Q2 2021 Osmotica Pharmaceuticals PLC Earnings Call
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Thank you for standby and welcome to the Akamai article Pharmaceuticals second quarter 2021 business update at.
At this time all participants are in a listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
I ask a question at that time. Please press Star then one when you touched on telephone.
As a reminder, today's conference call is being recorded.
I would now turn the call to your host Ms. Lisa Wilson.
That's the relations you may begin.
Thank you operator.
Welcome to osmotic of Pharmaceuticals, second quarter 2021 business update call.
This is Lisa Wilson Investor Relations for Ahs moniker.
With me on today's call Osmotic is Chief Executive Officer, Brian Marcussen, Chief operating Officer, JD, Schaub, and Chief Financial Officer, Andrew Einhorn.
This afternoon, the company issued a press release detailing financial results for the three months ended June 30th 2021.
Press release, and a webcast of this call can be accessed through the investors section of B as Monica website at <unk> 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 Reform Act. These forward looking statements are based on information available to us <unk> management as of today and involve risks and uncertainties.
Putting those noted in this afternoon's press release, and our filings with the SEC such.
Such forward looking statements are not guarantees of future performance.
Actual results may differ materially from those projected in the forward looking statements.
As Monica, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law.
During this call we may refer to non-GAAP measures such as adjusted EBITDA.
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.
We'll be available for 30 days on our website and as Monica Dot com for.
For the benefit of those who maybe listening to the replay or archived webcast. This call was held and recorded on August 16.2021.
Since then as Monica may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings and with that I'll turn the call over to as Monica CEO, Brian Martin said.
Good afternoon, everyone and thank you for joining our call today.
During the quarter, we took a major step in transforming our company.
In late June we announced the sale of our entire legacy business to a lora pharmaceuticals. The singular purpose of this divestiture has been to Delever and clear the runway for RVO pharmaceuticals, the home of a bleak.
We are now solely focused on the success of <unk> and expanding the market opportunity for this important brand of <unk> as the first and only FDA approved product for the treatment of acquired ptosis in adults is truly a unique asset.
The response to the product from providers and most importantly patients has been terrific as seen in the steady increase in new prescriptions in the second quarter, we had nearly 9000 paid prescriptions and 85% increase over the first quarter and we know that Q3 is.
Already off to a great start.
Our eye care franchise now has approximately 100 territories working seamlessly with our exclusive pharmacy. It should be noted that RVO pharmacy is the only way of lead can be purchased.
Thus assuring a level of customer service commensurate with our expectations were.
We also recently brought on ARINC green on to finalize and lead our aesthetic go to market strategy. Later in this call JD will provide more highlights framing the consumer market research, we recently completed and some of our near term catalysts.
This is an exciting time in our evolution and we look forward to sharing more information as we work to capture the growing value of <unk>, both in the U S and around the world through our partnership with Santander.
We also recently submitted an amended protocol for our baclofen phase III study to the FDA, we look forward to working with the agency on the development plans for this product and potentially meaningful benefits it can deliver to patients suffering suffering from Ms spasticity.
Now I'd like to turn the call over to Andy Einhorn.
Thank you, Brian as an opening comment this quarter, our financials look very different than in the past.
Under the accounting rules the divestiture of our legacy business is now accounted for as a discontinuing operation, meaning that the businesses P&L results assets and liabilities are collapsed into single line items on our face financial statements.
The operating results. We are reporting generally consist of revenues and expenses related to <unk> and the G&A expenses of the business.
Our revenues for the second quarter totaled $11.5 million made up of $1.5 million of product sales of up knee and a $10 million milestone payment from Santana pharmaceuticals, our ex U S license partner for up Nique.
As of <unk> was launched in September of 2020, there were no revenues from <unk> during the comparable period last year.
Cost of goods sold were 700000 during the quarter again, primarily attributable to up Nique gross profit for the quarter was $10.8 million.
Selling general and administrative expenses consisted of promotional activities related to the <unk> launch and the expenses of running the company.
Expenses during the quarter reflected an expansion of our sales force to approximately 100 professionals, a greater marketing spend as we broaden our reach into eyecare.
We expect these promotional expenses to increase in the quarters ahead, as we deepen our penetration in eye care and plan to launch into aesthetics.
