Q1 2020 Earnings Call

[music].

Ladies and gentlemen, please standby youre d. this first quarter 2020.

Financial results conference call will begin momentarily. Thank you for your patience. Please standby.

[music].

Good afternoon, and welcome to the be this first quarter 2020 financial results Conference call. Today's call is being recorded for introductions and opening remarks, I'd like to turn the call over to Matt Mr., Matt Steinberg with Lazard <unk> partners. Please go ahead Sir.

Thank you operator, good afternoon, everyone and welcome today today's teleconference.

With me on the call. It's John a most he was chief Executive Officer, Mark Oaky, Visvis as Chief Financial Officer, Dr. Santosh Varghese you. This is chief Medical officer.

Before we get started I'd like to remind everyone that during this conference call Visvis will make certain statements that are considered forward looking within the meaning of the private Securities Litigation Reform Act of 1995.

These statements may be identified by the use of forward looking words, such as anticipated. The leave estimate expect forecast intend hope likely may opportunity plan potential predict and should among others. These forward looking statements are based on D. This.

As current expectation and actual results could differ materially.

There are several factors that could cause actual result, actual events to differ materially from those indicated by such forward looking statements.

Investors are advised to read the risk factors set forth Dee Ann Visvis. The form 10-K for the your ended December 31st 2019, which was filed on April Threerd 2020, and as amended on April 29, 2020, as well as periodic reports filed with the securities.

Exchange Commission such as the this is form 10-Q filed earlier today.

This does not undertake no obligation to update or revise any forward looking statements made on this call.

I'll now turn the call over to John Amos.

Thanks, Matt and thanks to everyone on the call for your time. This afternoon fiscal Q1 2020 represents a successful completion of corker seven of our 10 quarter correct.

Given the well documented and back to cope with 19 on American global.

Right.

Overall, we grew revenue from Q4 2019 into Q1 2020 by 13.8%.

Well, we select fluctuations in the next three quarters as a normal course of business along with the potential called the 19 applications.

We transitioned our entire employee affiliated contractors into a work from home bode pretty much Ted.

And the team continues to work productively collaborative week, while staying safe at all.

Herky shouldn't be advantage program process 29000 scripts in Q1 2020, compared with 1700 scripts in Q1 of 29 team.

It was March 2020, being single hires monthly total ever.

We launched our Tele health platform at March 31st signed up positions in California, New York, New Jersey, Washington, DC, Massachusetts, North Carolina and Alabama.

We solve their shelf life chemistry issue would be eyes are 106 that are now working towards filing an I.M.D. for the treatment of patients with pulmonary arterial hypertension, where ph. We're working through how we will conduct a trial and the covert 19 environment Dr. bargains speaking about this program later in the call.

We've been able to continue the adolescence, you see me a trial, which in light of the negative outcomes for obese patients, who Kobe team has become more important than ever.

Okay, great and search for down slightly less than 1% from Q4 2019.

We were able to grow new prescriptions up increased by four produced 4.4% over the same period.

We received approval from the extended shelf life of pancreas to 36 months and plan to watch formulation in Q3 2021.

We're still working through our convertible debt issue I won't comment this comment on this in a matter and a bit.

I would like to spend some time discussing kobe team in obesity, both of which are at pandemic levels and have collided in the United States Oh didn't sensor rapidly evolving based on information collected by the CV. She other national and international health organizations and clinical researchers in countries with significant cobot mid teens burdens there Peter.

To be a significant correlation between and Nehemia 30, or greater and an elevated risk for hospitalization due to cope with 18 infections.

There is seems to increase as being by increases based on the weekly morbidity and mortality report published by the CDC on April 17, 2020 of the patients admitted to the hospital, 49% hypertension, and 48% were medically classified as a piece along with other co morbidities, including diabetes.

And impaired renal function.

I don't report authored by run one can see or indeed, he had a bariatrics surgery at the University of lowering your all in France sounds similar correlations between idea by an increased levels of hospitalization and mortality.

One underlying theory related to hide via my patients infected by Kobe team is that these patients have larger amounts of adipose tissue also known as stopped tissue.

I suppose cells within the adipose tissue expression is too which is a cellular receptor that source code to the virus that causes covert my team uses to buying and getting access to cells. Those patients with increased PM I have more cells that the virus kick in fact potentially increasing their viral load compared with non obese and.

The vigils, who become infected.

Over the past four weeks numerous local physicians treat idea my patients and contact can be this she would veevas can due to lower the out of pocket cost of qsymia to expand.

Excuse me to expand utilization.

We've been pointing these physicians to our kitchen advantage program, which offer solutions to help reduce the out of pocket cost for uninsured or underinsured patients.

