Q1 2020 Earnings Call
[music].
Greetings and welcome to the accident quarter 120, 20 earnings call.
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I'd now like to turn the conference over to Mark Hazeltine Senior VP of finance corporate development. Thank you. Please begin good afternoon. Thank you for joining us today earlier today exit and ink released financial results for the quarter ended March 31st 2023 leases currently available on the company's website.
At Www Dot exigent Dot Com run Rocca, President and Chief Executive Officer, Ecuador, <unk>, Chief Financial Officer will host this afternoons call before we get started I would like to remind everyone that management will be making statements. During this call that include forward looking statements within the meaning of federal Securities law.
Slides, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 any statements contained in this call that are not statements of historical facts should be deemed to be forward looking statements. All forward looking statements, including without limitation statements regarding our business strategy.
Okay, and future financial and operating performance the impact of the Cobot 19 pandemic on our business, our current and future product offerings and reimbursement in coverage are based upon current estimates and various assumptions.
These statements involve material risks and uncertainties that could cause actual results to differ materially from most anticipated or implied by these forward looking statements. Accordingly, you should not place undue reliance on these statements for list and description of the risks and uncertainties associated with our business. Please see our filings with the securities and exchange come.
Mission, including our form 10-K, and any subsequent filings the information provided in this conference call speaks only to the light broadcast today May 11, 2020 exit in disclaims any intention or obligation except as required by law update or revise any information financial projections or other forward looking statements whether because of new.
Information future events or otherwise I will now turn the call over to run Rocco President and CEO of oxygen. Thanks, Mark Good afternoon, everyone. I'm pleased to welcome you to the call to discuss our first quarter 2020 result to begin I would like to comment on that cobot 19 pandemic.
On behalf of the entire Exton team I'd first like to thank all of the health care professionals and other central workers committed to fighting the pandemic.
I would also like to thank our dedicated employees, who have worked with us with the highest levels are professionalism to support our customers and continue providing critical testing and therapeutic solutions for autoimmune disease patients.
Despite the try conditions accident employees have maintained our actually quality standards and turnaround times, the health care providers and patients expect.
I'm very proud of their team and their efforts.
Following the record 2019 performance the beginning at 2020 was off to a very good start for accident and the company performed extremely well in the first quarter until the pandemic began to impact our business and operations in mid March.
Test volumes are the best metric of growth of our business and we generated very strong volumes of 27126, where our flagship advice P.T.D. test in the quarter, a 13% year over year increase despite the cobot 19 pandemic.
The trend line, we were on for the first 10 weeks of the quarter would've resulted in record quarterly volumes.
Importantly, we maintained a very high retention rate of 99% of our doctors, who remain writers from the prior quarter.
We reported revenues of 9.6 million in the quarter, an increase of 3% year over year as higher testing volumes were partially offset by lower average selling price.
The to address the lower ASP, we are using the dossier for advised lupus test.
That we completed to help navigate and negotiate the in that works coverage and retain a higher reimbursement rate.
Turning to Symphony our co promotion agreement there was a variety of issues, which contributed to the prescription volume being below the pre defined baseline, resulting a recognition of zero revenue in the first quarter.
First with nearly doubling of the Salesforce and realignment, which extended into Q1 2020, there were still disruption in relationships with rheumatologist second the competitiveness of the marketplace with significant marketing programs for new JAK inhibitors is creating a substitution effect for our self administered anti TNF products.
Third cobot 19 has impacted patient flow.
Finally, I'd importantly, a change to the syndicated data that we used to measure I results was discovered after the quarter and did not allow us to proactively course, correct. We're actively working to resolve this with our partner we remain committed to developing that Dx Rx model, which we believe provides a novel differentiation.
And the selling approach that improved access to physician.
And a personalized medicine solution.
Well, we have plenty of liquidity and strong balance sheet, we have taken decisive steps to conserve cash while also investing appropriately in core areas of the business to enable robust long term outcome and growth come all will discuss these steps in more details.
In Q1, we expanded the Salesforce the 62 in order to continually increase our reach and frequency.
In any salesforce expansion, there's a significant investment training and it often takes six months or more for sales representative to be fully productive. The cohort hired in mid 2019 was achieving this productivity and testing products by January 2020, another aspect of the Salesforce expansion that is often not appreciated is the reorders.
As a portion of the sales territories.
When the Salesforce doubled in size there was a realignment of sales territories.
As you have heard me say our goal is to optimize the reach and frequency of our contacts with rheumatologist and to achieve this goal. Many representatives will begin to process of developing new relationships with health care providers. This takes time, we believe the quarterly testing volume achieved despite the cobot 19 related impact demonstrate.
