Q4 2019 Earnings Call
Good morning, and welcome to the color Pharmaceuticals fourth quarter and full year 2019 earnings conference call.
This time all participants are in a listen only mode. Following the management's prepared remarks acuity session will be held as a reminder, this call is being recorded I would now like to turn the call over sooner on June Commas, Lorne Senior Vice President of strategy for Cala Pharmaceuticals. Please proceed.
Thank you operator, and thank you all for participating in today's call.
Joining me from the company arc, Mark I Wiki, Chairman, President and Chief Executive Officer solid base more Chief operating Officer, Mary Remit, Chief Financial Officer, Tim Brasil, Chief Medical Officer.
I mean can chief scientific officer, today's call is being webcast like the webcast link can be found any investors and media section on our website called <unk> Rx stuff.
During this call we will be referring to non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting [laughter] reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release issued today, which can also be found on our website.
On this call we will make certain comments about college future expectations plans and prospects that are forward looking statements within the meaning of the private Securities Litigation Reform Act of 1990 fives.
These statements will include observations associated with our commercialization of in Delphis statements regarding the development and commercial plans right stupid, including the stride three clinical trials.
Sufficiency of my cash resources, that's projected revenue.
These statements are based on the beliefs and expectations of management as of today February 12, 20 quirky our actual results may differ materially from our expectations.
The company undertakes no obligation to revise or update any statements to reflect events or circumstances. After the date of this conference call.
Assertion carefully read the risks and uncertainties described in today's press release as well as their risk factors, which identify specific factors that may cause actual results for events to differ materially from those described in the forward looking statement included in the Companys annual report on form 10-K, and other filings with the FCC.
<unk> form 10-K will be filed with the FCC and will be available on our website and I'll turn the call over to college CEO, Mark I would keep.
Thanks Roger.
Good morning, everyone and thank you for joining US earlier today, we issued our financial results for the fourth quarter and for year ended December 31st 2019.
2019 was a defining year for Carla we made significant progress on the strides three phase three trial or by service, our dry eye disease pipeline candidate and we successfully launched our first commercial product envelop thus.
First and only twice daily Postsurgical ocular corticosteroid.
We're pleased to announce that the last patient in the stride. Three trial has now completed their final study visit we remain on track to announce topline data from strides three and this quarter and to resubmit R. and D. age of the F.D.A. in the second quarter of 2020.
We expect our end D.A. resubmission will be designated as class, two which would be subject to a six month review.
If approved we believe that I soup is could become the preferred first line prescription option for the treatment of dry flares.
In January 2019, we successfully launched our first commercial product in belt us for the treatment of post operative inflammation and pain. Following ocular surgery. We've consistently received positive feedback from eye care professionals and have seen steady prescription growth throughout the year.
Since launch over 144000 fell just prescriptions were written by more than 3300 eye care professionals. Our commercial team has done a terrific job educating prescribers on adulterous and we're pleased to provide ocular surgery patients with the only be I'd option that deliver strong efficacy.
Without compromising on safety or Tolerability, we look forward to seeing demand continue to increase as we enter our second your post launch importantly, we believe our success within felt this provides a strong foundation as we prepare for the potential launch of I assume this later this year.
I will now pass the call over to Kim Brazell, our Chief Medical Officer to further provide details on the strides three clinical trial Kim.
Thank you Mark and good morning, everyone [laughter] as Mark noted, we're pleased to announce that all patients in the stride three trial.
Have now completed their final study visit and that all patient assessments have been completed.
We're now preparing for database lock in statistical analysis, we continue to be on track for topline results in this quarter.
As a reminder, we've previously completed one phase two and two phase three clinical trials stride one its stride to and these trials, we demonstrate statistical significance for the primary sign and point of contact Teibel Hyperemia and all three trials.
In addition statistical significance was achieved four to pre specified primary symptom endpoints ocular discomfort in the entire population and ocular discount discomfort in a predefined subgroup of patients with more superior baseline discovered in stride, one with a strong trend for both something.
Endpoints in stride too.
I see this was very well tolerated with a very low level of adverse events and intraocular pressure effects comparable to the.
Based on clinical data from these three trials, we filed a new drug application in October 2018 in August of 2019, we announced that we had received a complete response letter from the F.D.A. with respect to the Cindy.
