Q4 2019 Earnings Call
Good day, ladies and gentlemen.
The box for core her on full year 2019 conference call.
As a reminder, this call is being recorded.
The company's prepared remarks, well open the call for questions and provide specific instructions at that point.
I would now like to turn the conference over to Nicole Senior manager Investor Relations you may begin.
Thank you Joe Good afternoon, welcome to the Guy he likes to building in a chief financial results Corporate update conference call. Joining me on the call today, Alright, Spencer Chief Executive Officer, Michael Ostroff, Chief Financial Officer, and going to solve vice president sales and marketing.
Before we begin I invite you got really making forward looking statements today, including statements regarding topic, just be commercial profile revenue expectation potential Keith.
Yeah.
Okay patient of post marketing studies, and the Guardian Bassi development with huge huge Gi Joe's jeans.
These statements are subject to a number of risk and uncertainty.
Could cause actual results could differ materially for example, we cannot quantify.
Good sign intact, the coolness virus tendon hospitals clinics and other customers had postpone some seems to be maybe generally names have imposed restrictions on access to non essential personnel owned fleet could slow customer decision, making a job.
And in some indication, resulting in lower sales during the course in Egypt borders.
These risks are summarized in todays press release and are detailed in the risk factor section of our could change you and say hey, periodic reports filed with the S. E C, which means you ultra what do you I will now turn the call over to rise sensor cheap.
Executive officer dying to that.
Thanks, and thanks for joining yesterday actually if you are probably making financial results.
What we think is an exciting outlets between 20.
Well, we began the transformation agenda.
The goal is building a leading dustin.
That's easy operation and its value cultures.
They also represents a valuable wallstrom business.
With the potential for study to clean up.
Fortunately for US we're in the unique vision of how you're going to pull that fee.
I was talking about the opportunity encourage others.
Additionally, we are focused on leveraging our core competency in vaccine development and commercialization to bring new products to market.
Continued development.
Gee, taking the actually making things necessary.
Oh, so some of the product.
Be pseudo schedule appetite feedback.
Which due to softer at higher rates of protection compared to the pellet smoky either.
Based on this pool.
He is well positioned to become the standard of care wholesale in the United States.
I was at the higher levels of detection and improved doesn't get.
Along with our marketing efforts, we've got to drive significant more people.
We ended up maybe walk me.
Oh, yes, we see potential for Epicel between.
China and other markets.
We acquired a multi optimization application would be amazed added China walking to identify.
That's a clinical development and most of the beach.
Well I'd be surprised series G.
Yes. She did you said 18 represents an additional offset significant long term potential.
The basketball CPG 18, with the goal of creating.
Capable of enhancing even spot to a variety of vaccine question.
Did I get up that had been mission even demonstrating.
We've always done a bad thing.
Gene in multiple instead the club.
The first one.
It's an ongoing programs that fit what she has institute of India.
Leading manufacturer adopting.
This call them fairly stable neither of them.
Focus on the development of it includes the toughest testing using <unk>. They see somebody would ask again, then that should bicmos to the.
More recently, we announced our collaboration with the University of Cleveland and stuff.
In addition to epidemic preparedness.
Cool about list or Covidien 18 Bucks.
The University it seems like it's clearly sets in CPG and kinase gene in combination with its proprietary after uniforms, which could result in initial clinical trial, beginning as early as a midyear Tim.
Over the course of the we anticipate injury multiple strategic relationship focused on advancing a variety of vaccine candidate and establishing a broad the JV CPG city.
He this approach we that's I guess I play opportunities decided to leverage CPG city team along with our clinical development.
The fashion.
So.
Shifting gears deficit beep commercialization.
We think it's worth reminding investors Hollywood, yes, I see that simple.
Yes, Mark has three major segments, starting with Monobore safety testing.
As I said this accommodation public policy and the vaccine and finally formulations and dosing regimen the patients obviously the dialysis.
Based on the David on label.
She is supposed to be improved profile compared to that I could talk market leader.
