Q4 2022 Better Therapeutics Inc Earnings Call

Good morning, and welcome to the better Therapeutics fourth quarter 2022 financial results and business update conference call.

After the Speakers' presentation there'll be a question answer session and instructions will be given at that time as a reminder, this call maybe recorded.

Now like to turn the call over to Mark Heiman, Chief Financial Officer. Please begin.

Thank you operator.

Everyone and welcome to the better Therapeutics Conference call. Our press release was issued this morning and can be found in the investors section of our corporate website, better TX Dot com.

Joining me on the call today is Frank <unk>, our President and Chief Executive Officer, Dr. Marc Berman, our Chief Medical Officer, and Diane Gilman status, our Chief commercial officer.

During today's call, we will provide a business update and financial overview of the fourth quarter and fiscal year 2022.

To provide our outlook for 2023.

A Q&A session will follow our prepared remarks.

Before we begin I'd like to remind everyone that any statements. We make are information presented on this call that are not historical facts are forward looking statements that are based on our current beliefs plans and expectations and are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.

Actual events and results may differ materially from those expressed or implied by any forward looking statements.

With that I'll pass the call over to Frank Harbor Frank.

Thank you Mark good morning, everyone and thanks for joining us on the call today.

The fourth quarter and full year 2022 were marked by significant progress for better therapeutics and that momentum continues into 2023 as we advanced our preparations for the anticipated commercial launch of Bt's years, Theyre, one and type two diabetes.

If authorized by the FDA.

Now before I recap our accomplishments in 2022 I will address the recent actions we took to ensure the long term success of the company.

On March 23rd we announced a reduction in force impacting approximately 35% of our colleagues.

I also shared that we are implementing other cost savings measures to extend our financial runway. So we can reach a critical milestones.

I want to underscore our long term outlook for the potential of our digital therapeutics platform and that is not just in type two diabetes, but potentially many other cardio metabolic diseases.

Unchanged, we continue to believe that we will demonstrate the significant medical and commercial potential of our therapeutic approach.

Furthermore, our guidance for potential FDA authorization remains unchanged and we continue to prepare for commercial launch.

The reduction enforce was structured in a way to preserve all key capabilities across the company to meet all critical milestones.

However, what.

Where we did lose bandwidth the speed at which we expand into new indications may be impacted.

Now ill recap our accomplishments in 2022 and in the first quarter of this year.

Last summer, we completed the largest randomized controlled pivotal trial to date for treatment of type two diabetes by a prescription digital therapeutics.

The trial met both its primary and secondary endpoints, showing statistically and clinically significant durable decreases in <unk> as well as positive results across a range of exploratory endpoints.

We subsequently submitted a de Novo classification request to the FDA seeking marketing authorization for PTC or is there one to potentially become the first prescription digital therapeutics for the treatment of type two diabetes in adults.

Authorized by the FDA. This would give physicians a clinically validated prescription solution delivering cognitive behavioral therapy from a mobile device with a promise to help patients make and sustain the behavior changes that the type two diabetes treatment guidelines are already calling for as the foundational therapy.

CBT in its traditional in person setting has been well researched and shown to be effective in type two diabetes and related cardio metabolic conditions, but it lacks scalability, which our investigational digital therapeutics is designed to overcome.

It's worth noting that the underlying behaviors, causing type two diabetes are largely the same for many other cardio metabolic conditions.

Supporting our belief that our investigational digital therapeutics platform has the potential to be rapidly scaled across many other cardio metabolic conditions.

Our groundbreaking approach and BT is usually a one pivotal trial results were published in one of the largest peer reviewed diabetes journals diabetes care in the fourth quarter and presented at several medical conferences, including at the American Heart Association last year and most recently at the American College of Cod.

Earlier this month.

Okay.

In December 2022, we also completed and reported positive results from a pilot study evaluating the feasibility of using our investigational prescription digital therapy platform for the treatment of Nash and novelty.

The lift Vita liver study met its primary endpoint and showed statistically significant and consistent improvements in magnetic resonance imaging proton density fat fraction or MRI P. D F F and a broad range of liver biomarkers.

