Q4 2019 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the try Sito fourth quarter 2019 financial results Conference call.

This time, all participants or any reason on email.

After the speakers presentation, there will be a question and answer session to ask the question. During the session you would need to press star one on your telephone if you would want any further assistance. Please press star Zero I will now and I piano conference over to Jackie Kaufman. Thank you. Please go ahead.

Thank you Kathy good afternoon, and thank you for joining the Tracy to fourth quarter and year end 2019 financial results conference call in today's call Gary cleaner, our founder CEO and President will discuss our business progress and Jeff Parker. Our CFO will then discuss our financial results for the fourth quarter and provide guidance for 2020.

Please note that in today's call, we will be making very statements that include forward looking statements as defined under applicable securities laws forward. Looking statements include statements regarding our future development and commercialization plans are hiring plan, our medical affairs activity the conduct of our valor CKD confirmatory post marketing trial.

Recruitment milestones anticipated activities related to our India filings, including the PDUFA goal date, and Advisory Committee meeting financial guidance and other statements that are not historical facts.

Managements assumptions and expectations and opinions reflected in these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from any future results performance or achievements discussed in four implied by such forward looking statements Tracy to can give no assurance and these statements will prove to be correct and we do not.

Intend to undertake no duty to update these statements. We also urge you to read the risks and uncertainties associated with our business that are described in our filings with the Securities and Exchange Commission.

For a copy of our press release that was issued prior to this call. Please go to www Dot Tracy the dot com and follow the linked to our Investor Relations page at this time I'd like to turn the call over to Garrett.

Thank you Jackie and thank you all for joining us today on the call.

Move right into key goal fortress either in 2020.

Planning and execution of a successful launch of the there.

Well to do for goal date, it's just six months away and we are engaged in multiple activities to ensure a successful on just a very much of the fourth quarter. All this year and sales both in 2021 and beyond.

And the next six months well, we'll continue to support and expand our comprehensive metabolic and doldrums disease awareness and education campaign to communicate the existing evidence that increasing standby problem is in patients with metabolic off the doses in CKD slow progression.

Maybe you can potentially improve oh patients feel an assumption.

We believe the broad understanding of this evidence will help to establish an increase urgency to treat patients within serious condition.

I'll plan includes extensive education adoptions with the fall does as well as significant here engagement.

In 2019, we made you hires in both the commercial and medical affairs functions.

Adding 27 executive and management position.

And the first two months of 2020, we have already added an additional 27 people those teams playing out key roles to expand though isn't perfect exchange enables market access.

Branded marketing campaign prepare for the very myself and ensure smooth logistics for the commercialization over there.

I mean, I'll highlight three major initiatives in the coming up.

First peer to peer engagement with Nephrologist Medical affairs team second disease awareness and education by our marketing team and feel very strategic account managers cert here into action by a bucket axis team to ensure appropriate coverage of Airbar if approved.

Oh, a medical affairs team now includes 14 medical professionals to engage with the fog.

Elizabeth false leads us to even as a long and successful career and medical affairs, where she led the teams at type and Pharmacyclics and has a key medical affairs roles at Celgene the named it.

She just joined up late last year and has already made a significant impact the medical pharmacy as all Amazon team is in place and will be deployed at the upcoming national could be foundation spring meeting at the end of March by April we expect to have nearly a dozen them without engaging with hundreds of key opinion leaders community to apologize.

And health care professionals answering questions about the pathophysiology of metabolic up doses and reviewing the growing body of peer reviewed publications on the serious complications with metabolic off the doses and the evidence of the link just because the progression.

Oh, a amazon well could play an important role in furthering our understanding of why despite clinical practice guidelines.

Accounting treatment up my baucus with those necessary. So disease is currently so under treated.

Most of the fall just you talked to would probably say that they use sodium bicarbonate managed but about half the doses and then non sodium sensitive CKD patients, but the evidence from multiple independent sources suggest that doesn't 15% other patients submitted all I got to those in CKD actually treated sodium bicarbonate. We of course believes that the price.

I'm impediment to treatment is a lack of an FDA approved therapy and limitations of sodium bicarbonate to manage metabolic acidosis.

Two recent bodies into placebo controlled study shows that the most common doses upland by calling of used today to management about doesn't those is what ineffective.

And these studies sodium bicarbonate doses typically used in clinical practice at this 0.5 to one grabs the three times daily achieved very little difference in means and bicarbonate levels between the access other people groups and showed no clinical benefits of sodium bicarbonate treatment.

Another concern to fall just have half with recommending for him bicarbonate to that patients is that the highest sodium intake has been associated with significant reductions in the effectiveness of in angiotensin aldosterone system inhibit us or RAF inhibitor.

