Q1 2021 Osmotica Pharmaceuticals PLC Earnings Call
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Good day, and thank you for sand and by walking to the moniker Pharmaceuticals quarter, One 2021 earnings conference at the earnings and business update call.
At this time, all participants on a listen only mode. After the speaker presentation there'll be a question and answer session to ask a question. During the session you on each press star one on the telephone. Please be advised that today's conference is being recorded and if you require any further assistance. Please press star zero and I don't know.
I like the hand of conference of what you're speaking of today Ms. Lisa Wilson Investor Relations for his medical Pharmaceuticals. Please go ahead.
Yeah.
Thank you operator, and welcome to osmotic of Pharmaceuticals, first quarter 2021 business update call.
This is Lisa Wilson Investor Relations for osmotic.
With me on today's call.
<unk>, Chief Executive Officer, Brian Marcus and.
Chief operating officer of J D shop.
And Chief Financial Officer, Andrew Einhorn.
This afternoon, the company issued a press release detailing financial results for the three months ended March 31, 2021 the.
The press release and a webcast of this call can be accessed through the investor of wet.
Section of the asthmatic of web site and as Monica Dot Com.
Before we get started I would like to remind everyone that any statements made on today's conference call that express a belief expectation projection forecast anticipation or intent regarding future events and the company's future performance may be considered forward looking statements as defined by the private Securities litigation.
For them Act the.
These forward looking statements are based on information available to us <unk> management as of today and involve risks and uncertainties, including those noted in this afternoon's press release, and our filings with the SEC and such.
Such forward looking statements are not guarantees of future performance and.
The results may differ materially from those projected and the forward looking statements.
As of <unk>, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law.
During this call we refer to non-GAAP measures such as adjusted EBITDA for.
For a reconciliation of adjusted EBITDA to net income or loss. Please see the tables at the end of our press release.
The archived webcast of this call will be available for 30 days on our website osmotic on dot com.
For the benefit of those who maybe listening to the replay or archived webcast. This call was held and recorded on May 13th 2021.
Since then osmotic and May have made announcements related to the topics discussed. So please reference the companys. Most recent press releases and SEC filings and with that I'll turn the call over to osmotic of CEO, Brian Marcussen.
Good afternoon, and thank you for joining our call today.
We have good news to share and I'd like to begin with <unk> for.
<unk> paid prescriptions through our exclusive pharmacy continued to ramp.
And the first quarter paid <unk> grew 74% over Q4 2020 and April prescriptions grew 17% over March. This is the beginning of the growth trajectory that we can expect as we move forward.
Another data point of note is at the end of 2020, we get the sampled over 4000 and eye care providers as of the end of April we have nearly double that number to over 8000 eye care providers sampled. This is of particular note for two reasons first.
We have worked down our early launched the distribution of nearly 12030 count equivalents and perhaps more importantly are trained and selling organization has grown steadily through the first quarter and numbers 77 active territories with another 20 and the pipeline.
Coming out of May we plan to field 100 active territories as we grow the prescriber base.
When looking at the market opportunity that we see for of knee. This level of sales force spend can only be viewed as modest. However, we are building a market that has no analogues.
And.
No competition our.
Our approach of strategic considering that we're about to test and unbranded direct to consumer campaign and.
And our medical education and initiatives are still ramping up.
We are also getting real time organic exposure from social Influencers and great publications, such as the March edition of Al. The April edition of Vogue and also in April we were featured on new beauty Dot Com just to name a few additionally, our two Youtube videos have reached one <unk>.
Views, each and we need to see the effects of these different tactics as we titrate our spend in this launch.
As we've said before we're just beginning this journey.
Looking outside the U S. Our partners Fan-tan had of highly productive meeting with the <unk>. The Japanese version of the FDA and are rapidly advancing their plans for the Japanese Chinese Korean and European markets.
When examining our first quarter performance in general the company exceeded its expectations, Andy will provide more detail, but our excellent customer service and manufacturing network insured and underwrote the supply chain during the pandemic on.
Our team is to be congratulated.
Our baclofen continues to make progress we are finalizing plans to submit a revised phase III protocol to the FDA under a special protocol assessment.
In the coming weeks, we will consider advancing this program. After we receive feedback from the FDA, but we are very excited about its future prospects in the treatment of MF specificity and.
And finally, our strategic process is well underway with keen interest and our legacy portfolio expressed by a number of qualified parties. We hope to update you and the near future with progress on this front and now I would like to turn the call over to Andy and.
<unk>.
Thank you, Brian before going into the Companys overall performance for the first quarter I would like to highlight some additional data points on up need.
