Q1 2020 Earnings Call
Ladies and gentlemen, thank you for saddened by N. welcome to the Osmotica pharmaceutical first quarter 2020 business update conference call.
At this time, all participants on to listen only mode.
After the speaker presentations that will be a question and answer sessions to ask a question. During the session you would need superstar one on your telephone.
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And I like to hand, the conference over two speaker today, Lisa we'll see an investor relations for Osmotica. Thank you. Please go ahead.
Thank you operator, welcome to as Monica Pharmaceuticals, first quarter 2020 business update call. This is Lisa Wilton Investor Relations for Osmotica.
With me on today's call or as Monica, Chief Executive Officer, Brian Markuson.
Chief operating officer, J.D. shop, and Chief Financial Officer.
Andrew Einhorn.
This afternoon, the company issued a press release didn't telling financial results for the three month ended March 31 2020.
Just press release in a web cast of this call can be access to the investor section of the Osmotica website as as Monica Dot com.
Before we get started I would like to remind everyone that any statements made on today's conference call that expressly belief expectation projection forecast anticipation or intent regarding future events and the company's feature performance.
Maybe considered forward looking statements as defined by the private Securities Litigation Reform Act.
Forward looking statements are based on information available to us Monica's management as of today and involve risk and uncertainties, including those noted in this afternoon press release and her finally P.B.S.P.C.
We're looking statements are not guarantee the feature performance actually adult differ materially from those projected in the forward looking statements.
I was Monica, specifically disclaims any intent or obligation update these forward looking statements, except as required by law.
During this call we refer to Nongaap measures such as adjusted EBITDA for reconciliation of adjusted even <unk> to that income or loss. Please see the tables at the end of our press release.
The archive web cast of this call will be available for 30 days on our website at <unk> Dot com.
For the benefit of those him maybe listening to the replay or archive webcam. It's called is held and recorded I made 12 2020.
Since then I've Monica may have made announcements related to the topics discussed <unk>. Please reference the company's most recent press releases in I.C.C. filing.
Would that I'll turn the call over two as Monocacy, Yeah fine marketing.
Thank you Lisa in good afternoon, and thank you for joining the call.
First.
Would like to thank all of our employees who have remained focused.
Dedicated during this unprecedented time.
Our manufacturing warehouse in supply chain colleagues have been showing up every day and it become the backbone of our company.
Promoted products are performing reasonably well.
Try Gen business has been exceptional.
Secondly, perhaps most importantly, the F.D.A. review of RBL 12 on or novel treatment for blood for intelligence or Droopy I appears to be on track to meet our July 16th Cold day.
While the pandemic will affect the early introduction and roll out of this innovative product.
Physician interest in K. will support continues to bill.
Over the past few months, we have used the advisory boards and focus groups to dive deeper into our future customer base.
In a world where everyone may be wearing face masks for a period of time, the focusing attention to the eyes will become even more pronounced R.V.L. offers a treatment option to patients inclinations.
Currently does not exist in today's armamentarium to treat acquired plus which houses or droopy guy.
In the coming most we anticipate a landmark publication of our two pivotal phase three advocacy studies in a major I care journal and or if she was partnership efforts continue on pace.
Finally, our amended new drug application or indeed far back within remains on track the file by the end of June.
As news or the pandemic was spreading earlier this year, our r. and D. team work expeditiously to close out all long term safety study and I'm pleased to report that the study has been completed.
As a reminder, as Monica will be submitting or backup in with one of the largest databases globally for the treatment of management multiple sclerosis specificity.
Through our large phase three programs, we have demonstrated advocacy and safety within twice a day regiment. In fact Orbanco finished exhibited dose response relationship with the 40 milligram and 80 milligrams doses as measured by the modified Ashworth scale and further demonstrated one your safety intolerable.
<unk> that is unprecedented for this molecule.
Now I'd like to turn the call over the Andrew Whitehorn people discuss the company's financial results, Andy will be followed by J.D. or Chief operating officer, who was your details or the company's promoted products.
<unk>.
Thank you Brian.
Total revenues decrease by eight and a half million to 48.6 million for the three months ended March 31st 2020, as compared to 57.1 million for the three months ended March 31st 2019, primarily due to decrease in that product sales.
