Q3 2019 Earnings Call
As time, all participants are in listen only mode. There will be a question and answer session to follow.
Please be advised that this call is being recorded at the company's request and will be available on the company's website for a period of 90 days from today.
At this time I would like to introduce Mr., John Doyle, Vice President Investor Relations in finance at Verastem oncology. Please go ahead.
Welcome everyone and thank you for joining us this afternoon Tim's got its nursing Oncologys financial results in corporate update third quarter of 29 team.
I'm joined today by Brian Sandwick, Chief Executive Officer, Dan Patterson, President and Chief operating Officer, and Rob Gagner, Chief Financial and business Officer. During today's call Brian will provide some opening comments and provide a corporate update Dan will discuss a few clinical development highlights and then Rob will provide an overview of our third quarter financial result.
Brian will then provide some brief summary remarks before opening the call up your questions.
Earlier today, we issued a press release detailing our third quarter 2019 financial results the leases available on our website that verastem dot com.
Before we begin our formal comments I'll remind you that we'll be making forward looking at Saracens during today's call that represent the company's intentions expectations or beliefs concerning future events, which constitute forward looking statements for the purpose of the safe Harbor provisions under the private Securities Litigation Reform Act a 1995.
All forward looking statements are subject to factors risks and uncertainties such as those detailed in today's press release announcing this call and in our filings with the FCC, which may cause actual results to differ materially from the results expressed or implied by such statements.
Mission any forward looking statements represent our views only as of today looks recording.
We relied upon as representing our views as of any subsequent date.
Specifically disclaims any obligations to update any such statements.
We refer you to the schools are notice section on the earnings release, we issued today and the risk factor section of the annual report on Form 10-K for discussion of important factors that could cause actual results to differ materially from these forward looking statements.
That I would now like to turn the call over to Brian stuff like Brian .
Thank you John Good afternoon, everyone and thank you for joining us on today's call.
In 2019, Verastem oncology has made continued progress in our mission to bring important new medicines to patients bad battling cancer.
Our lead drug called picture I know this duvelisib just completed its fourth full quarter on the market and retina.
Revenues for the three months ended September Thirtyth, 2019 were $4 million, 33% increase over the prior quarter.
Sure Dave Cote picture is generated revenues of 8.7 million and we remain on track to achieve the $12 million to $14 million that we previously guided for 2019.
In addition to increasing quarter over quarter revenues. The number prescribing physicians grew by 30% in the third quarter compared to the second quarter of 2019.
We continue to see solid progress or across all of our commercial efforts, including physician education and contracting.
We're making progress and understanding and addressing market dynamics identifying appropriate patients for treatment and building strong access across the country.
Overall, we are highly encouraged cycle picture is positive upward sales trajectory. We continue to believe in our peak annual sales estimates of 200 to 300 million for the current indications for which it is approved including chronic lymphocytic leukemia.
Small lymphocytic lymphoma, and public you out lymphoma.
That being said, we recognize that the go picture sales ramp has been slower than expected.
As such we have determined that we need to better align our upcoming expenses with the current launch trajectory.
Did that and we announced today that we will be reducing our 2020 operating expenses by approximately $25 million through a series of initiatives, including a workforce reduction and lowering operating expenses.
Specifically, we will be eliminated approximately 40 current positions across all functions.
These changes are designed to streamline operations.
<unk> execution and optimize the field organization for improved account access and performance.
We expect these changes to have minimal impact on topline revenue results.
The workforce reduction component or the industry would get once completed this week.
This reduction was a difficult decision, but based on our current plans and assumptions. We believe these changes give us the best opportunity could be successful with our stated six to five corporate plan.
In our last earnings call, we communicated our new six to five plan.
Which is a commitment to first.
Pepco picture revenues on a positive upward trajectory in closing the gap between revenue and commercial spend within the first six months, which would be by the end of 2019.
Second to achieve cash flow positive breakeven for both the <unk> commercial and clinical program within the next two years or by mid 2021.
