Q2 2022 Theravance Biopharma Inc Earnings Call

August 4, 2022

Ladies and gentlemen, good afternoon, I'd like to welcome everyone to the third advance Biopharma second quarter 2022 conference call during.

During the presentation, all participants will be in a listen only mode.

A question and answer session will follow the Companys formal remarks to ask a question. Please press the Starkey followed by the did you want on your phone.

Thats Star one to ask a question if listening via webcast. Please mute audio on your webcast device before asking a question over the phone I will repeat these instructions after management completes their prepared remarks also today's conference call is being recorded and now I would like to turn the call over to Gal Cohen with corporate Communications. Please go.

<unk>.

Good afternoon, and thank you for joining the <unk> Biopharma second quarter 'twenty to 2022 conference call to discuss our business.

I remind you that this call will contain forward looking statements that involve risks and uncertainties, including statements about our development pipeline expected benefits of our products anticipated timing of clinical trials regulatory filings and expected financial results.

Information concerning factors that could cause results to differ materially from our forward looking statements.

Described further in our filings with the SEC.

I would direct your attention to slide three.

Joining us are Rick Winningham, Chief Executive Officer, followed by Rhonda Farnham, Senior Vice President Chief Business Officer, Rick.

Graham Senior Vice President Research and development.

Hindman Chief Financial Officer.

Now I will hand, the call to Rick Winningham for opening remarks.

Thanks, Gail turning to slide four <unk> biopharma. Its purpose is to create medicines that make a difference.

Last September we announced a restructuring of the company to optimize our business, while staying true to our purpose this quarter the transformation continues.

Couldnt be prouder of the team that's focused and persevered to deliver the strongest sales quarter for you Pal resets its launch Rhonda will review the performance details.

A successful type C meeting for <unk> getting alignment with the FDA on a path to NDA filing with one additional phase III study and multiple systems atrophy patients with symptomatic neurogenic orthostatic hypotension, Rick will give you an update as to where we are today and the recently announced.

Sale of our trilogy royalty interests to royalty pharma for approximately $1 1 billion in the upfront cash and a total potential value of over one 5 billion.

Furthermore, as we shared when we announced the <unk> royalty transaction delivers strategic value in the near medium and long term upon receipt of the $1 $1 billion upfront. We immediately initiated a multi step process to eliminate all outstanding fair events Biopharma that the tender offer.

Or to redeem our 2023 convertible notes is ongoing and should close later this month.

After that we will announce the final details on our return of capital plan for shareholders later, Andrew will review the specifics of the trilogy transaction and speak to the overall <unk> Biopharma Q2 financials. All of these actions drive towards our goal to maximize shareholder value I will now turn the call over to Ron.

The Florida to review your Perl right Ronda.

Thanks, Rick.

I am pleased to once again have the opportunity to share our latest performance update on your calorie, which is the first and only once daily nebulizer long acting muscarinic antagonist that provides a full 24 hours of control for patients and is indicated for the maintenance treatment of patients with COPD.

Okay.

Turning to slide six.

This quarter, you probably had its strongest quarter to date as a reminder, they are events biopharma and the interest co promote in the U S with their combined sales infrastructure targeting healthcare professionals, who treat COPD patients suitable for your salary.

<unk> Biopharma commercial and medical teams cover the hospital segment.

Beatrice is responsible for outpatient based community health care professionals.

From a financial perspective, which our profits on <unk> in the U S with 65% going to the address and 35%.

<unk> Biopharma.

Looking at slide seven this shows their advanced Biopharma is implied 35% share of net sales for <unk> during the second quarter of 2022 up $17 2 million.

I'm also pleased to highlight that <unk> year over year net sales have increased by 17% comparing Q2 of 2022 versus Q2 of 2021.

Overall.

Q2, 2022 demand increased 9% from Q1 and increased by 18% year over year.

Looking specifically at that their advanced hospital segment deployment efforts on slide eight.

In Q2 of 2022 doses sold exclusively in the hospital setting represented a year over year increase of 54% from Q2 of 2021, and an increase of 10, 4% from the previous quarter.

Demonstrating the highest quarter volume launched to date.

As we have previously stated.

The respiratory pandemic.

The launch phase of <unk> growth in 2020.

We have seen you tolerate hospital volume returned to growth in the second half of 2021 and this momentum has continued through the first half of 2022.

As the environment for Pulmonologists continues to normalize we believe we will continue to see upside for the brand as the team continues to execute against our strategy leveraging a hybrid mix of in person virtual and digital education and promotional efforts that effectively.

We communicate the core benefits and value proposition for <unk>.

With the continued achievement of new key hospital.

System formulary placements and the continued addition of new purchasing accounts. We believe these wins will yield significant growth through the remainder of 2022 and beyond as <unk> will be the first Lama of choice in many hospital systems.

Turning to slide nine you can see that <unk> share of the hospital setting increased to 11, 9% in Q2 of 2022 up from eight 7% in Q2 of 2021.

<unk> market share in the community setting also increased to 25, 3% through April of 2022, which is our latest data point up from 24, 1% in Q1 of 2022.

As we have previously noted many patients with COPD experienced an acute respiratory episodes serious enough to require a trip to the hospital.

And therefore, the hospital becomes a key point to assess patients and convert or switch them from their current medicine to your salary.

Data shows that.

Later than 50% of patients who receive you tolerate in the hospital setting are discharged with a prescription to continue their treatment in the community, allowing for continuity of <unk> maintenance therapy post hospitalization.

The <unk> biopharma in vitro teams continue to work collaboratively and effectively to convert.

Appropriate patients to your calorie during their hospital visit providing support to discharge and enabling them to be maintained on your salary after their return home.

