Q4 2020 Baudax Bio Inc Earnings Call
Good morning, and welcome to the <unk> value of full year, 'twenty and 'twenty financial results Conference call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.
The remainder of this conference is being recorded and the company's request I would now like the true for turning the call over to the next largest zinger Investor Relations Ma'am you may begin.
Good morning, and thank you for joining us on today's conference call to discuss the product's bias for year 2020 financial result, and.
This is Claudia stifling, there and I am joined today by Gerri, Henwood, President and Chief Executive Officer, John Harlow, Chief Commercial Officer, and Ryan Lake Chief Financial Officer.
On today's call Gerry will provide some introductory remarks, and and business update and John will discuss the progress made on the commercial launch of launch of and just though and and Ryan will discuss the financial highlights following todays prepared remarks from Jerry John and Ryan We will open the call up for questions.
Earlier. This morning, we issued a press release detailing our financial results for the full year 'twenty and 'twenty. The press release, along with the slide Pretzel presentation that we will reference for today's call is available on the events page of the news and investors section of our website at <unk> bio Dot Com. Please note the slides for today's presentation.
And of your controlled.
Before we begin our formal comments I'll remind you the various remarks, we make today constitute forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995, including statements related to our financial outlook.
These forward looking statements are subject to risks and uncertainties that may cause the actual results to differ differ materially from our expectations and forecasts and can be identified by words, such as anticipate believe could estimate expect intend may plan predict project will and other.
Words of similar meaning.
The following are some of the factors that could cause our actual results to differ materially from those expressed and or underlying our forward looking statements.
The ongoing economic and social consequences of the COVID-19, pandemic, including any adverse impact on the commercial launch of and gesso or disruption in supply chain, our ability to maintain regulatory approval for inch S. L. Our ability to successfully commercialize and GSO the acceptance of and <unk>.
And so by the medical community, including physicians patients health care providers and hospital formulary.
Our ability and that of our third party manufacturers to successfully scale up our commercial manufacturing process for and Jess and our ability to produce commercial supply and quantities and quality sufficient to satisfy market demand range S. L and our ability to raise future financing for the continued product development and and gesture of commercial.
The nation. This list of important factors is not all inclusive.
Any such forward looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described and the risk factors and the management's discussion and analysis section of products Bio is the interim report on form 10-K for the fiscal year ended December 31.
2019, and any other quarterly reports on form 10-Q, which are on file with the Securities and Exchange Commission and available on the SEC's website.
Any information we provide on this conference call is provided only as of the day of this call February 16, 2021, and we undertake no obligation to update any forward looking statements. We may make on this call on account of new information future events or otherwise and in addition, any unaudited or pro forma financial information that may be provided is preliminary.
And does not purport to project financial positions or operating results of the company actual results may differ materially I would now like to turn the call over to Gerri Henwood Gerri.
Thank you Claudia and good morning, everyone. We hope those of US who are joining me those of you who are joining us today are keeping safe and we like to now turn to giving you an update on board ex bio and the interest the status. If you could turn to slide five and the presentation that is billable and our website and that has been a key.
And we are making progress in spite of the pace of being impacted by.
Our current pandemic. Unfortunately, it is still affecting had gone through a little bit of below came back with the war in the fall as you know and is still present, although we hope with vaccinations and with some abatement and infection rates that we will see further progress, but it has disrupted formulary meetings.
And the elective surgery schedules on the continuing basis.
The Q4 vials sold.
Grew by 58% versus the third quarter in spite of these COVID-19 headwinds.
And our average account purchases increased by 63%.
More than half of our accounts reordering in 'twenty and 'twenty, and then increased to 60% and the fourth quarter.
As of January of this year and just so is the one contract with the three largest G P OS and the United States, Louisiana.
Vermeer and helps trust.
I'd like to nail true the.
The meeting back to Jon to give us more color and more detail on the commercial launch highlights Joan.
Thank you Jerry and good morning, everyone now turning to slide seven.
The highlight of our commercial efforts, while Q4 brought continued COVID-19 related challenges and efforts we remain encouraged by our progress.
