Q3 2019 Earnings Call

Hi, I'm all participants are in listen only mode. There will be a question and answer to follow up. Please be advised this call is being taped out the company's request.

Well now introduce your host for today's call Felicia, but almost vice president of Investor Relations.

Please go ahead.

Good afternoon, everyone before we begin let me remind everyone. Our presentation will contain forward looking statements detailed disclosures can be found in our at these filings, which are public and we encourage you to refer to those filings.

I'll now pass the call over to Ron Cohen, our CEO .

Good afternoon, everyone. Thanks Felicia.

As you all know the initial stage of the launch of in breach has been more gradual that expected. However, multiple imports continue to support our conviction that embryo will be a substantial product and indeed, a standard of care in the treatment of walk periods in Parkinson's. These imports include our own.

Formal market research independent market research numerous conversations with prescribers patients and patient advocacy groups.

We've learned a lot about the dynamics of this market since the drug became available in March and we're going to share some key data insights with you today.

We also implemented a corporate restructuring in October to extend the time that we will need to establish a strong trajectory for the appraisal launch as well is to provide flexibility for us to address the company's convertible note. That's due in June of 2021.

I will discuss this further after Lauren takes us through updates on the a brings a lot Lauren thanks.

Thanks, Ron Good afternoon, everyone through October we received about 6400 prescription request forms and around 3100 patients have received their first prescription of embryo.

Total cartons dispensed were approximately 13000 and more than 1600 physicians have prescribed in breach through October we're pleased to see that total prescriptions increased by over 60% in the third quarter compared to the second quarter.

To date, roughly 43% segments eighth physicians have prescribed at least one and about 70% of these physicians have prescribed more than one.

As a reminder, there are approximately 1700 segment, hey positions and they are primarily movement disorder specialists and they treat I was the largest number of Parkinson's patients.

We continue to make good progress in the quarter in achieving formulary status.

Signing agreements with a number of significant paired.

A notable agreement that we are able to disclose which is prime therapeutics to be on their national net results formulary and on the formulary a number of prime therapeutics downstream client.

As of the beginning of the fourth quarter in breach is now available to approximately 66% of the commercial covered lives and 25% Med D life without the need for medical exception.

We recently conducted our first post launch awareness trial and usage for 80, you market Research study among both general neurologists and movement disorder specialist.

There's a survey with fielded to approximately 150 positions in our target universe.

Prior to the launch aided awareness of embrace it was close to 36% and it's now around 92%.

These data provide us with an understanding of current experiences in breach a bike early adopters.

And the likelihood for future prescribing. It also assessed the perception of physicians, but not yet prescribed and their likelihood to prescribe embry shows in the future.

But those physicians, who are aware of embraced our data showed that 70% of these positions expect to increase their prescribing.

The majority of positions agreed that the efficacy of them Breeze is clinically meaningful it is different from an extra Joseph oral carbidopa levodopa and it can be self administered.

We ask the physicians about what percent of their previous 100 patients they had prescribed in breach of four.

And how much they intended to increase their prescribing in their next 100 patients.

Among the 127 physicians, who answered both questions.

They estimated they had prescribed embryos you to about 7% other last 100 patients.

We're encouraged to find that these physicians expect to more than doubled their prescribing of embraced up to about 16% of their next 100 patients experiencing off period.

Indicating increasing adoption of the brand to become part of their standard of care.

This aligns with previous market research that indicated physicians expected prescribing brisa to approximately 25% of their patients with off period over the long term.

[noise] also in the survey current prescribers have embraced reported that an average of 15% of their patients have requested embry shop, and 64% who requested a prescription received.

We believe the patient awareness and request will be a key driver of the launch going for it and we're focusing on increasing the percent of patients do request in Russia.

To optimize the impact of patient request. It was important to first do two things.

First achieve a high level awareness and education among physicians so they could be prepared to respond to patients wanting to try and brisa and second to achieve a reasonable level of formulary status to minimize the frustration in describing process.

