Q3 2022 PLx Pharma Inc Earnings Call
The conference will begin shortly to raise your hand during Q&A you can dial star one one.
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Ladies and gentlemen, thank you for standing by and welcome to P. L X farmers third quarter 2022 earnings conference call.
At this time all participants are in a listen only mode.
Following the presentation, there will be a question and answer session.
Please be advised that today's conference maybe recorded.
I would now like to hand, the conference over to Janet Barth P. L. Ax as vice President of Investor Relations and corporate Communications. Please go ahead.
Thank you Liz and welcome to today's conference call to discuss <unk> 2022, third quarter financial results and business update before we begin let me remind you that our 2022 third quarter earnings release can be found in the Investor Relations section of our website at Www Dot <unk> dot com and that's it.
But as to the form 8-K, which we filed yesterday afternoon due to the federal holiday and the FCC being close today and observance of veterans day.
This conference call may contain forward looking statements, including statements about our references to our outlook regarding the company's performance our internal models and our long term objectives. All such statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say during the call today.
Please refer to our most recent periodic SEC filings for more detail on these risks and uncertainties, including the risk factors section in our annual report on Form 10-K, the company undertakes no obligation to update or revise any forward looking statements. Additionally.
Additionally, the information we will discuss today contains certain financial measures that exclude amounts or are subject to adjustments that have the effect of excluding amounts that are included in the most directly comparable measure prepared in accordance with generally accepted accounting principles a reconciliation to the most comparable measures presented in accordance with GAAP. Please refer to the table in our earnings press release available.
On our website and included as an exhibit to our form 8-K filed yesterday.
For the benefit of those who maybe listening to the replay or archived webcast. This call was held and recorded on November 11th 2022. Since then <unk> may have made announcements related to the topics discussed. So please refer to the company's most recent press releases and SEC filings.
I will now turn the call over to Natasha Giordano, the all access president and CEO .
Thank you Janet good morning, everyone and thank you for joining our call is veterans day today and on behalf of Pls I want to thank all of our veterans for their service.
During the first year of basketball launch we've invested in building a base of awareness among consumers and healthcare professionals.
Since market acceptance and sales have taken longer to develop than anticipated we've streamlined our investments with the goal of maintaining our base consumption level.
We recently initiated a formal process to evaluate strategic alternatives.
Ensure that backlog can remain available for the millions of patients who need it.
Today, We'll review our third quarter financial performance and share some highlights of our ongoing efforts to advance the adoption and use of alcohol in the marketplace.
We will also provide an update on the strategic alternatives review process. Then we will open the call up for Q&A to begin I'll turn the call over to Rita O'connor, our Chief financial Officer, and head of manufacturing and supply chain to share highlights of our third quarter financial results.
Thank you Natasha and Hello, everyone overall, our third quarter results reflected our priorities of stringent expense management and maintaining our base business as such we achieved a significant reduction in operating expenses, while making strategic investments to advance the awareness and trial of <unk> in the marketplace.
Keep in mind that our results from the prior year period included significantly higher sales and expenses related to the commercial launch and initial distribution of vascular to U S retail channels and the introduction of our field force and National Media TV campaign.
In the third quarter, we booked net sales of $400000, which included $300000 of unfavorable adjustments, which related to higher trade allowances and incremental sales returns reserves.
The increased trade allowances are associated with trade initiatives designed to promote sell through including promotions for the vessel or 12 count size to drive trial and purchase.
On a sequential basis reorders from existing trade customers were higher in the third quarter than the second quarter, which is definitely a trend in the right direction. However, total net sales were lower due to the non recurrence of initial product stocking a publix and Harris teeter that occurred in the second quarter.
The macroeconomic pressures that were prevalent in the first half of the year have persisted in the third quarter with a tough inflationary environment continuing to adversely influence consumer purchase behavior, putting pressure on the rate of acceptance of our products in the marketplace and on our commercial resources.
Retailers are feeling the effects of these macro pressures as well and we expect retailers to continue to reduce overall inventory levels throughout their stores, prompting us to increase our sales returns reserves.
To that end, we continue to support trade programs intended not only to drive sales, but also move through additional retailer inventory in order to minimize further product returns.
It is our intention to maintain a broad retail distribution nationwide across mass drug and grocery channels and we continue to work with our trade partners to demonstrate the value of Basel.
In a few minutes Natasha will review some of our newer programs designed to expand our engagement with health care professionals and consumers to drive retail sales.
Moving to cost of sales, we recorded $1 $5 million of expenses third quarter, including $1 million of incremental costs for expired packaging material and a reserve for finished goods inventory in our warehouse that has less than 12 months of life.