We have been encouraged by the growth trends seen in the retail script data, where total prescriptions have increased 26, 5% year over year.

And new to brand prescriptions have increased 16, 7% year over year with both metrics, reaching new quarterly highs launch to date.

As a reminder, while the script data only include the retail channel they serve as a very useful proxy for the total community, which includes retail plus the Danny or durable medical equipment fulfillment channel representing the majority of <unk> sales volume.

Okay.

We continue to see the impact of the pandemic on our business receipt.

Which we believe is leading to improved demand patterns, along with our increasing ability to engage in in person field facing activity.

We anticipate <unk> growth will continue to accelerate throughout 2022 and beyond.

Lastly, turning to slide 10, the phase four <unk> study comparing improvements in lung function in adults with severe to very severe COPD and suboptimal <unk> flow rates following once daily treatment with either.

<unk> delivered via a standard jet nebulizer or Tia tropaeum delivered via dry powder inhaler continues to actively enroll patients.

<unk> is responsible for 35% of the cost of this study and we continue to guide to top line results within the first quarter of 2023.

I'll now turn the call over to Rick Graham.

Thanks Rhonda.

As Rick mentioned today, I'm going to focus on their blocks of team and internally discovered once daily norepinephrine reuptake inhibitor for symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy also referred to as MSA.

Moving to slide 12.

<unk> is a rare disease affecting approximately 50000 Americans, including men and women of all racial groups symptoms.

Symptoms tend to appear in a person around the age of 50 and advanced rapidly over the course of five to 10 years.

With progressive loss of motor function in patients eventually become bedridden.

While some of the symptoms of MSA can be treated there is no cure for the disease and currently there are no therapeutics that are able to slow disease progression.

70% to 90% of people with MSA have symptomatic <unk>.

And MSA patients with NIH blood pressure falls with operate owing to impaired release of norepinephrine.

The symptoms that include dizziness.

There is no approved therapy shown to provide sustained efficacy in mitigating the debilitating symptoms for the MSA patient with NIH.

Both of the currently available therapeutic treatment options have complex dosing regiments with three times Daily administration.

They have been shown to have limited durability of symptomatic treatment effect and how black box warnings for supine hypertension.

With a unique mechanism of action of once daily dosing regimen of durable symptom effect demonstrated MSA patients in the phase III study 179, no signal of supine hypertension, and a safety database of greater than 800 patients in healthy subjects ample OXXO team has the potential to markedly differentiate from other treat.

Options.

Moving to slide 13.

Top panel shows the situation when <unk> untreated at the cellular the vascular and the patient level and the <unk>.

Untreated MSA patient norepinephrine available for action has impacted their uptake by the norepinephrine transporter.

And patients with MSA low norepinephrine leads the basal dilation associated with a decrease in blood pressure.

Increase in vascular tone can result in symptoms that are associated with tissue hypoperfusion.

In contrast, the bottom panel shows what happens when the norepinephrine transporter action is blocked by ample oxygen.

Inhibition of this transporter it leads to an increase in norepinephrine, thereby increasing blood pressure, increasing organ perfusion and reducing the symptoms and MSA patients with NIH.

Moving to slide 14.

We released Phase III study results from study 170 in April which demonstrated a clear benefit in study patients with MSA and symptomatic moh.

I recall the study 170 included patients in patients with Parkinson's disease paradigm, I'll make failure and MSA.

It's important to note that our hypothesis has always been that patients with MSA, where most likely to respond as these patients have a central lesion with intact peripheral nerves that innovate blood vessels. That's why we pre specified in the protocol that 40% of the study population was to include MSA patients.

The benefit to patients with MSA was observed in multiple endpoints in study 170 <unk>.

Including a statistically significant effect on the orthostatic hypotension symptom assessment score also referred to as the IHS a composite score.

This effect on the IHS a composite score was driven by all six symptom scores favoring ample oxygen on the questionnaire.

These include dizziness vision fatigue weakness trouble concentrating in head and neck discomfort.

Today I'd like to share some additional data supporting the totality of evidence that ample oxygen is effective in treating patients with MSA.

Starting with the figure on the left treatment with ample oxygen and resulted in an increase in norepinephrine and an associated decrease in BHP G. The metabolite of norepinephrine.

This magnitude of change in Europe and effort is consistent with our phase III study published in clinical autonomic research and Theres a level of change that has been associated with symptom improvement.

Moving to the Middle panel continued treatment with ample OXXO team prevents a drop in blood pressure as demonstrated in the randomized withdrawal period from study 170.

Note that in the placebo group blood pressure decreased by 12 millimeters of Mercury relative to baseline after <unk> was withdrawn.

As we reported previously and consistent with an increase in norepinephrine and sustained blood pressure ample occitane treatment prevented a worsening of symptoms as assessed by the IHS a composite score.

In contrast patients in the placebo group experienced a one four point worsening in the IHS a composite score on average.

The impact of ample oxygen on norepinephrine level on blood pressure and on symptom scores is considered clinically meaningful.

As we shared in our press release on July 13th during a recent type C meeting with the FDA, we aligned on the path forward to an NDA filing with one additional phase III study and MSA patients with symptomatic moh.

Results from study 170 will provide supportive data for the NDA filing.

The primary endpoint of this new phase III study will be change in OE HSA composite score in.

And the study will be similar to study 170 million with a randomized withdrawal design.

We aim to start the new phase III study in the first quarter of 2023 and plan to provide additional details of the protocol is finalized.

We've gained tremendous operational and technical experience from our recently completed phase III program.