As we entered the second phase of the launch we will be maintaining these efforts, while increasing the focus on patient awareness and education to drive demand by patients.

We are implementing a number of initiatives some of which we have already begun and others that we will roll out in the coming weeks.

These include patient focused speaker programs patient forum patient ambassadors patient videos radio ads community events advocacy and social media campaigns such as Facebook.

I'll now pass the call the Dave to review the financials Dave.

Next Lorne.

In October we implemented a corporate restructuring to reduce cost and focus our resources on the launch of embryo.

This restructuring will enable acorda to focus its resources on ensuring the success of in breach Oh provides flexibility for the company to address its convertible notes due in June of 2021.

In connection with the restructuring we reduced estimated 2019 operating expense guidance.

From 270 290 million down to 240 to 250 million.

It's important to note that we do not expect these reductions to detract at all from supported me embryo launch.

Unfortunately, we had to make the difficult decision to cease all unfunded work on pipeline programs and tour in a better position to support them.

We expect to realize estimated annualized cost savings related to head count reduction of approximately 21 million beginning in 2020.

We estimate that we won't incur approximately 8 million of pre tax charges for severance and other costs related to the restructuring through the first quarter of 2020.

Total operating expenses in 2020 are estimated to be approximately 60 million less than 2019.

Oh revised 2019, a new 2020 financial guidance is as follows.

In 2019, R&D expenses for the full year are expected to be 55 to 60 million reduced from 70 to 80 million.

<unk> expenses for the full year 2019 are expected to be 185 to 190 million reduced from 200 to 210 million.

Looking ahead to 2020 R&D expenses for the full year are expected to be.

20 to 25 million, an S.G. I mean, it that's <unk> expenses for full year 2020 are expected to be 160 265 million.

We expect our 2019 yearend cash balance to be greater than 225 million.

[noise] this table outlines key financials for the third quarter.

We reviewed goodwill for the quarter ended September Thirtyth 2019, as part of our normal reporting process and determined that a triggering event occurred due to a decline in the trading price of our common stock at the end of the quarter.

Based on the analysis performed we determined that goodwill was fully impaired and recorded a noncash impairment charge of 277.6 billion.

With regard to our 345 million convertible note due in June of 2021, we have engaged an adviser to address the stat.

We appreciate the impact to convert has on our stock price and addressing this is a top priority for the company.

Our cash and cash equivalents at the end of the third quarter were 253 million.

I'll now turn the presentation back over to Ross.

Thanks, Dave.

So in summary, despite the gradual uptake in the early stages of the launch all of our data continues to indicate that embryo will become a significant product and the standard of care for Parkinsons patients.

We are now go to take your questions operator.

Certainly in order to ask a question you will need to press star one on your telephone to withdraw your question first the pound or how should we ask that you. Please limit yourself to one question and one follow up please standby will be compiled Q and a roster.

[noise]. Your first question is from Celsion richer with Goldman Sachs. Your line is open.

Thanks for taking my question you know could you just walk us through just the pass that you're taking to address the the debt issue here and then secondly, where you stand with the a free drug in sampling program from Brisa. Thank you.

Yeah, well you know we can't go into great detail at this at this point, so being or we can tell you that we have a number of different pieces to address the debt. We're not looking for one size fits all magic solution to a.

To a a dress did that but rather to address it a using a number of different means including a cash.

There are number of ways for us to access cash we are working on those different avenues.

So beyond that I can tell you it's a top priority for us really the two top priorities are the embryo launch and addressing the debt.

You know by way of reminder, for those on the call that that is due in June of 2021, but by no means our we interested in waiting.

To anywhere close to that to address the that we're very actively engaged right now and as I said, we're looking at or or or actually we are actively engaged in considering a number of different ways, a which together will enable us to address the debt in the optimal way for shareholder.

Yes.

With regard to the.

Free drug program, we are continuing to sample.

And where samples are allowed to doctors are distributing samples a fairly liberally.

We also have our one box or first box free program for those are covered under commercial insurance and that is on the prescription request form that we provide for the specialty pharmacies that go into our hub. So when the prescriber writes the prescription.