All in mutual focused I think converting the model builder sentiment.
To optimize our efforts our commercialization is currently targeting approximately 56% other customers universe, focusing on retail in national account as well as far the ideal target.
George points, probably we will acquire commercial efforts to begins to come but between the segments as well and following that.
And pursue it.
I was just getting it once we have established vehicles dosing regimen.
The only coal market, we expect to build upon from a variety of factors, including including vaccination rates improved second dose employed and other market expansion initiatives.
For example.
[laughter] disease control healthy people place at least anymore includes the goal of eliminating Bobby I use other public health.
We believe whole said he plays a vital in achieving this goal.
Yes, it's got the safety.
White and Black is just affectionately ward.
Becoming the standard of care.
The best thing yes.
Global packaging essential to generate a preferential recommendation so how could that be subject Cdcs Advisory committee immunization processes or the IP.
Today, we also.
During the evaluation of a sequential localization et cetera.
To provide additional data and information.
The work is complete.
He says he's always type. Unfortunately is also evaluating just as GE recommendation for all the goal to be Docs me again.
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Oh my old specifically, it's got to sell recommended to be vaccinated.
Both the potential supports a recommendation.
Yeah, a recommendation for MACI adult vaccination Cushing valuable steps to helping achieve the healthy people putting food goal.
Based on the blows opportunity we've seen in years ahead, we believe the market for Epicel be has the potential ultimately increase well over $700 million into sales.
Okay.
Well this overview of the market opportunity.
Well it afterwards I will now I'll touch briefly on our recent financial results, which Michael will cover in more detail in a moment.
So they'll be missed sales during the fourth quarter $2.6 million, which is up to 3.9 million in the same period in 2018.
As expected we have seen some seasonality you know revenues for the fourth quarter.
Then by slower department of defense activity as well some other factors.
Well, here's what do you guys to me.
The net sales were 34.6 million in line with a couple of the revised guidance and substantially.
Sure increased from 22 6.8 million net sales.
All right because the commercial efforts are making excellent progress at least that's a significant growth to continue its full year 2014, that's what it still anticipating simply by approximately 70% over 22.
If we were successful in delivering high schools in 40, Twond, we expect to be honest bleach injection to achieve our long term goals.
Thank you.
We did we lose with additional graves, others, such as dialysis and the potential for an it shouldnt be recommendation.
Oh, yes, keep all these ongoing transformation into a leading fully integrated that he told me I'm very pleased with it seems accomplishment. This is open into productive use employment.
And positive momentum heading into 2012.
With that I'll now turn the call over to Michael to discuss our financial results in more detail.
Thank you I guess.
Our financial results are presented in more detail in the press release issued this afternoon. So I'll just touch on the key highlights here and provide some additional color.
Yes.
Consistent with our previous guidance, we used for you today full year 2019, epicel be net sales of $3 million to $4.6 million.
At the show season that sales during the fourth quarter 2019 were $10.6 million helped fund the $10.2 million employees. So this quarter, but a significant increase from the 3.9 million recorded in the fourth quarter, that's when they choose.
And our current scale quarterly product sales can be affected by variations in seasonal factors such as lower department of defense purchases. Following this summer sued recruits days lost the holiday periods, which can be delayed implementation of ordering by customers other stocking patterns.
The more distributors.
Research and development expenses were lower for the full year and continue to decrease during the fourth quarter down to $12.3 million from the $22.9 million for the fourth quarter last year.
The decreases resulted from winding down of oncology research activities and reductions in R&D headcount following the restructuring we implemented in May 29 gene to focus on our vaccine business.
Fourth quarter includes approximately $3 million in expenses related to oncology programs.
These expenses are expected to continue to decrease over the next two quarters. As these activities are completed with total additional expenses over that period, its anticipated to be approximately $6 million.
These increases as children age that's used to the three in 12 month periods in 29 gene compared to 20 into due primarily to increases in sales and marketing activities payments for completion certain milestones and helped us to be post marketing studies and higher facility costs.