During the quarter, we took better measures to align our cost structure with our post divestiture profile.
We curtailed the operations of our research and development subsidiary in Buenos Aires, Argentina, resulting in employee termination expenses totaling $3.2 million, which are reflected in our G&A and R&D expenses for the quarter.
Additionally, we recognized a non operating asset disposal charge of $1.3 million related to the closure of our of our Argentine subsidiary.
Research and development expenses of $2.1 million in the second quarter consisted of the Argentine restructuring costs and a small amount of project spend on our baclofen and follow on <unk> candidate.
During the second quarter, we recognized impairment charges of $7.9 million related to a write down of the R. Baclofen intangible asset the launch of which if approved would be delayed from our previous anticipated launch date.
As mentioned earlier other non operating expenses of $1.7 million in the quarter, primarily reflected the disposal of fixed assets of our Argentine subsidiary.
Net income from the discontinued operations of our legacy business was $4.2 million in the second quarter. Overall, we had a net loss of $17.7 million in the quarter.
Adjusted EBITDA loss from our continuing operations for the second quarter of 2021 was $8.4 million compared to an adjusted EBITDA loss from continuing operations of $15.3 million for the second quarter of 2020.
As of June 32021, we had cash and cash equivalents of $99.8 million and borrowing availability under our revolver of $25 million.
We also had $214.7 million aggregate principal amount borrowed under our term loans net of deferred financing costs.
With that I'd like to turn the call over to J D.
Thanks, Andy and good afternoon, everyone.
I'll update you on the recent highlights with our expanding launch of up Meek and share additional details on the tactics building momentum as we continue to create a new category and ocular aesthetics.
In July we recently completed our sales team expansion in eyecare with approximately 100 sales professionals now supporting the <unk> launch.
The broader reach helped to expand the prescriber base by more than 3000 in Q2 and as of the end of July we have more than 8000, Hcp's, who have prescribed up meek at least once truly remarkable breath, which continues to grow as awareness builds.
<unk>.
From a mix perspective, optometry makes up about 60% of prescribers today, while ophthalmology makes up the remaining 40%.
Similarly, total prescriptions in Q2 grew 85% over Q1 totaling nearly 9000 for the quarter.
We are seeing prescription mix hover around 60.40 between 30, count and 90 count and are also beginning to see a growing stickiness from refills.
No. It remains early to have a holistic view on annual patient utilization. The first cohort of patients those who filled their first prescriptions in September October of last year appears to be tracking north of 120 days of therapy on average per start in <unk>.
<unk> signal as to patient value and preliminarily quite a bit higher than our early estimates of about 90 days per patient.
Obviously, we're thrilled by the continued adoption and early utilization by so many of our ECP partners and moving forward remain focused on continuing to reach an expanding group of Ecp's, while at the same time working with those existing prescribers to unlock.
Haverhill shift and incorporate later valuations as part of their daily routines in our effort to build this market and importantly depth within each practice.
We are building a market and a key part of that effort is our ability to deepen the market's understanding of acquired blepharoptosis, including the prevalence something which has been lacking historically.
Obviously, the tip of the iceberg is fairly well understood.
Over half a million patients annually, who opt for corrective surgery <unk> experienced toxin induced doses.
Ultimately, we believe the market to be tens of millions of adults, which is supported by market research. We completed during the second quarter with 10000 consumers.
The research consisted of adult women between the ages of $20.70, the only qualifier being household income greater than $50000.
In short the results highlight the significant potential market opportunity for <unk> and importantly that this opportunity is largely agnostic to age and or severity of ptosis.
Sure.
Specifically about six in 10 adult women self identified as having some level of ptosis or low lying lit.
Moreover, more than four of 10 were bothered by the appearance of their eye and after presented with a product profile believed up nique would fulfill a need regardless of whether they identified as ptotic or normal.
Obviously this research further highlights what we have always believed is an outsized market opportunity and unmet need.
As we look forward, we have a number of catalysts supporting accelerating growth first several weeks ago, we began to pilot our physician dispense model with eye care providers.
Selected offices were allowed can purchase directly from us and dispense up nique at the point of care.
The early feedback has been tremendous and we see this initiative as a meaningful strategy and our efforts to drive deeper utilization at a practice level through a true partnership with the practice and their patients.