With this knowledge and experience we will streamline the protocol optimize trial site selection and with support from key opinion leaders trial lists and advocacy organizations. We're confident that we'll be able to deliver substantial time and cost savings for the new phase III study relative to the previous phase III program.

We reiterate that we expect a $25 million investment received from royalty pharma to cover the majority of these phase III costs.

Forward to updating you on the details once we finalize the study protocol I'll now turn the call over to Andrew to review the financials.

Thanks, Rick and before turning to our second quarter financials I'd like to comment on the trilogy lift the transaction with royalty pharma as it is transformational for their events Biopharma.

I'd like to start by recognizing the extraordinary extraordinary efforts of <unk>.

And extending my sincerest gratitude to the entire theremin Biopharma team, who brought this transaction to completion.

Additionally, I'd like to thank royalty pharma and GSK for their engagement and support throughout what was a competitive and thorough process.

Today, we are almost complete with deleveraging caravans as balance sheet, and we look forward to unlocking substantial value for our equity holders in the future.

On slide six and slide 16 summarizes the key components of our deal.

And of over $1 5 billion in potential total value.

We closed the deal on July 22022, and the transaction was carefully structured with royalty pharma to deliver three components of value to <unk> biopharma.

First upfront value in which we received a cash payment of approximately $1 1 billion in.

In exchange for all of our units and <unk> respiratory company LLC, representing our 85% economic interest in the sales based royalty rights on worldwide net sales of trilogy.

Secondly in medium term value in the form of potential milestone payments up to an aggregate of $250 million, which will be paid upon the achievement of trilogy revenue thresholds throughout calendar years 2022, 2023 through 2026.

In 2023 were eligible to receive a milestone payment equal to $50 million if trilogy global net sales exceed 2.863 billion.

As a recent point of reference during second quarter of 2022 global net sales of trilogy were $591 million.

Up 46% from Q2, 2021, and significantly exceeding GSK sell side consensus estimates by 23%.

Third and finally, we've retained long term value in the form of the return to <unk> Biopharma of our 85% interest in metrology royalties and what we are calling the outer year royalties or <unk> and some of our documentation.

The outer year royalties begin in 2029, and we will remain until our contractually defined royalty term expires on a country by country basis thereafter.

We calculate the net present value of the outer year royalties is approximately $200 million.

Derived from GSK, Bloomberg analysts' consensus forecasts for trilogy.

2032 for U S sales and through 2034 for ex U S sales.

As we discussed when announcing the deal this creative transaction structure monetize our equity our economic interest in trilogy royalties and allows their events biopharma to benefit from significant near term cash as well as retaining medium and long term value in trilogy royalties, which we expect will continue to benefit.

From GSK as global commercial execution.

And lead to the continued strong performance of trilogy overtime.

Finally, as a reminder, this monetization also removes uncertainty with the.

The receipt of trilogy royalties as the outer year royalties will be paid directly from royalty pharma to <unk> biopharma.

Moving the role of <unk> as the manager of Trc LLC.

Now moving to slide 17, we show our second quarter 2022 financial highlights compared to the second quarter of 2021.

R&D expenses for the second quarter of 2022 were $12 million compared to $43 8 million in the same period in 2021.

SG&A expenses for the second quarter of 2022 were $11 2 million compared to $18 3 million in the same period in 2021.

These quarterly figures exclude share based compensation, one time restructuring and transaction related expenses.

We ended the second quarter of 2022 with $133 million in cash and cash equivalents.

On slide 18, we are reiterating our financial guidance for the full year 2022.

For R&D expenses, we expect to invest between 45 and $55 million relative to the actuals of $168 million in 2021.

Of this expense range approximately $10 million is nonrecurring spend that was incurred in Q1 2022 to support the wind down of the items <unk> and <unk> clinical program.

R&D spend in Q3 and beyond will normalize and reflect recurring measured investments in our pipeline.

For SG&A expenses, we expect to spend between $45 35, and $45 million relative to actuals of $71 million in 2021.

Again, our operating expense guidance excludes share based compensation, one time restructuring and transaction related expenses.

As a result of our reduced spending and improved cash flow generation from <unk>, we expect to approach breakeven cash flow in the second half of 2022 and become sustainably cash flow positive going forward on an annual basis.

With that I'll return the call back to Rick Winningham for closing remarks.

Thanks, Andrew.

Turning to slide 19, <unk> Biopharma is in the midst of its transformation and this quarter has been pivotal as we reported key progress and we continue to demonstrate focus on our goals.

Our sale of 85% of the trilogy of lift of royalty interests to royalty pharma for over $1 $5 billion in potential total values delivers significant value to the company with again, it upfront and as Andrew mentioned of $1 1 billion of the mid term value of $250 million in contingent milestone payments.

Then downstream long term value and outer year royalties estimated to be approximately $200 million.

Royalty pharma strategic investment of up to $40 million in <unk> allows us to proceed expeditiously and retain a greater share of value of <unk> moving forward.

We expect the overall capital infusion of the company to enable us to restructure the <unk> balance sheet, which we're in the midst of and return capital to shareholders and to operate from a position of financial strength going forward.

In closing I'd like to thank GSK for their marketing excellence around trilogy royalty pharma for their investment and conviction to move trilogy, <unk> royalty transaction deal forward and invest in <unk> and to the internal <unk> Biopharma team that worked tirelessly to close the deal and meet the needs of the patient community.

We serve the COPD community with <unk> highest sales performance to date and the MSA community by offering them offering them hope that a more effective and safe option to manage their symptomatic <unk> has a path ahead, we're driving forward and we're well positioned to deliver medicines that make a difference and ongoing.

Shareholder value. Thank.