In the CRL, the F.D.A. indicated that efficacy data from an additional clinical trial would be needed to support a resubmission.
We initiated the ongoing stride three trial in the third quarter 2018, which we expect for service the basis of our response to the CRL.
We design stride three were certain modifications to the inclusion exclusion criteria <unk> relative to stride, one strike to which we believe will improve the probability of success of the trial.
As a reminder, stride three has two independent primary symptom endpoints ocular discomfort in the entire population and ocular discomfort into more severe so.
We believe that achieving statistical significance for either of these pre specified symptom endpoints in stride three will be sufficient to demonstrate efficacy to support the resubmission of the and <unk>.
We're looking forward to announcing topline results from stride tree in this quarter.
I will not pass the call over to Todd pays more our chief operating officer to provide further details on them belt to stand up.
Todd.
Thank you Kim.
We're very excited about the commercial potential by soup.
As a reminder, there are approximately 33 million patients with dry eye disease in the U.S. of which over 17 million had been diagnosed and our managed by an eye care professionals.
However, less than 1 million of them a currently treated with the prescription therapy.
Quantitative market research studies conducted with dry eye patients indicate that approximately 80% to 90% of them report experiencing dryly <unk>.
We estimate that there are over 300 million dry ice clear days per year in the U.S. alone.
Representing a total addressable market potential in excess of approximately $8 million annually.
If approved we believe I see this could become the preferred prescription therapy for the vast majority of dry eye patients who experience episodic flare it would benefit from a rapid assay short term treatment. They can address the inflammation, which is considered a t. trigger of players.
Our market research indicates that I see which would be youd mild to moderate patients who currently use palliative approaches such as artificial tears, which do not directly impact ocular inflammation as well as in more severe patients as an adjunctive therapy to their chronic dry eye prescription medication.
Other induction therapy to treat breakthrough symptoms.
This will allow us to position I see this as first line therapy to treat flair for all dry eye patients.
Our market research also indicates eye care professionals intend to prescribe <unk> for more than half of their dry eye patients regardless of whether they are currently on a prescription medication or only using artificial tears.
Our team is making great progress a month planning preparation, we feel we are well positioned to leverage our existing commercial infrastructure to support the potential launch of my students in late 2020.
Additionally, we continue to make good progress with adult.
We expect continued growth of prescriptions and net revenue in 2020, driven by growing demand and improved gross to net discount.
In the fourth quarter, there were approximately 47000 prescriptions of Intel just reported by Symphony Health, which represents an increase of approximately 17% <unk> third quarter.
This positive growth trend for adult us in the fourth quarter is particularly encouraging considering that the branded steroid market and all rexs were down by 16.5% between the Thanksgiving Christmas holidays.
Importantly, and felt this demonstrated strong prescription and market share growth throughout 2019, your which the other major branded and generic starwood demonstrated declining trend.
We've also seen continued growth in the number or prescribers to date over 3300 eye care professionals have prescribed in delta.
We've also achieved an 11.2% and arts here in the branded steroid market and an 18.8% and Rx branded market share among our called on eye care professionals.
We recently completed a large quantitative market research research study was 200 eye care professionals in the study you see P rated insulted highly for the key attribute are providing the best balances efficacy and safety and the oculist avoid class.
Approximately half of these easy to use reported having already prescribed and felt that.
At that they intend to increase prescribing from a current self reported market share up 6% growing to 25% over the next six months.
On the market access front, we have achieved unrestricted access for approximately 80% of all commercial lives and approximately 23% of Medicare part D lives.
The team has executed well on the launch of in bumped us and we have designed our commercial infrastructure to be readily scalable to support the potential future launch devices.
At the FDA approved actually this we plan to increase the fill for from our current 57 sales professionals to a total of between 75 to 100, who will promote both by Subaru and and Delta.
We expect the Salesforce the size will allow us to effectively covered the eye care professionals that are responsible for approximately 75% to 85% of all dry eye prescriptions.
So in summary, if approved I see this has the potential to become the preferred first line prescription therapy for the treatment of dry eye player.
Launch preparation for our Super so already well underway.
And the adulterous launch continues to progress well with strong growth in prescriptions and market share.
I'll now turn the call over to marry discuss all financial results.
Hi.