Since launch as Brian mentioned, we have sampled over 8200 eye care professionals and as of the end of April nearly 5000 have prescribed <unk> at least once during.
During March we saw a 76% increase and new to brand prescribers and we continue to add new prescribers and April to see sequential growth and paid prescriptions month over month with April coming in and 17% higher than March this.
And this performance reinforces our enthusiasm for <unk> as we believe we have the old we've only begun to penetrate the potential market for this product.
Finally, we anticipate receiving another milestone payment of $10 million from Santana pharmaceuticals, and the second quarter.
Now on to the company's overall performance for the first quarter.
Total revenues for the three months ended March 31, 2021 were $23 9 million compared to $48 6 million for the three months ended March 31, 2020, primarily due to a decrease in net product sales net product sales decreased to $22 5 million for the three months ended March 31.
2021 from $47 3 million for the comparable period in 2020.
Approximately $8 $8 million of this decrease is attributable to lower net realized prices and $16 million was due to lower volumes of products sold.
Cost of goods sold decreased $7 1 million to $13 $5 million during the quarter, primarily due to lower amortization expense royalty and sample expense, partially offset by higher production costs and inventory reserves.
Gross profit for the quarter was $10 4 million as compared to $28 1 million and the three months ended March 31 2020.
Selling general and administrative expenses decreased $2 3 million during the three months ended March 31, 2021 to $18 9 million as compared to $21 2 million and the three months ended March 31 2020 the.
The decrease and our selling general and administrative expenses reflects sales force reductions and the three months ended March 31, 2020, offset by higher marketing expenses related to <unk>.
Research and development expenses decreased by $2 4 million and the three months ended March 31, 2021 to $3 3 million as compared to $5 7 million and the comparable period in 2020. The decrease primarily reflects lower spending on our baclofen of <unk> and other R&D projects and lower.
Head count related expenses during the quarter.
During the three months ended March 31, 2021, we recognized a gain on the sale of product rights for <unk> of $5 6 million net.
Net loss for the first quarter of 2021 was $9 6 million compared to a net loss of $3 1 million and the first quarter of 2020.
Adjusted EBITDA loss for the first quarter of 2021 was $5 8 million compared to adjusted EBITDA of $11 1 million for the first quarter of 2020.
As of March 31, 2021, we had cash and cash equivalents of of $109 2 million and borrowing availability under the revolver of $50 million. We also had $219 8 million aggregate principal amount borrowed under our term loans.
With that I'd like to turn the call back to Brian.
Thanks, Andy Operator, if you don't mind wed like to open up the call to questions.
As a reminder to ask the question you will need to press star one on your telephone.
And two of drawing the question Crystal turnkey please.
And on BIOLASE and part of the Q&A roster.
Our first question comes from the line of Greg.
Fraser from interest Securities you may begin.
Thanks, and good afternoon.
First of all of the good afternoon and great.
Hey, Brian.
The Patriots prescriptions were there on the quarter.
And provide that.
Yes.
Let me back up.
I'm going to give you the Greg this is J D.
It was about 4700.
For the first quarter.
Okay.
And can you speak to some of the feedback that you've been hearing from the field on efficacy and Tolerability.
Oh, yes.
This is Brian Greg.
I should let JD pile on but.
The efficacy and Tolerability of all Ben.
Fantastic.
Yes.
Some of the efficacy stories for getting are nothing short of spectacular.
And as far as safety is concerned.
There are.
Very very very very few reports of any adverse events whatsoever.
So the drug is as well tolerated.
As we had hoped in fact, it's quite soothing as and eyedrops.
And the efficacy is being borne out every single day that we go to work so Joe David.
Yeah, I mean look for avid.
Greg is and what about six weeks since we last gave an update to you guys about things and <unk>.
And if anything we've just continued to accelerate off of that.
The new prescribers and starting to see some turn around and the depth within prescribers and offices.
Every month, they start to get more and more comfort and utilization with this product.
And I think of lot of that stems from the safety and efficacy we have seen I mean remember.
This is still one of those and we think about it.
If you go back and time to think about the launch of a product like Restasis.
The first to hit the market in dry eye is of prescription treatment.
And out of the gate.
A lot of that utilization is in grade three grade for.
The dry eye patients the most severe the train wrecks.
And I think you attribute that just classically to training and education that are the most obvious they are the most difficult to treat and now you've got a solution and you are kind of throw it at them.
And it took a lot of education on allergens part and obviously.
Over 15, plus years, they've done a tremendous job of building that.