The investments we made in the Salesforce is working as we had planned and will be a crucial ingredient in the recovery from this dramatic economic downturn.
We made excellent progress during the quarter on the reimbursement from signing agreements with northwest and multiple California medical groups.
To put the impact of this effort in perspective advice testing is now in network benefit for 40 million covered lives and we are currently utilizing the dossier for advice lupus and negotiations with payers representing 200 million lives covered.
Our dossier offers a compelling value propositions for payers. The pandemic has not slowed our efforts to advance our reimbursement initiative with payers and we expect additional reimbursement agreements to be side in 2020 and 2021.
Now for our thoughts when the impact of Cobot 19, and the outlook for the rest of 2020 as I mentioned earlier actions testing business was performing at a high level through the second week of March before we experienced a 12% decline in testing volume for the second half of the month compared to the prior year period.
Since then we have seen advice testing volumes fall over 56% in the month of April compared to prior year period, which we attribute to the reduction in patient flow as result of varying stay at home orders and related restrictions. Despite this we have seen volume growth per week since they bid April.
We remain well positioned to support health care providers through the remote communication channel and the ability to ensure supplies of testing kits and symphony samples are delivered as required.
As you all know autoimmune diseases are serious and can be fatal if not diagnosed and treated correctly. We believed that patients with symptoms of autoimmune disease will seek treatment as soon as safety as possible.
Team is prepared for a sharp recovery once the quarantine orders begin to lift we recognize that this is easier said than done and understand that it will take dr. sometime to address the massive backlog of patient clinical evaluations, along with the tests and prescriptions that have been delayed but there are several factors, which we believe we'll make doctors prioritize our.
Test one our autoimmune tests are anchored by proprietary CD caps technology to we had excellent relationships with the niche market of rheumatology.
And three autoimmune diseases are serious and patients depend upon timely and accurate diagnosis prognosis and monitoring and treatments I would now like to turn it over the call to come all who will discuss our financial results.
Thank you Ron let me lead by discussing the depth, we talked to rationalize our cost once it became apparent that the cobot 19 pandemic would have a significant impact to the healthcare industry first we selectively terminated three vice president and through other full time employees and released all temporary workers. Additionally, hardwoods put on hold.
We were reduced sapphires wherever possible, we determined that are laboratory and other critical operation could continue unimpeded. Following the SAP reductions. We've also scaled back marketing spend while sales bonuses see any expenses and variable costs associated with volume have dropped we will continue to monitor demand Eplex resources base.
So on workflow turning to the income statement for the quarter as Ron mentioned total revenues were 9.6 million driven by a 13, preventing creeping up by BTD talking volume to over 27000 compared with over 24000, a year ago volume growth is due to the continued adoption of the Obi PTD top five dermatologists.
Reflecting this trend the number ordering health care providers rose to 1692 for the first quarter 2020, as compared to 1325 in healthcare provider in the same 2019 period.
If I CGD tax revenues were 8 million in the quarter and other types of me revenues were 1.6 million.
Cost of revenue remained relatively consistent for three months ended March 30, Onest 2020, compared with a three month ended March 31, 2019, our gross margin with 53% in the quarter compared to 52% and the first quarter 29 team the slight improvement in gross margin was driven by higher testing volumes.
Operating expenses in the first quarter rose, 33% year over year to 14.8 million, primarily due to costs associated with the expansion of our salesforce and incremental costs of being a public company not prevalent in the first quarter 2019.
Net loss for the first quarter was 5.6 million compared with 2.7 million in the first quarter of 2019.
Looking at our balance sheet cash and cash equivalents as of March 30, Onest 2020 were approximately 58.6 million.
Regarding 2020 guidance, we do not believe that it's prudent to offer formal guidance at this time in light of the coal that 19 pandemic and resulting uncertainty in the economic climate.
Ill now turn the call back over to Ron.
Thank you can mall.
I would like to once again, thank the action team for their continued hard work and dedication exigent is in a solid financial and strategic position to weather the economic uncertainties and I'm confident that we will emerge from this pandemic and better competitive position I will now open up the call for questions.
Thank you at this time, we will be conducting a question and answer session.
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Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star case, one moment. Please while we poll for your questions.
Our first questions come from the line of Doug Schenkel Cowen and company. Please proceed with your questions.
Hi, Good I'd say this is operating well this is Chris I forgot to that.
Thanks for taking my question.
