Q3 2022 scPharmaceuticals Inc Earnings Call
Greetings and welcome to the AC Pharmaceuticals.
Quarter 'twenty to 'twenty two earnings call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press Star then zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is not my pleasure to introduce your host Hunt with midstream. Thank you. Mr. Fitzgerald you may begin.
Thank you operator.
Turning the call over to management I would like to make the following remarks concerning forward looking statements. All statements on this conference call other than historical facts are forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding SC pharmaceuticals expected future financial results and managements expectation.
And plans for the business and for Euro six.
The words anticipate believe estimate expect intend guidance confidence target project and other similar expressions are used typically to identify such forward looking statements. These forward looking statements are not guarantees of future performance and may involve and are subject to certain.
Risks and uncertainties and other important factors that may affect SC pharmaceuticals business financial condition and other operating results.
These include but are not limited to the risk factors and other qualifications contained in <unk> Pharmaceuticals annual report on Form 10-K quarterly reports on Form 10-Q, and other reports filed by the company with the SEC to which your attention is directed.
Actual outcomes and results may differ materially from what is expressed or implied by these forward looking statements any forward looking statements made on this conference call, including responses to your questions are based on current expectations as of today NFC pharmaceuticals expressly disclaims any intent or obligation to update these.
Forward looking statements, except as required by law.
It is now my pleasure to turn the call over to Mr. John Tucker Chief Executive Officer of <unk> Pharmaceuticals.
John .
Thank you Ron and thanks to everyone listening to this afternoons call and webcast are first in the history of our company I will begin with an operational overview, including a recap of recent development and racial notes our SVP of finance will follow with a brief review of our financials.
The October FDA approval of <unk>, the first and only self administered subcutaneous loop diuretic for the at home treatment of congestion in chronic heart failure represents the culmination of years of unwavering effort on behalf of the entire EMC pharmaceuticals team.
We have successfully developed what we believe to be a truly significant advancement in the management of heart failure.
<unk> offers a treatment option outside of the hospital, either pre or post admission by reducing preventable hospital admissions and Readmissions, we have the potential to effectively treat patients in the comfort of their own homes and potentially deliver significant cost savings for payers.
Given that the benefits of <unk> crude and multiple health care stakeholders, we anticipate positive uptake and are preparing for a robust commercial launch of <unk>.
Worth noting that we are very pleased with the final approved package insert and label, which we believe allows us to pursue the large population of New York Heart Association class II and III heart failure patients, who may stand to benefit from this novel treatment for those who may be new to the FC pharmaceutical story, where <unk> is our proprietary form.
<unk> that is designed to be administered by an on body of user.
West pharmaceutical services proprietary smart dose on body drug delivery system technology.
Rosemont is most widely used oral and parental diabetic available for patients with congestive heart failure, but the bioavailability of oral for <unk> decreases and becomes highly variable during episodes of worsening symptoms. However.
However, by enabling subcutaneous administration via the West Smart dose on body delivery system technology, we have been able to achieve greater than 99% bio available ability.
Terrible to that of an IV bolus, which is typically admitted administered in a hospital setting.
<unk> the patient can receive IV comparable treatment in the comfort of their own home when oral for <unk> isn't sufficient.
It has been estimated that up to 90% of patients presenting to the emergency department with symptoms of worsening heart failure are admitted to the hospital and 50% of these admissions maybe potentially avoided.
Heart failure is therefore, a significant pain point for health care payers. The average cost of a heart failure related hospital admissions for Medicare patients.
Nearly $19000 in heart failure is a top condition that is being targeted by the centers for Medicare and Medicaid services, hundreds hospital readmission reduction program or <unk> or RFP.
Heart failure is also significant burn to hospitals. The average length of stay is five two days, while CMS reimburses just three nine days under the current DRG hospitals also faced significant exposure to financial penalties, resulting from Readmissions under the HR P program just reference.
So that demonstrates the magnitude of the cost savings that can potentially be realized but for us we.
We ran a prospective clinical trial freedom Asia.