The back shared by the.
Early adopters of and gesture.
We continue to see significant linked quarter and significant quarterly.
The use by the end customers that is the hospital and ambulatory surgical centers. Despite.
Despite COVID-19.
Headwind.
This increase is coming from a wide variety of specialties, including usage and a variety of orthopedic procedures.
Expansion and the hospital, the colorectal procedures and a wide variety of general surgical procedures.
As Gary mentioned and Jessica was also now on contract for the three largest G. P O busy and Premier and Healthtrust, which was finalized in January as we.
We continue to navigate the ongoing pandemic and see our slower rate of adoption and debt.
And so then we would have expected without COVID-19 are third party market is encouraging.
And a large survey conducted in late fourth quarter more than one third of <unk> suggests increase and utilization over the next six months and why.
And I are limited customer access has created challenges generating awareness HCP noted many of our selling messages can be highly compelling.
For our current team is focused on the top drivers of industrial and adoption, which are driving awareness and working with advocate the silicate formulary inclusion and orders that the implementations.
The team is also focused on deepening usage, where and just though is already on formulary through order set of implementation, which also had been impacted by COVID-19 and the presses faster growth and pull through abilities.
Moving to slide <unk>.
C and increase in both <unk> and customer units and the number of formulary wins and 2020, almost 70 institutions added and gestured to their formulary and we've seen that number already increase since the beginning of 2021, the number of vials sold and customers increased by 58% and the fourth quarter versus.
And as the third and the number of vials sold the hospitals and <unk>.
The increased over 80% during that same time period the.
The average quarterly orders per accounts and the reorder rate both increased by 60% and Q4 versus Q3, which suggest a deepening usage pattern. Other important metrics include growth and the number of hospitals ordering during the fourth quarter and the purchases from ASC has nearly doubled and <unk>.
Summary, we are seeing average weekly sales.
Orders sizes and units per account continued to increase month over month.
Slide nine provides three blinded real examples of how the timing of early adoption varies by accounts size for large ASC that is represented here. The team was able to build advocacy secured P and for your approval and generate usage and about three months.
That account is now consistently ordering for 30 to 50 units per month and the affiliated hospital has begun ordering now and.
And the second example of midsize hospital. It took approximately six months from our initial touch point to order sent implementation of Orthopedics. This hospital has ordered a total of 200 and approximately 200 units over multiple orders and now additional units are being ordered at its affiliated.
And the final example, the team did a great job securing of TNT win at a very large well known academic medical center the <unk>.
Online for PMT approval with approximately 20 weeks and although that May sound long it surpassed our estimated pre COVID-19 time line of about nine months and this case. The hospital has started to use the product for still waiting for orders that's across multiple service lines to be implemented once this occurs.
We believe the significant uptick and usage will happen given the size of the hospital along with their positive views on how and Joseph and help them and their patients.
And all three of these victories Covid has impacted the entire process and these examples show how the pandemic has dampened the naturally slow adoption curve seen historically with most of optical product launches and we believe however that we can continue to replicate these wins as we raise awareness and educate health care provider.
On the benefits of and Jeff So for the management of moderate to severe pain and the acute care setting.
We are looking to achieve that through cost effective and innovative ways as shown on slide 10.
Our current team is focused on developing advocacy working for secure P&C wins and pull through with core accounts to support our current team we launched a virtual tele sales team to help increase awareness and broaden usage and a cost effective way.
And this team deployed and December that's had early success, increasing awareness of and Jacksonville and hospitals are not currently targeted by our sales team. Another approach deployed and late January enlist individuals with the medical device background and previous relationships with orthopedic surgeons to further expand our act.
And reach and orthopedics.
We have seen early successes with the cost effective approach and we believe that through the collective efforts of the team awareness and usage of Ingests, though should continue to increase our efforts plus the continued positive feedback from early adopters gives us reason to believe and the long term potential of this product with that.
Like the call turn the call over to Ryan to review the financial highlights Brian.
Thanks, John Good morning, everyone.
