Q4 2022 Novan Inc Earnings Call
Hello, and welcome to the Nova Inc. Full year 2022 update conference call and webcast.
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Following the presentation, there will be a question and answer session.
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At this time I'd like to remind our listeners that remarks made during this webcast may stay patterns intentions beliefs expectations or future projections.
Forward looking statements and involve risks and uncertainties.
Forward looking statements on this call are made pursuant to the safe Harbor provisions of Federal Securities laws and are based on <unk> current expectations and actual results could differ materially.
As a result, you should not place undue reliance on any forward looking statements. Some of the factors that could cause actual results to differ materially from those contemplated by such forward looking statements are discussed in the periodic reports <unk> files with the Securities and Exchange Commission.
These documents are available on the investors section of the company's website and on the Securities and exchange Commission's website.
We encourage you to review these documents carefully.
Additionally, certain information contained in this web cast relates to or is based on studies publications surveys and other data obtained from third party sources and the company's own estimates on research.
While the company believes these third party sources to be reliable as of the date of this presentation.
It has not been independently verified and it makes no representation as to the accuracy adequacy fairness accuracy or completeness of that are of any independent source verified any information obtained from any third party sources.
Joining us on today's call from diverse leadership team are Paula Brown, Stafford, Chairman President and CFO .
Officer, John agent, All Frio, Executive Vice President and Chief operating Officer, and John M Gay Chief Financial Officer, I would now like to teleconference over to Paula Brown, Stafford, Chairman, President and Chief Executive Officer. Please proceed.
Thank you operator.
Before I begin my formal presentation I would like to take a moment to recognize two important individual to me and to the full no van team those individuals' recently passed away.
First Dr. John Palmer, one of our original board members and shareholders passed away in November and second Mr. Bob Ingram.
Previous chair before myself of the Nov and board a decade long member and shareholder and an icon in the pharmaceutical industry passed away.
Last weekend.
I ask for just a moment of silence in their memory.
Thank you.
And now I would like to thank our stakeholders and analysts for joining our annual earnings webcast and general business update.
No man is building a premier medical Dermatology company that is focused on developing and commercializing innovative therapies for diseases of the skin.
In January we submitted our NDA for <unk> gel 10, 3% for the treatment of Molluscum Contagiosum.
<unk> has been accepted for review and we were provided are produced the goal date of.
January 5th 'twenty 'twenty four we are in the review cycle with nine months remaining hence we anticipate a potential FDA approval.
In the first quarter of 2024, if not before.
Accordingly, we could be the first F D. A approved prescription treatment solution for molluscum.
Yeah.
Over the course of 2022 and in the first quarter of 2023, we have achieved a number of noteworthy accomplishments.
We remain excited about our progress or momentum and what lies ahead.
Our NDA was filed and accepted for review with no known potential issues.
This followed our submission in January which followed the completion of our CMC and analytical testing, which we had shared with you which was required for submission.
Prior to that in July the results from our pivotal phase III trial were published in Jama dermatology.
And to start 2022, we acquired E P I health.
Which had marketed products and our commercial capability to launch spurred azzam or gel 10, 3% if approved.
We firmly believe that no van remains a compelling investment opportunity.
And speaking of bird asthma.
Or sodium or active pharmaceutical ingredient is a new chemical entity.
And Bert asthma gel 10, 3% as a novel topical nitric oxide releasing medication for viral skin infections.
Our NDA is based on our phase III program that demonstrated clinical evidence of efficacy and a favorable safety profile.
As I mentioned clinical trial data from the be simple for trial were published in 2022 in Jama dermatology.
If approved this product would satisfy an important patient care need largely displacing an office procedures that are often cumbersome painful and time consuming.
Molluscum Contagiosum has no standard treatment of care today more than 70% of molluscum patients patients go untreated.
The market is prime for a topical self administered or caregiver administered therapy.
The market potential is large with 6 million patients in the U S today, and approximately 1 million new patients annually.
Approximately 90% of pediatricians have a wait and see approach we believe the lack of at home options results and many undiagnosed cases.
We're dazzler gel 10, 3% has the potential to become a first line therapy from Alaska.
Dermatologists and communities will lead the way and we expect pediatricians to follow.
As I mentioned, there are no F D a approved treatments today.
Our NDA is in the review cycle and we are expecting the review to be complete by the goal date of January 5th 2024, again, just nine months away.
As we respond to the F. D. A information requests we are also investing in a successful launch in 2024, specifically, we are planning to build awareness and excitement for our potential product among our customers and our employees to educate health care providers about the disease on the tree.