During this discussion of our financial results I will reference certain non-GAAP financial measures.
Non-GAAP financial measures exclude stock compensation depreciation and noncash interest expense for a full reconciliation from GAAP to non-GAAP financial measures. Please refer to today's press release, which is available on our website.
Our cash position as of December 31st 2019, $85.4 million compared to $170.9 million as of December 31st 20 team.
We anticipate their existing cash together with projected enough. This revenue will enable us to fund operations into the second quarter at the 2021.
Well the fourth quarter of 2019, we reported in Belfast net revenue of $1.2 million and for the full year 2019 reported in Belfast net revenue.
$1 million.
As a reminder, we recognize revenue when products are delivered to distributors.
Revenues in Q4 were impacted by higher reserve estimates at the end of 2018, we said, we expect improvement in our gross to net discount beginning in Q1 2020 and to continue throughout the year and going forward.
Cost of product revenues for the fourth quarter of 2019 for $700000. We began capitalizing inventory cost greenbelt after receipt of FTC approval on August 22nd 2018 prior to receiving FDA approval that crossover Expensed as research and development.
Non-GAAP cost of product revenues were $600000 for the fourth quarter of 29.
[laughter] interest for the fourth quarter, 2019 were $14.5 million compared to $14.3 million for the same period in 2018.
The increase in SDN expenses for the fourth quarter of 2018 compared to the same period in 2018 was primarily due to cost associated with the commercial infrastructure being in place for the entire fourth quarter of 2018 as compared to only a portion of the fourth quarter of 20 team as well as an increased interest or where do you related costs.
Partially offset by lower pre launch external costs incurred during the fourth quarter of 2018.
Non-GAAP and <unk> expenses for the fourth quarter of 2019 were $12.7 million, which is consistent with the same period in 2018.
R&D expenses for the fourth quarter of 2018 were $6.1 million compared to $9.2 million for the same period in 2018.
The decrease in R&D expenses for the fourth quarter 2019, compared to the same period in 2018, which primarily due to Intel just related manufacturing in headcount costs, which in 2018 were classified as R&D expenses prior to the FDA approval any MDACC filing before encounter a $2.6 million incurred.
In the fourth quarter of 2018.
Non-GAAP R&D expenses for the fourth quarter were $5.5 million compared to $8.6 million for the same period in 2018.
Loss from operations for the fourth quarter of 2019 $20.2 million compared to $23.6 million for the same period in 2018.
Non-GAAP operating loss.
$17.6 million for the fourth quarter 2019, compared to 1.3 million for the same period in 2018.
Net loss for the fourth quarter of 2018 was $22 million were 63 cents per share compared to a net loss of $25.2 million were 76 cents per share for the same period in 18 [noise].
Non-GAAP net loss was $19.2 million for the fourth quarter of 2018 compared to $22.7 million for the same quarter of 28.
Please refer to today's press release for the weighted average number of shares to use any calculation.
Oh for share for the quarterly and annual period.
That concludes our prepared remarks for today I'll now turn the call over to the operator for questions.
Thank you and as a reminder to ask a question you only press star one on your telephone to withdraw your question. Please press the pound key.
Once again that is star one to ask your question.
Our first question comes from.
I'm sorry, those with Wedbush Security your line is open.
Thank you for taking my question and can you remind us of the different thing patient characteristics in stride to their stride one associated with the symptom endpoint and what changes were made to the inclusion exclusion criteria in stride three.
[noise] thankfully.
Next question, we haven't really.
Talked about the difference in the patient characteristics, but we can talk a bit about the changes we made.
In the stride three inclusion exclusion criteria in the primary focus of those changes was to screen outpatients that did not have a stable symptom profile during run in that could be either patients that were improving significantly during the run in but still would have made randomization or pay.
Patients that had highly variable symptom profile through the run in.
We often given the example, there were 80 or so patients in the strike to trial.
It had significant improvement in symptoms during the run in phase, but it's still had sufficient symptoms to be eligible for randomization is we'd look at those patient. We assume these where patients are we're having a typical drive flair and they continue to improve regardless of whether they were on drug or placebo and that.
And if you remove those 90 patients from the analysis, then you get a P value or <unk> 0.0 to that's just one example, we had a couple of other changes if you take those.