Just a note to our 10-K for the fiscal year ended December 31, 2020 was filed with the SEC of this morning. So I'm pleased to review that filing in connection with today's presentation.
Looking at Slide 12, the revenue recognized in our financial statements under GAAP is not reflective of the deepening the usage pattern, both and accounts and Reorders to end users. Just described by John which is why sharing the metrics around the end user volumes and growth that you saw earlier and the <unk>.
<unk> is really important to providing insight into our commercial launch trajectory.
Revenue and our financial statements is recognized at the time of shipment to our for distribution centers once title and risk of loss and control has passed.
Taking into account various estimates that we make.
Of what we believe is not likely likely of reversals. So for example, taking into account estimates for gross to net deductions discounts rebates returns and charge backs.
We have raised as you can see noted on this slide.
Approximately $55 million gross or over $50 million and net proceeds over the past several months and our cash and cash equivalents at the end of the year was over $30 million prior to executing on the additional capital financings and Q1 of 2021 that raised net proceeds of approximately.
$28 $5 million.
Turning now to slide 13 for year over year comparison of our income statement the.
R&D expense line items decreased significantly by approximately $11 million from the prior year due to the cost cutting measures that we've taken approval of and just so and really our vigilant focus on the commercial launch it and Jeff So and as Youll recall, we made significant cost.
The reduction.
That impacts our previous expense forecast for 2021.
Net are expected to result, and over $10 million and annualized savings and personnel and other related costs.
The SG&A line items increased as a result of our commercialization efforts with regard to ingest so, including the addition of sales personnel and our marketing and medical affairs costs and efforts.
What I think is important to note is the net loss reported for the fiscal year ended 2020 includes non cash charges of over $31 million. These noncash charges related to amortization of in process research and development cost at the end once and gesso was approved by the FDA.
And also changes and the net present value of the risk adjusted discounted cash flows for contingent consideration that are non cash and mark to market expenses on the warrants that are also non cash.
This net loss also includes as we noted last.
Last quarter onetime costs associated with our restructuring and <unk> and reduction in force efforts.
And we executed on during the fourth quarter of approximately $1 7 million. So excluding all of those non cash items and the cost saving measures.
Our cash used in operations for fiscal year, 'twenty was approximately $43 million.
So with that I'll now turn the call back to Jerry for closing comments Gerry.
Thanks, Brian.
And I actually like to loop, John and for another second and before I get to my closing remarks, because I think there's a little piece of good news that might be helpful to reported John.
Yeah. Thanks, Jerry the one other thing I wanted to add to my comments for today actually represented our largest.
Day of orders, we just received the report early this morning, which I just.
Received so I wanted to share that good news with everyone back to Gerry.
Thanks, John.
So in closing I, just want to recap some of the key takeaways from today's call.
Although not quite at the level that we might have thought pre COVID-19, we are seeing significant progress being made within Jeff snow and.
Despite the impact of the pace because of what's going on with COVID-19, formulary meetings and elective surgeries and.
The number of vials sold in the fourth quarter.
Significant growth compared to the third quarter more than 50%.
Despite these headwinds and account purchases increased by 63% during 2020 and more than half of the accounts reordering and all of 2020 and this was 60% for the fourth quarter.
As you know we are on contract now with the three largest gpus and the U S. Very important for access for a lot of our customers and in addition to that the formulary wins continue to increase.
And where would you go but making good progress and we think we will see more substantial progress with the product in 2021.
We're confident and our launch execution to date, we think we're well positioned to educate physicians and other health care professionals, the bally and <unk> benefits for managing manage severe pain and a wide variety of surgical settings, we're working with the surgical and anesthesia community to drive adoption of the and just so and have it incur.
In the interest standard pain management protocols. We're excited for what lies ahead and we look forward to keeping you updated and the months and the quarters to come.
I'll now turn the call over to the operator for any questions.
That concludes our prepared remarks, we will now open the call up for questions in order to ask the question Press Star and the number one and your telephone keypad.
Star one on your telephone keypad.
Your first question comes from Piper Sandler.