And options to deliver the best possible access program based on our market research, we expect favorable access with Payors.
To prepare our existing commercial organization.
And to protect our proprietary platform technology with patents.
Nationally and globally.
We are committed to the medical dermatology community with our diverse portfolio of promoted products in with strong development pipeline.
Our commercial unit is built to expand disease states within the medical dermatology area, such as molluscum and to other specialty areas such as pediatrics.
I'll now hand, the call over to our Chief operating Officer, John Knopf Rio to provide an update on the successes of our commercial unit in 2022 John .
You Paula and good morning, everyone. Our commercial organization provides an established foundation for the potential <unk> launch with an ideal complement to our R&D and manufacturing expertise, our commercial capabilities, including integration integrated platform with supply chain patient access and distribution with the sales and marketing team.
Ready to scale for the future.
We start with supply chain management, or our third party suppliers, along with an optimized demand management process and distribution capabilities to both wholesalers and direct network pharmacies.
Our market access strategy focuses on favorable insurance coverage volume complemented with patient affordability programs to ensure patients have affordable access to our medications are dedicated marketing team has significant experience in dermatology with demonstrated success with brand and disease state messaging and education.
Our team has extensive.
Launch experience.
Across numerous therapeutic areas, both in competitive selling and medical education, providing a solid foundation for a potential future launches.
We have also built strong professional relations engagement with our health care practitioners and key opinion leaders across the country.
Our sales organization consists of four regions at 42 territories with the ability to reach more than 4000 healthcare practitioners across the country. We're extremely excited to prepare for the potential launch present for <unk> gel 10, 3% while.
While we're excited about the future, let's review our promoted product growth in 2022.
I am pleased to report that our promoted products delivered strong double digit prescription growth for the full calendar year, all three brands exceeded targets established at acquisition and each outperformed the growth in their respective markets. We are also pleased to see similar strong double digit prescription growth.
For the fourth quarter, demonstrating our continued focus on execution of our commercial plans strong prescriber base and solid promoted product portfolio.
I will now provide additional highlights in each of our promoted products.
Rotate as the number one prescribed treatment for persistent facial erythema PSV or facial redness owning approximately 90% of the market.
Our growth strategy is to continue the expansion of the PSV market increased the number of rosacea patients treated for redness.
Q4 prescription volume of 40791 prescription was just shy of an all time high set in Q2 and total prescriptions for December exceeded 15000, the highest ever monthly total for the brand.
We're also extremely excited about the opportunities outside the U S for rebate, starting in Japan with strong potential to expand in other markets.
As we compete complete our first full year on the market with Windsor, We have established a strong base of prescribers, we have a partnership in collaboration with MTT therapeutics for the sales and marketing with door in the U S for black psoriasis.
As we've covered in our previous calls new competitive launch in Q3 have challenged the use of topical steroids for psoriasis and you can see the impact of the reduction of total prescriptions from Q2 and.
And we have primarily remained flat for the second half of the year. However, despite the strong competition with <unk> managed to finished Q4 with no loss in market share within the topical psoriasis market and today when Saar outperforms all competitors on average number of total prescriptions per rider or productivity.
<unk>.
We are confident in the continued use of topical steroid for the treatment of blacks rises going forward and the benefits that <unk> brings to patients who need and desire quick relief.
Our growth strategy continues to focus on increasing brand awareness and they can't continue expansion of our rate base.
<unk> is an oral minocycline for the treatment of acne offering weight based flexible dosing for patients with the first ever biphasic delivery system, we've seen significant growth in prescriptions since increasing our promotional efforts on the brand this year.
We delivered our largest growth in mineral air prescriptions during the third quarter and are extremely pleased with the 68% growth in Q4 versus last year.
The reduction in Q3, all time high was part due to seasonality and competitor supply challenges in Q3.
<unk> strong growth in 2022 was a highlight in the overall market declined 10% throughout.
Throughout the year.
Overall, we're extremely pleased with the performance and continued prescription growth of our promoted brands.
Thank you and I'll now hand, it over to John <unk>, Our Chief Financial Officer.
Thank you John .
Our December 31, 2022 year and represents our first fiscal year in which we have fully consolidated results from our commercial business.
I'll remind you that when I refer to year to date figures. This represents 295 days of activity based upon our March 11th acquisition.
I would like to let our listeners know that we are not yet in a position to provide guidance as it relates to Q1 and full year 2020 revenues or EBITDA.
As of December 31, our year to date commercial business reported total revenues of $21 million net.