Additionally, a few of the largest and most significant pharmacy benefit managers in the U.S. I've also reached out to establish contracts for Qsymia.

This is an important change at the payer and PBM level and as especially significant given the collision of the dual pandemics have killed the 19 and obesity.

We've also seen a dramatic change no obesity as being discussed the health care registry in the medical community are finally, realizing that obesity is not a choice that people make good rather a consequence consequence of human evolutionary biology, not keeping pace with food availability.

No one chooses to be or beats. The choice was made for humans hundreds of thousands of years ago.

Our goal Divas give patients with obesity, new choices and how they can achieve them maintained or healthy weight objectives.

Based on a robust and growing body of data. We believe that Qsymia has the highest level about can see coupled with perhaps the lowest cost therapy and that it provides the best outcomes for patients with the idea by in a convenient once a day oral capsule.

Now I'll provide an update on the activities regarding the Visvis health platform, which integrates pharmaceutical nutritional digital and information technology to enable better patient outcomes on March 31st 2020, we announced the launch of the D. This helps platform telemedicine module and are planning the launch of our remote patient monitoring platform this quarter we.

We're pleased with the response overall and I also had discussions with a number of physicians who are interested in utilizing the system for monitoring patients that are at higher risk with 19.

Very early cursory conversations around utilizing the platform has a workplace safety platform as well.

[noise] the monitoring technology remotely a passive recaptures information on up to eight vital signs two of these vital signs oxygen levels readings and temperature, our leading indicators of Covance 19 infection, while blood pressure and weight, our predictive of increased risk for negative outcomes related to covis infection.

Monitoring these vital signs may help physicians provide better care for their patients.

Let me turn now to review creates in the first quarter 2020 revenue was essentially flat.

We did grow new patient starts by 4.4% compared with the previous quarter to put retails were down and overall there were 50 fewer scripts filled that in Q4 20 like.

Our ongoing performance analysis has identified several areas and still need to be optimized.

We've seen some slowdown or retail pharmacies and geographies that have been Harvey I told my team, we are creating a mail order channel for the product utilizing what we've built for Qsymia a significant portion of patients who utilize pancreatic enzyme replacement therapies, our immune compromised and do not want to travel to a retail pharmacy locations.

Our PBM coverage still needs to improve but we have some contracts that are going live in the second half of 2020, which we believe will help to budget I assume its coverage challenge. The prior authorization process for this product is a bit burdensome and we're putting technology and process in place use this burden that the doctor's offices.

While revenues were flat quarter to quarter, we did experience growth in new scripts and just prior to the cold and 19 outbreak.

Best we can total scripts since product launch with strong ramp in the U.S.

So while we are behind in our business plan. We have started to see multiple points of improved performance that allows us to leave that we're moving in the right direction.

The STENDRA slash SPEDRA product is either partnered out.

Or license has been very as global territories, we continue to collect royalties and manage the manufacturing process for our marketing and life license partners. We are working with various partners in this program to reduce our working capital exposure for the product and to improve our return on invested capital.

We're also continuing our efforts to find commercial partners the key open territories, including the Middle East, Mexico and Russia.

[noise] VI zero 106 for the treatment of P.H. as our clinical development product I want to thank our CMC clinical team for finally, breaking through the chemistry issue that caused our self shelf life issue.

Spread through the significant to our company and for ph patients globally as it allows us to advance to clinical trials with a once a day formulation.

Optimized for treating ph patients with a commercially viable shelf life.

As a review we believe that the data from compassionate use that early stage clinical studies significantly de risks. This program and the chemistry issue is the last and most significant hurdle for moving the program forward. We believe now that we have now address the chemistry issue in a position to move forward with filing would filing the I'd.

And starting the phase two trial.

As a reminder, based on previous discussions with the FDA. This product could be eligible for fast track designation and to the extent that the studies supports our belief that means disease modifying could be eligible for breakthrough designation.

Finally, let me turn to our capital structure.

We are engaged with our largest convertible bond holder discussed satisfying the remaining be respond obligations. We are discussing a variety of options to profitably satisfied as to what we can't go into and go into the details of these discussions we want to assure shareholders that Visvis management and the board are focused on maximizing enterprise value any solution we.

My pursue.

I will walk you through the math and recent that settlement and what we still need to do to solve for the next quarter.

As we've said numerous times, we expect the turning bemis around will take 10 quarters from a calendar perspective, we have completed shot to turnaround.

Totaled 19 out of Lockdown the credit markets in mid March.

We would have likely have already completed balance sheet restructuring and would have largely been on schedule.