Patients that we've excluded in stride three and remove those from the analysis. The stride one and stride to then you get P values 0.002 for both of the trial. So our goal was sort of to eliminate those purpose patients that were problematic patients in stride too.
Thank you.
Thank you are falling question comes from the line of Chris Schott with JP Morgan. Your line is now open.
Good morning. This is Chris there off Chris Schott. So first is on deltas.
We have seen solid progress on coverage in script growth throughout 2019, and he predicts that Scott targeting roughly 6000 7000 high prescribing physicians I could you update where we stand on adding new physicians for the script and then second on see this the completion with the completion of a strike three study can you just.
Reiterate the factor that give you confidence in the six month filing timeline. Thank you very much.
Sure Chris Thanks for the questions. This is Todd I'll handle the envelop. This question that I'll hand. It over me can you address your question with regards I students. So we still our target universe for indulge. This is about six to 7000 physicians you know those physicians collectively represent.
80% to 85% of prescribing of all Oculus steroids, and all that universe to date or over 3300 have already prescribed involved and so you know where we're at about 50% penetration of the target universe in terms of operas copies of involved.
And that number is up significantly quarter over quarter, 22% growth at number prescribers from Q3 to four I'll hand, it over to come to answer your I see this call a with regards to the Resubmission as you recall, Chris we did submit an end to gay and received a complete response letter and that the two.
Question, then the Resubmission is considered a class two resubmission and that timeline for that class two or the producer for that is six months. It's a very similar situation that shire experienced with Zohydro, where they had a CRL resubmitted the results and got approval in that case.
Five months, so we're quite confident that the six month timeline is correct.
Thanks, so much.
Thank you enter following question comes from the line of Aster, Russia, They Lu with Oppenheimer. Your line is open.
Hi, Good morning. Thank you for taking my question I can you. Please help us understand how you're thinking about 2020 priorities in the context of you know a positive and or a negative read out really for <unk>.
Sure highest or its mark thanks for the question.
You know, obviously, where we're feeling a lot of excitement about where we're nearing the end of the stride through trial and I'm excited about seeing the results in the first cord and being able to report those out everyone and.
That will be a huge change for the company we really.
I understand that the unmet need for a product in the dry market that could be used in a first line fashion could be used as adjunctive therapy to Zadran Restasis is just something that the market has wanted for a long time.
There are no really quick acting products that can be used to treat patients flares and we know that over 90% of patients experience. These players routinely and that's whether they're on.
Just a otcs therapies like artificial tears or other kind of home remedies or if they're on.
More maintenance products. So that's a real change for us. The good news is we've created a terrific infrastructure, we have an outstanding sales force in commercial organization.
With a really deep experience both in the post surgery market as well as the drive market. So we are gearing up and ready to hopefully see those positive results.
You know in in a matter of weeks here and to be able to get the N. D. N and then hopefully secure approval and launch and think as Todd mentioned earlier, you know, we're fully capable of launching that product with our existing sales force.
And then also adding some additional representatives to make sure that we appropriately.
And go after what we think is a just a huge unmet need in the marketplace and target all the appropriate eye care professionals.
You know certainly if there's more work to be done we'll have to evaluate that if the results require us to to take some time in and we'll get back to everyone in and let people know, but right now where we're gearing up and are excited what for what we hope to be a real positive outcome on stride three and.
Then preparing to make the file in the launch.
Got you [laughter] quick follow up coming from that from a cost basis are we sort of.
Assuming that.
Over the course of 2020, you are not you it sounds like you're not going to need to spend a ton more than what you've been doing but on the salesforce I just wanted to confirm that.
No that's right I think in general.
2020 is much more of a sort of stable year and if we did secure the approval later this year than a you know we will most likely and plan to increase the the salesforce, but our expectation would be right now that you know that.
Would likely come either very late in the year early next year, depending on when we secure the approval. So youre right. This year is a much more of a stable.
Opex situation of course as the trial ends.
You know, though that expense run rate or you know will be.
Reduced a bit so you're you're spot on with your assessment.
Well, thank you very much.
Thank you.
Thank you and our next question comes from a line of Byron.
Freeze your line is open.
Hi.
Thanks for taking my questions Mark can you go long haul literally but can you just go over what type of the Salesforce increase you would need its stride three were positive and if you were able to secure a bright guy.