But shifting the continuum and I think I would like and kind of where we're at and the progress that we're making very similar I think the difference being.
And the efficacy in the more severely ptotic population and we're still tracking around 61 on average and.
In terms of patient age has been tremendous.
Yeah.
Got it Thats very helpful.
Question on on our backlog and are you planning to fund and the Phase III study yourself and so can you comment on how much the study might cost.
Yes the.
The study range that we're looking at right now is anywhere from say $7 million to $10 million to complete a new.
The phase III clinical trial, and we're not going to commit at this time until after we talk to the FDA.
And we are agreed on the endpoints.
So as of now we're not going to spend a dime on it other than our own sort of thought process.
But if we get a green light with the agency and a program that we believe we can be successful with.
And then we'll we'll either look at it and internally or and look forward externally.
Got it Okay and then just the question for Andy how should we think about SG&A spend in the coming quarters as you ramp up the investment behind it.
Yes the.
Good good good question, Greg the way to think about debt is.
Going into the first quarter coming out of last year and going into the first quarter.
And we from there we are increasing the size of the sales force and really starting to <unk>.
Invest more significantly and up of need so what what we would anticipate seeing over the coming year is.
And upkeep and uptick and the selling expense as well as the uptick and the marketing expense as we expand the field force and.
And begin to rollout some of the tactics to really grow this brand.
Great. Thanks, very much I'll jump back into the queue.
Okay. Thank you Craig.
And once again start on for questions on the.
Question comes from the line of Daniel Buzby for them.
And we see capital markets and May begin.
Hey, good afternoon.
Couple of questions on of Nick first can you talk about your strategy to further penetrate the mild to moderate patient categories.
And what needs to happen there to drive greater uptake and for.
Second how are you thinking about the aesthetics opportunity I think in the past you've talked about the potential mid year launch.
Right around the corner has that changed and is that and opportunity that you would look to commercialize yourself or are you likely to seek a partner and that market.
So.
With regard to seeking a partner.
Not interested.
The market potential we believe is.
Very very meaningful to us the gummy wrong, if someone comes along and once the help us out if the terms of right. We're going to do what's best for the shareholders, but we believe so wholeheartedly and the value proposition for this product.
We don't see a need the tradeoff the value of third party.
J D mild to moderate.
So all of.
I'll start with kind of and and.
And I think captures exactly what you're getting at and.
We had a.
The Doctor and Doctor.
A lot of respect for.
And that's been added for a long time.
Has been a sounding board.
More of a.
Dry eye specialists.
The practice and.
And as we were gearing up to launch this product it's interesting.
I think I think you've got a.
On a neat little product here.
Good luck of the anxious to see how you how it goes.
As you guys go.
And.
More recently.
He happens to have a patient who is in his office.
For dry eye treatment and she.
She finished treatment and asked him about Nick.
And he sort of stop for a second and I think process mentally and then started going through what he knew about the drug and all of those things and she asked if she could have it and.
And I talk to him. After this this occurred and.
He was very surprised but it completely shifted his perspective about up Nick is that don't underestimate the power of looking awake and I think thats. The exact process that we're going through and working on strategically to shift the paradigm and behavior with the new.
Market and a new condition that most doctors have paid little attention to beyond the most severe overtime, so hopefully that the perspective.
Yes got it.
Okay, so and.
On the first question just to clarify is the aesthetics of near term launch opportunity and then I do of another follow up can you talk a little bit more about which products drove the sequential decline and revenue from the fourth quarter to the first quarter and should we think of that as the new run rate for the base business going forward and just for.
Lastly on this point I have to believe that that level of erosion would have some impact on strategic interest and the legacy portfolio. So could you just comment on that.
Yes, so we'll start with finishing of the question on of <unk> and then we'll bounce over.
For the second part of your question and we're pretty much on track.
Heading into the aesthetic market, but we are we are fine tuning of it still as we're going.
I think one of the things that.
We are perfecting as we go or what type of guidance do we want to give the clinicians in that market that are traditionally not used to are accustomed to giving and eye drops and so on the surface. It seems really simple and obvious you give a drop and it lifts the lid and people look more awake.
However.
How do you use this.
In the backdrop of all of the other products that are being sold through and as sufficient as office right. So we have to give them a little more guidance a little more thoughtfulness. There. So I'd say, we're pretty much on track.
As our plans evolve and.
And really can't tell you much more than that right now.
<unk> had a number of advisory boards they are of great sessions.
For a number of assets.
<unk> practices really want to embrace this product and a few have already and sort of our test market phase. So.
It looks very good and very promising.