Also in cost of sales this quarter were higher cost per unit for freight stemming from shipments of product cases versus large pallets in the prior year.
With regards to gross margin. We previously said that we would expect it to be able to expand capacity of our 325 milligram SKU, which would have yielded an improvement in our blended gross margin rate by the end of this year.
However to preserve cash and in light of our current inventory levels. We made the strategic decision to delay this project and the associated spend.
We are currently working with our manufacturing partners to identify other ways to improve margin going forward.
Total operating expenses were $9 $8 million in Q3, a significant sequential decline of $4 $4 million or approximately 31% versus second quarter.
Collecting prudent expense management, particularly with less spending on television advertising.
We maintained a base level of network advertising during the quarter and also deployed a number of cost efficient marketing programs, including digital and virtual offerings.
In August we significantly reduced our cardiovascular specialty field force, which generated some cost savings in the quarter.
We expect more meaningful savings from this reduction in the fourth quarter.
Turning to the balance sheet, our cash and cash equivalents balance as of September 30th was $25 $8 million or cash burn of $9 $9 million in the quarter reflected very disciplined spending and we continue to have no debt.
In light of our decision last quarter to initiate a formal process to evaluate strategic alternatives. We are committed to funding certain programs with the goal of maintaining the base business, we've established for <unk>, including its current broad retail distribution.
In doing so we have significantly streamlined discretionary spending to ensure that our cash runway extends into the middle of 2023.
In closing our third quarter results reflected our two main priorities, managing our cash and maintaining our base business over.
Over the past year, we have invested in building a base of awareness among consumers and health care professionals and remain committed to making sure Boswell remains accessible for millions of patients who need its lifesaving benefits.
We believe the product is too important for the patients we serve not to be given the best chance to succeed.
I will turn the call back to you.
Thank you Rita or motivation everyday of the patients who need lifesaving benefits of Basel warm and FCA improved aspirin networks predictably and is designed to help protect the stomach.
Within its first full year on the market that <unk> has achieved the number three brand position in the heart health aspirin category well other leading legacy aspirin brands have experienced significant declines in the face of persistent macroeconomic pressures in which we're not immune we remain committed to it.
Vance things as well in the marketplace through medical and consumer education, along with retail trade program and our level of advertising with the goal to maintain our base of business in that regard. Let me tell you a few about a few marketing programs we have.
During the third quarter and another new initiative, that's just getting underway.
In an effort to retain our Nonbusiness avascular doctors and recommended we distributed samples and patient education materials to more than 1000 health care professionals. These advocates from across the country has been instrumental in building our base business.
Recognize pain awareness month in September with a new Facebook campaign, featuring legendary professional baseball pitcher and avid golfer John small who is the current vessel are used in a believer in its many benefits.
Debate. These ads have been well received and delivered high engagement levels, beating industry benchmark by four times.
Also in September we initiated a new medical education program focused on a targeted group of 3000 cardiologists and neurologists.
And to receive as a war material such as sample education versus yours and high value coupons.
We expect to receive some initial feedback from participants later this month to assess the level of engagement with our material and the likelihood of future product recommendation.
Next let me tell you about our recent partnerships with two major health care systems in Texas to incorporate vast war as the Aspen of choice into their med <unk> bed discharged protocols.
This means is that there's the opportunity for patients being discharged from one of these respective healthcare system on Doctor directed daily aspirin therapy to receive a starter pack of basketball plus educational materials and a high value coupons. This new initiative could advance basilar adoption and.
Use like potentially hundreds of patients every week.
Our goal is to replicate these programs and other health care systems nationwide.
At this time I'd like to welcome back Doctor Office Ali a preventative cardiologist and clinical associate professor of cardiovascular medicine at the University of Texas Health Center in Houston to share some additional details and perspective on these important initiatives. Dr. Roy continues to be a strong adds.
The kit for basketball and he was instrumental in facilitating these programs.
Great. Thank you.
But thank you so much and good morning, and thank you Nicolas and the team or having their own again happy to be here again.
You talked about the list.
Partnership with two of the largest healthcare systems in Texas, So I'm going to cover three points. This morning, and I'll keep my comments brief.
What are the two health care system number two what is the best program.
Number three how does <unk> fit into the mix the bad programs.
And just to make sure people understand the rationale of.
What we were looking at these two health care system.
One is.
Large tier one hospital system with 17 hospitals.
That is one of the largest in the landscape of Houston, Texas, and the Texas Medical Center all of them are focused on what are called heart and vascular institutes.
These are separate buildings.
Perform heart hubs.
Open heart surgeries and other advancements in heart failure.
We have initiated now program.