Due to the inclusion facility related to go live Mintel occasion.
DNA functions following the restructuring in May.
In addition, it's worth noting that includes lease expense, which is being recouped through a sub leads to a third party is recorded as point of other income.
Cash cash equivalents and marketable securities totaled $151 million at December 31, some of them too.
This is a strong financial position through June for a long term objectives.
On the strength of 20 on Hughes revenue growth and continued successful implementation of our commercial strategy.
You should expect net product sales for the full year 2020 to be between.
85 million $62 million.
Because it earlier, we cannot quantify at this time inside of the pool in the virus pandemic.
I'll now turn the call back to one for some closing remarks.
Hey, Michael.
Building on its own installation starting in 2018, we expect 2020 will be an important use the data that multiple value drivers included.
Oh got being that place revenue is expected to increase.
It was 7%.
Interim data to be leads to more ongoing study will set the patient that you know dialysis later this month for the final even if he wants to do that in the second half a point twice.
Completion update you follow up is that the post marketing studies in Q4 2020.
Completion of phase, one, enabling animal studies and toxicology funding pool, the Texas vaccine enable side CPG 18 by year end.
I don't have multiple strategic relationships focus on establishing cpgs anything I've been reading activity, including our recent announcements related to our collaboration to develop its a lot of I was asking.
We are.
Maybe selling to raise the buybacks.
Additionally, the company has substantial long term success benefiting both patients and shareholders.
As highlighted by recent events infectious diseases represent a significant public health and we believe the vaccine business represents a tremendous opportunity long term investment.
That's exactly how has the potential to protect more adult habitat must be in any products in the U.S. markets today.
Across the organization focused on day to day execution of our commercial strategies to drive annual revenue growth to 74 also working to drive value.
CPG 18 Basking ridge.
Which represents an additional opportunity to create differentiated asking for high unmet medical need.
We said all of our adapters and she's numbers to their commitment to divest and to have a Saturday. We look forward to all we will accomplish together over the course important 2030 years ahead as we build Dynagas LNG, leading soldier the baby steps in company.
Operator, we'd now like open the Q4 should be coal.
Thank you.
If you would like to ask your question. Please press the star followed by a one on your telephone keypad.
Please ensure the mute function on your telephone is switched off.
Signaling to reach our equipment.
Again that is.
On to ask a question we can pause for just.
Just a moment to everybody the opportunity to signal.
We'll take our first question from <unk>.
Blair. Please go ahead your line is open.
That's it thanks for taking my question I guess.
First could you try to quantify than some of the seasonality.
Q4.
Across the kind of mentioned some specific areas like the but other areas.
Furthermore, it how much of that or so.
But again should rebound in Q1.
So expense or how much of that she loved ones on the mentioned.
Milestones and goes marketing just kind of wondering how it should they spend.
Moves going forward, specifically and then lastly supply or do you guys have on hand, right now any concerns over your facility.
In Germany.
The manufacturer.
No I couldn't pick up the second question.
Yes.
In that situation.
Second question, if you don't estuary extends the mechanism one time.
I guess milestone for the goes Murphy favorably you mentioned was yesterday.
You can they qualify that just kind of curious how much she may extend to expects going forward.
Patterson.
Okay, well, let me tell bounce around a little bit first of all supply on hand, we have actually been quite significant inventory balance between finished products and raw materials and we continue to manufacture in Germany.
At the moment, so I I assume your question was time too.
Supply chain disruptions you too.
Many different impacts for the the Corona virus situation as it right now we feel like we have plenty of inventory to meet demand for quite awhile. So I don't think it's something that we're focused on.
Well should be at the moment.
And then as it relates to seasonality obviously, we mentioned the number of factors I think what we want to highlight is the seasonality as it relates to deal with something that we've always known to this and it really comes from.
She counts, we see it spiked in soup killed in the summer month.
As they know they bring in more new recruits in in Q4, it happens to be lower so it's hard to quantify because it depends on their own recruiting efforts each year and so we don't want to get into quantification of what you should expect annually. It also has an impact based on how many basis. We have at the time that have switched episode.
