Q4 2022 Theravance Biopharma Inc Earnings Call
The conference will begin shortly to raising Malawi Johan during Q&A, you can dial star one one.
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Yeah.
The conference will begin shortly to raise and lower your hand during Q&A you can dial star one one.
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Ladies and gentlemen, good afternoon, I'd like to welcome everyone to the therapist Biopharma fourth quarter and full year 2022 conference call. 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 press the star key followed by the digits. One one on your telephone again that star one wanted to ask a question if listening via webcast. Please mute audio on your webcast device before asking a question over the phone.
Pete These instructions after management completes their prepared remarks also today's conference is being recorded and now I'd like to turn the call over to Rick Winningham, Chief Executive Officer. Please go ahead.
Good afternoon, and thank you for joining the <unk> Biopharma fourth quarter and full year 2022 conference call to discuss our business.
I'll 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 is described further in our filings with the SEC.
I direct your attention to slide three.
Joining me today are under Florida, Chief Business Officer, Rick Gram research and development.
These swap Chief financial Officer.
Before I get started.
I'd like to make a brief statement regarding public announcement that ironic made earlier today.
The board and management are committed to acting in the best interest of the company and all of its shareholders and we're open to evaluating all ideas to.
To maximize shareholder value, including those from ironic.
We're disappointed that ironic has chosen to make a public announcement of this nature is we are engaged in substantive constructive dialogue on multiple occasions to work cooperatively with them.
We can offer and speak with them under a nondisclosure agreement or discuss their ideas and our upcoming plans, but our offers were refused.
Our nominating and governance Committee is regular board refreshment process in place to thoroughly evaluate all potential candidates and their skill sets, including relevant industry experience and.
Public board experience.
Our committee and other members of our Board management team met with ANV Dodge to consider him good faith as a candidate to join our board.
But given this lack of healthcare and relevant public company Board experience. We ultimately determined that he was not the most suitable candidate for the board.
We remain focused on the business and continuing to execute the ongoing transformation the <unk> Board and management team, who believe that today's.
Strategic actions in the past that's set forward for 2023 will indeed continue to drive value creation.
I'll take any questions during the Q&A Q&A regarding <unk> public announcements now.
Moving to slide four.
<unk> Board management team has a demonstrated track record of taking action to create near and long term shareholder value.
As the company has evolved over the past 18 months, we are continuing to take strategic actions that build our focus execution and performance. We remain committed to acting in the best interest of the company and all of its shareholders.
Today in addition to our financial results for the fourth quarter and full year ending on December 31, 2022, we announced three additional strategic actions to sharpen the company's focus and drive value creation. Those are outlined on slide four.
First we've increased our capital return program by 75 million to $325 billion in total the expansion of the open market share buyback program was a strategic decision.
Following consultation with shareholders on both the quantum and the instrument.
Market analysis, and continued assessment of our balance sheet and cash needs going forward.
Second we will discontinue investments in research, including the inhaled JAK inhibitor program to focus exclusively on <unk> and <unk>.
This means that we have made the difficult yet necessary decision.
To reduce head count by 17% and we plan to complete the reductions by the end of March 2023.
We thank the exceptional research team for their valuable work and dedication to the company, we will seek a strategic transaction to continue or progression of their work on the inhaled JAK program.
As our company transforms our board regularly evolves as well and I'm delighted to welcome Suzanne agreed with the board of directors as our newest independent director.
The board was introduced this is Adam while working with a leading independent search firm and conduct in connection with our nominating and governance committees regular evaluation of the board of directors and board refreshment.
Our deep expertise in our industry as well as her experience and value creation and strategic transactions will augment the established boards and managements case.
Capabilities.
In addition, our lead independent director Bill <unk> will not be standing for reelection to the board of directors at the company's 2023 annual general meeting for shareholders.
I'd personally like to thank bill for his tireless service to the board and the company.
I will miss Bill's guidance and Mentorship.
Following the appointment of Susanna and Bill's departure. The board will continue to be comprised of eight highly qualified directors several of whom are independent all of whom are committed to.
To maximizing value for shareholders as we continue to execute on the vision for the company as set forth in our restructuring our board also considers the company's governance structure and leaves is determined to put forth. A proposal at the May 2023 annual general meeting for shareholders to <unk>.
<unk> the board of directors over time.
Be providing more details in our proxy statement.
Moving to slide five I am proud of what the <unk> team has accomplished this past year were successfully positioned the company to create value for the foundation of financial strength.
No debt a strong cash position, having ended the fourth quarter with $327 million of cash and cash equivalents.
Since announcing the <unk> royalty transaction on the capital return program. The company has driven total shareholder return of 14% versus the S&P biotech index was a negative 2% in the S&P 500.
Of 6% over the same period, representing an outperformance.
Nearly 17% to 9%.
Respectively, and this TSA period.
Was calculated with the market close as of February 23rd.
Our path forward for 2023 is clear and focused as outlined in slide five I will now hand, the call over to Rhonda in a moment to review <unk> 2022 performance results, which are which gives us both the momentum and the confidence to deliver in 2023 and beyond.
We will discuss how we are well positioned to enter a new era in treating <unk> in multiple systems atrophy patients with the potential to offer a unique first in class treatment benefit with ample occitane and disease will share the details on the financials.
I'll now turn the call over to Robert to discuss you tolerate.
Thank you Rick.
Looking to slide six we're very pleased to share the latest performance update on Repowering.
In Q4 net sales of <unk> reached another quarterly high launch to date.
As a reminder, there are events and Beatrice co promote <unk> in the U S <unk> commercial and medical team to cover the hospital segment and the interest is responsible for the outpatient based community health care needs information for the product.
Slide seven shows third answers imply 35% share of net sales for <unk> during the fourth quarter of 2022 of $19 5 million up 27% from Q4 of 2021.
I am also pleased to highlight that the implied 35% of the coloring net sales for the full year of 2022 was $77 million.