Two of the 17, I believe Youre being launched next week.
And the second tier.
Sure.
That's the best programs with the largest independent system, a freestanding health care centers in the nation.
With more than 20 centers throughout Texas.
The landscape.
And between these two systems really do serve a very large volume of cardiovascular patients and they are known.
Our center of excellence.
Cardiovascular care.
And we.
We chose these two health care systems as they represent the typical access points for patients who come in with chest pain.
Now I want to transition to what led to best programs are and to do that let me just briefly walk you through the patient's journey to present to the emergency room. So as the patient comes in with chest pain.
For the American Heart Association American College of Cardiology guidelines within the first 10 minutes splits obtained vital U K.
325 milligram chewable aspirin and then ER doctors should the patient based on maybe it's put in an observation we ended up to 24 hours or what we call Chesapeake rollout.
So thats.
The typical scenario, but the the problem.
Problem is when you discharge of these patients.
There are.
Keep cleaners.
Unstable angina or non semi.
These are chest pain patients and they need to be discharged on medications. So typically they would receive a script.
And does it need to go to the pharmacy and filled the medications, but you can understand that if someone had a heart attack and now we're looking at that.
Secondary prevention that is utmost important that these patients don't fall through the clock and actually obtained their medications and submit the best wishes.
Which is the third or the second part is that it was developed by the health care system concerning the gaps in patient compliance and filling their medications if they don't feel theyre medications is with that.
<unk> made a crude.
Hum further.
Image to their hearts.
And so the Mets boat program was born out of the concerns and the patients and the first dose actually prior to being discharged from the hospital.
Take that dose of medication.
They would be given information and materials why they're taking these medications and this is known as shared decision making.
Which is a level one evidence in healthcare.
And so Ah.
Cardiologists.
Doctor, who are seeing number of chest pain patients. These patients are now being given the medication prior to discharge and the bed and then theyre given information.
On education materials about the medications that were being discharged and theres been giving samples. So that there is no gap in compliance or filling their prescriptions.
Our research confirms that if the medication is disseminated this way from discharge, especially when it's coming.
With like a cardiologist.
The ER doctor, they're more apt to stay on the medication, but Furthermore, when they go to their primary care Doctor. The primary care Doctor is very unlikely to change the medications that the specialists or the ER doctor discharge the patient home.
So how does <unk> fit into the <unk> program I think.
Very evident.
Our parent debt.
Your protocol for patients who present with chest pain.
And after the correct assessment as we described described above when the patients are being discharged. This is whereabout what system. This is where the education materials to shared decision, making and then ask one that's FDA approved.
Proved absorption and Gi protection months compared that costs us that's very coated aspirin.
That was chosen by the two large health care system.
The chairman the decision maker.
Chief Medical Officer sat down and said this is important for our patients.
<unk> was chosen because of its design to help protect the stomach and its absorption more predictably than enteric coated aspirin.
And that.
Where is the only asthma undergone.
The approval process.
Interesting enough last night, we had a wonderful chat with Dr. Gibson and two of the leading cardiologists in the Texas Medical Center.
But on domestic the best program.
And two of the largest.
The heart and vascular Institute.
And these are the clothes that were set by.
Last night.
By the decision maker.
One was after complex procedures, where I'm, putting in a stent.
Why wouldnt be use this medication on all of our patients.
Lot of my patients are higher risks from vascular disease, and Gi bleeds Wildwood leather Oliver patients to be discharged on this medication.
And this is still be cheapest cost of all of the medications that we discharge our patients.
If we are getting better absorption and better safety.
Why is this not.
Used on all of our patients. So this was a really close that were set last night from the chairs of the message that program and so I'm excited that the.
The goal is the possibility to replicate these programs and other health care system nationwide.
Thanks, so much for having me answer that.
Thank you Dr. Riley as always we value your perspective and approach to shared decision, making with your with your patients. We too have always put the patient at the center of everything we do is such an important life saving option in the treatment of secondary prevention of cardiovascular events.
Yes.
Our goal is to replicate these matched the best programs and other health care systems nationwide and to ensure the Bachelor can remain available for the millions of patients who need it.
Back in August we announced a formal process to evaluate strategic alternatives. This process is ongoing our primary goal is to enhance stockholder value.
This could come in the form of a licensing deal or partnership and asset sale, a financial investment or an outright sale of the company.
There has been outreach to a broad spectrum of companies, including large and small pharma companies and consumer companies as well as private equity and potential financial partners.
We will work to continue to to work the process aggressively and we will keep you posted.
We're looking for a company that believes that the warrant is an innovative aspirin that can potentially address critical unmet needs for patients and that has the resources and the expertise to take back towards to the next level.