The other items, Michael mentioned were around distributor stocking as well as Dave did that sales days or activity days in the fourth quarter.
That is again hard to quantify in particular it just we know that we will have an impact in implementation because implementations very specific to a number of individuals. We all have to be president and holiday schedule. It makes it harder to pull together groups of people that's not the same is product utilization.
That will be a little different in later stages of our lifecycle.
The only other point Michael mentioned, the weighting stocking distributors leaps on hand have.
General fluctuations that we can see between the two weeks on hand, usually a range of the carry a they could fluctuate my two weeks or so in that.
That's just not part of what we manage and so.
That's helpful to seasonality, but it's going to keep it can be an explanation for why quarterly variances names that are not indicative of doing they went helping the business I would point you'd see if you want to kind of dig in a little bit more or corporate presentation. We utilized slide that shows the segment.
Well.
Its course doses.
That is not at the information, including a corporate staff that can give you some sense of healthy.
Grown segment by segment over to the launch.
With respect to the question about milestones.
Page under the post marketing studies that was just actually because we achieved a significant.
Progress in completing enrollment and so forth and so the way the payment structure was related to that one having said, there's there's only a couple of million dollars destination.
<unk> expenses related to that school.
Two or 3 million for this year.
Thank you.
We'll take our next question from Phil Nadeau of Cowen and company. Please go ahead. Your line is okay.
Yeah. Thanks for taking my questions are just a couple of first on.
At the southern Q4 are there any updated statistics. So you can share around targeted accounts for the ordering for market share among Kirby recounts anything.
He used to benchmark versus the statistics, you gave us a wash sort of course.
Its course targeted accounts ordering we truly have moved away from that stat Phil.
So that the sure pointed it gets complicated as far as what we call target between individual sites of care within large customers or a customer themselves.
So it's over more it's multiple thousands of orders that but as we look at where our growth comes from they're not equal and still became it started to become a number that we didn't feel meaningful.
We have a whole bunch of small independent starting to order. It. We are you talking to provides a meaningful metric compared to some of the larger customers and so we felt that initially at launch and as you sort of shakes action in the marketplace, but now become.
It doesn't become something that's useful so we haven't provided it.
It is or isn't done yet fitted movies.
That's fair enough for now but.
More relevant information informations, our market share.
So we have increased our market share.
Our field accounts to 21%. So we did show continued progress there as well as 11.6% overall, which is up from something like I think 2.8% in Q4 last year. So it does show we are moving our metrics to provide you some level of traction, but she was a little bit higher level concepts.
Right that's very helpful.
During the second question is I'm just to dig more deeply into the professional recommendation and you mentioned for me CRP.
What is the process for for securing that in and specifically in regards to the post marketing studies, how does how does raise your peak at holding up to do you have to submit it does work for your formal publication that they can see how does that.
Okay. So.
He said he has a a working group they resonate for certain disease states sensitivity hepatitis fully converted.
And that is where we would interact if they need additional information. So we don't interact directly with the CIA PBX and we said to work with.
We have a relationship with the 50 working through the PDP.
And so via that relationship we can provide updated information either because we have new relevant information for the consideration or to answer questions. They may have specifically, obviously, a and B post marketing studies our.
Information that's important to their review we have provided the interim analysis to working with.
They have reviewed it they are working through the evaluation.
Do you worry meeting they confirmed that they are conducting a economic analysis, which I believe they said it would be available. This spring, which has their own analysis, we happened to conduct scenario, which we will share with them. So it's a.
[noise] open back and forth, but generally as it relates could data information not you know there's not a casual a casual relationship that was not as formal as.
BLE process for example.
And what do you see a P <unk> issue for French where conditions, that's something that they would have to tick up in an open public forum. So at some point, where we see.
Great gender that's is perfect for work.
Triple sub work, because it's something that could actually happen.
Public meetings and public so.