And third to broaden the indications for could pick Dre have at least one additional marketed products along with a robust pipeline of assets in development within the next five years or by mid 2024.
Based on our current assumptions. These changes will help set us on a positive path that provides us with approximately 18 to 24 months cash runway to deliver on what we believe can be achieved was called picture.
Collectively intends to these changes to focus our spend on areas that will directly benefit called picture uptake in the market.
Sure continuity of our development efforts, well condensing certain layers in the organization.
We recognize that the staff reduction personally impacts many talented employees.
And we wish to sincerely. Thank all those who are affected further important contributions to the company.
Importantly, we remain deeply committed to driving the adoption of could pick drugs in the U.S. into expanding the footprint both in other global geography, and an additional hematologic malignancy indications.
With that I'll turn it over today.
Thank you Brian .
But there have been multiple positive developments on the business development clinical and regulatory front.
For the BD front in July we executed a new Strategics X few S. partnership an exclusive license agreement with Santa fee to develop and commercialize picture in Russia, and C.I.S., Turkey, the middle Eastern Africa for a total of 78 countries.
Under the terms of disagreement we received an upfront payment of 5 million U.S. dollars and were eligible to receive aggregate future payments of up to 42 million U.S. dollar certain development and sales milestones are successfully achieved.
We're also eligible to receive double digit percentage royalties based on future net sales of could picture in the license territories.
On the regulatory front, we're planning to submit a marketing authorization application to the European Medicines agency seeking approval for Duvelisib in patients with relapsed or refractory CLL less allow and FL by the end of the year.
Duvelisib recently received orphan drug designation from the F.D.A. for use in the treatment of T cell lymphoma.
Duvelisib is not currently approved for the treatment of T cell lymphoma. However, we're currently conducting the registration directed phase two Primo study in patients with relapsed or refractory T cell lymphoma and.
An aggressive type of lymphoma to further characterized its efficacy and tolerability in this population.
The dose optimization dose selection portion of the Primo study was completed earlier this year and we submitted the data for presentation at the upcoming American Society of Hematology, 2019th annual meeting in December .
The registration directed portion of the Primo study is currently ongoing and is to be conducted in the U.S. Europe and Japan.
We also made progress recently, where their global Duvelisib partners in early October you Coke launch a dose the first patient in a phase one be Japanese bridging study evaluating could picture in patients with relapsed or refractory CLL FL following at least one prior therapy there.
T Center open label Phase one be study is expected to enroll approximately 10 patients in the primary endpoint at the study as objective response rate.
Secondary endpoints of the study include overall survival progression free survival in safety.
This study is expected to serve as a bridging study based on the efficacy and safety observed in Verastem Oncologys phase three duo study and if successful the results of your Colts bridging study are expected to form the basis of a regulatory submission so could picture for the treatment of relapsed or refractory CLL fell out in Japan.
Also on the global development front Duvelisib this partner to the C.S.P.C. pharmaceutical group in China.
We currently expect CSPC to dose the first patient in their bridging study by the end of 29 team.
That's right third quarter into the early part of the fourth quarter Verastem and its external collaborators has been actively generating a presenting supportive duvelisib data at medical meetings.
Total of seven Duvelisib abstracts were presented a two medical oncology meetings, the 18th annual International workshop on chronic lymphocytic leukemia.
And the society of hematologic oncology 219 annual meeting.
Collectively the presented abstracts highlighted a wide range of Duvelisib clinical data, including data from the phase three duo study in patients with relapsed or refractory CLL that's hillel.
Dose modification data from the phase three duo study.
Data from a post talk analysis evaluating the effective could picture on lymphocytosis, including with patients with high risk factors.
And data from the phase two Dynamo study on patients with refractory marginal zone lymphoma.
He's presented data continue to support the ongoing development of could sector.
And finally important preclinical research was presented at the fifth International Conference, our new concepts and lymphoid malignancies.
Presented data showed superior energy anti cancer activity of the dual Pithree K Delta Gamma inhibitor duvelisib compared to the pie three delta inhibitor I don't listen in preclinical models of mantle cell lymphoma.