Additionally, you will begin to hear more from us in the aesthetic space in the months ahead as we work towards expanding the launch in this market early next year.
We are ramping up our engagement with Kols and influencers across the core and noncore specialists and continued to refine our strategy based upon these discussions and increasing utilization amongst a key group of these clinicians.
Similar to eye care, we see a tremendous opportunity to expand the prescriber base to these specialties and incorporate up nique into the daily patient flow of aesthetic practices throughout the country.
In closing, we see a drug with tremendous upside and noninvasive treatment, which has an almost immediate positive effect on patients with numerous catalysts continuing to drive awareness and utilization in the months ahead. We are incredibly excited about the future of RVO in up Nik.
And look forward to updating everyone on our progress again in a couple of months with that I will turn the call back to Brian.
Thanks, JD and Andy.
Operator, we are ready for questions.
Thank you again, ladies and gentlemen, I'd like to ask a question. Please press Star then one on your Touchstone telephone.
Again to ask a question.
And then one.
One of them require first question.
Our first question comes from David Steinberg of Jefferies. Your line is open.
Thanks, and good afternoon, I have a couple of questions. So first is Bryan.
When you close.
Transactions are lower.
Financing plans do you have in place to fund operations and then I guess on the same question when exactly when do you think it will close.
Secondly.
How should we think about spending you mentioned spending is going to ramp up.
What are you sort of see as a fully loaded cost structure with the.
The full sales force in promotions in place and then <unk>.
Terms of the typical patient profile I know you've talked about.
Expanding into aesthetics.
At last check it was.
Asian in their sixties early sixties with severe forms of the disease, what's the as more and more patients.
<unk> scripts, which the typical patient profile at this point in time. Thanks.
Alright, Thanks, David and so I think what I'll do is I'll start with Europe.
Your last question first.
And that is the typical patient profile I think when we.
First launched the product are introduced in September of last year.
The average age of our patients which are predominantly.
Female.
Was about 69 years old.
And that age is steadily dropped as we've been out there talking about the product and promoting particularly this year.
And I think now the average age of our.
Patience is around 60 years old and we're going.
Going to be moving that needle further younger as we.
Get into the mildly Ptotic population I think the other thing and.
J D could expand on this a little bit is I think the patients. We got early on were those that were waiting for elective surgery and that they had severe ptosis.
And I think we're beginning to see now.
Is the more moderate so coming in a few miles are coming in but I don't have.
Strict breakdown on how that's shaping up so J D.
Any color to add to that.
I think all I'd add David is we continued to add so many new prescribers every day every week and every month and that that number has been pretty consistent.
In terms of a couple of hundred new prescribers every week and that's probably why we continue to see average age at around 60 right now.
Because we're just adding so many new prescribers, who for the first time are probably using in those most noticeable or more severe patients I think where we see the counterbalance to that are some of the folks that have really dug in with us and begun to change the paradigm in their own office in half.
These conversations and open up late assessments with a broader range of their patients.
Because we're starting to see more and more of those doctors and offices throughout the country. So I think as we move forward through the rest of the year a number of factors will I would anticipate seeing that continue to tick down and then over a longer period of time I think obviously.
We'd like to see that number down in the low <unk> in terms of really opening up this market.
Okay.
While we still have a couple of more parts to David's question. So David.
The other part.
If you wouldn't mind asking the question again.
Sure. So the other two pieces were.
When when Youre going to close a lora and when you do close it.
Sort of financing.
Plans do you have in place to fund operations and the other part was.
You said, you're ramping up spending and promotional just curious what a fully loaded cost structure might look like.
Once you got to Europe.
Pulling operational lineup.
Right Okay. Good so the.
The plan to close with the Lora is any day.
We've been waiting for the state board of pharmacy in Georgia to grant a license to a lora in order for them to operate the manufacturing facility.
That's a process where an inspection is required.
Inspection happened Thursday last week, so when we understand it very well so really quite frankly, we're hoping to close any day, but it could drag out a bit more because we have no control over the state board of pharmacy, but thats. The only thing outstanding right now when we close.
With respect to financing plans we are.
In discussions with a number of parties.
To refinance the company those conversations are going quite well.
Among other strategies that we could use but we are talking to.