Thank you everyone for your time and participation, although I'll hand, the call back to the operator for questions.

Thank you Sir once again, if you'd like to ask a question you may do so by pressing the star key followed by the digit one on you touched on phone.

If listening via webcast. Please mute audio on your webcast device before asking a question over the phone.

Are using a speakerphone for todays call. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again Thats star one if you'd like to ask a question and we will pause for a moment to assemble our roster.

We'll have our first question.

From Eva <unk> from Cowen.

Congrats on all the progress.

So I had a question about <unk>.

What.

The onset of the mechanism of action.

When are you seeing the norepinephrine become elevated and how quickly is that translating to the blood pressure response.

That's a great question, Rick do you want to take that.

Yeah.

So.

Because it was a phase III trial, we were measuring norepinephrine relatively sporadically. So we're not measuring it day 123, and four but early on within a couple of weeks' time point, we do see norepinephrine levels changed that's expected because thats sort of in a direct effect of the drug action on the transporter. We also see a relatively.

Quick effect on blood pressure as well.

Where theres a little bit of a gap is with regard to symptoms and as we speak to our kols and physicians and understand what these patients are dealing with it does make sense that there can be a little bit of a lag between a change in our epinephrine or change in blood pressure, which are direct effects and then the symptom response, because it takes patients a little bit of time to understand.

The effectiveness that they're seeing on symptoms.

Great that's very helpful.

And my second question is on <unk>. So the growth in the hospital setting is very impressive.

How do you expect that performance to translate to overall sales and is the trajectory you're seeing so far.

Of lining up with your expectations.

Rhonda.

So I'll start with the latter component is it in line with our expectations, yes, and given how we have organized around the potential and really see the role of <unk>.

Having the ability to support the very sizable niche of the COPD market. We do anticipate continued growth in the hospital setting.

And I think the other important piece of this to understand which I think you do quite well already as we consider this hospital volume channel growth as of late.

Leading indicators for the community volume, so seeing that contribution over time.

Recognizing there is a difference in duration of therapy in the inpatient setting approximately three five days.

What is treatment in the outpatient setting.

Do you anticipate that.

That growth to continue.

How long is that.

Lag between the hospital growths in that community growth.

I still think that's hard to be.

That precise.

Because I still think of the performance of this brand is in launch mode.

We basically had our launch halted with the pandemic in Q1 of 2020 and getting back to that trajectory and seeing that uptake.

Little hard to be able to transcribe that too.

A very precise.

Okay.

Time contribution of the hospital business to the outpatient side.

So what we do see.

What we do see.

And recent market research is that.

50% of the.

So the hospital visits and discharges are company by.

A prescription.

The other key point is that we've just now.

<unk> quarter gotten back to the.

Pre pandemic levels with regard to patient visits.

And the Pulmonologist sort of normalized foreseeing respiratory.

<unk> oriented care.

The hospital was hit harder.

Then the community into the pandemic both were hit by the hospitals hit a little bit harder. So the growth rates that you are seeing in the hospital are higher than the growth rates. Currently that you are seeing in the community, but you you do have this element of a leading indicator.

Rhonda said.

It's really up to the Villa trusts in the assets.

<unk> biopharma teams to maximize the opportunity that we're seeing with the terrific hospital growth that we have and the ongoing momentum that we see in the community.

Great. Thank you so much for taking my questions.

Our next question comes from Vikram.

From Morgan Stanley .

Good Disgustful onslaught vikram.

We have one question so for <unk>, assuming the phase III study you upon an MSA is positive.

What are audited dataset and started that you would include in the NDA filing.

How large of a study do you expect the phase III program to be.

In terms of patient and road on sites activated thank.

Thank you.

Rick you want to take that.

Yes sure so.

Thanks for the question. So the first question if the phase III study is positive what datasets would be included in the filings.

With our recent type C meeting with FDA, we had several important agreements that were reached one was we would do one new study in patients with MSA and that would be supplemented by the MSA results from study 170.

The other agreement was we agreed on the primary endpoint for that New study, which is the IHS a composite.

That's the endpoint for which we saw a statistically significant effect in the phase II study and one I'm sorry in the phase III study of 170.

And then we also agreed on general study design elements, namely that it will be a similar study to 170 with a randomized withdrawal design. The datasets therefore would be the new study study $1 70.

Safety data from our Phase II study or 169 study and then our clinical pharmacology program as well, which we've previously had conversations with FDA and aligned on that approach.

With regard to the second question.

It's too early to comment on the number of patients that we're going to include and site selection.

Just recently came out of this important meeting with the FDA. So now that we have an alignment will be working on finalizing the protocol will be doing site feasibility we have tremendous experience already from running a large global phase III program, and we're going to take the learnings from that and conduct a very efficient study.

This new study.

I'd also just.

In the meantime refer you to what we had put out.

I think it was around it was in April we had put out on our slides that in the.

170 study.

We saw a statistically significant effect on IHS, a composite with 38 patients.

Awesome. Thank you very much.

Our next question comes from Joseph Stringer from Needham <unk> Company.

Hi, This is Ben on.

On for Joe Thanks for taking my questions.

Just one question kind of similar related so just to clarify for the planned phase III MSA trial, what type of MSA patients are you considering including in terms of inclusion criteria will be similar or different to the previous MSA patients enrolled in that trial.

Yes, Rick go ahead.

Yeah, Hi, Ben Thanks for the question.

Based on what we.

In study 170 with MSA patients and we're very excited about the totality of data everything that we look at holds up it makes good scientific sense, we're going to try to keep things as consistent as possible.

To study 170, we don't want to change any variables because we believe theres a good effect in these patients that we had selected.