As we stated previously our long term goal is to expand Duvelisib development into additional lymphoid malignancies indications and these preclinical data support the future study of Duvelisib through clinical trials in patients with mcl.
In addition to these ongoing studies.
We're also working towards initiation of Threed company sponsored studies.
One is a randomized phase two open label intermittent dosing study, which will be named tempo and we'll evaluate the effective planned two week dosing holidays on tumor response and safety in patients with relapsed or refractory indolent non Hodgkin's lymphoma <unk> received at least one prior systemic therapy.
But the purpose of this study is to build on the data previously presented at medical meetings that show that dose interruptions or an effective means of managing side effects and keeping patients on therapy.
Without impacting efficacy.
We recently received RV approval for this multicenter study, which is expected to enroll approximately 100 patients and we'll have commenced by the end of this year.
The second study as a phase one be two study, which will combine duvelisib with the PD one inhibitor pembrolizumab in patients with headed Nexplanar cell carcinoma.
The immunomodulatory effective duvelisib to dual Pi three kinase inhibition that was previously seen in preclinical research provides the rationale for this combination.
We look forward to further exploring the effects of this combination in the clinic and we expect this study to convince by the end of this year.
And then third we're in final trip preparation phase for the confirmatory phase three duo study aimed at converting the accelerated approval of could picture in FL into full approval, we're working with the FDA on final details and we expect to commence this study by the end of the year.
Now I'd like to turn the call over to Rob for the financials.
Thank you Dan.
We issued a press release earlier today outlining our third quarter financial results I'll just review the highlights and to supplement our GAAP financial results, we have prepared and presented non-GAAP financial measures to help provide additional transparency and period over period comparability with respect to the companies operating performance.
We use these measures among other factors to assess and analyze operational results and trends and to make financial and operational decisions.
A reconciliation between the non-GAAP financial measures and the most comparable GAAP financial measures are included in the tables accompanying the press release.
Reconciling items include executive severance and separation costs as well as significant non cash charges and expenditure as reflected in the income statement related stock based compensation noncash interest expense and amortization of acquired intangibles.
I will now start with revenue total revenue for the three months ended September Thirtyth 2019, or the 2019 order was 9 million.
Net product revenue for the 2019 quarter was 4 million.
That compares to <unk> point Fivemillion for the three months ended September Thirtyth 2018, or the 2018 quarter. Following the FTC approval of co picture on September 24, 2018.
License and collaboration revenue for the 2019 quarter was 5 million.
Fair to 15 million, but the 2018 for.
For 2018 quarter included license revenue of 15 million related to an upfront payment pursuant to license and collaboration agreement executed between Verastem and CSPC.
Number 2018, partially offset by 5 million upfront payment received pursuant to a license and collaboration agreement executed between Verastem incentive fee in July 2019.
Total operating expenses for the 2019 quarter with 35.1 million compared to 41.4 million for the second quarter of 2019 and compared to 37.1 million for the 2018 quarter.
non-GAAP operating expenses for the 2019 quarter with 32.8 million compared to 36.2 million for the second quarter, 2019, and compared to 35 million for the 2018 quarter.
Research and development expense for the 2019 quarter was 12.2 million compared to 11.6 million for the 2018 quarter. The increase of point 6 million or 5.2% was primarily related to the timing of CRL costs.
Selling general and administrative expense for the 2019 quarter was 22.2 million compared to 25.4 million for the 2018 quarter.
The decrease of 3.2 million or 12.6% was primarily due to a decrease of 2.3 million in consulting and professional fees.
Primarily related to the support of launch activities and the 2018 quarter and a decrease of point 9 million and personnel related costs, including noncash stock based compensation.
Interest expense for the third quarter of 2019 was 5 million, which is mainly comprised of interest related to the convertible notes.
Net loss for the 2019 quarter was 30.1 million for 41 cents per share compared to 21.7 million or 29 cents per share.