Of I mean, David <unk> of Piper Sandler Your line is now open.
Hey, Thanks for taking the questions. So just a couple.
So Jerry and I was wondering if you can elaborate on the per.
PMT Committee reviews, and what I'm, specifically interested in us.
The pace of.
Getting meetings with P&C committees.
What do you expect will be the.
And the review time or lag time, and then just talk maybe and generally.
And how the pandemic.
And currently.
And is impacting.
The reviews, just being able to get in front of the P&G in the news and being able.
And to get sort of and Expeditious review and kind of what your expectations are currently and how you think the next few months in terms of the reviews will play out thanks.
Thanks, David sure.
So just as the setting I think you are aware of it but our full audience may not the because of the impact of Covid and elective surgeries throughout the U S.
And so thats consistent manner, and certain localities, but and a whack a mole matter and others, where the disease peaks and then subsides.
Our audience hospitals, and the United States. According to the American Hospital Association have lost over.
100 trillion dollars in 2020.
So they're very focused on trying to get the disease under control and to get back to doing more of elective surgeries and I think in that vein and Theyre also looking at anything new not just of anything new coming in front of the P&C committees as non fair number one per year.
Already as it might have been and other types.
So P&C committee meetings, sometimes get scheduled and then rescheduled and rescheduled and reschedule and I would say that that is more the norm than for US where you are scheduled for instance, you scheduled for November but the actual meeting takes place and January early February and <unk>.
Some of that is because of conflicting priorities for the munitions and other members of the P&C committees there.
The code to do clinical runs most recently, we've had somewhere of meetings got deferred because people were on part of vaccination initiatives. Obviously, a key part of getting things back to more normal runs. So we don't think it will be back to sort of normal.
We would have expected from the day, we launch we would have expected that it would take us probably a full two years to get on formulary for all of the institutions that we're targeting which is not all of the hospitals that are our target market.
We still think that it will take that long, but we think we will make if we look at from from zero. If you will we would not of expected really to have much in way of P&C Committee meetings in the summer anyway, you would and.
And the expected some starting in September and those kind of slid to October and November and timing and many of those happen, but a portion of those got moved into Q1. So I think we would expect it would still take us a further two years to get onto all of the institutions that we have targeted.
And assuming that the vast majority of those we would get on but often times and we saw this with Arthur Mab.
Sort of comps that we look to in non Covid times at Austin chalk one.
And two or three P&C committee meetings until we were finally approved till the till they were approved brands and until the their health economic story was understood and we're trying to learn from that and the way that we approach with the data that we have so I think.
We will be not able to as cash.
Clearly predict as we would like and this quarters for the first quarter successes.
Really the second quarter, but would expect that we will continue and make progress in those quarters, but then it would become.
More meaningful as we get to the second half of 'twenty, one and beyond.
Is that helpful for you.
Yes, no. That's helpful. And then just another question I had as of.
On the hospital versus the ASC mix.
I just wanted to get a sense for news too.
What you think the hospital versus ASC mix may have been and the absence of the pandemic.
And I guess going forward.
Uh huh.
And the normalization assuming normalization.
And how you think that hospital versus ASC mix.
Evolve.
I think that's of great question, and and the absence of a pandemic. We would have expected to see some early adoption by ASC is the trial usage rolling into more traditional adoption by hospitals, where more of the surgeries and a number.
And we're taking place right now because of the impact of inpatient facilities with the elective surgeries, we're seeing a little more of a skew the ASC.
And perhaps the patient.
The reported patient reluctance and some cases to have surgery in an inpatient setting versus the same day or outpatient setting.
And that May influence things as we go forward, but we continue to be targeting the bigger institutions that do have their own outpatient surgery departments of the encumbered by the same formularies, but we think the <unk>.
Over time, we knew before we got to the launch of the product last year.
There was a general although gradual movement toward outpatient facilities for some of the major orthopedic procedures for instance, total knee total hip.
And that CMS was providing a way for that to include Medicare patients as well and.
The commercial insurers for.
Uncomplicated cases words and.