Which represents a 25% year over year net sales growth.
The significant growth for the brand was again driven by strong overall customer demand from hospital and community outlets in.
In Q4 of 2022 demand increased by 6% quarter over quarter and by 19% year over year.
Looking specifically at the bare Vance hospital efforts on the right side of slide seven in Q4 of 2022.
<unk> is sold exclusively in the hospital setting represented an increase of 22% from the previous quarter, demonstrating the highest quarterly hospital volume launch to date.
With like a full year growth of 53% over 2021.
We have continued to see significant growth in <unk> hospital business every quarter since Q3 of 2020.
580 secured hospital formulary wins launch to date have led to approximately 200 purchasing hospital outlet through the end of 2020 to driving that growth.
Also additional adoptions are increasing weekly.
We believe these wins in forthcoming system additions for yield continued growth through 2023 as you probably will be the first Lama of choice in many hospitals due to the growing recognition and acceptance of <unk> clinical benefits and once daily value proposition.
Turning to slide eight <unk> share of the hospital setting decreased to 12, 5% in Q4 of 2022, although Depaolo Res hospital volume continued to set a new quarterly high.
On the previous slide.
The hospital market share drop can be attributed to the largest quarter over quarter growth in the long acting nebulizer market since you tolerate introduction.
This growth was driven by an increase in hospital.
Sensors associated with the <unk>.
Which is the confluence of RSV influenza and Covid at the end of 2022.
As the hospital long I think nebulizer market volume has stabilized so far in early 2023, you tolerate hospital share has returned yet again to its highest level.
Your calorie quarterly market share in the community setting increased to 27, 1% through November 2022, which is our latest data point.
Data continue to show that approximately 90% of patients who've received repowering in the hospital setting are discharged with a prescription to continue their treatment in the outpatient setting, allowing for continuity of repowering maintenance therapy post hospitalization.
We have also been encouraged by the growth trends seen in the retail script data, where total prescriptions in Q4 of 2022 have increased 18% year over year and new patient starts increased 30% over Q4 of 2021, both metrics both metrics once again reached new.
Quarterly high launch to date in Q4 of 2022.
The growing new patient starts and overall demand are seen as key indicators and growth accelerators for 2023 performance.
While recognizing the seasonality trends that typically soften performance in the first quarter of each year, we believe the team's historical ability to execute through the pandemic. In addition through in addition to the remaining sizable niche opportunity for additional <unk> patient equates to sing.
Inefficient upside potential for the brand in 2023 and beyond.
Turning to slide nine to phase four prefer to study.
<unk> continues to actively enroll and will potentially provide further competitive upside.
And we continue to anticipate that top line results will be available in the second half of 2023.
I'll now turn the call over to Rick Graham.
Thanks Rhonda.
Those of you following the slides I'll begin on slide 11.
<unk> is a norepinephrine reuptake inhibitor being developed for the treatment of symptomatic neurogenic orthostatic hypotension and patients with MSA.
MSA patients with NIH blood pressure falls went upright owing to impaired release of norepinephrine, leading to debilitating symptoms, which can have a profound impact on quality of life.
MSA as a rare disease affecting approximately 50000 people in the United States.
Approximately 70% or 90% of MSA patients experiencing symptoms and we believe the addressable patient population for <unk>. The team is in the range of 35 to 45000 patients in the U S.
We're seeking orphan drug designation for the treatment of MFA patients with symptomatic.
Neither of the two approved therapies to treat orthostatic hypotension have demonstrated durable effectiveness and mitigating the debilitating symptoms for patients with MSA.
There exists a significant unmet need.
<unk> has the potential to provide a unique treatment profile for effectiveness of multiple symptoms durability of effect once daily dosing and the favorable safety profile.
As we enter into a new era and trading MSA symptoms the potential of ample ox team offers hope to MSA patients with symptomatic and outage.
On slide 12, our explained the unique benefits of our blocks to treatment.
Starting with the figure on the left and the Phase III study 170, <unk> was effective in treating a constellation of Cardinal symptoms and MSA patient.
These symptoms include dizziness, visual impairment weakness fatigue trouble concentrating in head and neck discomfort.
Magnitude of changes for these items with clinically meaningful and the durability of effect was maintained over the length of the 22 week study.
In addition to a favorable impact on symptom scores with ample oxygen treatment there was.
And improvement activities of daily living that require walking and standing for a short time.
For someone with MSA suffering with symptomatic an outage even standing for a short time can have an enormous impact on quality of life.
Moving to the upper right hand section of the slide ample Oxiclean is a single 10 milligram tablet administered once per day, which is especially beneficial to MSA patients with dysphasia or difficulty swallowing. This is a frequent and disabling symptom of MSA.
Single tablet administered once daily with a key differentiating factor from current therapies that require multiple tablets administered several times each day.
Moving to the bottom right section of the slide patients within our risk for a dangerous increase in blood pressure, while the Mr. Time physicians. This is known as supine hypertension.
The two FDA approved therapies for NIH, each have black box warning on the label highlighting the risk of supine hypertension.
The safety database of more than 800 patients in healthy subjects.
For supine hypertension has not been observed with ample oxygen treatment offering the potential for yet another important differentiating feature relative to the current therapies.
Slide 13 shows the study design for the Registrational study 197, Cypress and MSA patients with symptomatic NIH.
We will begin enrolling patients from the Cypress study imminently.
This study includes a 12 week open label period, followed by an eight week double blind period, it's a placebo controlled randomized withdrawal study with a primary endpoint of change in the HSA composite score.
Learnings from our prior study, we have streamlined the operational infrastructure and optimize the country and site selection.
<unk>, we are aligned with the FDA on the primary endpoint and the overall study design, we look forward to sharing progress as we start enrolling the study I will now turn the call over to Steve to review the financials.
Thanks, Rick turning to slide 15, I'll provide an update on our return of capital program.
As Rick mentioned earlier, we have increased the program by $75 million and $250 million to $325 million.