There's a box that they check and the vast majority of the time, they do check that box. So that the first boxes ship almost immediately within a day or two to the patient. So they don't have to wait while there are benefits investigation is ongoing and then eventually hopefully the the drug is a ship to especially pharmacy and this.

Spreads.

That process right now has come down quite dramatically from the early part of the launch where it was taking 35 days are more on average now we're under two weeks around 13 days I believe on average and Meanwhile, the patient gets a full box, which is 30 doses that they can use.

Thank you.

Your next question is from Paul Matthews with Stifel. Your line is open.

Hi, Thanks for taking the question. This is Nate on for Paul.

Was hoping can you just get a little more detailed on on a reimbursement what channels are you seeing most scripts being reimbursed from and then well you know what's your plan for expanding part D reimbursement specifically.

Right. So so recall that as we mentioned.

About 66% of commercial lives are now covered on formulary. So there's no need for medical exception in general we've been pleased that the prior authorizations have been quite reasonable across the board. So we're not seeing the offices have to jump through hoops to to get through that met.

To care part D., we have about 25% of covered lives now on formulary with with that is also the case, where a it just goes through without the need for medical exception, now where where there is a need for medical exception.

For the patients plan is not yet to covering it on formulary. What we're finding is that the majority of those are actually getting through with a simple medical exception form so whereas earlier in the launch it was it was more difficult than that.

Because very frequently the medical exception form would go in and that would get denied and then you'd be in a morass, where you'd have to call them and have a peer to peer call and so and so forth. So it really was quite taxing we're at a point now where again the great majority of the commercial lives are covered without medical exception the ones that.

The majority of the ones that are not you can get through it would it be office, just simply submits a medical exception form and that's true a Medicare part D. As well, we're continuing to negotiate with various plans that where we don't yet have official formulary status and we anticipate that over time.

Those official.

Formulary status is will cover more and more larger and larger percentage.

Of the population, but where we are now is actually pretty good for being seven months into the launch and given.

The environment for reimbursement that we're living in right now.

It's pretty good and the physicians have routinely been giving us feedback that day notice it that their offices notice that it's much easier now to get through than it was in the first several months catalog.

Gotcha, that's helpful and could you update us maybe just rogen description on aware refill rates are today [noise].

Yeah I'm at this point in time given that this is a PRM medication, it's really difficult to understand you know what the refill rates are until patients have been on track for quite some time as we've mentioned earlier. The initial prescription is generally for two boxes.

And those patients with commercial insurance have already received a box of 60 prior to getting their prescription and we don't have an idea right. Now obviously, it's hard to know from the samples that are in the physician's office, how many of that how much of that drug patients have available to them. So at this point time, it's really too.

Early to know, but we know that utilization rates or couldn't consistent our cross below me even high users we share that with you in Q2, meaning that there is a group of patients they get on drugs that consistently refill several times a month and those are those high Utilizer patients then you have a medium.

Group in a low group, but to really be able to understand exactly what those refill rates will be over time, we still need more time for the launch to work itself through yeah, and if I could jump in on maybe I'll just illustrated.

With some specificity if you just think about it it really depends on the patient if the patient is using it on average once a day twice a day couple of times, a week and so a box will last a variable amount of time, depending on the usage pattern of the individual pace.

And and right now, it's not possible for us to tease that out because we have no way of knowing for a given patient if they got to boxes, a couple of months ago. When they haven't rebuild yet is that because they're not going to refill or they just haven't gotten through their two boxes, yet so we do need and that's why we need more time.

Critical mass to really get a better feel for those numbers.

Hi, I understood. That's that's helpful I'll hop back in here.

Your next question is from Macquarie Kasimov with JP Morgan Your line is open.

Hi, this is not on the Corey that's all I've two questions. The first thoughts about the for Pete subscribers can you talk a little bit more about who you are seeing repeat prescribing and for those who.

What kind of.

During the back from being repeat prescribers at this point its or specific period of time that you're seeing docs wait before they prescribe to a second patients.