These results support our belief in the potential for our PDT to become standard of care either alone or in combination with future pharmacotherapy treatments. As currently there is no FDA approved treatment for these conditions, which affect approximately one in four Americans and cost approximately a $100 billion in direct medical costs annually.

Okay.

Now as we look to the first quarter of 2023.

The review of our de Novo submission has steadily progressed since the FDA accepted our submission in October of last year.

We've had multiple rounds of interactions with the agency, including a request for additional information, which we received in February .

And it's a typical part of the de Novo review process.

Also in February we had a meeting with the FDA to clarify several of the items noted in the request.

The work to address the Fda's questions is well underway and our previously provided guidance that we anticipate the fda's decision by the middle of 2023 remains unchanged.

And we've made substantial progress in preparing for the potential commercialization of Bt's easier one specifically in the last quarter, we completed our health economic models.

Conducted several studies to inform our value proposition to payers and advanced contract negotiations for <unk> distribution services.

In addition to these key accomplishments that many other areas, where we have advanced our business.

And we believe our platform technology intellectual property portfolio and groundbreaking clinical research puts us in a leadership position in this rapidly evolving prescription digital therapeutics category.

The digital therapeutics market as a whole.

Is seeing tremendous growth and with recent research by global market insights projecting revenues to hit $100 billion by 2032. We believe now is the time to be innovating in this space.

This and recent use of the bipartisan access to prescription digital Therapeutics Act of 2023 be reintroduced in Congress underscores a recognition of the promise of Pdt's and this is an important next step towards gaining coverage of pdt's by Medicare Medicaid, helping millions of Americans receive it.

Innovative care to treat a growing range of conditions and illnesses.

I will now hand, the call over to Diane to provide a more in depth update on progress in preparing for potential commercial launch Diane.

Thanks, Brian .

I'd like to take the next few minutes to outline what we've accomplished since our last update with regards to our commercialization plan.

First as it relates to market access I'm pleased to report that we have developed our health economic model, including both a comparative effectiveness analysis or CE and the budget impact model using data from our pivotal randomized controlled trial.

The cei evaluate the long term or lifetime economic impact of an intervention with an incremental cost effectiveness ratio, which describes the cost per quality adjusted life year gain and.

And results from our initial model for the intent to treat population were positive.

With observed impacts on <unk> reduction and other halliburton.

Variable <unk> 001 was associated with greater last year's greater quality adjusted life years, and lower costs over the model time horizon.

So said differently. The analysis suggests that <unk> 001 achieved additional health gains at a lower cost.

And this means that it is defined as a dominant intervention.

It's incremental cost effectiveness ratio is below the willingness to take threshold and as such is considered to represent a good use of healthcare resources.

Comparative effectiveness analyses offer one input for payer decision, making and are often used by national health care system to evaluate the relative importance of treatments and their benefit to society and we're excited about these initial results since we believe they add an important component to our value proposition.

Hey.

Using inputs from the CEO . We've also developed a budget impact model, which evaluates the budgetary impact of a new treatment in a shorter timeframe, usually about 1% to five years shorter term costs such as the direct cost of the new treatment adjunct pharmacotherapy costs Hospital.

And ER visits and costs associated with complications when more heavily any budget impact model.

And the initial results in the intent to treat population and demonstrate the potential to see cost savings within the first two years.

Next we plan to submit our health economic model data for publication, while also initiating our pricing research. This all will ultimately feed our National Association of managed care physicians dossier.

Now, let me share some payer research data since our last update in December we conducted a blinded study to test the value story for <unk> 001 with Payors.

Participants were current voting member chairs our co chairs of committees for coverage decision, making both for pharmacy and medical the element of the value proposition tested included the disease burden of type two diabetes.

View of the current treatment landscape.

Unmet needs along with Btu zero-zero once product and clinical information.

The value story tested very well with payers and the feedback is in line with prior research that.

Final element of our payer value story undergoing testing with Payors is related to our health economic model, along with result, and our intent to treat population.