I'd say, a very good group of alternative lenders and are comfortable with where we are today, although I can give them the reassurance or assurance that we will be finance coming out of it so.
I have to say that for the purposes of full disclosure.
But I think run rate.
I think fully loaded.
Looking at around $7 million.
<unk>.
Rough Justice, maybe a little more maybe a little less depending upon promotion sensitivity to different levers that we have.
If we feel really good about some early feedback and returns on direct to consumer work that we're doing now which is a pilot we could scale that up but there'll be an immediate return, but I would say sales force R&D G&A all in.
Opex, if you would around $7 million a month.
Okay. Thanks very much.
Okay. Thanks, David.
Thank you. Our next question comes from Greg Fraser of Twitter Securities. Your line is open.
Hey, guys. Thanks for taking the questions.
I was wondering if you could comment on prescription demand that you've seen so far in the third quarter. I know you said third quarter is off to a great start.
Just hoping you could provide some quantitative color such as month over month growth in July.
Yes. This is J D I'll start.
And I think we we saw mid teens growth July over June in terms of prescriptions. So obviously I think given the holiday in the heart of summer.
Really positive momentum still continuing to build with with the launch here.
And the other factor is we just started shipping.
Direct expense to a few accounts in the month of July so we.
It took a few of our prescribers offline ship them product directly.
So we're and we're going to have to breakout I believe in the future. How this is all going to work out. So you guys can track this more accurately but.
As we go forward, we think that the buy and bill component of this or the value share if you would call it that.
Is going to begin to really ramp as we get into the latter part of the third quarter and then in the fourth quarter.
It's going to be fairly meaningful so as J D said July was pretty darn good.
Considering the fourth of July holiday.
And.
Again, I think August we would expect it to be a good month as well.
Got it Thats very helpful. On the physician's expense model that you're piloting can you give us some more details on how the model works.
Whats the acquisition costs and how are the practices and the price for their customers.
Yes, so so yes, let me help frame it and then J D will give you some some of the exact details.
So this is now in states that permit the direct expense model.
That is exactly what we're piloting right now for states that do not permitted such as Texas.
In New York.
We will be rolling out a different model that we're calling value share.
Probably around the first of the year and that's more of a technology solution, where the prescriber would purchase virtual inventory and the prescriptions would run through our pharmacies. So we kind of like that part of it both for the direct dispense component where states permitted now so J D.
Yes, no I think Brian really summarize the two programs Greg.
Obviously, we're just getting the direct dispense off the ground. We've got the first handful of offices kind of using that in terms of ensuring that the infrastructure and the pull through and the overall process is working well we've got a very elegant.
Ordering platform.
It seamlessly within the day to day flow of these practices in how they purchase.
And I think we're excited about the opportunity that that provides.
To really engage not just from from a margin perspective, but from a partnership perspective with these offices.
And getting our folks in there the team in there and really working with the entire office.
To begin to shape, a full blown solution to looking at lids and talking about this with with so many patients, which I think really sort of was born out of the market research that we did in the second quarter that highlighted just how profound of a concern. This is for so many.
Adults.
Okay.
Got it okay.
Okay. That's helpful.
I think the second part of your question was around margin.
And the way I would think about it today is.
Obviously subject to change, but about 50% baseline margin. So if you look at.
$105 four a month.
Somewhere between 70 and $80.
Box is the purchase price.
And look we've been we've chosen this path and this business model with with transparency and simplicity in mind.
So in terms of sellout pricing I think we anticipate trying to keep that consistent with.
What patients pay coming out of the pharmacy.
Sure.
Got it that's very helpful. Thank you.
My last question is two part question, but how many eyecare professionals are you calling on now with the Spanish Salesforce just curious if that ramp in Covid cases has had an impact on.
Each business to the docs that you are calling on are the level of access that your reps are able to get let's say eyecare professionals.
Thanks.
Yeah. So.
Our total footprint now.
Covers between 15 and 20000 Ecp's.
The number I work off of is about 18.
And through the end of July we've sample just about 12000, so I think we're making good progress in terms of the growth of the team the expansion of that reach.
And the ability to get in front of and begin to introduce these offices.
Two to the condition to the product and build from there.
And with respect to Covid.
We're worried that.
There's a little bit of pullback now.
<unk>.