Approval.
Absolutely a I'll just have taught answer that for you Barry.
Sure around you know that hurt sales organizations about 57 sales representatives. We believe we would grow the sales force is somewhere between 75 and 100 sales representatives and in that range. It would allow us to effectively covers 75% to 85% of all the drivers could prove to be written today.
Okay, and then I guess just from a pipeline standpoint, you know can you maybe update us on where the.
Okay, all right program as for retinal diseases.
Yes, sure Yeah, we have advanced that over the 2019 calendar year and you know we've not made any specific announcements about that program, but it. It does continue to move forward and of course, you know over the last few years, we've concentrated the vast majority of our.
Our resources on our first two programs, but hopefully on the other side of positive dry eye data and securing an approval that is an important program to us and we would expect to invest more in it overtime and.
Just a reminder, that isn't and she E kinase inhibitor that our internal discovery team has.
Developed and we're quite excited about it but again have remained focused on inventus and hopefully the upcoming positive data for I see this.
Great. Thank you.
Welcome. Thank you.
Thank you as a reminder, star one to ask a question and our next question comes from each one with H.C. Wainwright. Your line is open.
Thank you for taking my question. My first question is it seems that the growth rates in fell to scripts as being a slower and slower.
In the past two quarters could you.
Let us know what would be the catalyst.
2020, and beyond that to that will continue to drive the grossing im about to scripts.
Sure. He this is Todd.
No I think the growth trends have been really strong for involved to see remember they were scripts are up in.
In two three by 30% versus Q2.
The growth rate was 17% for Q4 versus Q3, but that was largely impacted by the holidays right were between Thanksgiving and Christmas holidays, you have a lot of practices that are not conducting surgery cataract surgery for that period of time.
We were to back out those holidays and treat them as normal days.
With normal script volumes, our growth again in the fourth quarter would've been up 30% quarter over quarter I'm just like it was Q3 over to too. So we think the growth rates have been tremendous and expect continued growth rates. This year, largely driven by our increasing market access so you'll recall that in <unk> second quarter third call.
Order of last year, our commercial market access was around 50% in fourth quarter that jumped up to 80%.
We currently have between our Medicare part D. In commercial access unrestricted access to about 145 million lives in the U.S.
And feel that we've got a lot of headroom in front of up to continue to show strong growth in the brand throughout 2020.
Thank you. My second question is could you give us some color on the gross margin in the fourth quarter of 2019, and whether we can expect that I served as to have a similar gross margin compared toone filters.
I'm, assuming you're referring to that the reserves that we Chuck you ended the year. So they were higher in Q4, as an 18 and rescue items that contributed to that in the fourth quarter.
Yes, yes first okay. It was the resetting of their deductibles under.
The health insurance plans assets as of January 1st which meant that more patient freezing our co pay card and when they're in the higher deductible portion of their plan and second we had a price increase on January one which meant that a unit that we sell to distributors in 2019 or we would.
Reserved for at the rebates based on the new 2020 prices those those both impacted the reserve that we took in in 2018.
Okay.
This well led by higher gross margin been built to us.
So we haven't we haven't talked about that yet and guidance on I think this yet.
Okay got it my final question is.
Can we assume that the R&D expense quarterly R&D expenses will be.
Lower significantly wants to strike the trial is completed.
Yeah, It's a great question.
Time, we don't have another large phase two or phase three program that were putting into place. We have earlier stage programs. So you know where it is our expectation that compared to 2018 in 2019 that overall the R&D expense.
In particular associated with clinical work will be reduced there's always some R&D expense.
When youre manufacturing, a new supplies and other things, but as it relates to clinical.
Trial work, we do expect a reduction there.
Got it. Thank you all one more thing could you give us the shares outstanding at the end up 29 team and when the thinking will be filed.
Sure I 35.5 million shares outstanding at the end of 19, and we'll file the 10-K this week.
Thank you.
Thank you and I'm not.
I'm showing no more questions in the Q.
I'll turn the call back to Mr. Vicki.
Well. Thank you very much everyone for your time. This morning, we greatly appreciate your interest at this really exciting juncture for color Pharmaceuticals, and we look forward to updating you later in the quarter have a great day.
Ladies and gentlemen. This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.
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