And the findings from this research will allow us to further refine our overall value proposition and we believe we are in an excellent position now to commence meaningful pre authorization information exchange meeting with payers beginning in April and over the next few months ahead of launch.

Beyond the payer messaging study we conducted another research study in February with payer decision maker to understand the role of value based agreements might play in coverage discussion, we tested several variables upon which agreements could be structured including patient engagement metric clinical up.

<unk> and financial targets.

As in prior studies overall payers reacted positively to <unk> 001 target product profile and the pivotal trial results.

Study conclusion suggests that value based agreement will indeed be important to payer negotiations and yield important insights to guide our pricing and contracting strategy.

So while our focus on market access is a priority it does take more to drive strong patient and provider adoption.

Our recently completed provider and patient journey work confirms the fit of between 001 into clinician workflow. Since it is intended to be treated as a prescription product whose benefits will be recognized at follow up patient visits as would be the case with China.

His unique is one the digital fulfillment and delivery of this novel investigational therapy, which we aim to keep it simple for both providers and patients and to the ability to expedite time to treatment and track adherence to therapy by the inherent nature of this investigational digital prescription therapy.

And to continue our efforts in raising awareness and educating the market. We have made progress expanding our publications and podium strategy to communicate the body of evidence supporting <unk> and its underlying science and mechanism of action.

Frank noted on March four of this year, Dr. Mark the NASA principal investigator for our pivotal clinical trial delivered a poster presentation at the American College of Cardiology annual meeting, which Gardner tremendous press with more than 80 outlets picking up the study headlines.

And with regards to our publication plan, we expect to submit the 180 day data from our Btu Zero-zero, one clinical trial for publication as a follow up to our published 90 day primary endpoint results last year.

Yeah.

Finally, I would like to provide an update on our go to market strategy last quarter, we laid out a targeted plan informed by patient claims analysis that masked the highest concentration of uncontrolled type two diabetes patients to providers and <unk> integrated delivery networks or health system, which overlap.

With approximately 25 regionally dominant players.

Further segmentation of this targeted patient that reveals that about 25% of these patients can be reached by about 5% of providers in the snapped cohort, which we believe makes this a reasonable target group could support a strong initial launch with a modestly sized sales force deployed in key geographies.

And a deeper analysis indicates that about one third of this provider group is made up of endocrinologist further focusing our efforts.

This now provides a view of the initial areas for us to prioritize based on the data. We have recently acquired profiles of our targeted list of health systems to characterize their readiness to evaluate and consider <unk> 001, systemwide, while also identifying key champions and these health systems are focused geographies.

Overall, we continue to make progress on prelaunch preparations and I look forward to sharing additional updates next quarter.

Mark <unk>, our Chief Financial Officer will now review our year end financial results.

<unk>.

Thank you Diane.

I'll begin by discussing our year end operating expenses.

R&D expenses for the fourth quarter were $3 million. This.

This compares to $6 4 million for the same period in 2021.

The decrease was primarily related to a $1 $8 million declining clinical trial costs as the company completed its pivotal trial for <unk> 001 in the third quarter of 2022.

And the $1 6 million decreases in incentive compensation expense compared to 2021.

Prior year incentive compensation expense was dependent on completion of the spec business combination and as a result of full year incentive compensation was recorded in the fourth quarter of 2021.

For the fiscal year 2022 R&D expense.

It was $16 4 million compared to $19 4 million in 2021.

The decrease was primarily related to lower pivotal trial costs.

This was offset somewhat by the increase in personnel costs related to expanding our software development capabilities and an increase in capitalized software amortization.

Sales and marketing expenses for the fourth quarter were $1 7 million compared to $1 2 million for the same period in 2021.

For the fiscal year, 2022 sales and marketing expenses were $7 million compared to $2 3 million in 2021.

The increase in sales and marketing expenses, primarily reflects an increase of $3 million related to the advancement of our real World evidence program, which was launched in late 2021.

And higher personnel costs to support the potential commercial launch of <unk> 001.