Although as I've noted, we are having to send them and from what behind some of the pancreas business plan.

While we are disappointed and not finalized in the financing we're very encouraged that the healthcare industry is finally, taking obesity infinitely more seriously now due to click collision of the coded and know they team and obesity pandemics.

While it is unfortunate that these circumstances exist, perhaps a silver lining in this crisis provides a loud and persistent wake up call to the healthcare industry that our collective energy needs to focus on helping people holistically achieve optimal health rather than focusing on individual therapies.

We'll now turn over to Mark Oaky to review the financials of Q1 2020 in more detail after which Dr. Varghese will provide an update on our clinical progress.

Thank you John.

At the dental practice, we believe that comparing the first quarter 2020 to the fourth quarter 2019 will provide you with the best indication of how our turnaround efforts and congrats.

Qsymia net product revenue was 8.9 and 9.8 million, though in the first quarter 2020 in the fourth quarter 2019, respectively.

The decrease from the fourth quarter due to the seasonal decrease in shipments to wholesalers.

Total qsymia scripts were approximately 83000 in both the first quarter 2020 in the fourth quarter 2019.

We continue to see the transition of patients in the retail distribution channel to the keeping the advantage program.

In the first quarter of 2020, 30%, 36% of Qsymia squid will defend the that he semi advantage program direct to patient model up from 31% and 22% in the fourth and third quarters of 2019, respectively.

Thank you had net revenue was $5.8 million in both the first quarter 2020 in the fourth quarter of 2019.

These amounts included Canadian pancreas, net sale of 0.7 million in that 0.9 million in the first quarter of 2020 in the fourth quarter of 2019, respectively.

The 2 million dollar milestone revenue in the first quarter of 2020 represented the amount earned for the commercial launch of Qsymia in South Korea by our marketing partner Allergan.

Revenue related to royalties earned from memory STENDRA sales, which is typically run for 500000 to $600000 per quarter.

It was approximately 547000 in first quarter 2020, $468000 in the fourth quarter 2019.

In the first quarter 2020, we also recognized royalty revenue $564000 based on net sales of Qsymia in South Korea.

Royalties earned on South Korean keeping in net sales could vary materially.

As a result of Elgin supply chain management and end user demand.

Total cost of goods, so excluding amortization was 4.6 and $4.8 million in the first quarter 2020 on the fourth quarter 2019, respectively.

The increase was primarily due to increase.

In supply revenue over the fourth quarter of 2019.

Amortization of intangible assets with $3.6 million in both the first quarter 2020, and the fourth quarter 2019. This amount was primarily the amortization of can capitalize related to the acquisition of Pinkie.

[music].

[laughter].

With corner 2020 in the fourth quarter 2019.

Research and development expenses were primarily related to the Qsymia adolescent safety and efficacy study and pancreas post marketing requirement the thing for me.

Selling general and administrative expenses were 11 million and $10.9 million in the first quarter 2020 in the fourth quarter 2019, respectively.

Included in these amounts were selling and marketing expense of 4.2 and $4.3 million respectively.

The fourth quarter 2019, we incurred approximately $1.9 million seventh Cup.

In the first quarter of 2020, we incurred additional professional fees related to addressing our outstanding debt.

Total interest another expense net with 3.2 million and $2.9 million in the first quarter 2020 in the fourth quarter 2019, respectively.

Net loss for the first quarter of 2020 in the fourth quarter, 2018 was 5.2 and $6.5 million respectively.

Cash and equivalents with $32.9 million at March 31, 2020.

In April 2020, we raised approximately $10.5 million net of underwriter and other feed through the issuance of 7.2 million shares of our common stock were registered direct offering.

And in May 2020, we retired a $11.3 million face value of convertible note and paid all accrued interest that were due on may one 2020.

I see eight Biopharma all thing the holder of the remaining $170.2 million of convertible note has granted as a 30 day Grace period during which time, we will negotiate exclusively with them to attempt to restructure the remaining note.

Non-GAAP EBITDA, that's earnings before interest taxes, depreciation amortization and discretionary research, which we believe provides a good indication of higher commercial business is performing with 3.2 million, though for the first quarter 2020, and $1.9 million for the fourth quarter of 2019.

A reconciliation of the GAAP net loss to this non-GAAP EBITDA can be found in our earnings release issued earlier today.

With that I'll now turn the call over to Dr. varghese for clinical and product lifecycle update.

Thanks Mark.

I will review, the clinical and regulatory aspects of Qsymia Pan craze and VI zero 106.

With respect to Qsymia as previously announced we have completed enrollment of subjects in our phase four study designed to evaluate the safety and efficacy of Qsymia beats adolescence between the ages of 12 and 17 years. We've had we have not had any impact of cobot 19 on steady progression to date.