So wrapping that up a one of the oneq classes of agents that up and proven to slow CKD progression.

Post talk analysis of combined data from the NOL and idea and T trial evaluates the impact of low medium and high levels of 24, sodium crap and make sure in patients at minutes that enter Tencent receptor blockers, all your hobbies versus non RAF inhibitor treated patients.

The authors concluded that and I quote directly from the publication.

The vino and cardiovascular protective effect will there be therapy compared with non RAF inhibitor based therapy attenuated in subjects with larger consumption of sodium but in subjects with the highest for him and take the treatment effect on hard vino and cardiovascular outcomes are completely annihilated.

Approximately 70% of patients with he couldn't hear treated with raas inhibitors to manage hypertension and therefore these patients cannot afford an elevated level of sodium intake.

Back to Amazon.

Another critical role of arm as always we'll be recruiting the fall just to participate in the ultimate CKD patient registry. This registry, but then see understanding of metabolic off a dose and CKD by enabling us to generate clinically important publication and giving us insight into the real world effects of metabolic up doses in patients with CKD.

Medical Affairs effort includes medical communications generated some publication.

The patient a national regional and local Congress has worked at advocacy groups and importantly, bringing together leading experts in the following.

We now have a growing number of key opinion leaders and nephrology that'd be engaging with identify key topics related to the complications of metabolic off the doses in patients with CKD.

In 2019, we had 14 publications and the aim to double that this year 14 aspects have already been accepted for presentation at the end cap spring meeting and the southwest and followed your confidence in Arizona, So we're well on our way.

So I see does also committed to general medical education, and a sponsor three independent continuing medical education or see any courses covering CKD and metabolic after doses.

These programs are anticipated to reach or what 2000 and involved.

Now turning to our commercial team led by so then I can try.

As you know so that has significant commercial leadership experience from go ahead and Gentech. She has made significant progress on the disease awareness fund both in the fall just in Paris, and preparing for a branded launch.

This is that the or should we expanded our marketing team how it all into that market access and sales management teams and build the infrastructure to support sales operations and product distribution.

Oh disease awareness campaign, that's been expanded to include significant digital direct targeting to drive to fall just to the metabolic us the doses insights website and to do live a key messages intended to raise awareness metabolic after dosing.

Well go out disease awareness Arbitron may but the deployment that was field based support team of 80 to 85 strategic account managers.

[noise] team will be initiating a in person disease awareness campaign. This enable us enables us direct interactions wasn't apologists and other health care professionals to show. The most recent publications and data about metabolic us the doses and its complications.

These visits will also enable the reps to gain familiarity with key stakeholders in that territory.

Oh, sorry, major initiatives educating peers and completing the necessary task to ensure appropriate college up a very much if approved is well underway.

Our work with past again, there early interest he does history and this effort continues.

Market exits team led by we'll see among gardening, who has extensive experience in all aspects of pay engagement and distribution logistics from tide Celgene and vote.

Our team consists of 16 professionals covering all aspects of access to their amount from supply channel logistics to engaging with payers imagine easy access to go there.

Our corporate accounting is already met the 50, you want to pay as representing approximately 230 million toggled insured lives.

These engagements enable us to educate pairs funding impact and consequences metabolic off the doses presented to them as a potential first and only ft april's treatment for metabolic doesn't doses and to provide real world data on the potential health and economic benefits of treating metabolic after dosing.

The other shown keen interest in a significant health benefits for patients that translate to cost savings. These early engagements have all been able to up to understand the timing and requirements for coverage from these payers also on the market access bonds. We are setting up a patient support out arranging for an open access distribution channel, which will allow both retail.

And specialty pharmacies access to their mind settling up see him in setting up the appropriate market access infrastructure to ensure a broad access to the verma launch.

I'll go into market access fondest to meet with 100 pairs pilots off due for Dave.

Oh post meeting payer surveys will confirm our success in reaching these past with rice message and also gauge the attitude about that need to include the there on the former there.

Beyond these significant medical affairs and commercial front, we continue to focus on dollar CKD recruitment you have made good progress in enrolling patients with all of US he could be post marketing trial as large outcome trial being conducted and 33 countries that approximately 350 sites or targets I took an open and we anticipate randomizing six subjects in the trial leaf a complete.

Enrollment this year.

And finally with respect to India, we will not be providing updates on our discussions but into action to the FDA. During the review process other than to say that the routine matters a lot of a mission on the way we will continue to work with the FDA send able to them to complete their review and the timing that.

The Afghan fighting to old Advisory Committee meeting or outcome to discuss the application, we're anticipating or the outcome would likely occur in the second quarter of 2020, and well know the topic of discussion closer to the meeting date as he said previously given that'd be up assuming of attention disease, modifying indication and CKD utilizing the accelerated approval of hold them we welcomed.