Net product sales included in our commercial businesses total revenue was $11 5 million poor road paid $1 6 million for wind Zora and $1 6 million for middle era with other products in our portfolio contributing $1 1 million year to date.
In addition, our commercial business also reported licensing and collaboration revenue of $5 2 million.
Was primarily of the 5 million out license agreement will rotate signed in December of 2022 for the Japanese territory with Sato Pharmaceuticals.
Our blended product portfolio ROE paid prescriptions have continued to grow with a year over year increase of 33%. We continue to see market opportunity for improvement in resort, which John mentioned launched in Q3 of 2021.
In addition, mineral air prescriptions have continued to grow with a year over year increase of 61%.
As of December 31, 2022, our year to date R&D business reported total revenues of $2 7 million.
This amount related to the <unk> two agreement related to the Japanese territory out license of two of our product candidates, including <unk> 10, 3%.
I will now provide a bit more detail on our fiscal year 2020, twos financial results, which expands on the information filed this morning with our earnings release and in our annual report on Form 10-K.
Total cost of goods sold was $7 4 million for the year ended 2022.
Cost of goods sold include the cost of procuring finished goods from our third party manufacturers sales based royalty and milestone expenses and other third party IP licensing costs.
For the year ended December 31, 2022, we recognized net product revenue related royalty expense of 4 million within cost of goods sold.
This amount included our current obligations to third parties. In addition to amounts related to the accounting presentation for the M. C. Two license agreement of $1 4 million.
In addition, 1.25 million was included in cost of goods sold as part of them Sato Rosebay license and collaboration upfront payment with the Japanese out license agreement due to a third party.
Our R&D business incurred research and development expenses of $16 million for the year ended December 31, 2022, compared to 24 million in the prior year. The decrease of $4 6 million was primarily driven by decreased clinical costs associated to the timing of the be simple for trial totaling seven.
7 million offset by an increase of $3 1 million of costs related to regulatory activities stability testing CMC and material costs to support our <unk> gel 10, 3% NDA filings.
On a consolidated basis SG&A expenses were $34 1 million for the year ended December 31, 2022, compared to $12 3 million for the prior year.
The increase of $21 8 million was primarily due to $13 $7 million of selling general and administrative expenses incurred to support the conduct of our commercial operations acquired during the year.
$4 7 million of transaction related expenditures related to the Epi health acquisition.
$1 1 million of investment costs related to the U S. B two of six prelaunch strategy and commercial preparation and $2 3 million of facility and depreciation personnel and other general and administrative costs.
For the year ended December 31, 2022, we also had not $2 9 million of other income which is comparable.
Those of a $4 3 million gain on debt extinguishment related to the promissory note issued in March of 2022 in connection with the Epi health acquisition, partially offset by a $1 4 million of interest expense incurred prior to the settlement of a promissory note in July of 2022.
On a consolidated basis total revenue was $23 7 million for the year ended 2022 compared to <unk> 3 million for the prior year.
Consolidated net loss was $31 3 million for the year ended 2022 compared to $29 7 million for the prior year.
Our commercial business net loss for the year ended 2022 was $1 8 million and our R&D business net loss for the year was $29 5 million.
As it relates to our balance sheet as of the end of the year, we had a total cash balance of $12 3 million and accounts receivable totaling $22 million.
Since December 31, 2022, we closed a registered direct offering for gross proceeds of $6 million. We received the Sato upfront payment of 5 million related to the road Bade out license agreement and we have continued to use our $15 million accounts receivable back backroom facility executed in December of 2022.
Which provides working capital and an amount that is up to 70% of our commercial businesses gross eligible receivables.
We will need additional funding to support our planned in future later future operating activities and our brand asthma gel 10, 3% product candidate and our business in general.
We believe that our cash balance as of December 31, 2022, plus expected receipts associated with product sales from our commercial product portfolio and the proceeds of the March 2023 registered direct offering will provide us with adequate liquidity to fund our planned operating needs into the latter part of the second quarter of this year.
Variability in our operating forecast driven primarily by commercial product sales timing of operating expenditures and unanticipated changes in networking capital may impact our cash runway.
We are tirelessly working to obtain the additional funds necessary to get to a potential approval and launch of the Geismar gel 10, 3% improved including the evaluating potential strategic opportunities while at the same time, conserving cash by delaying or deferring certain expenditures.
<unk> been pursuing and we'll continue to pursue additional capital through a broad range of financing strategies and other strategic alternatives.
Other potential funding activities may include equity financing convertible debt or capital from other sources or traditional debt financing.
That I will turn it back to Paul.