You might remember we did things like included in enrollment steering committee to make sure that we're trying that we're able to decrease signal from noise enroll the right patients.

We will have certain other criteria at baseline, making sure that these are patients that have MSA and that may respond.

And really just trying to find the best ways to minimize signal from noise, which we did a pretty good job of in study 170.

Team has taken an extremely careful data driven approach, though to look at those elements, perhaps in the 170 study that we might want to make some modifications to and we're really threading. The needle on that new study design. So largely similar to 170 with regard to patient selection, but taking a data driven approach to optimize this.

Next study.

Great. Thanks very much.

It appears we have no further questions on the phone and I would now like to turn the conference back to Mr. Winningham. Please go ahead Sir.

Thank you operator, I would like to thank thank everyone for joining us on this call today.

Extremely proud of the accomplishments of the <unk> biopharma team in the second quarter.

And everyone.

Everyone, who has participated in in fact, achieving the transformative goals that we've achieved in the second quarter and we look forward to bringing.

News of of continued progress against the company's objectives in the third quarter. The fourth quarter of this year. Please have a great day and again, thank you for joining us.

This concludes today's conference call. We thank you for your participation you may now disconnect.

[music] Steve question.

[music].

Ladies and gentlemen, good afternoon, I'd like to welcome everyone to the third event Biopharma second quarter 2022 conference call.

During the presentation, all participants will be in a listen only mode.

A question and answer session will follow the company's formal remarks to ask a question. Please press the star key followed by the did you want on your phone.

Ed.

Good afternoon, and thank you for joining the <unk> Biopharma second quarter 'twenty to 2022 conference call to discuss our business.

As always I remind you that this call will contain forward looking statements that involve risks and uncertainties, including statements about our development pipeline expected benefits of our products and has to pay the timing of clinical trials regulatory filings and expected financial results.

Information concerning factors that could cause results to differ materially from our forward looking statements.

God further in our filings with the FCC.

I would direct your attention to slide three.

Joining us are Rick Winningham, Chief Executive Officer, followed by Rhonda <unk> Senior Vice President Chief Business Officer, Nick.

Brown Senior Vice President Research and development and Andrew Hindman, Chief Financial Officer.

Now I will hand, the call to Rick Winningham for opening remarks.

Thanks, Gail turning to slide four thereabouts Biopharma. Its purpose is to create medicines that make a difference last September we announced a restructuring of the company to optimize our business, while staying true to our purpose this quarter the transformation continues.

I couldnt be prouder of the team that's focused and persevere to deliver the strongest sales quarter for <unk> since its launch Rhonda will review the performance details.

<unk> announced sale of our trilogy royalty interests to royalty pharma for approximately $1 1 billion in upfront cash and a total potential value of over one 5 billion.

Furthermore, as we shared when we announced the <unk> royalty transaction.

Deliver strategic value in the near medium and long term upon receipt of the $1 $1 billion upfront. We immediately initiated a multi step process to eliminate all outstanding fair events Biopharma that the tender offer to redeem our 2023 convertible notes is ongoing and should close.

Later this month.

After that we will announce the final details on our return of capital plan for shareholders later, Andrew will review the specifics of the trilogy transaction and speak to the overall thorough Vance Biopharma Q2 financials. All of these actions drive towards our goal to maximize shareholder value I will now turn the call over to Rob.

Rhonda, Florida to review your Perl right Ronda.

Thanks, Rick.

I am pleased to once again have the opportunity to share our latest performance update on your salary, which is the first and only once daily nebulizer long acting muscarinic antagonist that provides a full 24 hours of control for patients and is indicated for the maintenance treatment of patients with COPD.

Turning to slide six.

This quarter, you probably had its strongest quarter to date as a reminder, <unk> biopharma and <unk> co promote in the U S with their combined sales infrastructure targeting healthcare professionals, who treat COPD patients suitable for you tolerate.

<unk> Biopharma commercial and medical teams cover the hospital segment.

Beatrice is responsible for outpatient based community health care professionals.

From a financial perspective, which our profits on <unk> in the U S with 65% going to be addressed and 35% to <unk> biopharma.

Looking at slide seven this shows their advanced Biopharma is implied 35% share of net sales for <unk> during the second quarter of 2020 to $17 2 million.

I'm also pleased to highlight that <unk> year over year net sales have increased by 17% comparing Q2 of 2022 versus Q2 of 2021.

Overall.

Q2, 2022 demand increased 9% from Q1 and increased by 18% year over year.

Looking specifically at that their advanced hospital segment deployment efforts on slide eight.

In Q2, 2022 doses sold exclusively in the hospital setting represented a year over year increase of 54% from Q2 of 2021, and an increase of 10, 4% from the previous quarter.

Demonstrating the highest quarter volume launched to date.

As we have previously stated.

The respiratory pandemic in the launch phase of <unk> growth in 2020, but we have seen you tolerate hospital volume returned to growth in the second half of 2021 and this momentum has continued through the first half of 2022.

Communicate the corp benefits and value proposition for <unk>.

With the continued achievement of new key hospital.

System formulary placement and the continued addition of new purchasing accounts.

Believe these wins will yield significant growth through the remainder of 2022 and beyond as <unk> will be the first Lama of choice in many hospital systems.

Turning to slide nine you can see that <unk> share of the hospital setting increased to 11, 9% in Q2 of 2022 up from eight 7% in Q2 of 2021.

<unk> market share in the community setting also increased to 25, 3% through April of 2022, which is our latest data point up from 24, 1% in Q1 of 2022.

As we have previously noted many patients with COPD experienced an acute respiratory episodes serious enough to require a trip to the hospital and therefore, the hospital becomes a key point to assess patients and convert our switch them from their current medicine <unk>.