This opportunity and we'll be prepared because then the underlying rationale and the considerable body of evidence supporting the creeping up metabolic acidosis. Most a question of kidney disease. Furthermore, well be ready to walk through all of 'em Ivera medical data, including results beyond the surrogate endpoints, such as improvements and how to patients feeling functions.

And the impact on mortality and progression of security.

I hope we provided you with a clear understanding of how focused be on reaching our target audience to increase the understanding that metabolic as the doses linguistic any progression and that they're simply I know safe and efficacious at the april's treatment for the serious condition.

Leave this will lead to a successful launch up there, but early adoption and favorable pair coverage.

I'll now turn the call over to Jeff for a review of financial results.

Thank you Gary and thank you all for joining us today on the call I will now provide a brief overview of our financials additional detail regarding our fourth quarter and you're on financial results can be found in our press release issued earlier today.

Our financial position remains strong.

As of December 30, Onest 2019 try see that had cash and investments of $355 million.

In the fourth quarter, our R&D expense was $40.7 billion DNA expense was $17.5 million.

Our net loss for the fourth quarter was $58.2 million for $1 in 17 cents per share, including noncash stock based compensation expense of $9.4 million.

Now turning to our financial guidance for 2020 as Garrett as indicated we're building out our commercial and medical affairs teams and conducting numerous other activities in preparation for successful launch of a bear armor.

For the first half of 2020, we expect that R&D expense will average approximately $40 million per quarter, what the first quarter expected to be slightly higher in the second quarter.

In the second half of 2020, we forecast that R&D expense will decline to an average of <unk> approximately $25 million per quarter.

R&D expense is forecasted to be higher in the first half versus the second half given the timing of certain expenses related to the timing of drug substance delivery and plant optimization at our CMO pay on.

For the first off of 2020, we forecast the GNS expense will average approximately $30 million per quarter.

The second quarter expected to be slightly higher than the first quarter.

In the second half a 2020, we forecast the DNA expense will increase to an average of approximately $40 million per quarter as we complete the buildout of our commercial organization.

We estimate total cash expenditures of $250 million to $260 million in 2025.

Based on our current operating plan and excluding any potential revenue from firmer if approved criteria expects that its cash cash equivalents and investments.

As of December 31, 2019, and its anticipated additional borrowing capacity.

$90 million under its Hercules debt facility will enable the company to fund its operations at least into the second half of 2021.

Assuming we meet our internal commercial forecast riverbed summer, our cash runway could be extended through to profitability.

With that I'll open the call the questions operator.

As a reminder to ask a question do we need to press star one on your telephone.

Try your questions twice, the pound or hash key piece standby, we capacity cooney roster.

First question is from.

No not down of Cowen and company.

Good afternoon, congrats on the progress in thanks for taking my questions [laughter] first tier one for you.

Follow comment to what you just sit on the outcome should you know the topics for sure as you get closer the meeting one do you have any sense, what the topics could be today, even to how will you communicate the topics. Once you are aware of them.

Something that you disclose or who have to wait until the briefing documents are posted on the website to know for sure.

Yeah. So yeah, we don't really speculate about about the potential topics a that might yes, and that typically happens quite late in the game. So we don't expect any communication before the actual outcome and it's it's a very discrete.

Yeah, and very clean and clear or development programs. So we are preparing to present.

The three studies really the Trc a one on one study the pivotal trial Trc has real one and then of course extension trial. He has he asked me a one eat so so that's that's at the heart of of everything we are preparing and it's it's very straightforward.

Okay Fair enough second on your parent gaming I.

She could your analyst meeting you mentioned that you were continuing to work on Pharmacoeconomic data to communicate to the payers. The benefits of <unk> can you give us maybe an update on what do you have today and what the payers are finding most compelling.

Yeah, I think we've moved on from Hum generating more data and more to really communicating the overwhelming existing data then we've shared that with you before in terms of the the annual cost savings and more importantly, I think how well see you explained that is that each month that pairs.

Don't increase.

As patients not increase there Sam backup I wasn't medical and they have they have 7% high all costs cost that month, and so that's really the core message resonates because it's not it's not a long term cost savings, it's really a short term game, where they really each medical and of standby type increase.

These matters.

Got it Okay and then last.

Question for me, what's your most recent thinking.

On Europe would will when could we have some clarity on your European find my question.

So Phil it's Jeff our plants continue to be that we will have substantive engagement.

With European regulatory authorities are starting just after our expected approval a in the U.S. So that would be post the August 22nd PDUFA date.

Perfect. Thanks, taking my questions and congrats again on the progress.

Thanks Bill exit.