Thank you Don Okay. Thank you, John but not for you.
Listeners are you heard an update regarding our lead asset.
Asthma or gel 10, 3%, our commercial operations and our financial update and status.
No van is in a solid position to succeed with a potential approval and the infrastructure to support a launch.
We are therefore focused on driving towards the potential approval of <unk> gel.
Aligning our commercial infrastructure to support a potential launch on continued growth of our marketed products rotate Windsor and then the lira and on pursuing additional ex U S out licensing opportunities.
So in closing we had no van remain focused and excited for our future.
So thank you and operator, you may now open the line for questions.
Yes. Thank you at this time, we will begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
Your question. Please press Star then two at this time, we will pause momentarily to assemble the roster.
And the first question comes from Josh Ashraf with Roth.
Thank you good morning, guys and congrats on the increasing sales.
You guys have definitely talked about some of the special items that have led to I guess like a 74% Cogs for.
For the fourth quarter, but.
What can you say about gross to net for 2023.
And also should R&D dropped substantially in that year and this year versus last year.
Okay.
Yeah. Thanks, Jonathan Good morning, This is John gay and thanks for the question.
So to your point make sure I touch on all of them cause you're correct. There is some atypical activity for the current quarter as it relates to the sorts of agreement.
As it relates to your question on gross to nets.
I'll give a little bit of background as you know, but I think it might be helpful. You know the components of gross to net or G. T N deductions.
Categorized in two parts.
First the actual activity based upon the number of prescriptions filled for patients in a given period.
And second estimates used to project future activity per script or prescriptions, not yet billed for patients as the channel inventory held at wholesalers or for our pharmacy direct customers.
Both components, both the GTA and components consider the most.
They can buy the most significant line item. So those deductions is comprised of payer rebates co pay coupons and reserves of products.
Each each period, we update our gross to net deductions for both parts of the actual and the estimated.
The actual activity can vary based upon the numbers and method of how prescriptions are effectively until our customers. You know for example, what insurance program, they're covered by what health care plan, there one of which P. B M is utilized.
In addition, the mix of coverage of P. B M versus coupon will vary by the underlying patient.
So this product mix and changes peer to peer and will impact the actual G. T N deduction that may move up or down over time.
The estimated activity or that part of the gross to nets can also vary based on how we utilize historical trends.
Paired with assumptions to protect future deductions based on channel inventory open lots and other factors. So during the fourth quarter, you're right. We saw T Rx increase.
Certain products for unpaid for example, but we also saw a decline.
In the in the period of a peer gross margin to that you know this was based upon the gross to net deductions based on actual activity.
As it relates to the payers and coupon mix.
And our estimates which is based upon historical trends and year end accounting adjustments. So you know both the commercial and finance teams are working closely with our partners to work towards optimizing both the payer and coupon mix. If you will and we will continue to focus on improvements in the near term.
John do you have any.
Thoughts on them yeah, great. Thanks, Thanks, John Jonathan Thanks for the question to you.
Probably the industry issue across the board with some challenges and we have seen some increased rebates and some challenges at the pharmacy, but we've already started to implement in the in 2023.
Better partnership with the Pbms to ensure that the coverage that we have acquired is actually pulled through at the pharmacy level.
We've also looked at our copay card redesign to ensure the business rules that we set in place to make sure. There's access but also profitability on our scripts and implemented and we're also looking to implement a hub.
Hub service to help facilitate the scripts and ensure that our Scripps group go through the fall of the coverage that we've won and earned as we focus on 2023. So I think there are some critical operational.
Programs that have already been started or that will be implemented in Q2 to ensure.
See that kind of be just a bump for Q4 versus an ongoing.
Trend.
Well, thank you Jonathan and part of that the second part of that question was the R&D drop should that be substantial this year versus 2022.
Yes, so obviously with the reduction of the clinical trial so.
It will.
We ended up the year.
Alan as it relates to prior periods.
Because of the cost of the nature of the clinical trials.
But we will still continue to have R&D expenses relates to the activities associated with the regulatory.
Process right. So as we continue to move toward the <unk>.
January of next year, we will continue to have R&D costs associated with that or what caused that will be categorized as R&D because obviously prior to approval.
The nature of those expenditures.
Can be categorized as R&D.
I think it's fair to say that we will continue to have.
Relatively consistent R&D spend as we move towards the regulatory.
Approval process.
Okay.
Does the year end 'twenty two cash of $12. Three include the 5 million that was booked in the fourth quarter or does it not include that.
And it was not was not included Jonathan we had it at an accounts receivable, but we did collect that in January .