Okay.

Data shows that.

Greater than 50% of patients who received <unk> in the hospital setting are discharged with a prescription to continue their treatment in the community, allowing for continuity of <unk> maintenance therapy post hospitalization.

The <unk> Biopharma and via trucks teams continue to work collaboratively and effectively too.

To convert appropriate patients to your calorie during their hospital visits providing support to discharge and enabling them to be maintained on your salary after their return home.

We have been encouraged by the growth trends seen in the retail script data, where total prescriptions have increased 26, 5% year over year.

And new to brand prescriptions have increased 16, 7% year over year with both metrics, reaching new quarterly highs launch to date.

Okay.

We continue to see the impact of the pandemic on our business receipt.

Which we believe is leading to improved demand patterns, along with our increasing ability to engage in in person field facing activity.

We anticipate <unk> growth will continue to accelerate throughout 2022 and beyond.

Lastly, turning to slide 10, the phase for the <unk> study comparing improvements in lung function in adults with severe to very severe COPD and suboptimal inventory flow rates following once daily treatment with either.

Robert Denison delivered via a standard jet nebulizer or Tia tropaeum delivered via dry powder inhaler continues to actively enroll patients.

<unk> is responsible for 35% of the cost of this study and we continue to guide to topline results within the first quarter of 2023.

I'll now turn the call over to Rick Graham.

Thanks Rhonda.

As Rick mentioned today, I'm going to focus on ample oxiclean and internally discovered once daily norepinephrine reuptake inhibitor for symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy also referred to as MSA.

Moving to slide 12.

MSA as a rare disease affecting approximately 50000 Americans, including men and women of all racial groups.

Symptoms tend to appear in person around the age of 50 and advanced rapidly over the course of five to 10 years with progressive loss of motor function in patients eventually become bedridden.

While some of the symptoms of MSA can be treated there is no cure for the disease and currently there are no therapeutics that are able to slow disease progression.

70% to 90% of people with MSA have symptomatic NIH.

And MSA patients with NIH blood pressure falls when operate owing to impaired release of norepinephrine.

The symptoms that include dizziness.

There is no approved therapy shown to provide sustained efficacy in mitigating the debilitating symptoms for the MSA patient with NIH.

Both of the currently available therapeutic treatment options have complex dosing regiments with three times Daily administration.

They have been shown to have limited durability of symptomatic treatment effect and have black box warnings for supine hypertension.

With a unique mechanism of action of once daily dosing regimen of durable symptom effect demonstrated MSA patients in the phase III study 170, and no signal of supine hypertension, and a safety database of greater than 800 patients in healthy subjects ample occitane and has the potential to markedly differentiate from other treat.

<unk> options.

Moving to slide 13.

Top panel shows the situation when NIH is untreated at the cellular the vascular and the patient level and the <unk>.

Untreated MSA patient norepinephrine available for action has impacted their uptake by the norepinephrine transporter.

And patients with MSA low norepinephrine leads the basal dilation associated with a decrease in blood pressure.

Increase in vascular tone kind of result in symptoms that are associated with tissue hypoperfusion.

In contrast, the bottom panel shows what happens when the norepinephrine transporter action is blocked by ample occitane inhibition.

Inhibition of this transporter it leads to an increase in norepinephrine, thereby increasing blood pressure, increasing organ perfusion and reducing the symptoms of MSA patients with NIH.

Moving to slide 14.

We released Phase III study results from study 170 in April which demonstrated a clear benefit in study patients with MSA and symptomatic and of which you may recall that study 170 included patients in patients with Parkinson's disease paradigm, I'll make failure and MSA.

It is important to note that our hypothesis has always been that patients with MSA, where most likely to respond as these patients have a central lesion with intact peripheral nerve that innovate blood vessels that is why we pre specified in the protocol that 40% of the study population was to include MSA patients.

The benefit to patients with MSA was observed in multiple endpoints in study 170.

Including a statistically significant effect on the orthostatic hypotension symptom assessment score also referred to as the HSA composite score.

This effect on the IHS a composite score was driven by all six symptom scores favoring ample occitane on the questionnaire. These include dizziness vision fatigue weakness trouble, concentrating and head and neck discomfort.

Today I'd like to share some additional data supporting the totality of evidence with ample oxygen is effective in treating patients with MSA.

Starting with the figure on the left treatment with ample oxygen and resulted in an increase in norepinephrine and an associated decrease in THP G. The metabolite of norepinephrine.

This magnitude of change in Europe and effort is consistent with our phase III study published in clinical autonomic research and there is a level of change that has been associated with symptom improvement.

Moving to the Middle panel continued treatment with ample oxygen prevents a drop in blood pressure as demonstrated in the randomized withdrawal period from study 170 <unk>.

Note that in the placebo group blood pressure decreased by 12 millimeters of Mercury relative to baseline after <unk> was withdrawn.

In contrast patients in the placebo group experienced a 1.5 dollars four point worsening in the IHS a composite score on average.

The impact of ample oksana norepinephrine level on blood pressure and on symptom scores is considered clinically meaningful.

The results from study 170 will provide supportive data for the NDA filing.

The primary endpoint of this new phase III study will be change in or HSA composite score and the study will be similar to study 170 with a randomized withdrawal design.

We aim to start the new phase III study in the first quarter of 2023 and plan to provide additional details of the protocol is finalized.

We've gained tremendous operational and technical experience from our recently completed phase III program.

We reiterate that we expect a $25 million investment received from royalty pharma to cover the majority of these phase III costs.