No. It is a public for all eight this creates at the meeting each year and they all public and that is where the entire dialogue happens as it relates to any change to the recommendations.
<unk>.
That's very helpful. Thanks for taking my questions are triggered some partners.
Thank you Phil.
Thank you when their take our next question from age Weiss of hate C. Wainwright. Please go ahead. Your line is open.
Hi, Thanks for taking my question. So the first question just wanted to give an update on the diabetes pharmacy chain and that she Burke.
But you were working on to launch or this quarter.
Good day.
I'm, sorry, and lastly that goes in diabetes.
Pharmacy policy.
Pharmacy, Trina sugar Yep honestly I'm, sorry, I was I heard policy and I got confused because we didn't we do not have a policy issued the pharmacy initiative.
Turning to launch one like turn this over that Saddam to sell our head of sales and marketing you can give you a general overview on I think more beyond just the specific one off how we're approaching diabetes throughout 2020, but it takes to the question.
So there's only obviously is a partnership it it's been very successful, but then the opposite perspective, I'm able to identify thousand station.
During the two week initiative as though it became kind of a have a playbook walkman poor.
With a different a different pharmacy itself basic thoughtful and so it comes off taker before.
Trying to do more places like this or with other retailers 20 point as you know sees opportunity with diabetes and face originations in the pharmacy. So looking forward to do more and this isn't a board.
Yeah.
In general and this is how we're going to have to get out from the diabetic recommendations through these institutional customers would have an ability to leverage their control their system to target specific patient. So the on pharmacy, we will start to evaluate opportunities with large guidance, we have made system.
Switches to a couple of stuff I have to support.
Programs around using electronic medical systems to cost position to vaccinate, the diabetic patients as well.
Great. Thank you.
And then just a question around the corner virus initiatives with the University insulin.
No you're providing technical expertise in her.
Oh I get attachment.
How much you know.
I'm just thinking from an R&D standpoint in the course to this program as if it's going to be minimal or could this be a material.
Setting and then also just on the timing of it there's a lot of and there's a lot of our.
We're in a virus.
Seeing no initiatives going on right now.
And just wondering you know where are you sort of standard watching to see you know some kind of data or get more information about this program. Thank you.
So this means that a couple points.
Hi life, where we are with our CPG adds an important.
It's typically the Corona This program is funded.
By itself.
That being one primarily by the University in Queensland, we are providing the accident and the expertise that we're providing is our know how.
The reason the thing.
There's a very opportunistic for us because this as it is the thing that unit, we manufacture for public that until actually leveraging all the listening work. We're doing now it's not much of it.
But you know many of the people involved in Colorado that you hear about our.
Taking it from the standpoint of putting you efforts do it for us we're leveraging.
Who is actually in the food that's the eight NFI approved product. So we're able to supply it works at no cost to be part of this program.
England University of Cleveland is doing the initial research and it's all funded by stuff and so we do not see being your costs at this stage good dynavax and the whole reason.
Cleveland disease involved because they have a they have a beauty long term funding to separate so I don't even sleep is being something that impacts R&D spend.
And it is a little bit indicative of what we should expect for other CPG related program initially where we're able to leverage the fact that we make large quantities of this problem and we're willing to provide our expertise on how to use the I'm getting a interacting setting to research partners.
Which can rapidly which can you guess their efforts.
In a meaningful way in terms of time and reduce the list of success and so specifically with respect to diseases, including some collaboration they're hoping to to complete the random, especially in our new here and then go into the clinic.
Yeah rapidly so.
We'll see what happens with the animal side of the work that we're hoping to see initial clinical trials in middle of the or.
It doesn't guarantee that our product will be selected for clinical trials, but.
If the results are positive stuff, but this is going.
Oh, I'm, sorry that was mid year.
Yes.
Okay, I can imagine that.
We can't be too specific at this point everything going so fast.
Sure.
Okay, great. Thanks for taking my questions.
This concludes todays call.
Thank you for your participation you may now disconnect.
Yes.
Good bye.
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