And how much of it is paid out to a third party.
$125 million 25, 5%.
Okay, and how much of the 15 million facility has been used.
So at the end of the year, we had a $10 3 million as it relates to what had gone through.
As of the balance sheet date.
But you can see it in our statement of cash flows we had almost 20 million of usage.
Is the 18 billion or so.
In the fourth.
Sure.
Okay, but there's no subsequent event footnote in the 10-K about usage subsequent to the fourth quarter and.
Well, we can thats correct, and we continue to utilize it at our discretion.
That's correct.
It is fair to say that.
Just the nature of our commercial business and the nature of our payables and accounts receivables cycles and timing with our customers and vendors.
It's advantageous to have a working capital on.
So we do continue to utilize it.
And it's all again subject to our sales and activity from our.
Trs perspective.
Okay. Thank you very much.
Thanks, Jonathan.
Operator, yes. Thank you and the next question comes from our loved that with H C. Wainwright.
Thanks for taking the questions I was hoping to talk bigger picture as you look forward to the SB 206, a potential approval in January .
Can you just talk about what you are able to do with the API business in place in terms of I guess priming the pump so to speak as you know like you said early theoretically nine months away and you've got boots on the ground already what are your reps able to do now before our <unk>.
Alex approved in terms of education, if anything in terms of awareness building Mollusca and also when you think about a potential catalyst in a another in office procedure for our Americas product getting approved in July potentially what kind of impact do you think that has on awareness.
In the space and you know do you think that helps or hurts you guys heading into January approval Bureau, and I have a follow up thanks.
Okay. Thanks.
So our reps, we are not able to train them or prime the pump because we do not have an approved product.
Our sales reps are aware and are excited to potentially have something to begin to talk to their health care providers about but they they cannot do so until it to prove so if you will the only way to prime the pump is.
Through education, and we do that with our medical Affairs group and so we actually have for individuals and our medical Affairs group and three of them are dedicated to really SP 206, and that is around publications and presentations at meetings via abstracts.
Or posters or.
Full on presentation. So we were active at the AAD The American Academy of Dermatologists meeting, which was just two weeks ago.
And we are very active there and had a late breaker presentation that Dr. John Browning.
One of our Kols presented and that was very exciting for us. So that's how we can get out and build awareness, but with reference to verica. They will build awareness for the disease of molluscum, yes. They are approved.
So they have to do for date in late July but again. This is for a procedure and as I said, we believe that we would be.
Once if approved we would likely be the first line therapy, because it is a prescription take home.
Gel.
Topical treatment.
Once a day versus a procedure that is.
Potentially requiring three or four you know doctors' visits.
But we believe because roughly 70% of patients today go untreated because there is no FDA approved treatment. We believe that there are patients that will begin to hear and be offered this yeah. Its really not a new procedure, it's a new way of <unk>.
Delivering the same product comparison, but we have a novel new chemical entity that again is a prescription benefit as opposed to a medical benefit. So those are some of the differences.
Okay and just.
What did you talk about preparing with your existing commercial infrastructure for that launch can.
Can you remind us I guess how much.
How much of that SB, two Essex market is addressable with your current infrastructure versus how much you think you would need to scale up more and add onto your capabilities to actually launch it.
Yeah, no. It's a good question. Thank you Oren.
We will begin with the dermatologists because you know as I mentioned in my statement that we believe that the dermatologists will be the first to to prescribe <unk>. If it's approved and we believe that in our community the pediatricians no the.
Logistics to whom they refer their patients for the treatment because generally a pretty pediatrician don't offer.
In office procedures and after they begin to see that the dermatologist is offering a prescription they will look to the dermatologists as the key opinion leader in their community and then the pediatricians will fall there.
There are a large number of pre need attrition within the U S. It's a very difficult market to call on with reps and we.
We are planning for digitally.
Forming them once.
Our product is approved and that that's the way, we would do that and so it wouldn't necessarily be increasing our number of of reps at this point and so it preparing preparing the field also means looking at the.
Payer access and preparing.
For that and then preparing ourselves to train a sales force.
You know we are limited.
By our funds or lack thereof, and so this preparedness is an investment that we will make as funds are available.
Okay, and you kind of just segue to one more follow up on payer.
Can you just remind us.
Well, what's your thinking on pricing I know, it's early but have you done any more yes. Since the data was out since you filed or you know have you been doing more payer outreach and research and refining your thinking around likely.
Next monthly pricing around the product.