I just want to come from did you say there was a 56% adoption by the quality and April I know, you're not providing guidance as we try to triangulate switching volumes using 56% the worst case scenario.
Yeah, we've seen it come back since thanks, Chris So the drop in April at a low point there.
Since then we are seeing the climbed back I would not say, it's a full recovery by any stretch of the imagination, but that does seem to be a low point with sometime in the second third week of April.
Okay, and maybe a bit earlier, given that theres a lot of rheumatologists.
Patients annually I wish they require multiple visits to diagnose Lucas have you seen any indications of increased interest and dr. by CE CE panel one to lock down he says.
This is actually serve as a catalyst for adoption of why CPD.
Chris We think Thats, a logical thing to say anything because of the conversations we have since had with Rheumatologists as you know there cereal testing with connective tissue, especially lupus, where you're going to be doing you know, perhaps a three tests at a time for tasks and bringing that patient back and forth with a glut of patients that are going to search back.
A test like ours that one blood draw covers a loving connected tissue disorders that overlap with lupus that convenience factor as long as well as the fact is the best Lupus test, we think positions us cells logically for extra utility post cope and so we agree with that scenario.
Okay, maybe just one last question Steve.
Update us on higher detailing practices at this time ads are you, making any changes to your salesforce given the current environment. Thank you.
Right. Yeah that is a good question. It is state by state Chris There are certain states that are more open than others and New York is pretty shut down so for that representatives, they're using telemarketing virtual calls as well as we're calling in services virtual in services. So we do those those close states and.
Other states, where it's a little more wide open I'm thinking more along the lines or parts of Florida.
Arizona and Texas, those representatives are actually getting out and about enabled to deliver samples as well as kids transportation kits. So those offices, but overall on a national level. What we're looking at his first and foremost the representatives need to adhere to whatever laws that are they are living under and we don't encourage them to break.
The rules at all what we do encourage and to do is staying on the phone to get on the computer and calls many of the office staff as possible ensuring that they had the adequate number of kits and samples to be able to take the amount of patients that are coming through and take care that we will adjust accordingly every week, Colin I look at reach and frequency throughout the nation.
And we do just that call plan accordingly.
Next question.
Our next question has come from the line that Brian Weinstein of William Blair. Please proceed with your question.
Hi, Brian you guys. Thanks, Hey, how are you doing thanks for taking the questions.
Starting on on Simponi <unk> can you kind of explain what's going on there I'm a little bit surprised that.
You guys were unable to recognize any revenue at all in the quarter here you held your call late March and we Didnt get indication that it was trending that way so.
I'm a little bit confused on I'm kind of housing shook out in the quarter, what that trend line. It looked like up until the last two weeks I'll start with that and then some other simponi questions after that.
Sure No problem Brian.
After the quarter ended and our projection showed that we were doing actually exactly what we said we were going to do.
And moving the needle.
We were notified by Janssen that there were some changes in the syndicated data data comes from either IMAX or Wolters Kluwer Acuvue.
That was not given to us to afterwards, so we couldn't course, correct and we have some disagreements there.
The sand in the hourglass quite frankly ran out before this call in the quarter could end.
We're still working with them to actively resolve this situation with the data, but they also introduced a term that they called the Kogan factor.
Obviously, you realize that there ivy businesses under a lot of jeopardy, because of the amount of patients that are scared to go into an Ivy center specialty for immuno compromised. So they do want to talk to us more about these therapies that are at home therapies. Those discussions are taking place we're going back and forth. We have meetings set up with them to do additional discuss.
Yes, but at this time, we thought it was proven to just say look we don't like the way the data came in after the quarter. We have some culpability here too I'm not going escape that we could have been doing a much better job here, Brian and pushing it and also notifying them that about the data the way, we solid but really what it comes down to is that we still bill.
Leaving the Dx arch model, we still think are a is a great market a big market and room toured arthritis is a big issue for our clients. So we are highly engaged janssen keeps telling us how happy they are with us in what we're doing but we have to come into an agreement with what the database tells us what is the baseline and how we're going to be judge.
On that baseline and the fact that there's this pandemic and the IB products, you're getting hurt we don't feel that we should be taking the brunt to that in a nutshell thats. The issue. We're still trying to work with this this customer let me just add this is this is one year into the agreement this product was declining.
And what our job is to do a stopped the decline in reverse that using our internal infrastructure.
The economics that we did in quarter, one which were substantial on the diagnostic proves that our sales reps know what to do now we just have to make sure. We adjust this with Janssen going forward.