<unk> of which we brought out in July of last year to summarize the key takeaways select patients who presented emergency room within a worsening heart failure event were treated with <unk> at home as opposed to be admitted to the hospital partially related costs within track for 30 days as compared to historically matched comparator patients treated with <unk>.
Six out of Hartley related costs that were lower by an average of $16995.
Those figure excludes the cost of growth prospects, which had not been stout established at the time of the study completion. This conclusion is unchanged by more aggressively treating patients outside of the hospital, where possible significant healthcare costs can be avoided.
Notably this result was achieved with a very high level of statistical significance and in fact based on the results from the planned pre specified interim analysis conducted to confirm the final sample size and following input from statisticians principal investigators payer advisors in health economics and outcomes research experts.
<unk> was terminated early at 21 24 subjects is versus the original enrollment target 34.
The final analysis. Therefore, it included 24 subjects treated with <unk> and 66 match competitors based on seven variables associated associated with hospitalization.
More recently, we announced positive results from our phase II pilot study at home H F. This.
This study consider proceeds for the treatment as usual approach in chronic heart failure patients presenting to our heart failure clinic with worsening congestion.
Wiring augmented diuresis.
Study enrolled 51 subjects of which 34 receive proceeds and 17 receive treatment as usual along the key findings subjects randomized to <unk> had a 37% reduction in the risk of a heart failure hospitalization at day 30.
Relative to patients randomized the treatment as usual. In addition, all pre defined secondary endpoints measuring symptoms of congestion quality of life and functional status favorable ferocious group.
Needless to say we were very pleased with the results of these studies, which added significantly to the growing body of clinical and pharma co economic evidenced favoring the <unk> versus the current standard treatment protocol.
Our presence at important medical meetings is key to our efforts to drive awareness of <unk> as a new element of the heart failure treatment paradigm to that end last month, we presented two posters at the 2022 annual scientific meeting of the heart failure Society of America.
This is among the most important we'll intended gatherings of heart failure experts each year. We also had a large coming soon campaign that allowed us the opportunity to drive both brand and name awareness anticipate anticipation of the <unk>.
Turning now to the total addressable market there are approximately $7 2 million heart failure patients in the U S who experienced approximately $4 1 million heart failure episodes of fluid overload per year of these we estimate $2 1 million episodes to be addressable by <unk>.
If we assume an average cost of <unk> of approximately $3300 per episode the equivalent of four doses at a WAC price of $822 per dose that yields an addressable market opportunity of $6 9 billion.
So we believe there is a substantial amount of opportunity here and we believe <unk> once launched will be adopted rapidly turning now to our launch preparation activities. We are working towards a broad commercial launch of <unk> in the first quarter of 2023, we have completed or in the process, including several important activities associated with the launch.
Beginning with distribution, we've identified Cardinal health as our third party logistics provider.
We are building a limited specialty pharmacy network with biometric serving as lead specialty pharmacy.
In terms of reimbursement, we have held productive discussions with the largest provider of Medicare part D plans.
Our compelling farmer economic data such as those that we obtained from our freedom HFF study with P&C Committee meetings, a range with a number of the top players this quarter.
As we indicated previously given the strong clinical and pharma economic case to be made for <unk> as a key component of an updated heart failure treatment Regiment, we anticipate few obstacles and securing favorable formulary replacement.
From a marketing perspective, we rolled out our comprehensive coming soon campaign at both the recent heart failure Society of America annual meeting and the American Heart Association scientific sessions that generated encouraging interest.
<unk> been busy in the field and have already made contact with over 500 key opinion leaders in the heart failure space in 2022.
Finally in terms of sales team and infrastructures, we have hired a highly qualified VP of sales and what I regard as a top tier regional sales directors. We also have contingent offers out to approximately 40 field territory sales representatives.
We are advancing a comprehensive multifaceted launch plan that we believe positions us well to maximize our reach broadly both heart failure physicians and patients.
To ensure that we have the resources available to support our launch of <unk> commercialization plan, we entered into a $100 million.
Secured debt facility with funds managed by Oaktree capital management on October 13th 2022 at which point 50 million became payable to us immediately.