For the 2018 quarter, and 42.2 million or 57 cents per share for the second quarter of 2019.
non-GAAP adjusted net loss for the 2019 quarter was 26.2 million or 35 cents per share compared to non-GAAP adjusted net loss of 19.4 million or 26 cents per share for the 2018 quarter and 35.7 million for 48 cents per.
Share for the second quarter of 2019.
And as of September Thirtyth, 2019, Verastem had cash and investments of 160.2 million.
Compared to $249.7 million of cash and investments as of December 30, Onest 2018.
As Brian mentioned earlier, we are reiterating our 2019 net revenue guidance as we continue to expect co pay extra sales to come in at that at between 12 and 14 million.
This estimate is based on net product revenue to date current run rates and near term expectations.
Based on our current operating plans and assumptions, we expect our operating expenses for the full year 2020 to be in the range of 110 to 115 million.
Looking ahead, we anticipate providing preliminary 2020 net product revenue guidance during our year end 2019 earnings call.
With that I will now turn the call back to Brian for closing remarks.
Thanks, Rob.
I'll now review, our key upcoming goals and priorities for the months in quarters ahead, our key priorities are as follows.
One executing on the six to five plan.
To continuing to execute on the commercial launch of coal picture.
Three pursuing the regulatory approval in Europe , where we expect to submit our EMEA aided by the end of 2019.
For initiating the tempo study by the end of 2090.
Five initiating the confirmatory phase three duet study evaluating duvelisib for the treatment of patients with relapsed or refractory for look you couldn't unfold.
That confirmatory study is also expected to start by the end of 2019.
Six constructing the registration directed portion of the phase two pre will study in patients with relapsed or refractory PTCL for which the dose optimization dose selection portion is now complete and the data have been submitted to ash 2019 for presentation in December .
And seven initiating the phase one be two combination study investigating duvelisib and the PD one inhibitor pembrolizumab in patients with heading next squamous cell carcinoma.
End of 2019.
In closing I would just like to reiterate that we remain deeply committed to bringing called picture to patients with these devastating human biologic malignancies.
With the announcements made today, we believe that the 18 to 24 month runway will allow us to continue to progress co picked right in its current indications and ensure continuity of our development efforts.
We believe we have the right people and right plan in place to maximize the value for both kopec, Dre and Verastem oncology and for all stakeholders.
We look forward to keeping you updated on our progress in the months in quarters ahead.
With that well now open the call up for your questions.
Operator.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby well, we compile the Q and a roster.
Oh.
Our first question comes from at least a young with Cantor Fitzgerald airline is now open.
Hi, This is <unk> on for at least yes. So what's your plan was just your line or reduce opex. How many of the 40 positions that you would let me end horsetail trapped in can you give a sense of what percentage of overall sales force that represents.
Hi, yes. Thank you for the question this is Rob.
So of the 40 heads approximately 14 or so.
Fell within the sales organization and if you recall when we started the launch we had about 50.
Sales reps in the field so.
Thats the lets the numbers there as far as far as a restructuring on the commercial sales force.
And I was just add rob's comment that.
When we look at our deployment plan now.
We actually are going to cover those offices.
Our focus will be mostly now on the high volume offices and this move also allows us to put some of our very best sales representatives on newer accounts.
Great. That's helpful. Thank you.
Thank you. Our next question comes from Robert Hazlett with BTI G airline is now open.
Hi, guys. This is Jack on the line for Bert. Thanks for the question I'm, just wondering maybe could you talk a little bit of all your strategy for Europe and in light of this current restructuring and then maybe could you comment on I guess, where you are with enrollment and Primo and when we may see data there. Thank you.
Yes. So this is Dan.
I will say, we've not given guidance on how long Primo will take to be done I will say, we are ahead of our internal projections.
And.
Continue to be optimistic I think once we have a little more of a track record on the expansion phase will give guidance on that.
Thanks, and then I guess just on on Europe , you know just your thoughts on taking it yourself or potentially looking to partner that geography.
Yes, so we are doing the filing ourselves.
We've not made a final decision we're in discussions with potential partners. We obviously understand what it would take if we did it ourselves and we'll make the decision.