Encouraging so just moving that direction. So we think we will see institutional approvals, where they have and even deeper ability to do numbers of patients. Although that may shift over the next couple of years to being a little bit more.
More so on the ASC sides, and we would've predicted before but before we probably would have said more like 60, 40 or a little bit more than the 60 favoring hospitals 40 asp's.
And just take it may turn out to be fully that way with the movement of patients to more same day surgical settings, where their cases or uncomplicated and enough to do that.
Great. Thank you.
David.
Yes.
Your next question comes from Mr. Jason Butler of.
JMP Securities. Your line is now open.
Great. Thanks for taking the question I just had one on the promotional activity as you talked about in terms of the territory advisors and the auto outreach and can you just talk about how focus these.
And efforts were on certain targets, what geographies and how we should think about that.
And the potential to build or expand these activities throughout 2021.
Sure I'm going to ask John to step in and then ill wrap it up at the and John do you want and respond to that yes sure.
Our current targeted effort is.
With our telesales team as well as the territory advisors, we have the handful of territory of advisors around the country and they are working very closely.
With our sales team given their deep experience and orthopedic and.
And helping.
Really give us greater access and penetration.
They're what our goal is is in the geographies that we're currently covering.
Around the country is as we hope to see a deepening of usage then we would continue to add on.
Whether it is additional sales representatives.
Or other types of promotional activities to increase the depth and breadth of.
Of the usage in those geographies. So it really is dependent upon the geographies of the receptivity and quite frankly, the the adoption so and one of the cases.
And that I used in the slide deck and one of the large academic medical centers and and that's the geography, where we're looking to.
And on very quickly to take advantage of that.
And that win so it's difficult to predict but we will continue to scale up moving throughout 2021 as we see the.
The trends support those decisions.
Terry back to you.
Thanks, John So Jason if I could just sort of amplify a little bit when we made the decision in the early part of the fourth quarter two trimmed back our sales force to conserve expenses, especially during the pandemic.
That was when we started to work on and then to subsequently implement some of these other strategies to help us look at even in the pandemic, which of these could help us the most successful and we're really using that as a guide for okay. This this appears to be working and it's working and more than one geography.
The list adopted to other geographies, we are trying to not follow our sword into battle in terms of formularies, hoping that we'll get formulary wins, but rather working to get formulary wins, and then staffing for pull through.
So that we're in a prudent position in terms of using our resources to try and get more pull through especially during the pandemic and as we see the pandemic recede and that may give us a little bit more breathing room, but that's kind of the stepwise way, we're looking at it right now.
Okay great.
And then can you give us any color on the growth of the number of physicians that are using the product and the centers that are reordering or I assume most of the still small number of physicians for institution, but just any dynamics there that speak to you know how.
The growth and build over time.
So when we get information about purchases we.
It is sometimes even the challenge to get it down to the institutional level, but the more the more.
The significant purchases you can get to that level, John do you want to speak to a little bit of the deepening within institutions.
And what your sense is right now of that.
Yes, absolutely. So one of the one of the greatest challenges as you may be aware of and this marketplaces.
And then a vial or sold to an individual institution you don't know who ultimately uses the product.
All of our institutions that have and debt so on formulary or where we have usage. Obviously, we have built strong advocacy because of those champions has asked for the products. They are using the product and what we are seeing the.
The early traction is we have a handful and a given the account lets call. It two to three for.
Either surge and sometimes even the pharmacy director.
For the anesthesiologist champion for the product and then usage begin and what the goal there is to use that individual clinicians experience and help ex.
And the depth and a given accounts so I would say, it's tough to give a number on the total number of physicians who have tried the product. It's certainly larger than the number of formularies, where we're on because we're also getting usage and and certain accounts, where we're not on formulary.
Yes, it's part of for that process, there, but we're encouraged that we continue to see.
On a daily basis more clinicians using the product based on the feedback through the various channels that we receive it.
And John if I got it great.
Jason there are often associated with the b the groups tend not to be solo practitioners as you may know.