Remaining $50 million becomes available in $225 million tranches, each tied to the achievement of Prespecified commercial milestones that facility carries an interest rate equal to the three months secured overnight financing rate sulfur.
$8 75, with the interest rate cap at 11 75 per year.
Following the achievement of $100 million in trailing 12 month U S net sales of <unk>.
The sulfur premium will be lowered to 825%.
The debt facility is expected mature five years from funding and carries a 36 month interest only period. We believe these terms are favorable favorable to a company. We are very grateful for the support of Oaktree at this transformational time.
At this point I'll turn the call over to our senior Vice President Finance Rachel notes for a review of our third quarter results and final financial position Rachel.
Thanks, John .
As of September 30th 2022, we held $45 $4 million in cash cash equivalents restricted cash and investments.
<unk> any net funds received from the upstream project final Goldman as previously discussed.
Now I will cover a few income statement items.
Reported a net loss of $10 $2 million for the third quarter of 2022 compared to a net loss of $6 6 million for the comparable period in 2021.
Search and development expenses were $3 $7 million for the third quarter of 2022 compared to $3 $7 million for the comparable period in 2000 2021.
General and administrative expenses were $6 $3 million for the third quarter of 2020 compared to $2 $2 million for the comparable period in 2021.
Increase in general and administrative expenses for the quarter ended September 30th 2022 was primarily attributable to an increase in employee related costs and commercial preparation costs.
Based on our current operating plan, we have adjusted our 2022 net loss.
$38 million to $41 million, a decrease over prior guidance of $43 million to $48 million.
As of September 30th 2022, we had 27 billion 402121 total shares outstanding that concludes the financial update John .
Thanks, Rachel and this concludes our prepared remarks at this point, we will open the call for questions.
Thank you we will now be conducting a question and answer session.
I would like to ask a question. Please press Star then one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue.
You May press Star and then two if you would like to remove your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Okay.
Our first question is from Brian <unk> of SVP Securities. Please go ahead.
Okay, great, Thanks and afternoon everyone.
So a couple of quick questions on for Essex, and the patient types that you expect at the beginning of the launch could you just go over what the features you expect to see in the early adopter patients in first quarter win for a six launches.
Sure and I'll, let Steve answer that question Steve.
Yes, I think the largest <unk>.
Blue patient volume for <unk> six is the patients pre hospitalization who are worsening.
They are on oral diabetics, despite that background therapy.
There is still increasing and symptoms.
And signs and the severity and that will be the best opportunity for us to intervene and.
Reset their fluid status and help them stay at home and avoid having to go to the ER and the hospital.
There is also a good population of patients who who do reach the hospital.
They've been treated stabilized in there.
Discharged.
A.
A significant portion of those 25% to 30% of them.
Are readmitted within 30 days and those patients will also benefit from <unk> in the post discharge setting if there's any increase in signs and symptoms of fluid overload.
Got it helpful.
And I was also curious.
Anecdotally what are you hearing from Kols and physicians regarding for Essex's label and also particularly curious what youre hearing about the monitoring recommendations because my senses.
Did seem fairly flexible so if you can elaborate on that that'd be great.
Okay. Thanks, Ron I'll, Steve answer that again, yes.
Yes.
The folks have looked at the label are very pleased with it.
I don't see anything that is out of the ordinary it's routine monitoring as they do now with.
An escalation of oral diabetics or.
Addition of.
Non loop <unk>, so when they see the label they just see it as a routine of normal they'll do what they normally do today.
Without <unk>.
When they do prescribed for Essex, so and Thats to order labs.
Within a couple of days of escalating care.
Got it makes sense and the last one for me I was curious on the commercial scale up side.
Many devices do you plan to have ready for a launch in first quarter.
Yes, so we planned to when we launch have about six months of inventory.
Ready to go at at launch.
And then continually.
Right that is as we sell through it.
Great. Thanks, a lot.
Thanks, Sean.
Our next question is from Glen Santangelo of Jefferies. Please go ahead.
Hi, yes. Thanks for taking my question Jonathan last time, we spoke I think you sort of talked about already have them.
Roughly a 40 person sales infrastructures salesforce ready to go I was wondering if you can give us an update there and then maybe if.