And expect the last patient.

We'll complete treatment by the end of the first quarter of 2021.

We're closely monitoring the pandemic situation and have remote monitoring capabilities on standby through our Visvis health care platform to the extent needed.

We believe that qsymia it could be an important part of integrated strategies to address adolescent obesity and this study is designed to provide clinical data to support a potential label expansion for the syndication.

We continue to have productive discussions with the FDA regarding a study designed to evaluate the effect of qsymia on ambulatory blood pressure.

We believe this study could provide us with new data to further and form our dialogue with the FDA regarding our post marketing cardiovascular outcomes trials, which was required as part of the initial approval of Qsymia.

We hope to have a final protocol agreed upon in the next few months.

We also continue to work with researchers at major institutions to develop clinical protocols and initiate the related clinical trials to evaluate our visvis health platform to augment and track patients effort in weight management.

We hope to have more information regarding the launch of a new study in the coming months.

Finally, we expect the European Medicines agency will respond to the de centralized qsymia marketing authorization application in the second half of 2020.

As the global community lives through the intersection of two Pandemics covert 19, and obesity, a greater focus will be needed to be placed on providing treatment options to patients who are obese.

Studies have shown that there is a potential linkage of increased mortality and complications of viral infections like those of the novel novel Corona virus in obese patients as evidenced by the CDC warning for people with severe obesity body mass index or be a my a 40 year higher who they define as.

Those at high risk for severe illness from coal to 19.

These early studies have suggested an association of various inflammatory biomarkers and enzymes, such as and just tenths and converting enzyme to or ace two in adipose tissue that may increase these patients risk.

And that is in addition to the other already known Comorbidities like type two diabetes hypertension, and obstructive sleep apnea.

Additional research is needed to fully understand this convergence and I expect to see more in the scientific literature in the coming months.

Now I'll turn to pancreas.

As previously announced the FDA approved the San Diego for the 36 month shelf life formulation in February of 2020.

And we continue to evaluate potential studies of pancreas, and additional pancreatic disease indication.

We are working with Cedars Sinai Hospital in Los Angeles to start a study evaluating pancreas in the treatment of excellent pancreatic insufficiency in patients with pancreatic cancer.

Finally, we anticipate filing the I Andy for VI Zero 106 in the second half of this here as we have finalized our unique proprietary once daily extended release formulation.

We believe this formulation will facilitate therapeutic drug levels, while minimizing immunosuppressive effects for patients with ph.

We will plan to initiate a phase two clinical study in group one ph patients at functional class three or four in Q1 of 2021.

After we filed the ft reviews, and except our investing investigational new drug application.

We believe this patient population has a critical need for new treatment option and expect that the cobot 19 pandemic will have limited impact on trial enrollment as many of these patients are hospitalized frequently due to their disease progression.

As with all our future studies, we will look to optimize patient compliance and steady adherence utilizing remote patient monitoring through our Visvis health platform.

This concludes our opening remarks, operator, you may now open the lines for the question and answer period.

Thank you as a reminder to ask a question you will need to press Star 100 telephone to try to question press the pound Keith Please standby we compound kuni roster.

Our first question is from.

John Vandermosten with Zacks you May proceed with your question.

Good afternoon, John Larkin fantastic congratulations on solving the as airlines are a six chemistry mission, let's see you few out we're able to to make some progress on that and also congratulations on the upcoming I'd in the same put us into one of those start out with obviously the into the big issue as with that refinancing.

We've heard a lot of.

Efforts by Congress and the fed too.

How about companies that may have and travel due to at the front of Iris and the cares Act had some provisions in it as well and I'm not as familiar with those as you probably are since you're doing with with this every day, but are there any pathways that you might be able to pursue to help resolve the issue through either the fed or some of the legislations that.

Past.

Yeah, I think the world. So we've got a couple of advisors held at us and through that.

Well, we really are an exclusive period with the age bondholders.

So we're really just trying to focus on solving issue though.

So obviously, we do remain interested in what.

The various programs and and treasury programs or.

As just a general comment not so much related to our business, which is related to the the way the fed programs have been organized the really organized around bonded her rated bonds.

Moody's S&P.

Fits et cetera.

Think about the biotech industry as a whole which were obviously part of the vast majority of bonds and biotech our.

Current rated bonds.

So weve submitted.

With along with other biotech companies.

Around.

He came to an exemption to that rating.

Whether that happens or not who knows but you know were.

We are working exclusive Lu with the IDH bondholders.

To try to resolve our outstanding bond issue.