Forward to updating you on the details once we finalize the study protocol I will now turn the call over to Andrew to review the financials.

Thanks, Rick and before turning to our second quarter financials I'd like to comment on the trilogy lift a transaction with royalty pharma as it is transformational for their events Biopharma.

I'd like to start by recognizing the extraordinary extraordinary efforts.

And extending my sincerest gratitude to the entire <unk> Biopharma team, who brought this transaction to completion.

Additionally, I would like to thank royalty pharma and GSK for their engagement and support throughout what was a competitive and thorough process.

We are almost complete with deleveraging caravans as balance sheet, and we look forward to unlocking substantial value for our equity holders in the future.

On slide six and slide 16 summarizes the key components of our deal.

And of over $1 5 billion in potential total value.

We closed the deal on July 22022, and the transaction was carefully structured with royalty pharma to deliver three components of value to <unk> biopharma.

First upfront value in which we received a cash payment of approximately $1 1 billion in.

In exchange for all of our units in <unk> respiratory company LLC, representing our 85% economic interest in the sales based royalty rights on worldwide net sales of trilogy.

In 2023, we are eligible to receive a milestone payment equal to $50 million if trilogy global net sales exceed 2.863 billion.

As a recent point of reference during second quarter of 2022 global net sales of trilogy were $591 million.

Up 46% from Q2, 2021 and significantly exceeding GSK as sell side consensus estimates by a 23%.

Third and finally, we've retained long term value in the form of the return to their events Biopharma of our 85% interest in metrology royalties and what we are calling the outer year royalties are <unk> and some of our documentation.

The outer year royalties begin in 2029, and we will remain until our contractually defined royalty term expires on a country by country basis thereafter.

We calculate the net present value of the out of your royalty is approximately $200 million.

Derived from GSK Bloomberg analyst consensus forecasts for trilogy.

2032 for U S sales and through 2034 for ex U S sales.

As we discussed when announcing the deal this creative transaction structure monetize our equity our economic interest in <unk> royalties and allows their events biopharma to benefit from significant near term cash as well as retaining medium and long term value in trilogy royalties, which we expect will continue to benefit.

From GSK as global commercial execution and lead to the continued strong performance of trilogy overtime.

Finally, as a reminder, this monetization also removes uncertainty with.

The receipt of trilogy royalties as the outer year royalties will be paid directly from royalty pharma to <unk> biopharma.

Moving the role of <unk> as the manager of Trc LLC.

Now moving to slide 17, we show our second quarter 2022 financial highlights compared to the second quarter of 2021.

R&D expenses for the second quarter, 2022 were $12 million compared to $43 8 million in the same period in 2021.

G&A expenses for the second quarter of 2022 were $11 2 million compared to $18 3 million in the same period in 2021.

These quarterly figures exclude share based compensation, one time restructuring and transaction related expenses.

We ended the second quarter of 2022 with $133 million in cash and cash equivalents.

On slide 18, we are reiterating our financial guidance for the full year 2022.

For R&D expenses, we expect to invest between 45 and $55 million relative to the actuals of $168 million in 2021.

Of this expense range approximately $10 million is nonrecurring spend that was incurred in Q1 2022 to support the wind down of the items that nib and add products to your clinical program.

R&D spend in Q3 and beyond will normalize and reflect recurring measured investments in our pipeline.

For SG&A expenses, we expect to spend between 45, 35% and $45 million relative to actuals of $71 million in 2021.

Again, our operating expense guidance excludes share based compensation, one time restructuring and transaction related expenses.

With that I'll return the call back to Rick Winningham for closing remarks.

Thanks, Andrew.

Turning to slide 19, <unk> Biopharma is in the midst of its transformation and this quarter has been pivotal as we reported key progress and we continue to demonstrate focus on our goals.

Our sale of 85% of the trilogy of lift of royalty interests to royalty pharma for over $1 $5 billion in potential total values deliver significant value to the company.

Again, it upfront and as Andrew mentioned of $1 1 billion of the mid term value of $250 million in contingent milestone payments and then downstream long term value and outer year royalties estimated to be approximately $200 million.

Royalty pharma strategic investment of up to $40 million and they have <unk> allows us to proceed expeditiously and retain a greater share of value of <unk> moving forward.

We expect the overall capital infusion of the company to enable us to restructure that their events balance sheet, which we're in the midst of and return capital to shareholders and to operate from a position of financial strength going forward.

In closing I'd like to thank GSK for their marketing excellence around trilogy royalty pharma for their investment and conviction to move trilogy, <unk> royalty transaction deal forward at Investor day in <unk> and to the internal <unk> Biopharma team that worked tirelessly to close the deal and meet the needs of the patient.

We serve the seed.

<unk> community with <unk> highest sales performance to date and the MSA community by offering them offering them hope that a more effective and safe option to manage their symptomatic <unk> has a path ahead, we're driving forward and we're well positioned to deliver medicines that make a difference and ongoing shareholder value.

Thank you everyone for your time and participation in the <unk> I'll hand, the call back to the operator for questions.

Thank you Sir once again, if you'd like to ask a question you may do so by pressing the star key followed by the digit one on you touched on phone.

If listening via webcast. Please mute audio on your webcast device before asking a question over the phone. If you are using a speaker phone for todays call. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again Thats star one if you'd like to ask a question and we'll pause for a moment to assemble our roster.

We'll have our first question from.

Eva <unk> from Cowen.

Congrats on all the progress.

So I had a question about <unk>.

What.

The onset of the mechanism of action.

When are you seeing the norepinephrine become elevated and how quickly is that translating to the blood pressure response.

That's a great question Eva Rick do you want to take that.

Yeah.