If youre expecting what are you expecting the start incurring the expenses around that and do you expect to start generating revenues in the first quarter. Because I think you said you're already chose Cardinal health is your distributor with distributed to specialty pharmacy networks. When you start booking revenues immediately once you start selling to Cardinal So I'm just.
Trying to get a sense for how we should think about the.
The income statement sort of evolving right around the launch.
Okay sure.
Glenn This is Jon Hamm.
Try that take all of those.
So we would recognize revenue we sell to not to Cardinal Cardinals, Our third party logistics, but when it is sold to the specialty pharmacy and they take title.
And as far as the reps yet we.
Have contingent offers out to all of those representatives were planning to launch in Q1. So we anticipate having revenues in Q1, and having that sales force cost hit us in Q1 as well.
Right Alright, so just back to the sort of the inventory question I mean, if you're going to if you're going to start generating revenues once the specialty pharmacy take title.
Will you start shipping in <unk>, So we should see the revenues.
Start right in <unk> and then.
Consistent with that should we.
You have the agreeing.
Agreements already in place with the salespeople should we start to see the expenses matching that in the first quarter.
Yes, Yes, we would we would book the revenue in the first quarter and see the Salesforce cost hit us in the first quarter as well.
And any I know you don't want to give 'twenty three guidance at this point, but any any sort of high level thoughts in terms of how we should think about the cadence of the launch as we as we roll through 2023.
Yeah. So we haven't we haven't given guidance, we are planning to give to give updates we will give updates as they come along on big managed care plans and then we'll have a series of key performance indicators.
That will we will announce quarterly Steve do you want to kind of hit some of those high level Kpis.
Sure Yeah of course gross sales and net sales will talk about that.
The number of total doses.
The average number of doses per prescription.
The payer formulary coverage as a percentage of lives that have access we will talk about out of pocket costs to our patients.
The number of unique prescribers as well as the number of new prescribers and the number of unique patients.
And the number of repeat patients. So we'll update that each time, we we talked with you guys.
Okay. Thanks, a lot I appreciate it.
Great. Thanks, Glenn.
Our next question is from Douglas Tsao of H C. Wainwright. Please go ahead.
Hey, good morning, Thanks for taking the questions and just maybe John just trying to play in terms of the field for us once they get out into the field. How long do you think it will take for them to make initial contact with the target audience.
Hey, Doug It's John I.
I guess I'm going to have Steve answer that.
Steve.
Yes.
Pent up demand already people are reaching out to us.
Asking when they can begin to prescribe when they can get access to it so.
We'll we'll make contact with the prescribers of Hep's.
First week on the job and.
There's a lot of interest here. This is not a me too.
It's very disruptive.
Big unmet need and we've had a lot of time to.
To increase awareness of the product so.
Right away.
Doug.
We've been doing it coming soon campaign to drive awareness of the name and the brand and again the.
For us its name really tells people what it does right Perot FC receptor detainees. So we've been doing that digitally we were big at the <unk> meeting.
And so we think that we've driven then and our MSL have been out in the field made over 500 contacts with with Kols over the last couple of months. So we think we're doing a lot to drive awareness now.
And I get it, but I guess, how long before.
Your target.
A number of docs or providers do you think youll have that initial uptake.
Face to face interaction do you think you can accomplish that all in the first quarter. Several weeks I'm just curious about how you are sort of mapping out yeah.
Yes, yes, we intend to reach our entire target list with.
With a face to face conversation in the first three months of promotion.
Okay, a lot of them two and three times <unk> Super target for the real high prescribers and we will see them at launch as often as weekly Doug.
Okay, Great. That's helpful and just maybe some color on some of the initial.
Interactions with payers now that you aren't approved price you have a whack in the market.
And just how those are going and what how we should think about the reimbursed access landscape.
Yes.
Action with payers has been as it exceeded our expectations.
We will have.
PMT formulary meetings and decisions made with.
A couple of the biggest.
Medicare part D PVM plan combinations in November .
And they don't have to do that they are all scheduled expedited meetings typically its three months four months five months, we're getting we're just approved in October will have meetings.