We've completed approximately $155 million today in the form of share buybacks, including $60 million completed in the open market, which was initiated in mid December .
Yes, the $155 million represents approximately 50% of the apps Upsized capital return program and we have 170 million remaining as of today.
We expect to complete the remainder of the program by end of 2023 to date, we have bought back approximately 15 million shares at a weighted average share price of $10 21.
Turning to slide 16, which covers our Q4 2022 financial highlights.
Starting with the balance sheet items.
We ended Q4 with approximately $327 million of cash and.
Within the quarter, we had two significant cash outflows.
First we paid $118 million of taxes related to the sale of our trilogy royalties.
This tax payment was $3 million less than expected and we booked a tax liability at the end of Q3.
Second we have $34 million worth of share buybacks.
Excluding this cash outflows, we incurred $7 million of cash burn in Q4, a substantial improvement versus prior quarters and a result of the share repurchases. We ended 2020 to 65 million shares outstanding.
Our end of 2022 cash balance of $327 million excludes the remaining $197 million earmarked for a return of capital program in 2023.
Including the amounts already purchased in early 2023, and the remaining amount on the program as of today.
The board continuously evaluate progress towards achieving.
Towards achievement of our financial targets and other factors and if appropriate we'll look.
The plan accordingly, as demonstrated by the action today to substantially increase the size of the program.
Now from a P&L perspective, Q4 operating expenses, excluding share based comp was $25 million.
Note that the R&D spend in the quarter was higher versus prior quarter, driven primarily by startup costs incurred for the <unk> phase III <unk> study.
Before share based comp was $6 9 million, which is approximately 60% less than the same period in 2021.
For full year actuals versus our 2022 financial guidance total operating expenses and R&D expenses were in line with guidance and SG&A 2 million above the high end.
Turning to slide 17, I'll conclude by covering 2023 financial guidance.
In 2023, we are guiding towards R&D R&D opex of between 35, and $45 million and SG&A opex of between 45 and $55 million, excluding share based comp and onetime severance costs related to the 2023 head count reduction we expect these one time severance and termination costs to be.
Approximately $1 million to $2 million, a majority of which will be recognized in Q1.
For 2023 guidance midpoint for R&D represents a year over year reduction of 22%.
All while incorporating new costs for the <unk> phase III program.
Since we will incur employee related costs for our discontinued research operations through March and will be required to closeout research related activities into Q2, we expect R&D cost to be relatively higher in Q1 and to a lesser extent Q2 before decreasing more significantly the remainder of the year.
And as a result, we continue to expect to generate profitability from a non-GAAP perspective in the second half of 2023.
It did not include any potential one time milestones in this profitability metric.
Achieving profitability is dependent both on the cost savings and continued sales growth from the <unk>.
Relative to this goal in Q4 2022, we incurred a non-GAAP loss of $7 million, which is the same amount as our cash burn of $7 million, excluding the tax payment and share buybacks.
We will begin to break out this non-GAAP metric on our P&L starting in Q1 2023.
Lastly, while we are not providing formal guidance for this metric stock based comp is expected to be materially lower in 2023 versus 2022.
Due to the elimination of onetime stock based comp related to the 2021 restructuring, which was completed in 2022 and the lower head count due to the reductions announced today.
With that I'll turn the call back to Rick for closing remarks, Rick.
Thanks disease.
On slide 19, as we reviewed were taking three additional strategic actions to drive near mid and long term value creation.
So I think the capital return program to $325 million.
This continuing investments in research, reducing head count by approximately 17% focusing exclusively on <unk> and.
And three evolving the board, which includes the appointment of Suzanne Gray.
Independent director of the board and again, we're looking forward to benefiting from her deep expertise and we're committing to declassify. The board of directors before we open the call up for questions I'd like to reiterate a few key items. Our team is laser focused on building on last year's growth of <unk> and generating important data from.
Pepper to study in the second half of 2023.
Additionally, we remain focused on advancing <unk> clinical study initiation and patient enrollment in the phase III program as well as achieving orphan drug designation.
And importantly, we will continue to execute on achieving the important goal of non-GAAP profitability in the second half of the year.
All of which should continue to drive shareholder value.
Thank you everyone for your time and your participation and I'll now hand, the call back to the operator for questions. Certainly thank you ladies and gentlemen, as a reminder, if you have a question at this time simply press star one on one on your telephone.
Moment for our first question and our first question comes from the line of David Risinger from SVP Securities. Your question. Please.
Thanks, very much and thank you for the update.
And the commentary on the prospects. So I have a few questions. Please first with respect to your <unk> profit growth, it's obviously been constrained and been well below end market sales growth due to the partnership change.
But I'm, hoping that you can help us understand.
When that annualized is and we should see the positive inflection.
In <unk> profit growth.
Once it annualize.
And then the follow on to that is when should we expect you powered profit growth to approach that of end market sales growth.
And then a separate financial question. Please in terms of thinking about R&D spending beyond 'twenty four once you're done with preferred to any any color you can provide on that I know that youre not going to provide guidance for 2024 at this time, but if you could help us understand the outlook for R&D spending beyond 'twenty three that would be held.
Thank you.
Sure. Thank you David I'll take the last question, then I'll kick it over to <unk> to provide some color on the first two questions. So E aren't bad.
Post <unk>.
<unk>.
That's that's what we're influx of team R&D really development spending.
The regulatory cost and progressing to approval assuming success.
It's going to contribute a majority of the R&D costs as we assume today.
Obviously through 2023 are part of 2023 will have pipher costs, which were also absorbing.
With data in the second half of 'twenty three those pepper costs are going to drop materially so.
<unk> you want to comment on David's first two questions.
Yes, Hey, David.
So I think when you are saying profitability, maybe you're referring to the collaboration revenue.
As a reminder, we achieved all time high profitability. This quarter just like the last couple of quarters.
In terms of normalization of the.
<unk> amounts.