I I just wanted to thinking there im sorry for being a little bit dent on this but I want to make sure that this is that this is clear are you, saying that the that's a baseline itself had changed in some way or are you seeing is a dispute over how much your sales reps actually how well they performed and what they actually did in the quarter, which of those two is the uncertainty about.
Yes. The first one is the data the database the data baseline has changed due to some changes that happened on their end to not ours and we were told about that after the quarter. So were home and along thinking we're doing actually pretty quite well until well after the quarter. When they said that these changes have.
The data that's something we got to work on.
The part where could we have done a better job selling symphony during the quarter. Yeah. The disruption was taking a long time to to get through longer than we like and the competitive environment with the JAK inhibitors, which definitely creating alternatives for at home therapies with that being said it was a combination of both and the timing one year end.
To this negotiations that we said look we need to figure this out.
Recalibrate before we can move forward, we're still selling the product today, we're still promoting it but there is an agreement between the management teams that we have to sit down and reward how we calculate baselines and again theres. Some trepidation on their side on the ivig, but theres not pulp ability here to be shared so I don't want to escape that Brian.
We could always do a better job and a better job managing our partners as well.
So at this point do you know what your targets are for the second quarter and how you're going to get measured on this or is that still up from here.
We are working through that right now.
Okay.
How are you getting support from them on changing the marketing message here given the advantages that simponi housing to market and the pressure that they're under our the present the pressure at its under from the JAK inhibitors. I mean, you guys don't necessarily have the.
The.
Marketing, where with all that you mentioned how are they looking to support you in this.
Yes. That's this good question Brian.
Theres definitely some thoughts on their side. They see the same thing we all see right. The immunocompromised patients not wanting to be with a bunch of other immunocompromised patients.
With that being said that's their franchise and they want to protect it so their support for us is going to be contingent on how these discussions go over the next couple of weeks.
With them as they discovered factor that they've just introduced us to which affects them on the Ivy side is something obviously, we recognize is a big concern of theirs. So as we work with them, we will look to retain a significant part of the profits from our activities and.
We would also like for them to speed up some of the marketing efforts for these patients that don't want to go into fusion centers.
Thats all work in progress I do want to stress. The fact that on the testing side, how well we did and still have the symphony also too to bring into it because to US Symphony is a great cash flow and we want to do a lot more de XR actually think thats the right way to promote these products, but our base business. The foundation to that business I think you saw.
The first quarter, we're very solid in spite of all this.
How are you inform the street what the outcome of this discussion with with your partner is something or are we going to be able to have some idea what the new metrics are that you're going to be measured on and then last question I have on this is.
I believe that the extension is coming up here right that you guys can choose to extend this for another I believe it's 18 months hockey concerning the timeline on that and when we will find out about your intentions on that as well.
Sure we've already extended it out and to what do we extended out too and the 20 ended 2000 20.1 ended so we've already extended it nave accepted that so thats already being extended now as far as your other question with the metrics. Yes, we will once we get the metrics that we agree on them, we'll let you know and all that.
Metrics, Brian really have to do with baseline baseline and what they see is a potential huge windfall.
Because the patients moving into at home testing.
So those are the two things so its has been extended and we will share as many metrics as they will allow us to share with you.
All right and last one sorry, if it's if you have some at much here, but on Opex that was a big sequential step up there and it was more than we were thinking it was there anything onetime in nature.
The kind of I mean, I recognize that you've made some cuts so I'm trying to understand the 14 eight in Q1 versus kind of what you are set up for the rest of the year.
Yes, Brian there why the onetime expenses that came with the expense for severance for the six employees that we mentioned that we terminated on March 30, Onest. So there is that one time expense, but keep in mind, we expanded the salesforce and year over year. We are now public coming in Q1 compared to Q1 of last year.
So what's the right based on that we should be thinking about for that fair for kind of how we're modeling at least a spending type.
The model for spending.
So right now we've disclosed where it's 62 on the headcount for sales are up.
Is there is more to your question outsized.
Sales for you I'm just wondering I'm just wondering how we should think about the opex number going forward you were at.
Just put up 14 aid in the quarter. There was some one time in there there were some other reductions in spending I'm just trying to understand what were thinking about this being on a base kind of going forward, there's a $10 million quarter Opex and that 12 as its seven just trying to give us some idea about where the opexas.
Sure so keep in mind.
As we are now in the pandemic, we're going to feed some of the cost come down as I mentioned with the fell through our bonus with T. any and with variable expenses, primarily in the lab is going to heck hop to fail, but there's going to be comparable offend event and OPEC that might have mall.