So.

Because it was a phase III trial, we were measuring norepinephrine relatively sporadically. So we're not measuring it day 123, and four but early on within a couple of weeks' time point, we do see norepinephrine levels changed that's expected because that's sort of in a direct effect of the drug action on the Trans border. We also see a relatively.

Quick effect on blood pressure as well.

And the effectiveness that they're seeing on symptoms.

Great that's very helpful.

And my second question is on <unk>.

So the growth in the hospital setting is very impressive.

How do you expect that performance to translate to overall sales and is the trajectory you're seeing so far.

Lining up with your expectations.

Rhonda.

So I'll start with the latter component is it in line with our expectations, yes, and given how we have organized around the potential and really see the role of <unk>.

Having the ability to score the very sizable niche of the COPD market. We do anticipate continued growth in the hospital setting.

And I think the other important piece of this to understand which I think you do quite well already as we considered this hospital volume channel growth as of late.

Leading indicators for the community volumes has seen that contribution over time.

Recognizing there is a difference in duration of therapy in the inpatient setting approximately three five days.

What is treatment in the outpatient setting.

Do you anticipate that.

That growth to continue.

How long is that.

Lag between the hospital growths in that community growth.

I still think that's hard to be.

That precise Eva Tim because I still think of the performance of this brand is in launch mode.

We basically had our launch halted with the pandemic in Q1 of 2020 and getting back to that trajectory and seeing that uptake.

Hard to to be able to transcribe that too.

A very precise.

Okay.

Time contribution of the hospital business to the outpatient side.

But even what we do see.

What we do see.

And recent market researches that.

50% of the <unk>.

Of the hospital visits and discharges are company by.

A prescription.

The other key point is that we've just now.

<unk> quarter gotten back to the.

Pre pandemic levels with regard to patient visits.

And the Pulmonologists sort of normalized foreseeing respiratory.

RSP Tory oriented care.

The hospital was hit harder.

The community.

And the pandemic both were hit by the hospitals hit a little bit harder. So the growth rates that youre seeing in the hospital are higher than the growth rates currently that you are seeing.

In the community, but you you do have this element of a leading indicator as Rhonda said.

It's really up to the via <unk>.

<unk> biopharma teams to maximize the opportunity that we're seeing with the terrific hospital growth that we have and the ongoing momentum that we see in the community.

Great. Thank you so much for taking my questions.

Our next question comes from Vikram.

From Morgan Stanley .

Disgustful offload vikram.

We have one question so for <unk>, assuming the phase III study you upon an MSA is positive.

What are audited dataset on studies that you would include in the NDA filing on how large of a study do you expect the phase III program to be intense.

Terms of patient and road on sites activated.

Thank you.

Rick you want to take that.

Yeah sure. So thanks for the question. So the first question if the phase III study is positive what datasets would be included in the filing.

The other agreement was we agreed on the primary endpoint for that New study, which is the IHS a composite.

That's the endpoint for which we saw a statistically significant effect in the phase II study in <unk> I'm, sorry in the phase III study of 170.

And then we also agreed on general study design elements, namely that it will be a similar study to 170 million with a randomized withdrawal design.

The datasets, therefore would be the new study study 170.

Safety data from our Phase II study or 169 study and then our clinical pharmacology program as well, which we've previously had conversations with FDA and aligned on that approach.

With regard to the second question.

It's too early to comment on the number of patients that we're going to include and site selection. We just recently came out of this important meeting with the FDA. So now that we have an alignment will be working on finalizing the protocol will be doing site feasibility we have tremendous experience already from running a large global phase III program and we're going to take the.

Learnings from that and conduct a very efficient study in.

And this new study.

I'd also just.

In the meantime refer you to what we had put out.

I think it was around it was in April we had put out on our slides that in the.

170 study.

Statistically significant effect on IHS, a composite with 38 patients.

Awesome. Thank you very much.

Our next question comes from Joseph Stringer from Needham <unk> Company.

Hi, This is Ben on.

On for Joe Thanks for taking our questions.

Just one question kind of similar related to just to clarify for the planned phase III MSA trial, what type of MSA patients are you considering including in terms of inclusion criteria will be similar or different to the previous syndicated patients enrolled in that trial.

Yes, Rick go ahead.

Yeah, Hi, Ben Thanks for the question.

Based on what we thought.

Study 170, we don't want to change any variables because we believe theres a good effect in these patients that we had selected you.

You might remember we did things like included in enrollment steering committee to make sure that we're trying that we're able to decrease signal from noise and enroll the right patients.

We will have certain other criteria at baseline.

I'm sure that these are patients that have MSA and that may respond and really just trying to find the best ways to minimize signal from noise, which we did a pretty good job of in study 170.

The team has taken an extremely careful data driven approach, though to look at those elements, perhaps in the 170 study that we might want to make some modifications to and we're really threading. The needle on that new study design. So largely similar to 170 with regard to patient selection, but taking a data driven approach to optimize this.

Next study.

Great. Thanks very much.

It appears we have no further questions on the phone and I would now like to turn the conference back to Mr. Winningham. Please go ahead Sir.

Thank you operator, I would like to thank thank everyone for joining us on this call today.

Extremely proud of the accomplishments of the <unk> biopharma team in the second quarter.

And everyone.

Everyone, who has participated in.

And in fact, achieving the transformative goals that we've achieved in the second quarter and we look forward to bringing.

News of continued progress against the company's objectives in the third quarter. The fourth quarter of this year. Please have a great day and again, thank you for joining us.

This concludes today's conference call. We thank you for your participation you may now disconnect.

Q2 2022 Theravance Biopharma Inc Earnings Call

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