This would have happened in the last couple of quarters. The only time that would have been would have been affected with early on in 2022. After we had the restructuring within their events.
No.
Since we've reduced our commercial footprint, a little bit and that's that.
Reduction in spend actually reduces our collaboration revenue because to 65% of the cost reimbursement is baked into that number so that would have washed out in the beginning of the first half of last year. So Q3, and Q4 of 2022 would reflect more normalized spend so going forward. If you just think about.
The collaboration revenue and profit and spend has been somewhat normalized if you just take 35% of the incremental sales.
Should flow to both the.
Collaboration revenue and the bottom line as well.
Alright, thank you.
Thank you one moment for our next question.
And our next question comes from the line of Douglas Tsao from H C. Wainwright Your question. Please.
Hi, Good afternoon. Thanks for taking my question Ron I think in terms of your calorie you indicated that the hospital. There is a slight decrease in share and that was largely driven by just the overall market growth. So in terms of the accounts that you're selling with your market share largely.
Unchanged or did you see a drop there as well.
Excuse me.
Rhonda.
Yes, Thanks, Doug for the question.
So for those.
Particular accounts, where we have.
<unk>.
Secure not only the formulary position, but also the Lama of choice, we do have a higher market share, but when you look at the overall marketplace and particularly due to the fact that in December and tire Nebulize market went up significantly as I highlighted the high.
Since the launch of empowering.
It affected our overall drop.
Okay.
Doug we continue to continue to see overall.
Strong overall growth and Thats.
Driven both by the market, but also driven very important by the work done.
We are achieving both formulary status.
At Loma of choices Rhonda <unk>.
<unk>, yes.
So.
Look ahead, because obviously the volume growth has been really impressive should we see it.
<unk> continued to have these important formulary wins and Lama choice wins in particular should we see a resumption of that share growth trend that we've seen pretty consistently for the last three years.
Yeah.
Yes, and as I commented during the the earnings script.
<unk> already seen a return to growth.
And the first couple of months of the year. So we'll continue to obviously continue to work through on those accounts, where we know there are opportunities and we believe with the prior success that we have the ability to continue to capture that Lama choice position.
Okay.
Great. Thank you very much.
Thank you one moment for our next question.
And our next question comes from the line of either private Euro from Cowen Your question. Please.
Hi, congrats on the quarter and thanks for taking our questions. So with the discontinuation of R&D in the expectation that <unk> will start generating meaningful cash.
How are you approaching capital allocation after the $25 million share repurchase is complete should we expect accumulated cash balances to be returned and if so would this be additional share repurchase or can we expect something like a quarterly dividend in the future.
Well I think thanks for the question I think as Ive pointed out.
We're going to execute on the 325 capital return if we can.
After looking at what's in front of us if we can increase the <unk>.
Returns to shareholders in the fourth in whatever form it might take.
Then we will do that obviously we've got.
We'll still continue to spend on <unk>.
Yes.
<unk> and <unk>, but the.
We will certainly look at returning capital.
As we can in excess of the $3 25.
Okay. Thank you.
Thank you one moment for our next question.
And our next question comes from the line of William Humphrey from Morgan Stanley . Your question. Please.
Hey, everyone. This is will on for Vikram. Thanks for taking our question.
Back on <unk>, what's your latest thinking on if positive pipher two data is going to be increasing sales of share.
And if so how significant of an increase particularly in that in hospital share do you see that driving.
I guess, how do you see that influencing prescriber behavior.
Thanks, Paul for the question.
And looking at the hospital components specifically.
The ability to be even more definitive on the appropriate patient as well as the overall relative to handheld choice and the inpatient environment a positive type of study would certainly help too.
And prove that messaging and Paul through Similarly, you would expect the same to be able to affect the community or outpatient volume.
Particularly in that setting, helping clinicians understand not only the importance of reassessing.
Patients' ability to utilize a handheld device versus what can be offered with the nebulizer therapy.
Definitely contributing to our competitive advantage in that particular situation.
Okay, I think the real opportunity here with tougher as Rhonda indicates it's really growing beyond.
What is considered the traditional <unk> market.
Making progress growing beyond the traditional liberalized market, which is about one in 10 COPD patients to something greater than that.
While the foothold would be in the hospital.
Majority of the volume will be lower in the outpatient I think that's the real that's the real opportunity with the with the Pipher program.
Okay. That's very helpful. Thanks very much.
Thank you one moment for our next question.
Yes.
And our next question comes from the line of Lisa <unk> from Evercore ISI. Your question. Please.
Hi, there I just wanted to ask a couple of questions about the Cyprus study for.
Craft velocity in an MSA.
First of all what are your what are your powering assumptions for this study design is as it relates to the OS H score.
Yeah, Hi, Lisa this is Rick <unk>.
We don't disclose powering assumptions, but just assume that it is.
Traditionally.
Howard has a traditional phase III studies I think one of the things that I can point to is if you look at our data from the 170 study and the MSA patients we had a statistically significant outcome in the 38 MSA patients using this for HSA composite so.
That should give you a sense of.
What we're looking at here.
And how does that work.
I see what you're saying there okay.
And then.
Can you remind us of the exclusivity for <unk>.
Yes sure.
Would expect composition of matter with patent term extension to be out.
They totaled 35 and then.
Beyond that.
For <unk>, the use of and the use of <unk>.
Okay.
We have that we have added a new slide to the deck slide 20, which outlines the patent protection for both <unk> and <unk>.
Okay, Alright, I'll check that out thank you very much.
Thank you.
This does conclude the question and answer session of today's program I'd like to hand, the program back to Mr. Winningham for any further remarks.
Yes, I'd just like to thank everyone for joining us today on this important.
<unk> call Youll outlining both the strategic actions that we've taken and the review of 2022 performance and the outlook for.
For 2023.
We're excited about what we can accomplish in the business in 2023 with the focus on <unk> and <unk> and we look forward to bringing you updates as we work through the year and worked through the important capital return program, an increase of which we highlighted today. So please have a good day and thank you for joining us.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
The conference will begin shortly.