Okay and is there any sense of how the capital structure might change as a result that I mean, I know you're in negotiations now and it's probably a big part of the discussion, but any any sense that you can give us how how that that's progressing.

Yeah I agree uncomfortable.

I think.

Well, we'll get through the negotiations only and then we'll certainly bring everybody up speed once those are completed.

Okay got it understood.

So give us how platform a great timing on that in terms of how to get ready to go as as more people need to take care of things from home.

What what progress has been made on pancreatitis off you mentioned to that.

Do you CEMEA has has done really well in terms of getting getting up to speed what do we seen on the pancreas side for the Visvis how platform, so far and what should we expect to see over the next quarter's yes, what our focus will be the cell platform has really been on cystic fibrosis, others. So weve shown the platform to a few of the foundries.

Once had a few doctors without really a lot more demand interest on the other side of the corn, but one one of the.

Presidents of a large cystic fibrosis foundation one for you saw all vital sign management, how we collect data on the vital signs.

He said quote unquote, it's a game changer for cystic fibrosis patients.

Currently the cystic fibrosis patients vast majority of them travel somewhere between 60 and 200 miles to go to their center of excellence and with air travel effectively town and their immuno compromised.

You know systems.

And just really don't have the ability to travel into these locations anymore without exposing themselves.

Two significant adverse events and so the cystic fibrosis foundation is not going to yours cystic fibrosis community. It's a cornerstone of the pancreas business. We don't think it's going to be a large driver of revenue and the overall visas health platform as a patient population.

But it's one that clinically is very very important to us and these solutions are this solution that we built it really has a game changer for those folks they can stay at home.

And effectively monitor their lung function oxygen levels blood pressure weight et cetera, so without ever having to step in that slipped into a clinic and that's a that's a big deal to lot patient population.

Yes, definitely and then milestones for the Visvis health platform over the next couple of quarters I mean, if maybe even items in the back office or things like that what what is still kind of on on the list to achieve for 2020.

What's been interesting is.

Employers and this is something we never or think about Oh until probably a couple of weeks ago.

Larson, our chief strategy Officer sand wash myself, Joe other folks that really working pretty hard on this program and trying to bring its trish.

And what we realized is that in order for workers to go into a facility based locations.

In effect, we have to create a prior monitoring platform through these patients not patient who just individual workers.

And so that's been something that is as a kind of opened up potentially a new market for us that weve never really thought about and that's probably the biggest opportunity.

Opportunity that sits in front of us other than just going out get physicians and patients on the platform in the.

CDN covert baking monitoring space so.

More on that to come the demand.

The initial demand has been very high.

What we have found it has been a little challenges and people onto the platform.

Then it's not a difficult platform to get onto it's just how they think about running their clinics. So there's a lot of people who are you know there wrestling with the coated.

Team and damage and they're trying to figure out how to practice manager Edison and this framework and so that it's taken a little bit more education that we saw we thought it was like side up yet on and just get ripping on the platform, which some doctors have others, just a little bit more handholding. If you will buy once people see the value of.

Platform and though the power that it brings to a clinic delightful goes on just a.

Well, we're excited about it is and it's very cool and we've got good penetration in California, New York.

Obviously with Cold is has been excellent source of opportunity and what we're seeing down on kind of ill go right at the L. of the nation that were.

Locations that really have higher percentages obese patients. The doctors are really understanding the applications of cold. It on those patient population. So that's pretty alarming phone calls because with doctors and those who those geographies.

Okay.

And moving overseas has elegant allergan given any sense of what their sales go goals are for the next year.

Yes, they did for pre coated.

You know, obviously South Korea, if you follow them, they've they've done an excellent job of managing keeping their economy running and managing their patient.

[noise] managing the Pandemics, others, I, just really have done a bang up job there and so.

There is obviously the same correlation.

Obesity.

I think there's still just like everybody triangles graphic.

Right.

Still on important products its patent category has become much more important globally.

That was previously, but then provided us with the additional updates and we're not the habit of provided forecast so.

Okay. Thanks, John appreciate and I'll get back and yes, yes. Thanks appreciate.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to John Nameless for any closing remarks.

No I appreciate it operator.

Thanks to all of you pretty time today kind of continued interesting reasons I'm pleased that we've continued to make significant progress.

I guess in or 10 gorder turnaround.

Strategy, even as we navigate chip changing the challenging landscape find new ways to Peter commitments to patients and physicians, while adhering to guidelines to keep our employees and customers are safe.

Look forward to sharing our continued progress with your months ahead.

And I certainly hope all of you stay safe and healthy in the interim.

Operator.

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

[music].

[music].