Yeah, we did some market research in August of last year and yeah. We can send you got to have some discussions but in terms of payer researched it was from August and it was pretty much in line with the you.
You know maybe a bit of an increase from what we had seen in 2019. When we went out and did that research. So we've updated that and you know we haven't given guidance, but I know our.
Our our analysts have been looking at anything between $501000 per kit.
Okay.
Sorry go ahead, let me interrupt.
Yeah, I was just saying in the kit is for four weeks of treatment.
Alright I appreciate the time thank you.
Thank you Andy.
I'm sorry. The next question comes from Jeff Jones with Oppenheimer.
Hi, guys.
Congratulations on the quarter and thanks for taking the question.
Hum.
I guess two questions in terms of cash needs to which you've spoken to in terms of where you get later.
Latter part of two <unk>.
What are you looking at to get through.
The year end.
What does that allow you to do wind terms of building.
Building up or sales and marketing prep for launch and then.
Any update on discussions with Sato, where others around further ex U S partnering for brocade.
Yeah. Thanks, Thanks, Kevin I'll take the first question as it relates to.
Cash needs.
S and prep.
You look at back at kind of the historical activity that we add darrin.
2022 were utilized in about eight to 10 million of cash on a quarterly basis.
Going forward.
Q1 that you'd probably look similar.
Really as it relates to from here forward for the rest of the year, it's going to be dependent upon to Pauls comment just a moment ago. The amount of activity that we do to prepare the market. If you will.
So that number can vary but I think it's fair to say that.
If we.
Look at that activity.
I think the prior year numbers call. It eight to 10, a quarterly basis, we can probably bring that down.
A couple of million on the on a quarterly utilization.
Just based upon some of the cost conservation measures that we're doing.
And.
Also paired with the amount of activity, we're able to do as it relates to preparing the field.
So again that can be variable again, depending upon our access to capital.
And then as it relates to Sato, yeah, So Lus and ex U S.
We have active discussions going on and in many countries in Asia Pacific Europe , Canada, others. So there is a.
Interest I was kind of qualify that but there is interest in ROE fade because it is a very good good product and.
A number of companies and countries are interested in that so we continue to progress those discussions and as always is as we can or when we can we will we will shale shared the detail of those discussions and those potential agreements.
Thanks for asking.
Okay.
A quick follow up on Sato.
I mean, they had limited time to exercise.
Right and just certain additional territories.
How much time was left on that or has that expired.
It has not expired and we've got a couple of months to go before that expires, but we we.
Or are aware and.
<unk> will proceed elsewhere if for some reason that doesn't move forward. So there is interest.
In addition to Sato.
Great. Thanks, guys.
Thanks, Jeff.
Thank you and the next question cost agenda for Kim with Cantor Fitzgerald.
Hey, good morning, Thanks for taking my questions I have two here maybe on the first and following up on a prior comment the digital investments that you're currently planning what degree of additional investment group would go into that and is there a way to think about your potential reach through digital investment or an analog.
On to other similar approaches to launch it.
And then my second question is I know you're not in a position to provide guidance just yet but is there anything you can say on I guess expectations on the cadence of growth over time, and maybe when you believe you'll be in a position to provide guidance.
Thanks.
Thank you Jennifer I'll take the first John I'll take the J&J I'll take the second.
It definitely is up.
In terms of the digital investment.
And the investment or.
The potential launch of <unk> gel is.
Four for us is measuring.
Measuring over time and balancing over time.
The funds available and and the win et cetera, I think one thing to say is that it's not just sales and marketing, but it's also manufacturing so it's to be able to launch and in 2024.
And hopefully in the first half of 2024, we need to manufacture product and so on.
I'll put that spend ahead of you know.
Some of even the sales and marketing to make sure that we have the product available and then put that spend into 2024, if we don't have it to spend in 2023.
So it's a it's a matter of you know her.
How how how much you put in is how much you get it out and so we will continue.
We continue to evaluate and balance our funds with the investment in our potential launch.
Yeah, Hey, John Good morning, I'll take the first part of that the second part of your question.
Maybe ask Jonathan operator weigh in but you know as it relates to guidance.
Like you said, we continue to evaluate that.
Now keep in mind.
It's Ben.
So roughly nine months from a fiscal period that we that we churn consolidated results. So I think we're still working through that and both internally with the board on how to approach potential guidance. He goes forward that being said as it relates to <unk>.
Our T Rx growth in prescription growth, we continue to focus on that.
And maybe John gave some comments on that going forward. Yeah. I think as you can tell Jim for just the momentum we've had throughout the years across our products we've had a.