G&A expenses were $3 6 billion for the fourth quarter of 2022, and $4 6 million for the same period in 2021.

The decrease was primarily related to lower incentive compensation costs compared to last year driven by the completion of a spec business combination as described earlier.

For the fiscal year 2022, G&A expenses were $14 8 million compared to $8 $8 million in 2021.

The increase was primarily related to the additional costs of being a publicly traded company with $3 $4 million of this increase related to our D&O insurance.

The remainder is related to an increase in head count legal and other professional fees.

We incurred a net loss of $8 8 million for the fourth quarter of 2022 compared to $13 9 million for the same period in 2021.

On a per share basis net loss was <unk> 37 for the fourth quarter compared to 71 days for the same period last year.

For the fiscal year 2022, we incurred a net loss of $39 8 million compared to $40 3 million in the prior year.

On a per share basis net loss was $1 69 for the year compared to $3 11 for the same period in the prior year.

Now turning to our balance sheet, we ended the fourth quarter with $15 $7 million in cash and cash equivalents compared to $22 3 million in the third quarter.

As a result of the workforce reduction and other cost savings initiatives, we expect cash burn for 2023 to be lower than previously forecasted by approximately $10 million.

With that I will turn the call back over to Frank for some closing comments Frank.

Yeah.

Thank you Mark.

Before I wrap up I would like to provide an update on our financing strategy and then share a preview of our critical milestones for the year ahead.

So first we are pursuing a three tiered financing strategy, which consists of capital markets based financings business development and structured non share dilutive financings such as royalty monetization transactions for example.

With this financing approach, we aim to achieve multiple objectives.

First extend our financial runway through potential FDA authorization, several quarters of commercial launch and potentially initiate a pivotal trial in another indication such as fatty liver hypertension and hyperlipidemia.

Second.

At new high quality shareholders.

Third alleviate some of the technical trading power meters that are weighing on our stock and fourth seek one or several partners to help us potentially launch a product in the U S.

Our geographic presence and or accelerate the expansion of our pipeline.

We are pursuing all elements of this financing strategies simultaneously.

We're making good progress on all fronts.

Secondly, we anticipate the following milestones for 2023 one.

One FTA authorization and subsequent successful launch of <unk> in type two diabetes.

In the middle of the year.

Two.

Apply for breakthrough device designation from the FDA investigation of CVT based treatment platform for nationality offered by the middle of the year or early in the third quarter, depending on bandwidth issues I mentioned earlier.

Three strengthening our financial position by executing on multiple elements of our three pronged financing strategy.

For <unk>.

Pending our financial situation and Resourcing bandwidth potentially launching another pivotal study to expand our pipeline of commercial products.

And five share the first data set from a PTC as their one real world evidence program in the fourth quarter of this year.

Reflecting on the progress we've made throughout 2022.

What stands out is.

How the sophisticated and methodical approach we are taking reflects the quality of talent we have at the company.

I truly believe this differentiates us now I want to thank the entire better therapeutics team for their commitment to challenging the status quo and their passion for driving change and how cardio metabolic diseases are treated.

I just want to sincerely. Thank our colleagues who are impacted by the layoffs for their many contributions.

I am grateful for their dedication and passion.

And then decided to continue on the path we've set for a breakthrough year ahead.

The prescription digital therapy space needs a success story.

We are working all out to be the company that demonstrates at a large scale the promise and commercial viability of PDT.

And with that we're now ready to take your questions. Thank you.

Thank you if you'd like to ask a question. Please press star one one if your question has been answered and you'd like to remove yourself from the queue. Please press star one again.

Our first question comes from Thomas Flaten with Lake Street. Your line is open.

Hey, good morning, guys. Thanks for taking my questions.

With respect to the cash runway situation Mark you mentioned, you expected to be $10 million less than previously forecast, but relative to the operating cash use in 2022.

Can you just give us some directional guidance on how you expect that to look relative to 2022.

Hey, good morning.

Thomas Thanks for participating thanks for the question.