Yep product sales decrease by 9.1 million to 47.3 million for the three months ended March 31st 2020, as compared to 56.4 million for the three months ended March 31st 2019, primarily due to declines for both methylphenidate E.R. and <unk> E.R. tablets.
Stemming from lower net selling prices in volumes.
Selling general and administrative expenses decrease by half a million dollars. During the first quarter of 2020 to 21.2 million, that's compared to 21.7 million in the prior your quarter decreases reflect expense productions associated with a sales force realignment in the third quarter of 2019.
Which was partially offset by increases in marketing costs associated with the expected launch of our V.L. 12 to one severance costs associated with the sales force reductions during the first quarter of 2020.
Research and development expenses decrease in the first quarter of 20 25.7 million as compared to 9.8 million in the prior your quarter, primarily reflecting the completion of the second phase three clinical trial of our backup in E.R. during the first quarter 2019.
Lower clinical trial costs related to our V.L. 12, or one and the cost of manufacturing development batches of OSBL lacks in the three months ended March 31st 2019, which costs for not present in 2020.
Net loss for the first quarter of 2020 was 3.1 million compared to a net loss of 6.7 million in the first quarter of 2019.
Adjusted even for the first quarter of 2020 was 11.1 million.
Two adjusted EBITDA 16.6 million in the first quarter of 2019.
As of March 31st 2020, we had cash in cash equivalent of 125.8 million and borrowing availability under our revolver 50 million.
We also had 271.4 million aggregate principle amount borrowed under our term loans.
January 2020, we completed a public econe offering generating 31.8 million of net proceeds after giving effect underwriting discounts commissions and offering expenses.
I will now turn the call over to J.D.
Thanks, Andy.
The impact of covered 19 is presenting unique challenges and like all of US we continue to monitor the situation closely.
As an organization, we have been able to rapidly embrace new ways of working.
I'm very pleased that we were able to effectively support our employees as they'd transition to working remotely while protecting their wellbeing as well as the safety of our customers as we continue to ensure they get the information and education, they need and patients receive uninterrupted access to.
Our products.
During the first quarter of 2020, we continued to make progress on our strategic priorities shove growth from our existing promoted brands do the gel M. 72, and a hospital lax with market, leading volume in our key generics methylphenidate E.R. and Ben vaccine extended release tablets and continue pepper.
<unk> for the potential launch a bar B.L. 12 or one.
Predictably and more recently the impact to our promotional efforts has resulted in a slowing us the growth rate with our existing brands into the second quarter.
National shelter at home orders extended and patient visits a new prescription trends have decreased.
Fortunately, we believe the overall steps, we're taking to navigate these uncertain times have to date minimize significant impact to our business.
More specifically all of our promoting brands. So I'll continue prescription growth in the first quarter 2020, when compared to the same period in 2019.
Do the gel grew approximately 10% versus the prior year quarter.
And while the existing called the dynamics impact our ability to be in front of our customers everyday. We've seen continued strength. We did the gel volume and expect it will continue to maintain its position as a market leader and topical asked me a replacement.
M. 72 also experienced a strong first quarter as prescriptions group, 40% versus Q1 19.
We are encouraged by M. 70, twos performance versus the broader 80 H.D. market over the last 10 weeks and although we anticipate a leveling of growth in the short term, we expect the product to continue to grow as our reps resume more traditional promotional activities in coming months.
Lastly, awesome elects prescriptions total 645 in the first quarter.
Despite the abrupt impact of Kobe to the neurology space in early March.
The disruption we continue to focus on alternative ways to engage in connect supporting patience and physicians be in telesales virtual education online sample bordering interpretation services center with access cosmetics.
We expect to continue to adapt our tactics through this challenging time and remain committed to the practitioners in patients who have embraced OSBL x. through his first year on the market.
And indeed commented earlier in the financial highlights are generic anon promoted products business continues to be an important contributor dislike increase competition and consolidated buying.
Our manufacturing supply chain and operations colleagues have been well prepared to mitigate potential disruption. During this time and those efforts are greatly appreciated.
As we look towards the pipeline, we're gaining significant momentum with our launch planning for our B.L. 12 or one.
As Brian touched on in his opening remarks, there's a lot to be excited about and the last 10 weeks have created an opportunity to engage even more deeply with our K.A.O.L. is then I'd care professionals.
While we are all being forced to adapt and adjusted the disruption. We've always believed in this launches being about doing things differently.