A few ups and downs in the psoriasis space, but we've continued to be the market leader and expand our persistent facial erythema and we expect to continue to do that that's what our goals are and our objectives are for 2023, I think the pollen jobs. Both point the continued investment around that we've demonstrated but that will also be dependent on.
And going forward, but we do expect to still grow that market and you'll see significant opportunity in the.
Oral antibiotic market with malaria and again, we feel like we've leveled out the noise of the new.
The competitors in the topical psoriasis market and we expect to see a rebound in that so where we are.
Again, we're not giving guidance per se, but.
Our brand plans our tactics, we talked about SB 206 and for dazzle.
Plans we have.
Plans for all three products, they've all been initiated over in the National sales meeting.
In early March and are being active so we would expect to continue that momentum that we've seen.
Alright, thanks for taking my questions guys.
Thank you, Dan and preference share.
Thank you and the next question comes from Kevin Oliver with Brookline capital markets.
Yeah.
Thank you and good morning.
This is a based on backing into the numbers and could be off but the winds or fees look like they are down sequentially or.
Just in broad terms fairly depressed versus last few quarters could you talk a is that correct and b could you just discuss.
What's going on behind that.
Yeah. So good morning, Kansas is John Thanks for your question. So the Windsor a piece you know keep in mind.
A couple of things one subsequent to the acquisition and the accounting presentation in treatment of wounds.
The ball a little bit over time.
So youre looking period over period, there could be some.
Artificial changes.
But effectively agree.
The agreement with the resort or the way that it works is that.
The agreement is that we are the distributor and the commercial partner or we're in situ for that product. So we effectively recognize all the revenue because we get cash as it relates to the product sales.
But we do effectively remit.
85%, if you will.
Back to.
MCT because effectively.
And we said that is a cogs.
Because effectively that's the way the disagreement works right. So the net net if you will is the residual 15%. So as it relates to changes in disease quote unquote or the part of the in situ agreement that goes through Cogs and that can vary based on <unk> net product revenue.
But then again like I said, we've also had some presentation changes during the quarter I'm sorry during the year I should say.
Okay.
Looking at the underlying script trend is still reliable.
Hmm.
Measure of what the fees would be on a normalized basis.
Yes.
Okay great.
Shifting to ROE fade.
And the activity there I think the one question in my mind with regard to.
How that's impacting you is looking.
Looking at the competitors' data it looks like there.
Very depressed net to gross.
And despite the fact, you do have rebate agreements in place you are somehow having to respond.
<unk>.
<unk> is.
The discussion around.
Coupons were in the pharmacy and the like.
There doesn't seem to me maybe the adequate the full explanation to that but I'm just trying to understand in that context.
This initial period of virtually free product out there that's.
That's real in the final analysis that just responding to that is what youre dealing with.
Yeah. This is Jonathan I forgot I'll I'll take that I think I think you hit a few points in just the gross to net dynamic of Payor rebates have increased not only for new market entrants, but also for products on the market like real estate.
We continue to still have strong coverage across all the major players that's been with brocade for awhile, but we have seen increased rebate percentages I think where the challenge and opportunity is still what's going on at the pharmacy.
We've seen less scripts being adjudicated through that coverage through numerous reasons and.
I think we've identified that we're working with the payers and pharmacies to ensure that the scripts that are coming through are not getting rejected in their borrowing the business rules and the contractual obligations have been setup.
And I think that's a primary driver of some of the correction you've seen.
And we continue to see good coverage as far as our competitors goes really knowing competes in the redness market per se. The new products are all still doing and got the anti inflammatory and yes, they've come out with heavy sampling and heavy discounts and and we did mentioned in my commentary too.
It will abate at this point in its lifecycle still has very very very favorable a copay card rules and we're looking to assess that and ensure that we meet the optimal that we still have patient affordability, which is still important but that we can bring optimal value back to November so that's being assessed as well.
And as you know Theres a lot of analogs out there what that means and we think we're very comfortable with some of those opportunities going forward, especially with brocade.
Solid writer base that we do.
Yes, thank you and the increased rebate.
The increase rebate levels, that's something it's.
Carrying through in 2023 is part of your.
Annual discussion with the plans is that correct.
Yes were baked for 2023, so we're already having conversations for 2024, but our contracts are all go through 2023. So yes. So the experience we had in 2022.
No no no changes for 2023 for the rebate percentage.
Great. Thank you.
Thank you.
Thank you and the next question comes from Jon Vander most of them with Zacks.
Good morning, Paula and John regarding gross margin, we saw a lot of volatility in 'twenty.