We're pretty much on track is what I would say J D anything to add or no I think important context, though is.
We are actively working with some more of aesthetic leaning.
Not leaders.
Teasing out the total package if you will right now and I think we're seeing everything.
That you'd want to see in terms of validation of the opportunity and the market potential within that setting.
And it's encouraging because the.
The the intersection of <unk>.
Patience and a target demographic for this type of product.
Is frequent and often in these settings and so I think Dan.
We are moving as fast as possible understanding that we're going to continue to be very deliberate and thoughtful to ensure that when we're there we're launching into the highest orbit possible.
And then just get to the I think the first part of your question the large drivers quarter over quarter of the decline were really and <unk>.
Metal and venlafaxine were the primary drivers Knight and.
Nitrofurans tone as well.
And I think.
And those markets are now very very crowded.
And so what we would expect is that this is going to be kind of a steady state.
For the for the base business.
And this was this is Ben.
Anticipated by Us and.
It's what forms the basis of.
Body, who has been taking a look at it.
Yeah, and just to add to that a little bit.
And the strategic process, we have some very.
Well informed parties looking at it.
And as you would imagine.
We already reflected.
This trend and our analysis and theirs.
So it's a very complete picture, but again as Andy said.
We believe we're pretty much at steady state here.
And again have differentiated ourselves with the quality of our supply chain.
Okay. Thanks for all of the color guys.
Okay. Thank you.
Our next question comes from the line David Steinberg from Jefferies. You may begin.
Hi, there guys of Chang on for Dave actually we've noticed some recent magazine covers and articles about up Nique.
And I don't know if you guys can speak to the impact on the recent prescription trends youre talking about or is it still too early.
The C any impact from that.
Yes, no and it's.
We think we're seeing the impact it's early.
We had a nice article and Vogue, another one and <unk> magazine.
Good beauty dot com and if you actually a few others as well and every day of is another influencer on Instagram posting of great before and after picture and a great outcome.
It's building I think it's early.
And it's organic and we're not paying a whole lot for a whole much of this other than our.
And our Youtube ads, which have.
Quite an interesting hit rate I mean, J D, you're a little closer to that aspect of it.
Great noise, yes, this is raising the awareness and conscience level.
Just in the ECP community, but also spilling over into into the aesthetic community and obviously the broader consumer base.
I can tell you I think we're seeing more patients coming in asking for it.
And I think when we look at kind of the continued growth maybe.
<unk> growth acceleration and the number of new prescribers every week.
And we're adding more new prescribers in recent weeks than we had through the first part of of launch when and when we were really and a.
A very controlled setting at.
And I think those types of things the.
The vote.
Cover and Allen magazine and.
Some of the social activity, that's going on and some of the investments that we're also.
In that side.
Certainly contribute and.
And Moreover, allow us to continue to focus on driving depth within the office getting these these doctors comfortable.
With the protocol change getting the entire office behind what has to happen.
And to assess the lids and really make this the daily part of everything that they're doing.
Got it that's super helpful and.
And I think Brian alluded to.
A DTC program that Youre looking to rollout is that going to coincide with your push into aesthetics.
And can you speak a little bit more about the timing that how this might unfold.
Yeah.
So separate.
No direct correlation to the push into aesthetics.
But the plan right now is to begin piloting some of those efforts.
Through through the end of second half of this quarter.
I actually just got a chance to see some of the draft cuts recently and and it's great loan. This is about raising awareness and.
And <unk> caving and elevating.
On the consciousness of both.
On the consumer and the practitioner and I think it all helps whether it's the eye care side.
For the functional and aesthetic and aesthetic side and the one thing we've learned early here is the.
This product.
And has broad applicability across a wide range of patients.
Age demographic and also clinician and so I think when we look at that and how we best kind of build.
And capture momentum as we go it's all going to be important.
And Ed we are also completing of fairly extensive round.
The consumer market research as well, which is what we're using to feed and inform.
Our DTC pilot and I think we're going to be presenting at your conference in first of June.
And we will be able to come out with a lot more data and a lot more results from this effort at that June meeting, which we chose to switch to our presentation rather than a fire side. So.
And hopefully we will make a big big splash of your event.
Hey, thanks, so much for the color and definitely looking for to the presentation come John.
Yes.
Thanks.
Yes.
Thank you once again Thats star one for questions.
Yeah.
Commercial and any further questions and the queue I would like to turn the call back over to Brian when you're closing remarks.
Great operator, thank you and thank you for everybody for listening in today and taking part in our journey as we continue to advance of neat.
And you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Okay.
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