<unk>.

Yes, so again when you talk about a physician what you expect out of physician for change in behavior. The very first thing you want to see happens at the right. The first prescriptions and then of course, but you want to seize that they right second prescriptions that they start to change their behavior in start utilizing the medication.

As we mentioned in those top prescribers, 70% of them that have prescribed kept prescribed more than one in the overall.

Prescribing base, 50% of those physicians have prescribed to more than one it really depends on the physician in terms of what that cadence looks like many physicians want to wait until that patients had enough time to trial. The medication gets back to the physician in terms of how they've done.

There are waiting for that feedback loop oftentimes before they will prescribe again another issue that we've run into in the early part of the launch as we've discussed is that the amount of time it takes for each.

Patient to get on drug and the amount of time required by the office to make that happen.

Stops that position from over prescribing because just too much of a burden on the office as we can reduce that burden was more formulary wins and more process improvements and actually just having the offices become.

Better at actually getting through the process, we anticipate that will help so right now it is dependent on each individual Pete physician and they really want to get the feedback from the patients and that usually is what drives the continued prescribing. Additionally, as we said later in the in my comments if.

Patient comes in and asks for the medication often 64% of the time the physician will fulfill that request. So that's the other piece of it if someone's coming in asking a doctor for the drug chances of them repeating a prescription or greater.

Okay, Great and then the second question, it's actually thought compare I am I know earlier. This year you talked about how you made a.

A big inventory purchase that was expects its got to cover all 2019, and I think last quarter. You said he was going through that inventory a little faster than anticipated. So should we expect to see another major purchase of inventory.

Her first quarter for the 2020 I.

Thanks.

Oh, no not a major purchase this year I mean at some point next year, we will have to purchase inventory, but it wouldn't be anything to the degree that we had that adjustment or that purchase in the first quarter of this year.

Great. Thank you.

Your next question comes from Michael Yee with Jefferies. Your line is open.

Hey, Hey, guys. Thanks for the question I had two questions. One was on the U.S. when we look at Scripps both interaction trx, even though you've gotten significantly improve reimbursement.

The interaction to your extra generally short of study I would say over the past three to six months I was wondering if you could just comment as to does your data continued to show upticks every week generally or why was there. Some disconnect adds to either it's not that accurate or it's going to take some time I should just wanted to understand that and then second.

My question was actually on Europe , not sure. If it was addressed obviously you've got approval are you actually expecting sales in Europe are you putting money to invest there maybe just comment about what's actually going on in Europe , a little bit. Thanks, so much.

A lot you want to yeah. So in terms of the new Rx Trx line at this point in time again, we started getting some of these managed care when I'm in the last couple of months and that takes time for that to pull through and also remember something with a national plans for each individual physician.

It's kind of out a in steepened a mile wide right. So it doesn't impact all of the patients in their practice and so therefore, even though you may have a couple of major wins save a lot of other plans and so therefore, there may still be hurdles. So we anticipate that the new Rx line is going to start to take.

An upward trajectory exactly when that's going to happen is hard to know, but as we've mentioned all the qualitative feedback that we are getting is very positive in that regard we have seen some increase despite the fact that the new Rx is haven't been going higher in the Trx numbers. So there is a slight increase in trx is over the course.

First of time.

Okay do you want to talk that makes sense.

Yeah. So.

On the E U Mike can you just repeat your question on that.

Yeah sure.

In Europe , you just got approval for in Russia, Correct me, if I'm wrong. So maybe you could comment about whether you're actually putting money to market. It and invest there are a bit are you actually expecting shales.

In the quarters to call them, or obviously partnership and out licensing our various scenarios to address your first question, which is related to paying down debt show, maybe just talk to what you'd like to do and what shopping there, but should we can think about that opportunity.

We don't have current plans to market ourselves in Europe , or we just don't have the financial bandwidth or <unk> capacity to do that so we have to focus everything here in the U.S. and we are engaged in.

Discussions with potential partners right now.