Next question, there's some Jessica fye of JP Morgan.

Hey, guys. Good afternoon, and thanks for taking my question and thanks for providing that detailed operating expense outlook.

When I add up well it sounds like 130 million of R&D spending 140 of GNS teenage spend you get around to 70 million for the years I want to make sure. Those figures are gap and include non cash expenses since they came out a little higher or something to.

She's 50 to 60 range, you're talking about for cash spending 2020.

Yeah those expenditures do include.

Noncash stock based compensation.

Okay, Great and then when we think about the 40 million per quarter in.

Ah ash in a run rate you know exit the year with is that a good friend right to think about 420, 21 and beyond just kind of a fully loaded.

She married.

So on.

First let me comment on.

On the R&D side.

You know I think this won't be likely our highest R&D or and so I do think the exit rate for R&D of $25 million or should be applicable.

For at least a the 21 22 timeframe and then as we begin to wind down Valor N. The 23 time frame a we expect R&D.

Should continue to decline.

As far as S. Gionee, you know, we would expect or the overall expense ratio of the company to stay about static to where we'll be in 2020, and so as R&D goes down a asked you nay would step up so as far as.

You know ending the year at 40 million on SGN A. I think that that is a pretty close to what the annual runway will be but it could step up.

10, or 15% from there.

Awesome. Thank you.

Your next question is from.

Quick Savannah base of Goldman Sachs.

Hi, good afternoon. Thanks for taking my questions. Congrats on the progress two questions for me [laughter], one [laughter], how should we think about the real world experience was a farmer and how that might contrasts with the clinical trial experience.

Some drugs perform very well in clinical trials in the world real World. They don't perform the same so any kind of color around your expectations around how you think for farmer will to a once approved would be helpful. And then along the same vein how should we be thinking about perhaps your expectations on the slope of.

Uptake for this product is long lead times you expect this to be hockey stick you know, there's really not much out there. So it would seem to suggest to me that this could be relatively quick but I just want to make sure our expectations are set appropriately. Thank you.

Presses does get so I think this so good question and small molecules that gets metabolized in different ways or biologics I I agree with you there that was a controlled setting up a clinical trial versus real world there's risk.

We don't believe that that's the case for a non absorbed a polymer jive as polymer where we effectively are doing what the kidney naturally does but the kidney how's the kidney can naturally excrete.

Yes, it loses that ability and then effectively the them a binding hydrochloric acid Angie I tracked as making up for about the kidney can no longer do so so both from a compound perspective.

The non absorb PAMA and from a disease perspective in terms of CKD and metabolic doesn't doses, we don't expect.

A difference between what we've seen in the clinical trials and hopefully we hope to see and the mill.

And then in terms of just how we should be thinking about the slope of market uptake.

Yeah, we think that when you compare it again.

Data driven manner, when you compare to other launches wed never incumbent.

At the April product.

I can hyperkalemia and fast follow us this is different and rightly a building the market for metabolic absent those and we hope to be one.

But we hope to be the first and only and we believe that the the pent up unmet medical need billions can outpace the the market building component of this so we think that there's a there's a good chance for <unk> fast uptick.

Okay. Thank you very much.

Thanks, Greg Thank you.

Your next question is from Alan Carr of Needham.

Hi, Thanks for taking my questions.

Can you give miss any update on Falor CKD you mentioned.

Back to finish in Rome, and at some point this year I'm wondering if it's if you're still thinking middle of this year and can you go over your latest thoughts and and intentions around the interim analyses and then second.

What about which look let me be on the very mer.

Any.

Long term thoughts on what.

What else you might have.

In Atlanta or thoughts on business development. Thanks.

Hi, guys on a valid ticket is there a coupon is going well, it's it's really as expected quality assumptions that we've gone into our contact and ER. We I think are in terms of fine fine, finishing recruitment here I think this is a.

But it's something that that'll happen this year the exact time, we'll communicate Atlanta time point.

The.

In terms of in terms of a pipeline I think we we are really laser focused on on launch and that that's really something that he has an organization need to two focus on and we need to execute against and ER. However, there's lot of excitement you know weve many of US who worked together here for.

The third company we've done this before and you can you can anticipate that they're not going to stop doing what we've done before so stay tuned I think towards the end of the well communicate on the potential pipeline.

Great. Thanks for taking my questions.

And doing a lot of questions and Keith.

Thank you and thank you all for joining us on the call today.

Have you plan to be at Cowen 14th annual Healthcare Conference in Boston next week, we'll see there our presentation will be webcast in available live on our website. It to 10 PM Eastern time on Monday as always if he has additional questions. Please don't hesitate to contact us via email at <unk> IR at Tracy the dotcom, Thank you and goodbye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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