And lower Johan during Q&A, you can dial star one one.
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Ladies and gentlemen, good afternoon, I'd like to welcome everyone to the thorough Vance Biopharma fourth quarter and full year 2022 conference call. 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 press the star key followed by the.
Digits, one one on your telephone.
Again, 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 is being recorded and now I'd like to turn the call over to Rick Winningham Chief.
<unk> Executive Officer. Please go ahead.
Good afternoon, and thank you for joining the <unk> Biopharma fourth quarter and full year 2022 conference call to discuss our business.
I'll 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.
Expected financial results.
Information concerning factors that could cause results to differ materially from our forward looking statements is described further in our filings with the SEC.
I direct your attention to slide three.
Joining me today are under Florida, Chief Business Officer, Rick Gram research and development.
These swaps Chief financial Officer.
Before I get started.
I'd like to make a brief statement regarding Republic announcement that ironic made earlier today.
The board management are committed to acting in the best interest of the company and all of its shareholders and we're open to evaluating all ideas.
To maximize shareholder value, including those from ironic.
We're disappointed that I rarely has chosen to make a public announcement of this nature is we are engaged in substantive constructive dialogue on multiple occasions to work cooperatively with them.
We've been offered to speak with them under a nondisclosure agreement or discuss their ideas and our upcoming plans, but our offers were refused.
Our nominating and governance Committee is regular board refreshment process in place to thoroughly evaluate all potential candidates and their skill sets.
<unk> relevant industry experience.
And public board experience.
Our committee and other members of our Board management team met with Andy Dodge to consider him in good faith as a candidate to join our board with given this lack of health care and relevant public company Board experience. We ultimately determined that it was up the most suitable candidate for the board.
We remain focused on the business and continuing to execute the ongoing transformation Thereabouts Board and management team believe that today's announced strategic actions in the past that's set forward for 2023 will indeed continue to drive value creation.
Don't take any questions during the Q&A Q&A regarding <unk> public announcement now.
Moving to slide four.
<unk> Board management team has a demonstrated track record of taking action to create near and long term shareholder value.
As the company has evolved over the past 18 months, we are continuing to take strategic actions that build our focus execution and performance. We remain committed to acting in the best interest of the company and all of its shareholders.
Today in addition to our financial results for the fourth quarter and full year ending on December 31, 2022, we will have three additional strategic actions to sharpen the company's focus and drive value creation. Those are outlined on slide four.
First we've increased our capital return program by 75 million to 325 billion in total the expansion of the open market share buyback program was a strategic decision following consultation with shareholders on both the quantum and the instrument market analysis and continued assessment of.
Our balance sheet and cash needs going forward.
Second we will discontinue investments in research, including the inhaled JAK inhibitor program to focus exclusively on <unk> and <unk>.
This means that we have made the difficult yet necessary decision.
To reduce head count by 17% and we plan to complete the reductions by the end of March 2023.
We thank the exceptional research team for their valuable work and dedication to the company. We will seek a strategic transaction to continue to have progression of their work on the inhaled JAK program.
As our company transforms our board regularly evolves as well and I am delighted to welcome Suzanne agreed with the board of directors as our newest independent director.
The board was introduced this is out of our working with a leading independent search firm and conduct in connection with our nominating and governance committees regular evaluation of the board of directors and board refreshment.
Our deep expertise in our industry as well as her experience and value creation and strategic transactions will augment the established boards and managements case.
Capabilities.
In addition, our lead independent director Bill <unk> will not be standing for reelection to the board of directors at the company's 2023 annual general meeting for shareholders.
I'd personally like to thank bill for his tireless service to the board and the company.
I will miss Bill's guidance and Mentorship.
Following the appointment of Suzanne Bill's departure, the board will continue to be comprised of eight highly qualified directors seven of whom are independent of all of whom are committed to.
To maximizing value for shareholders as we continue to execute on our vision for the company as set forth in our restructuring our board also considers the company's governance structure and leaves is determined to put forth a proposal at the May cycle 2023 annual general meeting for shareholders to <unk>.
<unk> the board of directors over time.
Be providing more details in our proxy statement.
Moving to slide five I am proud of what the <unk> team has accomplished this past year were successfully positioned the company to create value for the foundation of financial strength.
No debt a strong cash position, having ended the fourth quarter with $327 million of cash and cash equivalents.
Since announcing the <unk> royalty transaction on the capital return program. The company has driven total shareholder return of 14% versus the S&P biotech index was a negative 2% in the S&P 500.
Of 6% over the same period, representing an outperformance.
Nearly 17% and 9%.
<unk>, respectively, and the CSR period.
Was calculated with the market close as of February 23rd.
Our path forward for 2023 is clear and focused as outlined on slide five I will now hand, the call over to Rhonda in a moment to review <unk> 2022 performance results, which are which gives us both the momentum and the confidence to deliver in 2023 and beyond.
We will discuss how we are well positioned to enter a new era in treating NIH and multiple systems atrophy patients with the potential to offer a unique first in class treatment benefit with ample OXXO team that disease will share the details on the financials.
I'll now turn the call over to Roger to discuss you tolerate.
Thank you Rick.
Looking to slide six we are very pleased to share the latest performance update on Repowering.
In Q4 net sales of Repowering reached another quarterly high launch to date.
As a reminder, there are events in vitro to co promote <unk> in the U S. <unk> commercial and medical teams cover the hospital segment and the trust is responsible for the outpatient based community healthcare Nathan promotion for the product.
Slide seven shows third answers imply 35% share of net sales for <unk> during the fourth quarter of 2022 of $19 5 million up 27% from Q4 of 2021.
I am also pleased to highlight that the implied 35% of you tolerate net sales for the full year of 2022 was $77 million, which represents a 25% year over year net sales growth.
The significant growth for the brand was again driven by strong overall customer demand from hospital and community outlets.