I'll hand over to marketing just a second but overall of course with the actions. We have taken you should expect operating cash burn to be lower than what you saw in the prior year.

And.

The actions, we've taken I think impacted a number of different elements of our cost structure.

Part of course related to hiring.

Some of it related to.

Temporarily slowing down the enrolment in our <unk> study.

And of course implementing the reduction enforced so combination of all of these.

Has resulted in a reduction in operating expenses.

Mark was mentioning in his prepared remarks, and they will result in overall lower burn rate.

Got it.

Yes.

Let me just I'll add on there.

Frank mentioned earlier, we are pursuing that three pronged financing strategy.

And with that we do anticipate.

It should provide us sufficient capital to get through several of those milestones that you mentioned as well throughout the rest of 2023.

Got it and then Frank I was wondering if you could provide some color on the request made by FDA in your interactions anything you could share with us there in terms of.

<unk>, what you needed to do to respond to those any new work or is it just.

Simply submitting paperwork I'm, just trying to get some color on them.

Yes.

And then maybe just.

Take a step back as I answer. This you remind everyone. So receiving such a request from the FDA is a typical part of the de Novo process and one that we had absolutely expect that you recall, we had mentioned on prior calls that the FDA has the South Dakota mandate to review.

De Novo submission so within 150 days.

But when the ball is in our court meeting when they put questions to us that we have to answer than the clock stops and so.

When we provided our initial guidance back in.

Late September when we submitted our.

Our de Novo that it would take about nine months for the review to be completed we took into account that there would be these types of.

Delays, if you will to ask that question. So it's.

Just to make clear to everyone. This is a typical part of the process.

Look we don't want to get into the details of our interactions with the FDA, but I will say this.

We believe the questions that we received all readily addressable.

Work to address them is well underway.

Uh huh.

We are reiterating our guidance today on when we expect a decision from the FDA.

Great I appreciate you taking the questions. Thank you.

Thank you. Our next question comes from Charles <unk> with Cowen Your line is open.

Yeah, Hey, guys. Thanks for taking the questions.

Obviously, you outlined some.

Our strategies for financing maybe is there.

Maybe kind of give us a sense for how some of your discussions are going with potential partners.

And.

Maybe just a little bit more on <unk>.

Each of the strategies that you are pursuing currently.

Uh huh.

<unk>.

No.

Closer maybe than others.

Maybe in a little bit more around anything that you could add that'd be helpful.

Sure So oh.

There's three different elements to this financing strategy.

Capital markets based financing business development and structure financings and as I mentioned we.

We are and we have been pursuing all three of those elements in parallel for quite some time.

And.

Further we have made good progress on all fronts. So we're actually confident that.

One or several of these elements of the financing strategy will bear fruit.

It's obviously.

Difficult environment at the moment, which I think particularly cause for great diligence in evaluating all the options available to us and that's exactly what we're doing so well.

Very carefully and diligently evaluating.

All options available to us.

And.

<unk>.

And.

I can't tell you exactly in what order we will.

We will execute on all of these things but.

Yeah.

I think.

One thing that might come first as perhaps a capital markets based financing.

And that might then be supplemented by other elements of our strategy.

Thanks, I appreciate that I guess, because maybe I was just maybe a little bit more focused on royalty monetization.

Given sort of the the data that you've been presenting here I could imagine.

This would translate well into other countries, where you probably don't have the resources, yet too to really launch on your own.

Just curious like.

If you were to do something.

Are you finding interest in that maybe into Europe for example.

<unk>.

Would it be difficult to translate the program into other languages is any of that already been done.

Maybe I mean is it currently is it available let's say Spanish for example.

Anything like that.

Maybe on the outside of any kind of color you can provide there.

Yes, so you touched on two things you touched briefly beginning on the royalty monetization transaction. So there I would just say.

The.

The optimism that we have that this is a viable option to us really goes back to the projected peak revenues in our lead indication type two diabetes.

Here, we expect revenue to be in the one five to two plus billion dollar range and on a revenue projection of that magnitude.