The approval certainly has helped those conversations and are continuing to carry those through and when we have a if and when we have news we're going to share it with everyone.

Okay. That's helpful. On appreciate that I think thats.

Potentially oh.

Now sort of value to help you out on the first part thanks.

Your next question is from the Kenneth Atkins with Cowen Your line is open.

Hi, Thanks for taking my question.

You mentioned previously that younger patients who might still be in the workforce could receive a lot of benefit from an on demand therapy for off episodes could you.

Take a bit about the adoption of enbridge and not market in particular.

Yeah, I mean, we don't have a good way.

Of tracking that per se, so necessarily it's going to be anecdotal when we talk to the physicians about who their prescribing for you get patient stories back and so on but I think that that's tough to segment out you know if a given patient is someone who is working who is using it for off episodes at work.

You know I cannot obviously, it's not an absolute Toronto point, but about 40% of our first expenses are for commercial patients. So that doesn't necessarily mean that they're in the workforce that you know they could have a spouse is in the workforce et cetera et cetera, they could be a Medicare h. patients. So it isn't an absolute but it gives us some indication that.

Younger patients are.

Very interested in this medication and we are doing a lot of our digital promotion towards that patient population because that patient population can be co pay mitigated. So they don't have the expense out of pocket.

That they Havent Medicare population right and let me expand that a little bit because it's not just people who are working.

You know we read what we're really talking about as people who are relatively earlier in their diagnoses.

Versus those who are further out and typically.

If you're if you've had a diagnosis of parkinsons for five years or more you are almost certainly having off periods of some kind a those increase overtime as the disease progresses, and you get less and less optimal control with the daily regimens and of course, the you know the the.

Treatment algorithms are to increase dose increase frequency of leave Adelbert Carbidopa then add another mechanism maybe add a third mechanism, sometimes you'll add fourth mechanism and eventually.

Some people get referred to.

Brain stimulation and so forth.

So what we're really talking about is people.

Who are.

Generally if your earlier on and if your commercial stage, you're probably a commercial pay your for the most part you're probably early or mid.

It's you know people who are in their forties, and Fiftys and Sixtys generally who were quite vigorous active maybe even if they're not working they have other things. They do in their lives. They have hobbies. They have sports they take care of their kids are the Grand kids, They get together for family Get-togethers. They go to weddings and you know someone has a.

Expected off period in the middle of their daughters wedding, you can imagine how devastating that can be you can imagine if you're going to store restaurant with friends and family and you suddenly get hit with an off and you know that that is.

A a serious issue for these people. So you can imagine any number of reasons why people would like to have more control over their off periods and especially on demand when what as good as their daily regimen is it it just for various.

Reasons, they are always going to be moments, where it fails them and the main reason is that the got is involved intimately on several levels with the disease in Parkinson's disease, there our absorption issues, they're small bacterial excuse me a small intestine bacterial.

Overgrowth that actually Metabolizes leave a dopa in many cases in the got there are the effects of food and protein on reducing absorption I'll leave it open. So you get erratic and again as you get more severe and need higher and higher doses. It gets more and more radical but very important to re.

Our lives and this is something we discussed with the prescribers as well.

That even people who are generally well controlled but every now and then you know maybe it's once a week maybe it's so once every two weeks or a couple of times a week not necessarily every day or multiple times a day, but when they have an episode and their active it can be really distressing.

And troubling for that for these patients and so they also benefit by having in Brisa in their pocket in their pocket book in their gloves and department, where they can get ready access to it and that's a message that we continue to discuss because again.

It is to some people it seems most obvious when someone's, having two or three or more office today.

And in fact, it's just as obvious from the patient point of view.

When they're having a few a week that are really bothering them.

Okay. Thanks, that's helpful.

This does conclude the Q and experience on I'll turn it back over to Brian for any closing remarks.

Okay, well, thank you for joining us everyone and have a good evening and we'll look forward to reporting our progress and the next quarter.

Ladies and gentlemen, this does conclude todays conference call. Thank you for your participation and you may now disconnect.