To date, there has not been a simple safe and effective treatment option for all of them more than 15 million patients suffering from acquired tells us in the U.S.
With RBL, we will be launching an evolution and I care challenging the traditional and deploying a customer experience for patients m. providers alike unprecedented.
Are partnerships in collaboration with the T.C.P. community will serve as the foundation for early momentum, creating strong connections and positive experiences from which we will build and expand.
And all sincerity.
Yeah. Some is contagious and we believe the combination of a first in class products together with the launch of our novel cash paid business model will deliver a truly unique value proposition for providers fulfill a huge unmet need for the millions of patients and continues to transform our organization.
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Well now turn the call back to Brian.
Thank you J.D.
And operator alternative to you for the Q. and I. Thank you.
Thank you Sir.
As a reminder to ask a question you would need to press star one on your telephone to which are your question press. The pound key please stand by while we compiled a cute when a roster.
I started first question comes from the line of Greg Fraser from centrist. Please go ahead.
Great Good afternoon folks things taken the questions.
First on RBL has the economic environment and the risks that could be a prolonged downturn changed Sega thinking about positioning and specifically wondering is contracting.
Pay or is it something that you might reconsider.
You had thanks for the question.
I'll I'll take the first part and I think J.D. will take the second apart.
Are launched plans are proceeding we do know that the review the N.B.A. is on track at least in the last time, we touch base with the F.D.A.
And I think what we're going to see is a.
Little bit slower ramp than what we originally anticipated.
Frankly, right now the entire sales force position model is on its ear and as things begin to come back to a new normal the rules for engagement with clinicians will be different no matter, how we look at it but we're taking the time as we mentioned earlier.
Earlier to spend a lot of time with art.
<unk> with our key customers and understand how they want to be approached and it'll be a combination of direct selling digital.
As well as as other tactics as we go forward on the pay side J.D.
Yeah. Thanks, Thanks, Greg the the question I believe was would we reconsider contracting with payers and I think our approach is is rooted in transparency and simplicity and niamh no matter what way you <unk>. This is neat.
Large market opportunity I think our our estimates in the research we've done in a 15 million plus patients out there with with.
Acquired ptosis across the continual mild too severe.
Continues to tell us that the cash pay approach is is the right approach and business model for this product and entering contracting discussions and trying to balance back and forth between reimbursed product and the challenges and lack of control and simplicity that comes from.
Direction versus the size of this patient population and the value proposition from a cash pay model not really drive drive sticking with or without approach.
<unk> that makes sense.
So wondering if you could speak.
Generic supply chain in the history of small d. and whether you expect the U.S. centric nature of your model.
Supply the demonstrated over time to help you win business in this environment.
Well I think the short answers yes.
Methylphenidate for example, we manufacture in Marietta, Georgia, along with the many other products.
And the fact scene manufactured in the U.S., but there's a lot of other companies that are are trying to just take that same ground as well.
We're just steady at it we've been.
A pre emptive in our ability to secure all of our raw materials way in advance and we're in very close communication with all of our customers. So.
We we don't see interruptions in supply chain from any of our products.
On the horizon.
Yeah.
Thanks, I'll get back in the queue.
Thank you. How next question comes from Saudi I'm from S.V. be leery. Please go ahead.
Hi, Good afternoon. Thanks to take my question what to follow up on a prior question on the L.
Yeah, I'll go to market strategy.
Unexpected increase an unemployed then 10, maybe more product recessionary trend.
Does that change your thinking around the pricing strategy for the product.
And then and you prepare for the launch.
When you start I think you expect to stop sending inventory and should we expect to see some type of an impact on the r. and d. expense and the second quarter and then I have maybe another question.
If you have time.
Okay. So we will begin to build inventory.
In the coming months, not really not before the end of May.
This is a drug that's very you know sort of straightforward to manufacture with our partner nephron.
And Hmm.
Lead time is not not outrageously long I think beginning to end.
We're looking at a month month and a half to build inventory. So we're going to start probably in June we've got excellent dating on the products with regard to pricing. We were always looking at a range between 75 and $100 a month and quite frankly I've been at 100 J.D. has been at 75 and I think.
The current environment is not changing our perspective before all that much.
We continue to do a lotta market research and dip into the willingness to pay and I and I think this is something where it's going to become a lifestyle drug and people that do well with it and rely on it or not going to want to change and I'm going to be willing to pay.