In Q4 of 2022 demand increased by 6% quarter over quarter and by 19% year over year.
Looking specifically at the bare Vance hospital efforts on the right side of slide seven in Q4 of 2022 doses sold exclusively in the hospital setting represented an increase of 22% from the previous quarter, demonstrating the highest quarterly hospital volume launch.
To date.
With like a full year growth of 53% over 2021.
We have continued to see significant growth in <unk> hospital business every quarter since Q3 of 2020.
580 secured hospital formulary wins launch to date have led to approximately 200 purchasing hospital outlet through the end of 2020 to driving that growth.
Also additional adoptions are increasing weekly.
We believe these wins in forthcoming system additions will yield continued growth through 2023 as you probably will be the first Lama of choice in many hospitals due to the growing recognition and acceptance of <unk> clinical benefits and once daily value proposition.
Turning to slide eight <unk> share of the hospital setting decreased to 12, 5% in Q4 of 2022, although Depaolo Res hospital volume continue to set a new quarterly high as seen on the previous slide.
The hospital market share drop can be attributed to the largest quarter over quarter growth in the long acting nebulizer market since you tolerate introduction.
This growth was driven by an increase in hospital census sensors associated with the <unk>.
Which is the confluence of RSV influenza and Covid at the end of 2022.
As the hospital long acting nebulizer market volume has stabilized so far in early 2023, you tolerate hospital share has returned yet again to its highest level.
Your calorie quarterly market share in the community setting increased to 27, 1% through November 2022, which is our latest data point.
Data continue to show that approximately 90% of patients who received <unk> in the hospital setting are discharged with a prescription to continue their treatment in the outpatient setting, allowing for continuity of repowering maintenance therapy post hospitalization.
We have also been encouraged by the growth trends seen in the retail script data, where total prescriptions in Q4 of 2022 have increased 18% year over year and new patient starts increased 30% over Q4 of 2021.
Both metrics once again reached new quarterly high launch to date in Q4 of 2022.
The growing new patient starts and overall demand are seen as key indicators and growth accelerators for 2023 performance.
While recognizing the seasonality trends that typically soften performance in the first quarter of each year, we believe the team's historical ability to execute through the pandemic. In addition, three in addition to the remaining sizable niche opportunity for additional <unk> patient equates to significant.
Again upside potential for the brand in 2023 and beyond.
Turning to slide nine to phase for Cooper to study continues to actively enroll and will potentially provide further competitive upside.
And we continue to anticipate the top line results will be available in the second half of 2023.
I'll now turn the call over to Rick Graham.
Thanks, Rhonda for those of you following the slides I'll begin on slide 11.
<unk> is a norepinephrine reuptake inhibitor being developed for the treatment of symptomatic neurogenic orthostatic hypotension and patients with MSA.
And MSA patient with NIH blood pressure falls went upright owing to impaired release of norepinephrine, leading to debilitating symptoms, which can have a profound impact on quality of life.
MSA in the rare disease affecting approximately 50000 people in the United States.
Approximately $70, 90% of MSA patients experiencing symptoms and we believe the addressable patient population for <unk>. The team is in the range of 35 to 45000 patients in the U S.
We are seeking orphan drug designation for the treatment of MFA patients with symptomatic moh.
Neither of the two approved therapies to treat orthostatic hypotension have demonstrated durable effectiveness and mitigating the debilitating symptoms for patients with MSA.
This is a significant unmet need and <unk> has the potential to provide a unique treatment profile improve effectiveness of multiple symptoms durability of effect once daily dosing and the favorable safety profile as.
As we enter into a new era and trading MSA symptoms the potential of ample ox team offers hope to MSA patients with symptomatic Noh age.
On slide 12, our explained the unique benefits of our blocks to treatment.
Starting with the figure on the left and the Phase III study 170, <unk> was effective in treating a constellation of Cardinal symptoms and MSA patient.
These symptoms include dizziness, visual impairment weakness fatigue, trouble, concentrating and head and neck discomfort.
The magnitude of changes for these items with clinically meaningful and the durability of effect was maintained over the length of the 22 week study.
In addition to a favorable impact on symptom scores with ample oxygen treatment.
As an improvement activities of daily living that require walking and standing for a short time.
For someone with MSA suffering with symptomatic moh, even standing for a short time can have an enormous impact on quality of life.
Moving to the upper right hand section of the slide ample Oxiclean is a single 10 milligram tablet administered once per day, which is especially beneficial to MSA patients with dysphasia or difficulty swallowing. This is a frequent and disabling symptom of MSA.
Single tablet administered once daily with a key differentiating factor from current therapies that require multiple tablets administered several times each day.
Moving to the bottom right section of the slide patients within our HR at risk for a dangerous increase in blood pressure, while the Mr. Pyne position. This is known as defined hypertension.
The two FDA approved therapies for NIH, each have black box warning on the label highlighting the risk of supine hypertension.
The safety database of more than 800 patients in healthy subjects.
For supine hypertension has not been observed with ample oxygen treatment offering the potential for yet another important differentiating feature relative to the current therapies.
Slide 13 shows the study design for the Registrational study in 197, or Cyprus, and MSA patients with symptomatic NIH.
We will begin enrolling patients from the Cypress study imminently.
This study includes a 12 week open label period, followed by an eight week double blind period, it's a placebo controlled randomized withdrawal study with a primary endpoint of change in the HSA composite score.
Learnings from our prior study, we have streamlined the operational infrastructure and optimize the country and site selection.
Importantly, we are aligned with the FDA on the primary endpoint and the overall study design, we look forward to sharing progress as we start enrolling the study I'll now turn the call over to Steve to review the financials.
Thanks, Rick turning to slide 15, I'll provide an update on our return of capital program.
As Rick mentioned earlier, we have increased the program by $75 million and $250 million to $325 million. This.
This completed approximately $155 million today in the form of share buybacks, including $60 million completed in the open market, which was initiated in mid December .