Probably sometime.
After filing.
Thanks.
Thank you and the next question comes from Swayampakula Ramakanth with H.C. Wainwright. Your line is now open.
Thank you.
Thanks.
For the call congratulations on the progress.
But I'm just trying to understand.
Guidance versus.
Commentary.
You know this.
You seem to be comfortable that.
Then you would increase in the prescribers and also your general overall positive commentary on your current sales.
But if I look at your guidance.
Basically is is.
Quite similar to the front for the 4 million that.
You recognized in this quarter. So I'm just trying to understand how do I go to triangulate your commentary versus your guidance versus what we should expect in the fourth quarter in terms of sales Onco picture.
Hi, our K. This is Rob. Thank you for the question Yeah. Just to go back as we stated we were committed to delivering on the 12 to 14 million that we last communicated back in queue Q2.
You know, it's it's still I know, it's been over a year, it's still quite early in the overall launch in determining the trajectory and this is going to be really our first fourth quarter and year end post launch I know the product launched very late in September but it was early months last.
Sure. So it's a little bit unknown in terms of seasonality and how December will affect the numbers.
At this point, we felt like the right thing to do is just reiterate the guidance and stay the course, because it is just still a little bit early in determining the fourth quarter impact.
Okay and then.
Another question on on on the sales and also.
What do you think is that total value of this drug in terms of sales.
If you if you annualize where you are right now no real looking at like 16 million a year, but.
Still feel peak sales could be somewhere.
Between 200 300 million.
So what what's the difference what's missing obviously, you spent a solid year.
Im trying to get this drug launched effectively but but how should I think about you know going from here to 200 or 250 million and one other things that.
One.
Should I expect.
To see if we need to get there.
Yeah. Thanks again for the full of RK, It's Rob I'll start and then Brian and then May want to add but keep in mind you know in the second quarter sales grew at a pretty good pace. It was about 80% and enough in the third quarter, we continue to experience a good high growth rate quarter over quarter.
It's difficult to predict and the short term on a on a quarter by quarter basis, just where that trend will go but we're confident that we will continue to experience a pretty good growth rate in the fourth quarter and into next year and when we talk about the peak sales of two to 300 million that was really in reference to year four or five post launch.
And so we're making progress against that and we still have a ways to go but that's how we're thinking about peak sales it would come and probably after the fourth year, maybe the fifth year of of launch Yeah, and then arcade to build on robs.
Robs commentary you know, we believe there's about 20000 or so third line FL and CLL patients and when we launched a year ago, we didnt necessarily have all the infrastructure process these relationships and people in place and so over the past year.
We've been doing improving each of those.
Starting first with improving thought leader support and experience we didn't go through it this quarter, but we do have a number of investigator sponsored studies, where we're beginning to see that strong thought leader support.
Second with many of our big accounts were trying to secure picture as the pie three of choice through.
EMR systems, and and getting that that top spot in those EMR systems, and then third we're continuing to move to this account based selling which will get us focused in a much larger accounts.
So.
Started to just keep questioning on the sales, but just one last question.
From me.
Im just again I'm trying to figure it out if you're removing 30% off your sales force.
From the 50.
You started off.
But at the same time, you you were hoping.
Hoping for growth.
In the coming years, So war.
Can you just give us a little bit more color us too.
Yes, it's a good thing, but it wouldn't impact.
On top line I'm, just trying to understand how that works.
This is Dan I think as Brian mentioned, one of the things. We've we've started within the last quarter to focus a lot more on is really the large practices and the large accounts and you know I wouldn't reason exactly from the numbers of 50 to 36 on the Salesforce because weve.
Change some roles and we have people that were in say market access rolls before that are now focusing on these big accounts and so we're putting much more attention on them.
One of the things frankly that we found as a company that was new to this market and didn't have the existing relationships with the big practices is there's somewhat of an inverse relationship between access and practice size and we could get into the smaller practices, where they might see one to four patients a year and didn't have nearly enough access into the.