We must continue to stay the course with a keen eye on maintaining our cash runway selectively investing in opportunities that will bring value to the brand and to our company. Our goal is to ensure the sidewalk and remain available for the patients we serve.
We can now open the call for questions.
Yes.
If you'd like to ask a question at this time. Please press star one one on your telephone.
Again that is star one one if you'd like to ask a question.
Yeah.
Our first question comes from the line of Leland <unk> with Oppenheimer. Your line is now open.
Hi, good morning, Thank you for the.
Dave.
Just wanted to.
Maybe drill in a bit further into.
On the strategic side that you might be leaning towards if any at this point.
Or perhaps it's still early and you have kind of a broad view.
On the opportunities wondering.
Just curious if you could maybe share what you think might be.
The best value.
For <unk> shareholders.
With respect to.
What you might be able to do with the best Thank you.
Thank you Leland and of course, our main goal is to bring the best value to our shareholders. That's for sure that's our objective and our guiding principles.
Certainly in the midst of an ongoing process and we're talking to several different companies. Unfortunately, I can't give too much more detail than that.
However, you can see where a product like <unk> could fit in in any one of those options whether it be an outright sale of the company our licensing partnership even a financial arrangement. So we continue to drive the process it aggressively.
As soon as we can we will continue to update them.
Great. Thanks.
And with respect to the <unk>.
Launched just wondering.
Pricing certainly there is a.
Quite a difference between the vascular price point than what the competitive.
Aspirin products.
So I was just wondering if you have a grasp having now been in the market for some time of what the sensitivity is.
And where you may be able to gain more traction should you.
Reduce that that price.
Well at the same time of course, having to preserve.
The ability for <unk> to generate a return.
Yeah.
Thank you for pointing that out it is quite a challenge to manage both right.
And so we do believe because the products brings so much to the patients that have cardiovascular disease.
Premium can be absorbed by the patients you've heard Dr. Rollie talked about how on calls in the past on how he and.
His patients.
Sorry and require treatment for them.
As you look at the other medications that they're on it really falls in line with those other medications.
Right.
Yes. It is quite the challenge, we're working with with our retail partners across the across the country.
Supporting doing doing trades per month.
Different programs that can help the patient in the end drive patients to use.
Hi.
From that retailer.
Yes.
Great. Thanks, Thanks for taking my question.
Thank you Leland.
Again that is star one one if you'd like to ask a question.
Our next question comes from the line of Jason Butler with JMP Securities. Your line is now open.
Hi, Thanks for taking the question.
Just in terms of the sampling program I think you said no more than a thousand health care providers. You are sampling with can you talk about the return on that program, but are you seeing.
Prescribing.
Our physicians that are directing their patients to go get the product are they doing that more are you getting more more physicians to engage in the product just any any color you can give us there.
Of course, Jason Thank you for the question.
Our goal right now is to continue to maintain and rethinking.
Thank goodness and wanted to do that in our first year of launch we have identified.
And or so health care professionals that have exhausted or into their into their practice and that's why we came up with this program to ensure that they retain their patients on backlog provides them.
Ample of high value coupons to drive them to the retailers, but also provide a patient education materials that really describes the difference between banks or any other aspirin formulations on the market and why it's different and why this is relevant to to managing their own.
We do.
C N track data as it relates to these these different hcp's.
And we will continue to watch that and we do think it's a worthwhile investment because they are our base business and what our primary goal is to maintain the value behind the asset.
Factset and the company as we engage and continue to engage in a strategic alternatives process.
Great and then just a follow up there can.
Can you maybe speak to any data you have about.
The physicians that are using.
As Laura or directing patients to utilize more for pain, how much traction you're gaining there with your promotional efforts over the last quarter. Thanks.
Yeah.
It is difficult given that it's an over the counter product to discern.
What each dose being used for so what we look at is the percentage split between the two doses.
Can't tell you that in the pain awareness month of September that's when we launched our campaign, which on small to mid.
And avid believer in Basle, Brian has made a significant difference in his daily life as he transitions from baseball to a lot of skol and so we have a lot of Jason anecdotal.
Views anecdotes from physicians and from consumers that tell us that the Avalon is quite different and the management of pain and that is factored into our ongoing commercial strategy on how to position Vasco in not only for cardiovascular disease, but also.
For propane.
Great. Thanks, Thanks for taking the questions.
Thank you Jay.
I'm showing no further questions in queue at this time I'd like to turn the call back to Janet Barth for closing remarks.
Yeah.
Thank you Liz and thank you all for participating in our call today. Please feel free to contact me with any additional follow up questions have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
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