Yes, the $155 million represents approximately 50% of the apps Upsized capital return program, and we have $170 million remaining as of today.
We expect to complete the remainder of the program by end of 2023 to date, we have bought back approximately 15 million shares at a weighted average share price of $10 21.
Turning to slide 16, which covers our Q4 2022 financial highlights.
Starting with the balance sheet items.
We ended Q4 with approximately $327 million of cash.
Within the quarter, we had two significant cash outflows.
First we paid $118 million of taxes related to the sale of our trilogy royalties.
This tax payment with $3 million less than expected when we booked a tax liability at the end of Q3.
Second we have $34 million worth of share buybacks.
Excluding this cash outflows, we incurred $7 million of cash burn in Q4, a substantial improvement versus prior quarters and a result of the share repurchases. We ended 2020 to 65 million shares outstanding.
Our end of 2022 cash balance of $327 million excludes the remaining $197 million earmarked for a return of capital program in 2023.
Including the amounts already purchased in early 2023, and the remaining amount on the program as of today.
The board continuously evaluate progress towards achieving.
Towards achievement of our financial targets and other factors and if appropriate we'll look.
The plan accordingly, as demonstrated by the action today to substantially increase the size of the program.
Now from a P&L perspective, Q4 operating expenses, excluding share based comp was $25 million.
Note that the R&D spend in the quarter was higher versus prior quarter, driven primarily by startup costs incurred for the <unk> phase III Cypress study.
Before share based comp was $6 9 million, which is approximately 60% less than the same period in 2021.
For full year actuals versus our 2022 financial guidance total operating expenses and R&D expenses were in line with guidance and SG&A 2 million above the high end.
Turning to slide 17, I'll conclude by covering 2023 financial guidance.
In 2023, we are guiding towards R&D R&D opex of between 35, and $45 million and SG&A opex of between 45 and $55 million, excluding share based comp and onetime severance costs related to the 2023 head count reduction we expect these one time severance and termination costs to be.
Approximately $1 million to $2 million, a majority of which will be recognized in Q1.
For 2023 guidance mid point for R&D represents a year over year reduction of 22%.
All of our incorporating new costs for the <unk> in phase III program.
Since we will incur employee related costs for our discontinued research operations through March and will be required to closeout research related activities into Q2, we expect R&D cost to be relatively higher in Q1 and to a lesser extent Q2 before decreasing more significantly the remainder of the year.
And as a result, we continue to expect to generate profitability from a non-GAAP perspective in the second half of 2023.
Did not include any potential one time milestones in this profitability metric.
Achieving profitability is dependent both on the cost savings and continued sales growth from Repowering.
Relative to this goal in Q4 2022, we incurred a non-GAAP loss of $7 million, which is the same amount as our cash burn of $7 million, excluding the tax payment and share buybacks.
We will begin to break out this non-GAAP metric on our P&L, starting Q1 2023.
Lastly, while we are not providing formal guidance for this metric.
Stock based comp is expected to be materially lower in 2023 versus 2022.
Due to the elimination of onetime stock based comp related to the 2021 restructuring, which was completed in 2022 and the lower head count due to the reductions announced today.
With that I'll turn the call back to Rick for closing remarks, Rick.
Thanks disease.
On slide 19, as we reviewed were taking three additional strategic actions to drive near mid and long term value creation.
Upsizing with capital return program to $325 million.
Continuing investments in research, reducing head count by approximately 17% focusing exclusively on <unk> and <unk>.
And three evolving the board, which includes the appointment of Suzanne Gray.
Independent director of the board and again, we're looking forward to benefiting from her deep expertise and we're committing to declassify. The board of directors before we open the call up for questions I'd like to reiterate a few key items. Our team is laser focused on building on last year's growth of <unk> and generating important data from that.
Pepper to study in the second half of 2023.
Additionally, we remain focused on advancing <unk> clinical study initiation and patient enrollment in the phase III program as well as achieving orphan drug designation.
And importantly, we will continue to execute on achieving the important goal of non-GAAP profitability in the second half of the year.
All of which should continue to drive shareholder value.
You everyone for your time and your participation and I'll now hand, the call back to the operator for questions. Certainly thank you ladies and gentlemen, as a reminder, if you have a question at this time simply press star one on one on your telephone.
For our first question and our first question comes from the line of David Risinger from SVP Securities. Your question. Please.
Thanks, very much and thank you for the update.
And our commentary on the prospects.
I have a few questions. Please first with respect to your <unk> profit growth, it's obviously been constrained and been well below end market sales growth due to the partnership change.
But I'm, hoping that you can help us understand.
When that annualized is and we should see the positive inflection.
In <unk> profit growth.
Once it annualize.
And then the follow on to that is when should we expect you powered profit growth to approach that of end market sales growth.
And then a separate financial question. Please in terms of thinking about R&D spending beyond 'twenty four once youre done with preferred to any any color you can provide on that I know that youre not going to provide guidance for 2024 at this time, but if you could help us to understand the outlook for R&D spending beyond 'twenty three that would be held.
Thank you.
Sure. Thank you David I'll take the last question, then I'll kick it over to <unk> to provide some color on the first two questions so aren't bad.
Post <unk>.
<unk> team is.
That's that's what we're in philosophy in R&D.
Really development spending.
On the regulatory cost.
Progressing to approval assuming success.
To contribute a majority of the R&D costs as we assume today.
<unk>.
Obviously through 2023 are part of 2023 will have pipher costs, which were also absorbing but.
Data in the second half of 'twenty three those pepper costs are going to drop materially so.
These are all the comment on David's first two questions.
Hey, David.
So I think when you are saying profitability, maybe youre, referring to the collaboration revenue as.
As a reminder, we achieved all time high profitability. This quarter just like the last couple of quarters.
In terms of normalization of the.
Amounts.
This would have happened in the last couple of quarters. The only time that would have been would have been affected with early on in 2022. After we had the restructuring within their events.