Bigger practices and that's been the relentless focus and I think that's what gives us confidence that the opportunity is still there. If you think of how you know these prescriptions grow you get a first prescription the doctor has a good experience and you get the next patient it's hard for that to catch a lot of tailwinds when the doctor.
As one to four of those kinds of patients a year you need to get into the places that have the critical mass and we've really doubled down on efforts around that within the last quarter or so yeah. The last thing to build on Dan's answer is it's also in today's commercial world a multichannel approach so.
We're upping our digital efforts, we are expanding our programs through the group purchasing organizations and at what we didn't necessarily talk about yet is where else so adding a nurse educator role to expand.
Education within the Doctor's office so.
When you look at all of those efforts and we take a step back on the total impact of.
Share of voice in the marketplace.
We don't believe there's going to be a significant impact on on those efforts.
Thank you thanks for taking all my questions.
Thank you.
Thank you and our next question comes from Matthew Cross with Jones trading your line is now open.
Hey, guys. Congrats on the earnings speed and thanks for taking a couple from me.
Following up on making what I think arcade RK was getting at a bit but getting maybe specific about a six month portion of the six to five plan as I think that offers some read through to success on your two inside your goals I was hoping it a little bit of clarity around what amount of revenue to expense differential you'd consider success in that timeframe.
I know you've announced it will be cutting 25 million in expenses will certainly help bring down burn closer to topline revenue, but thats, a 2020 initiative I mean, you've reiterated sales guidance of 12 to 14 for this year burning about 30 million a quarter on the 20 million on annualized basis.
There's usually a rather large gap to close I'm just trying to understand.
What more immediate cost savings or sales inflections, you're expecting over the next two months to meet that six month cool brought down has done a pretty substantially quarter over quarter. So should we expect that to continue were what specifics hope gets you there.
Yeah, Matt. Thanks for the question. This is Rob I'll start so I just want to make sure. It's clear the the goal was within six months to have sales on a trajectory that would allow the company to achieve cash flow breakeven for the co picture franchise within two years. So.
So we stated that gold back in the June quarter, So that would put it in June of 2021.
We haven't communicated exactly what we would consider to be except success and on that glide path.
But as we continue to grow at good double digit growth rate quarter over quarter, we're making progress against that goal and as you can see as we've announced today were taken action to significantly reduce the operating expenses and streamline the organization to bring those two numbers closer.
We haven't given quarterly guidance around operating expenses, but as you've seen in previous quarters.
The expenses tend to be somewhat straight line, there's a little bit of lumpiness over the summer months.
For the most part if you take that guidance of 110 to 115.
It it would be a pretty good straight line type allocation. If you wanted to estimate that impact or that that estimate on a quarterly basis.
Great. Okay. No that's very helpful clarity I appreciate that Rob.
And just to clarify is it fair to assume that since some of these headcount reduction just occurred you certainly last week is that something that we would see reflected in the next quarter or is that kind of part of.
The reduction we saw this quarter.
So a lot of those actions took place this week and so you should expect to see the benefit of those changes for two of the three months within the quarter and the full year effect of those changes next year.
Perfect I appreciate appreciate that a housekeeping and then just wanted to touch on the duet study that you've announced pointing to begin by the end of this year is theres and thats or other type timeframe here I mean, something you guys are gonna have quite a lot beginning by the end of year is there anything you can say about designed for that trial should weeks.
Just to be a pretty standard.
In addition dose escalation design.
Is there any insight into you know, what's the combination dosing schedule might might look like extrapolating from what you saw a pre clinically and anything you're looking to avoid or that this particular area of interest in terms of toxicities that might emerged.
Yes, we've not really commented on the design of the study we're finalizing things with the FDA I think right around the time, we start we would be disclosing the design.
Okay Fair enough. Thanks, guys appreciate the answers here.
Thanks, Matt.
Thank you and at this time I'd like to turn the call back to CEO , Brian stuck like for any closing remarks.
Thank you very much with that I'd like to thank everyone again for dialing into todays call have a great day.
Hi.
This concludes today's conference call. Thank you for participating you may now disconnect.