Between 75 and $100 a month, so I are thinking about pricing is pretty much.
In the same Zip code.
J.D.
Well, what would you add to that yeah, I would just say.
That I think the <unk>.
The current lands game.
As really like many of our peers just force continued adaptation N. adjustment really understanding what are the ways in which our our customers and in this case.
In particular, the I care professionals won't want to communicate and interact as we get this out there you know the the excitement and enthusiasm is real.
I don't think it's a question of you know does the landscape in terms of on employment in pact pricing per se, there and everything large market out there.
We're launching this in a way that that is controlled.
And and really gets at the education and awareness that is necessary to build and create a market and I think that's something that that we're focused on and very uncomfortable doing right now.
Okay.
Two location, if I mean data for probably somewhat oblique one fucking stupid.
And with the completed C.P. study.
Additional color I think you can give a good.
Safety profile.
And then how should we think about.
For a second quarter.
Okay, so with our back bluffing.
The the N.D.A.R. resubmission of the N.D.A.'s on track to the <unk>.
And at the second quarter.
Excited about that and the.
Clinical study reports are being drafted right now and reviewed by the team and quite frankly, we we have a.
A lot of information that's going to go into the submission that's very exciting to us.
Completion of our one year safety study at 80 milligrams. We we just got it in at the finish line in March right when things started to shut down in international travel.
Began to evaporate altogether.
And the safety Intolerability of 80 milligrams too over 100 people for a year. It's in my in my my estimation is unprecedented in terms of tolerable product at a higher dose than has ever been delivered before and we have additional information in an additional data.
Such a C.S.S.
Levels of both our Backlisted and back within that will also be talking about in the near future and we'll be part of our submission that are also very interesting and it shows that with backless in the R.S.I. summer is in the C.S. happened with our backless in naturally only be all right <unk>.
And that may be a strong linked adverse events and.
In particular, so we'll be for that see that story over the coming months, but it's it's right now it's all hands on deck to get the application and and then trends J.D.
Yeah. So.
Just like the.
The earlier comments about the overall trajectory of business you know, we're we're we're fairly stable I think we've seen.
Some of the the headwinds over the last you know six weeks or so in terms of the drop off in in a patient visits and the N.R.X. in pact with you are promoted brands like in a jail and 72, but overall I wouldn't say.
Say that we expect any massive clicks in terms of Q1 into cute to Ah and probably just.
Tampering the growth trends that that we have seen in recent quarters.
And ultimately you know modestly down over the first quarter. The good news I think for US is you know we've talked about the supply chain stability and you know obviously on a generic side, but even with our brand in business you know what we've been very focused on just maintaining.
Consistent unstable levels of of supply out there and the channel. So I don't think that we've seen a huge spike in the first quarter. You know X. factory volumes that contributed to performance that Dan is going to come with back around in the second quarter.
And it really been focused given strong supply on keeping things is level as possible on the generic side I think we anticipate the consistency of market share and relative volume for the keep products from quarter Rwanda quarter to.
Thank you.
Thank you. My next question comes from David Steinberg from Jeffries. Please go ahead.
[noise], Thanks, and good afternoon. Another couple of questions on our the first is Brian I think he said that your dialog with the F.D.A. is <unk> progressing as expected and.
And do for date, you think we'll hold sort of that end up just curious what exactly is the projected launch date and yeah right now.
No patient you're going to see optometrists or very few.
Meetings with off Tamala, just and the things stay kind of the way they or would you consider delaying your lunch a little bit I know some companies have delayed their lunches.
Or is there any seasonal impact that you want to pick up.
And that's why you'd want to lunch right away and then secondly relating to a collaboration to take on the last call.
You said that you peddling, a dialogue with <unk>, Egypt, particularly Japan I think you said you you had you know pretty serious discussions with at least two Japanese companies in Japan's the second largest mark it after the U.S. any progress there and then I guess for late you know coming back to the U.S. given in fact that you've made this too.
<unk> to Christ cash pay business and it'd be a largely a consumer product any thoughts on doing some sort of collaboration with a larger.
Company in the United States to help <unk>. Thanks.
Yeah.
Okay. That's a bunch of questions. So X.U.S. partnership conversations are proceeding I would say nicely, we have a pretty competitive process.
And we are planning to complete.
These negotiations.
Then the quarter.