Anti decision meetings in November and more in in December before we launch in Q1, we will have will have formulary decisions and we expect those to be positive all indications are that they're going to be positive they recognize the unmet need.
They see the the.
Cost effectiveness of this product relative to the alternative which is go on the ER and hospital. So.
Yes, we're pretty bullish about it Doug.
And I've been I've been following this I think we're really bullish on the fact that they're scheduling. These meetings. So quick these PMT committee meetings not waiting for a script or anything there theyre going so we're very encouraged by what we're hearing.
Okay.
Any sense of where in terms of what is it going to be a prior off if I can ask for.
Presumably it will be failures of oil.
So my first.
Well they might on the wrong, but that's fine because that's.
How the product's indicated right.
<unk>.
They are going to this is why they need it so because our goal again is to get them back on that generic oral as soon as they can without them being hospitalized. So we don't think that's an issue for us at all because all of these patients have failed all diabetics to be there.
Hey, Joe.
Yes.
No other sort of burdens requirements are in terms of step edits for Ya.
Not that we're hearing now.
Hey.
Thank you and congrats.
Thanks.
Thank you. Our next question is from <unk>.
<unk> of Maxim Group. Please go ahead.
Hi, Thanks, just a my question those 10 payers there Youre meeting with could you give us some color on how many covered lives they represent and what percentage or what amount of the market opportunity they represent roughly of the total.
Okay.
So.
So what percent of the total lives have we met with announced plans boy, that's a big number.
What I can say is there's about 10 <unk>.
<unk> that cover about <unk>.
85, plus percent of Medicare part D benefit beneficiaries, our meeting with all of them.
We've had meetings with all of them with a clinical presentations.
<unk>.
Submitted bids so.
I can't speak to how much of the commercial that is really not much commercial is only 10% commercial four for our product based on the age of the patients who have heart failure.
And then another 8% that are Medicaid so.
Yeah, I'd have to say when we're done with this one I've talked with people responsible for 85 plus percent.
The Medicare part D lives.
Got it so I guess on that point do you guys also plan on.
Addressing the commercials side of.
The market opportunity and what do you think those conferences you could happen.
Yes, we do.
In fact, I'll, let Steve talk about talking about it will have.
Our co pay card for the commercial to make sure where we're buying down Ah patients co pay but Steve you want to talk a little bit about the commercial payers yes.
We haven't targeted.
The regional commercial plans this yet, but when youre talking to.
The big Pbms planned combinations like.
Cvs Caremark Aetna.
Optum and United.
Si Cigna.
We're talking to them about the commercial side of their business as well, but we haven't done is gone down to every state level of Blue Cross Blue Shield.
This state or that state that'll happen before before we launch.
We're not we're not planning to not do that but our priority clearly has been the Medicare part D.
So as I said commercial will make up 10% of the total opportunity for <unk>.
Now on the DS 10 players in the 85% of the lives do you expect to actually have coverage for them. Initially at launch in January or do you think the comp or trickle in like two <unk>.
I think it will take till the end of <unk> just based on when they have PMT Committee meetings.
We're fortunate that will get it.
Done with some big ones in November and December , but theres, others that will take until their normally scheduled meeting in Q1, which could be.
January and February I think the latest we'd have to weigh it would be would be would be march but.
Q1 for sure.
And all of the meeting scheduled.
Views conducted and decisions made and as I said, we expect them to be universally positive it'll be surprising to us.
Very surprising if anyone.
It makes a decision not to cover <unk>.
Got it thanks for taking my questions.
Ladies and gentlemen, we have reached the end of the question and answer session I would now like to hand, the call back to John Tucker for any closing comments. Please go ahead Sir.
Thank you.
That concludes our call for this afternoon, we hope we were successful in conveying our enthusiasm for us for <unk> following its approval and a significant advancement that rep represents along the heart failure treatment paradigm, a multibillion dollar market in the U S alone we are well financed and we will be reaching what we think is a very robust commercial launch in the coming months.
Thank you again for joining our call. This afternoon and have a great evening.
That concludes today's conference. Thank you for joining US you may now disconnect your lines.
[music].
Yeah.