Turning to for a number of reasons that you mentioned, how should we think about it.
Your product gross margin for 2023 will it be as volatile and then if you look at kind of the full year.
Percentage there what.
Way Directionally should we think about that going product gross margin.
So thanks Jonathan.
Certainly, there's a little bit of a breakup, but I think you were asking about the gross margin on a product basis in the volatility we've seen and then what it looks like going forward. Yeah. I think you know again, if you think about it.
Like I said in the prepared remarks.
<unk> is impacted by a couple of different things.
The true product Cogs, if you will.
Our Cogs number like I said, it was roles either milestones et cetera.
But if you think luxury product Cogs I mean that.
That's going to be a pretty consistent.
Margin, if you will as it relates to product Cogs as part of as a percent of our gross margin of NPR net product revenue.
Roughly.
88% or so so we would expect that to continue.
As it relates to the product portion of Cogs on a go forward basis, and where we see some variability as it will be again in the royalties and potential milestones.
Great. Thank you and when we look at selling general and administrative.
And how do we split that between I guess sales and marketing and general and administrative for this year.
Yes, so if you think about.
Again bifurcation, if you will the SG&A from the.
Our commercial business it was about almost not quite 14 million.
And quarter over quarter that that spend is state Q4 to Q3 has been kind of been relatively consistent.
As it relates to what part of that relates to marketing et cetera.
That is also staying consistent again.
As it relates to our activities.
Yeah.
I don't know the exact percentage, but I would say, it's fair to say that we expect our G&A as it relates to our SG&A I should say for the Epi health business to say between 45 million on a quarterly basis.
Okay, and then final question on <unk>.
When we finally, if we see approval for SB 206, how will that incrementally affect sales and marketing expense.
That's rolled out I mean, I know you have a lot of excess capacity.
Capacity, but there might be some other demands that need to be made how should we think about that in 2024 assuming approval.
Yeah, I mean, I think there will obviously be some increase but part of the main benefit of having the acquisition of Epi health is that it will greatly reduce the amount of marketing spend according closed that'll be necessary for to a six well I was going to say too that the sales I think it stays the same and that's the market that might be what increases as we try to <unk>.
And as I mentioned earlier, it's going to be relative to the the mine actually in the funds that we have how much we are able to market the product.
Ahead or at launch.
Great. Thank you.
Thank you Tom and John .
Thank you and the next question is a follow up more on Loopnet with H C. Wainwright.
Ah Thanks for accommodating the follow up you mentioned earlier on the call John discussing R&D that a top priority is certainly progressing the manufacturing activities. So you're ready to launch if and when the time comes can you just talk can you guys talk about in general what is left to do.
On that front is it just is it just a.
Crossing T's, and dotting I's and and manufacturing.
Keeping keeping things in compliance or are you going to actually ramp up and build launch quantities ahead of January ended that in your financial plan.
And I guess also just.
Risks Derisking wise are there any things left to do that in your mind represents.
I guess risk gate gate gates, he passed with regards to manufacturing or there's things that need to be verified still in terms of scale up.
Or inspection with the F D a.
Thanks Erin.
We are on track for the January 5th Hadoop, a goal date in the normal course of that standard review.
We here.
We're producing in Durham, North Carolina, our drug substance and.
We have submitted our what we need to submit and we are on track I mean, there are usual processes that you go through in terms of process validation et cetera.
So all of that is ongoing no risk that we are aware of and.
We continue to progress.
And want to move toward manufacturing or a potential launch and in terms of that derisking and how much do you do you know.
Ahead of an approval.
The mid cycle review would come sometime this summer and I think once we get through that we'd like to be in a position to begin.
To manufacture product.
Product that would be.
You know available for a launch I think John wanted to add to your point out as it relates to the cost piece of that or.
Anything that we do from preparing for launch.
Apologies just mentioned as it relates to product preparedness.
That is going to be rolled up the R&D expenses to my earlier point.
On the earlier question, which is why we're going to see essentially the same level of R&D spend.
<unk> year that we did this year.
At this point that that amount of cost will be able to get us to a point in there.
Actual losses.
Thanks, Thanks for the clarity.
Sure Mike.
Thank you.
And this concludes the question and answer session I will turn the floor to Paula Brown Stafford for any closing comments.
Okay. Thank you operator, and thank you all for joining for really good.
Questions This morning and extended call.
No man is in a solid position to succeed with this potential launch we're on track for our January 5th Paducah date.
So we remain focused and excited for our future and I appreciate you being on the journey with us and thank you have a great day.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.