But it may still live still a little bit into the next quarter I'm hedging to that because we just can't get on an airplane and see each other and hammer out details.
But we do have a good process were pleased with it and I think it's going to bear fruit fairly soon.
So look where rid of it environment and you know this from all the companies you cover where people are sort of making it up as they go she here's what's factual that I could tell you upon approval.
Going to reach out to a chord number.
Hi, prescribers K.L. wells that we've been talking to and working with and we're gonna get them going right away.
These are people that were talking to you know every day during the pandemic, while we're in lockdown, we're going to get a lot of information and experience with that core group and as we're developing that time and model, we will begin to expand softly.
As different states in different organizations opened up to see wraps and open up their practices more formally so.
We're going to call. This a controlled launch we're going to start with a small group right away. That's you know if we get approval on our goal date of July 16th let's say.
We'll be putting product in people's hands in a couple of weeks from that date, but we're going to start with a small group.
Going to test it out we're going to learn a lot and then it'll be something we can replicate doctor by Doctor have a great sense of the return on investment.
And then build backup from there and begin to throttle up the expenses as we go for it we don't see any seasonality.
I think.
That was.
All the questions right.
I think that covers it.
Okay. Good.
They tax David.
Thank you.
As a reminder to ask a question you would need to press start one on your telephone to withdraw your question press the pound key.
Hi, Sean next question comes from random Stanicky from RBC capital markets. Please go ahead.
Great. Thank you pay Brian.
As a lot of obstetrics offices across the U.S. getting pretty hard.
I have to take looking for opportunities to make more money.
Try to catch up to cover costs spatial talks because you're in be quick highly profitable, but so was cross selling.
What do you look at our viola and.
Partner with a a firm.
Side and talk that market too and.
And what do you need to do to do that and I have a follow up.
Yeah. So [noise] that was I think the third question as well the tape it asks that I didn't get to.
You know we can.
We're thinking about partnering it'd be a static space to be quite Frank.
And we're having a few conversations that are advanced.
But not completely convinced.
That we can't do it ourselves because this drug is so novel.
It is complimentary with.
A lot of the things that the aesthetic physician is doing right now.
So.
You know I think we're waiting into this very carefully I think J.D. I mean, what would you add to that.
I think Brian's points aside Randall you know, we are developing our own relationships with with the practitioners and K.L. wells in these static space right now.
And using that to to really assess in balance you know the merits of the ongoing conversations with the opportunities to to build it and go it alone and I think you know like most.
The decisions that we ultimately make you know.
In in optimizing and maximizing ultimate value here.
And then Brian you touched on my second question.
Let's talk about the existing saying structure, you've got your toe in a few different waters here therapeutically.
You know how are you thinking about the sales force split and more importantly, what Wayne.
Do you start thinking about adding additional products in licensing to further leverage.
The sales force and some of those therapeutic areas specifically.
Yeah, Great <unk>, we're we're thinking that.
Once we start to sell or V.L. [noise].
We are going to basically turn this organization.
Almost completely in that direction.
That the current promoted products, David Gell I'm 72.
We'll take really a background position a reminder, calls maybe telesales virtual detailing to support those products, but the growth.
We anticipate relative to the other brands.
The tradeoff decision really a no brainer.
On the acquisition front, we would we would love to partner with talking and I care company or anesthetic company. That's in the space and right now we've got a neuro.
Sorta ARMA women's health farm and we're developing this I care space.
You know, we we could see ourselves pruning the portfolio on one end, possibly women's health down the road and baby other products, but you know right now we're in a very good spot where.
Has got a great cash position and we can financial structured launch and I think what we're going to wait for his as we roll out the launch we'll get a feel for the uptake and that's going to determine how we add more wraps, but our plan for the back end of the year.
Was to launch the drug was around 150 sales rep.
I'm not sure all of them are necessary any longer in this calendar year, because they may not be getting into all of the offices. So we have a smaller group right now we have around 65 wraps to 70, and we'll expand once we get a strong sense physician receptivity.
And uptake and how we can defend it with a return on investment bottle.
Great. Thanks.
Thank you.
I shouldn't have further questions in the queue at this time I like to turn the call back over to Mister Bryant markets and C.E.O. for closing remarks.
Okay, well, thanks, everybody for joining the call we really appreciate your time.
Please stay safe and social distance. Thank you bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating.
<unk>.
[music].