That could take place we haven't seen it as of yet right now.
But as more mask restrictions come into play.
We could see providers shutting us down a little bit.
We're monitoring it obviously.
Close to it but right now we haven't seen it hurt us.
But we are acutely aware of it.
Great. Thank you.
Okay. Thank you.
Thank you again, ladies and gentlemen, if you'd like to ask a question. Please press Star then one on your Touchtone telephone. Our next question comes from Daniel Bernstein of RBC capital markets. Your line is open.
And everyone maybe.
Maybe building upon those last question.
Those last couple of questions.
First for those eye care professionals, who haven't prescribed unique yet or are there any common themes in terms of pushback and then second what is the typical or average period of time between the first instance in eyecare professionals samples of <unk> and when they become a repeat prescriber as their standard.
The months that that.
Transpires there.
Yes.
Yes, so taking the first part of the question.
There really hasnt been any pushback.
I think.
What we're seeing is everybody gets it rather quickly.
I think that with are pretty broad and deep sampling program out of the gate.
A lot of eye care providers tried it on themselves and their families.
So I think the real the real hard work is going to begin roughly now.
Where we want to drive the prescription volume deeper into the practices.
<unk>.
Examining the lids and working it into your daily routine is really not been common practice for eyecare.
I think when we launch into aesthetics, it'll be a different situation altogether, because they're the patient is coming in for that aesthetic treatment, but for here for eye care.
<unk> got a very busy practice, that's dealing with macular degeneration.
Dry eye and glaucoma et cetera, ptosis is not top of mind.
So there's very little if any pushback I think the chore in front of us where the heavy lifting if you will is driving deeper into the practice and I think the buy and bill or value share programs that we've developed.
Are going to play a very major role in that partnership with the provider.
So I don't know J D. If there's anything you want to add to that no I think I think it's important just that context.
There's very few ptosis experts out there today right. So on the one hand, obviously why we're hard at it building this market, but on the other hand.
Just the sheer number of prescribers. So far is pretty remarkable when you put it in that context, and so I think tying that to Brian's comments.
This is all about taking something there is a clear need and desire and willingness to use it try it start to throw at it patients.
Our seemingly easier to identify and then it's on US now through tactics, such as direct dispense I think beginning to build around the market research that we conducted in really bringing that story into these practices and spending time, making it relevant to.
Each of our physician partners say look take a step back you don't have to get behind the slit lamp pier and run through a real lengthy diagnosis have them circle, what their eylea it looks like and the number of <unk> over the last several weeks in.
In particular that you start to hear back is like Wow.
This really does impact a lot of these patients running through my office, regardless of the reason they're in there and so those are the things that I think are really encouraging and I think the focus from a field force perspective right now the team is out there laser focused on that depth and spending the time with.
Our partners in some of the early adopters to pull that through.
Okay got it and maybe pivoting to the aesthetics opportunity have you put any more thought into how many more sales reps you may need to hire for that launch next year should we think of this as kind of two distinct sales forces or would you anticipate more of a hybrid approach where single rep may be calling on both.
Care and aesthetics professionals.
Yeah. Good question so today.
I would look at them as two distinct forces.
And from a number perspective, I think where we're focused on a number right around 50.
Which gives us the coverage and reach that we need in the large msas and then filtering in throughout some of the other key geographies in this in in the United States and then I think as we go from there.
We're going to have a pretty good picture as we move out over time of what an optimal territory looks like and how the trajectory builds and what that means in terms of adding from that.
Okay, Great and just last question from me are back with them.
Should we expect the next update on this program do you have any meetings set up with FDA to discuss the amended protocol.
Yes. The agency has 45 days to respond to.
Two our protocol submission.
So.
I think at the end of next month at the end of September.
We would expect to be in a dialogue with the agency around our back et cetera.
Okay cool thanks.
Alright, thank you.
Thank you I'm showing no further questions at this time I'd like to turn the call back over to Mr. Brian markets Im for any closing remarks.
Okay. Operator, thank you and thank you all for joining our call. We are as you could tell thrilled with the progress we've made.
On <unk> <unk> and also have our shoulder.
Shoulder leaning in hard to close the transaction with <unk> and continue to grow our business. So thanks again.
Yeah.
Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may all disconnect have a great day.
Okay.
Okay.
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