Decline on the path, but there when it comes to our biggest increase in Opex expense that we've seen it was with the sales force and as Ron mentioned, we continue to monitor what the right number as and right now we're at 62.
Okay. Thanks, guys.
Thanks, Brian.
Our next question liner Kyle Mexican of Cantor Fitzgerald. Please proceed with your question.
Hi, guys consolidating the questions Hey.
So first I just wanted to confirm what the advised testing volume year over year, what at this point or at least your last data point in I guess may or may be late April.
Okay, and the down 20% like you.
The the volume in Q1.
Oh the in April no no no.
Got it.
Saying like your last data point.
So we're going through that will come out.
Through April were saying the month of April year over year were down 56% with a low point coming in mid April.
But it is ramped up since then right.
Yes.
Yes, okay.
Hello, everyone has come up a little bit more.
Yes, Okay. We've been we've been shown progress color.
Since at low point everyday it's been going up a little bit more to time, we're not to where our level was pre coated.
But we've made up a lot of ground since then which gives us confidence and we're monitoring through a heat map, where that's coming from and it's real obvious which states are open or close when we look to that heat map.
Okay that makes sense.
Thank you.
Other clinical related question, so I mean, obviously.
Yes.
And then because clearly force divisions, including Rheumatologists kind of adapt to this new normal clearly, obviously seamlessly and an increase in tele health among providers, including prescribers that medication. So I guess in this context, how are you working with your salesforce or but the rheumatologist to accommodate that shift to remotes or mobile services and have them as effective.
I had Angie I guess after covance.
Yes, we are doing quite a bit of telemarketing and tele health. If you will we are doing quite a bit of that we're doing a lot of virtual meetings with them. The other thing were doing as we got a fairly new CMO Phd MD Board certified Rheumatologist, Dr. Deb Zac and she has been on pretty much a virtual tore talking to all the K wells, which happened to be or her.
Our friends and colleagues and in that engagement re reminding them about our work with the CV caps and what we're doing so actually having a new CMO having to introduce yourself tell dermatologists has come up to be a window and opportunity for additional communication along with the tele health the virtual calls and.
And all the additional things that we're doing in the field.
Okay.
Well in that I had the other therapeutic question so.
From what I understand it's agreement with Astrazeneca for media Swiss not only able to promotes and deformed also just distribute marketing selling product. So it's not something that you're getting that would change or maybe another manufacturer could evolve into overtime or it's kind of curious how.
More comprehensive Dx Rx agreement with line with your strategy. Thanks, Yes, that's a really good point called because with end to court. The ball was in our core we control the marketing we control the data and basically on a quarterly level. We would just report back how well we did.
And then we split the in somewhat of a royalty fashion with Astrazeneca. This agreement is quite different.
Janssen has never done an agreement like this so there's a lot of in trepidation. So they gave us the ability to market only what they wanted us to market and they control the data the baseline.
In the negotiations that we're going to be going in the future I'm going to be marching much closer to what I had with an accord, which is a lot more control on the data a lot more control of what we can do for marketing that's going to be my stance in the negotiation or whether its except that are not as another story, but it's definitely would help us if we could have.
More control of the way, we communicate and what we communicate as we do future Dx deals will continue to look for more agreements the line up with the way we did the Entocort deal.
Okay Thats great. Thank you Ron and then last question around I guess and reimbursement I mean, I have you been having discussions maybe virtual meetings with payers. So.
So far in Twoq, you how are those going out as the feedback and like what can you share there.
Yes that thanks, how we actually we had some everything we were working on.
Up until December was to get ready with their dossier to approach the payers for coverage and increased ASP. So we've got a couple of them real quick as the year started you saw the.
What we did with the California companies as well as soon or Quest agreement that we had and we've already presented to the big outlets. If you will evercore and decision story, we're looking to to get solidified with them meetings have been set up we're continue to move forward. The dossier a solid the feedback we've gotten from every outside.
So thats looked at it not our own employees has said you did everything that is required for you to get in network coverage. So.
Everything's done there the analytical validation the clinical validation some of them twice and published the clinical utility study published the healthcare economic studies complete so we feel Kyle that we're ready we're doing virtual meetings right now we're continuing to work with the payers but.
But we feel there's no reason not to be included in network with every major payer and as these meetings take place that's what we're going for.
Okay got it so that's great. Thanks, so much.
Thank you Paul.
That was all the time that we have left for the question and answer session that does conclude todays conference. You may disconnect. Your lines at this time. Thank you for your participation have a great day.
Thank you.