And so getting into an orthopedic group and getting one colleague or two to start using it does help spread it to the rest of the group and makes them the tons more open to and in service on.
A deeper understanding of the product and where it can be used and so on and we expect over time that that's going to lead to get further.
Outreach and further spread of the use of that product within that practice and then obviously trying to get other large orthopedic practices at the same institutions.
Okay, great. Thanks.
Thanks for taking the questions. Thanks for the question Jason appreciate it.
And as a reminder, in order to ask the question for US, it's hard and the number one and your telephone keypad. Your next question comes from Leland <unk> of Oppenheimer. Your line is now open.
Alright, good morning, gentlemen, thanks for taking my questions.
The question for you and then maybe John.
Encouraging to see the early.
Uptake.
And the hospitals alongside the afcs.
And as with surgeons practicing perhaps in both settings I'm wondering.
Those who are they of seniors, who then see and GSO and the hospital.
Push for more of the ASC that they're working and is there any sort of cross pollination that happens between one and central and the other when you have the surgeons for may be operating in both places and then the follow up question sure.
Sure John you and I do that.
Yes, good question Leland and Thats, absolutely the case and that was our pre COVID-19 prelaunch strategy of <unk>.
Targeting strategic ASC, where.
Surgeons.
And could get experience and a Q&A and environment, where the barrier to use the product is often lower and then bring that experience forward through and affiliated hospital.
And help champion and the product for that formulary of process. So.
And what we're seeing play out is that exactly whether we're seeing of go quite frankly, both directions, where we're getting usage and ASC and then that clinician brings it forward with his and her peers to the hospital setting that is the affiliated and vice versa and win the one example.
And then a share in the slide deck. The midsized hospital, we were able to get on formulary for orthopedic outpatient use.
And that mid sized hospital and as clinicians who had experience there and then they brought it to other ASC that our affiliated and more and more importantly, where they practice that so we're seeing the deepening of usage.
No of cross settings of care as for as you said as the.
Surgeons move around the different locations, where they operate.
And I think really having have the J code since October has helped us in those settings. Because there are some ways that they can try and where it's going to be cost neutral because of the pass through under the J code for those who are Medicare patients et cetera.
Got it okay great.
And then my other question is.
And what I understand opioids have been used more.
And the COVID-19 period last year.
And on the rise for various reasons I'm just wondering if that has had any impact in either direction on and GSO.
In terms of the motivation by centers to adopt.
Adopt non opioid.
Analgesics. Thanks.
And I'll use an example of one institution, where I I know the chief of medicine pretty well.
And.
They they were very active in Eros the early recovery after surgery protocols.
Pre COVID-19.
But kind of during Covid. It was you know and any port and the storm with whatever we need to do to get through it I'm not saying that they've lost track of that objective, but there was such a mix of patients with other issues and the.
Very particular infection control techniques et cetera, and I think it did not get the growth emphasis that they had hoped for at that institution and my sense is it is similar to that institution and other places and the country and in fact, we know that unfortunately of the not.
It really associated with just the acute usage of the opioids and <unk>.
And related deaths grew tremendously during 2020.
So we think it's an issue the hospitals relate.
Relate to that they would like to be doing more to moving that direction I think as we see greater vaccination and more case control over the numbers of Covid patients hospitalized I think that's something that we will see more emphasis placed on and they'll get back to that and I think we have a role and pain.
Relief without that we havent and even better role if we can help them in their goal to have these early recovery after surgery protocols implemented with less opioids.
Got it great. Thanks for taking the questions.
Thanks, very much Leland.
As a reminder, in order to ask a question for <unk> and the number one on your telephone keypad.
Yes.
And we are showing no further questions I will now turn the call back to Jerry for closing remarks.
Thank you very much operator, we inclosing I just wanted to.
Thank you everyone for taking the time to have joined US on this call. We're actively working to grow and gesture of success and to help with the adoption of India, So and institutions and look forward to keeping you posted on progress as we go forward Hope you are of great rest of your day.
Thanks Bye.
This concludes today's conference. Thank you all for joining you may now disconnect.
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