Asia it’s primary liver cancer perhaps more than metastatic colorectal cancer. What would continue to drive that patient population is, number one, an aging population, because this disease is associated with older patients and Hepatitis B and also we are beginning to see now in these potential markets, better detection of primary liver cancer. So the statistics around this suggest that, for example, in China there are 350,000 new cases every year, which just by itself is a very significant opportunity. So, net-net unfortunately patient’s liver cancer is increasing in incidence. It is a very serious cancer and it’s a very significant cancer. So, patients need a treatment option and radioembolization is clearly a treatment that is gaining increasing acceptance. Just to give you another data point, proof point, Lennox, recently I was in Europe with our team at the European Conference of Interventional Oncology, which is attended by over a thousand healthcare practitioners. It’s just another proof point that image guided interventional oncology is a growing modality, it’s growing acceptance, and it is becoming the fourth pillar of cancer care.


Neil Maruoka – Canaccord: Just first quick follow up on one of Lennox’s point. The slow enrollment that you are seeing in STOP-HCC, what do you see as being like a worse case impact on trial completion and data read out based on the trends that you are seeing now with that enrollment?

Steve M. West – CEO: At this stage Neil, it really is too early to read detail. We have perhaps focused on EPOCH first and we are getting trial sites initiated and we have seen faster adoption there than in STOP-HCC, so perhaps we put a bit more emphasis on it, but one of the challenges that we have is very simply that TheraSphere is an accepted treatment option for patients and we just have to be cognizant of the fact that this is randomized trial, and the implications of that, it’s a bit early for us to frankly to really yet have a view on any specific implications of what might be challenging enrollment, we are just beginning to be aware of it and we are going to plan around that and we are looking at the options that we have to just make sure that we can find a way to get patient enrollment with significant velocity such that trial can be completed in the appropriate timeframe.

Neil Maruoka – Canaccord: So, you don’t see any evidence of slippage in timelines at this moment?

Steve M. West – CEO: At this moment in time we believe that the trial will be completed in six years.

Neil Maruoka – Canaccord: On the Medical Isotopes can you talk a little bit about the nature of the unexpected disruptions and given the age of the NRU can we expect greater likelihood of similar disruptions going forward.

Steve M. West – CEO: Yeah, it’s challenging to predict going forward. They were unplanned, they were about a week each, they were mechanical issues. We were obviously very disappointed by that as always the AECL team do a pretty good job of trying to remediate those issues and pull all this stuffs out to minimize the impact on our supply and on patients, but I don’t know that I could say that these specifically tied aging infrastructure, I mean they were mechanical and engineering issues, will we see more than going forward? Yeah, when it’s aging infrastructure, AECL spends a lot of money on it. The planned outage did go according to plan and they were back up on exactly the day they said they would be, so from time to time to be honest with you Neil, I think we may experience more of this, I’m hoping that AECL continue to learn from their experiences, the reactors had a lot of investments in it and its reliability, we hope will be good enough to maintain our supply chain, but as always there is always a risk that there will be unplanned outages, but I can’t give you any quantitative predictive value on that.

Neil Maruoka – Canaccord: I’ll just hit quickly on the sterilization technology, can you provide an update on customer interest in GammaFIT that’s in early stage of launching and when do you expect to see your first delivery?

Steve M. West – CEO: There has been lots of interest in GammaFIT, it’s got a long sales cycle as we kind of indicated we weren’t expecting to set any GammaFIT in 2012. We are hopeful that in 2013 we’ll get some customer traction. If you think about a situation we have in sterilization technology PI sales, we expected that we would be able to get revenue from two sales this year. We believe that those customers will still continue to move ahead with their plans, but they have deferred them. Both of these PIs were in Europe actually, and I think it is a function of the situation in Europe and the uncertainty economically there now that definitely impact some large capital investments. So, I hope that GammaFIT is actually more attractive because it does have a lot of capital requirement. It is more modular. Although, having said that, the GammaFIT customer segment is slightly different perhaps to the folks that go ahead and order the larger PIs. It is not meant to replace the larger PIs. It’s a range extension and so generally GammaFIT is targeted at people that want to get into the gamma irradiation either in food or in other or in medical devices with a lot of capital costs. So, it’s a slightly different customer segment, and we are expecting that we’re going to get some successes in 2013.