No.
Since we've reduced our commercial footprint a little bit.
And that reduction in spend actually reduces our collaboration revenue because the 65% of the cost reimbursement is baked into that number so that would have washed out in the beginning of the first half of last year. So Q3, and Q4 of 2022 would reflect more normalized spend.
Going forward, if we just think about the collaboration revenue and profit and spend has been somewhat normalized if you just take 35% of the incremental sales that should flow to both the carload.
Collaboration revenue and the bottom line as well.
Alright, thank you.
Thank you one moment for our next question.
And our next question comes from the line of Douglas Tsao from H C. Wainwright Your question. Please.
Hi, Good afternoon. Thanks for taking my question, Ron I think in terms of <unk> indicated that the hospital. There is a slight decrease in share and that was largely driven by just the overall market growth. So in terms of the accounts that you're selling with your market share largely.
Unchanged or did you see a drop there as well.
Excuse me.
Rhonda.
Yes, Thanks, Doug for the question.
So for those.
Particular accounts, where we have.
<unk>.
Secure not only the formulary position, but also the the Lama of choice, we do have a higher market share, but when you look at the overall marketplace and particularly due to the fact that in December and tire Nebulize market went up significantly as I highlighted.
The highest since the launch of empowering.
It affected our overall drop.
Okay.
Doug we continue to continue to see overall.
Strong overall gross to nets.
Driven both by the market, but also driven very important by the work done.
We are achieving both formulary status.
And a lot of choices Rhonda <unk>.
Emphasized.
And so.
Look ahead, because obviously the volume growth has been really impressive should we see it.
<unk> continued to have these important formulary wins and lot more choice wins in particular should we see a resumption of that share growth trend that we've seen pretty consistently for the last three years.
Yeah.
Yes, and as I.
Commented during the the earnings script.
<unk> already seen a return to growth.
And the first couple of months of the year. So we'll continue to obviously continue to work through on those accounts, where we know there are opportunities and we are.
With the prior success that we have the ability to continue to capture that Lama choice position.
Okay, great. Thank you very much.
Thank you one moment for our next question.
And our next question comes from the line of either private Euro from Cowen Your question. Please.
Hi, congrats on the quarter and thanks for taking our questions. So with the discontinuation of R&D in the expectation that <unk> will start generating meaningful cash.
How are you approaching capital allocation after the $25 million share repurchase is complete should we expect accumulated cash balances to be returned and if so would this be additional share repurchase or can we expect something like a quarterly dividend in the future.
Well I think thanks for the question I think as Ive pointed out.
We're going to execute on the 325 capital return if we can.
After looking at what's in front of us if we can increase.
The returns to shareholders.
And whatever form it might take.
Then we will do that obviously, we have got.
We'll still continue to spend on <unk> and.
Yes.
A bit on <unk>, but the.
We will certainly look at returning capital.
As we can in excess of the $3 25.
Okay. Thank you.
Thank you one moment for our next question.
And our next question comes from the line of William Humphrey from Morgan Stanley . Your question. Please.
Hi, everyone. This is will on for Vikram, thanks for taking our questions.
Back on your pillory, what's your latest thinking on if positive pipher two data.
Is going to be increasing sales of share.
So how significant of an increase particularly in that in hospital share do you see that driving.
Or I guess, how do you see that influencing prescriber behavior.
Thank you all for the question and looking at the hospital.
Components, specifically, having the ability to be even more definitive on the appropriate patient as well as the role relative to handheld choice and the inpatient environment.
A positive type of study would certainly help too.
And prove that messaging and Paul through Similarly, you would expect the same to be able to affect the community or outpatient.
Ryan.
Particularly in that setting, helping clinicians understand not only the importance of reassessing, our patients' ability to utilize a handheld device versus what can be offered with the nebulizer therapy.
Definitely contributing to our competitive advantage in that particular situation.
Okay, I think the real opportunity here will with pepper as Rhonda indicates it's really growing beyond what is considered the traditional <unk> market.
Making progress growing beyond the traditional <unk> market, which is about one in 10 COPD patients to something greater than that.
The foothold would be in the hospital. The majority of the volume will be lower in the outpatient and I think that's the real that's the real opportunity with.
With the Pepper program.
Okay. That's very helpful. Thanks very much.
Thank you one moment for our next question.
Yes.
And our next question comes from the line of Lisa <unk> from Evercore ISI. Your question. Please.
Hi, there I just wanted to ask a couple of questions about the Cyprus study for.
Craft velocity in an MSA.
First of all what are your what are your powering assumptions for this study design is as it relates to the OLED H score.
Yeah, Hi, Lisa this is Rick Graham.
We don't disclose powering assumptions, but just assume that it is.
Traditionally.
Powered as a traditional phase III studies I think one of the things that I can point to is if you look at our data from the 170 study and the MSA patients we had a statistically significant outcome in the 38 MSA patients using this alright, just a composite so.
That should give you a sense of.
What we're looking at here.
And how does that work.
I see what you're saying there okay.
And then.
Can you remind us of the exclusivity for <unk>.
Yes, sure we would.
Expect composition of matter with patent term extension to be out there.
2035, and then.
Beyond that.
For <unk> and the use of and the use of <unk>.
Okay. This is we have that we have added a new slide to the deck to slide 20, which outlines the patent protection for both <unk> and <unk>.
Okay, Alright, I'll check that out thank you very much.
Thank you.
This does conclude the question and answer session of today's program I'd like to hand, the program back to Mr. Winningham for any further remarks.
Yes, I'd just like to thank everyone for joining us today on this important.
Horton call Youll outlining both the strategic actions that we've taken and the review of 2022 performance and the outlook for 2023.
We're excited about what we can accomplish in the business in 2023 with the focus on <unk> and <unk> and we look forward to bringing you updates as we work through the year and worked through the important capital return program, an increase of which we highlighted today. So please have a good day and thank you for joining us.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.