There is a good chance to be able to see.

Structure, a reasonably sized royalty monetization transaction.

Plenty of examples in the biotech sector I think thats.

Is that a precedent for that so we feel confident about that.

With regards to the business development.

Opportunities.

Let me just say more broadly here the universe of options available to us is actually quite broad I guess, we are talking on one hand.

Now to big pharma companies and there is I think an obvious value proposition. If you look at how our pivotal trial was structured where we have demonstrated.

Improvements.

And <unk> on top of the standard of care and so obviously there.

The value proposition here for pharma companies that have.

Two diabetes medications that are part of the standard of care today.

But well and some of these discussions.

Focus either on perhaps.

Perhaps helping us commercialize our product in the U S. Some of these discussions focus more on expanding our geographic footprint as you just mentioned.

We believe with the data package that we already have enhanced we could be on the market and several European countries, where it's just really quickly, but we are really not set up internally ourselves to pursue their services when a partnership could come in.

And accelerate that progress.

And then thirdly, I mean, we could also imagine to leverage partnerships to maybe accelerate how we expand beyond type two diabetes into other.

Disease States as you know, we already have proof of concept in hypertension, and hyperlipidemia and nationality, but beyond the discussions with pharma companies.

The other potential partners out there for example in the medical device space, you can imagine that manufacturers of.

Certain wearable devices might be a natural fit with the type of digital therapy that we have and then lastly.

Lastly, you could also imagine that what we do is perhaps of interest for some of the.

Tech companies that have an interest in housekeeping so it's abroad.

Spectrum of discussions that we have and that.

That gives us some confidence that one or several of those will ultimately be.

To be successful.

I appreciate that.

Going back to sort of the.

<unk>.

The cash burn obviously can you remind us what was the earlier projection of cash burn.

And then secondly are there any one time what are the sort of the onetime costs related to workforce reduction we should expect maybe here.

When you guys reported first quarter.

Yes, I don't think we have provided prior burn guidance, but obviously our cash burn was.

Available from the from the prior quarters right and that has not been impacted by the cost containment measures that were implemented.

Months.

And for the one time cost ill defer that to mark.

Sure Hey, Charles.

Questions Yes.

Yes, I would say onetime charge will be less than half a million dollars that youll see youll see that hitting in Q1.

Okay, and then when you talk about a overall.

Should we be is this I guess is it.

You should think of it as a step down in the quarterly run rate, but then that's kind of consistent or do you see room for or should we see continued improvements.

Until maybe approval and then.

And then an uptick in some expenses such as sales and marketing.

Yes, I think thats, the right way to think about it.

We have implemented now in terms of cost containment measures I think in some part hopefully just temporary measures and our.

Our expense structure evolves going forward it really depends on how successfully we executed on our financing strategy and so once we.

We do that we'll obviously make that public and if our.

Operating expense trajectory changes, we will then.

Provide additional updates on that as well.

Okay, great. Thanks.

Thanks for the questions I appreciate it.

As a reminder, if you'd like to ask a question. Please press star one one our next question comes from Keay <unk> with Chardan. Your line is open.

Yes. Thank you.

So maybe one of the prongs.

Financing the Biz Dev part.

In your conversations there.

Our.

I would imagine youre seeing interest in is it more at this point of discussion about.

The potential of the product the viability of the product as a market or is it the numbers of how how the partnership would be structured.

Yeah, Hey, good morning.

And.

I appreciate the question.

Really wanted to go into the details off.

What we are discussing specifically and where we are in those discussions with partners, but I can't tell you.

The discussions are not focused around the viability.

After all of the markets or the potential of the product I think that is readily understood.

And I think you know.

Pretty much every large pharma company today has a team.

Sizable team focused on on <unk>. So it gives you a therapeutics in general and I think where we stand out is that we have.

The largest randomized controlled trials to date, we've generated very broad clinical evidence.

And we have.

Proof of concept data not just in type two diabetes, but other indications as well, which speaks to the potential applicability of our platform across sort of the cardio metabolic disease space.

Yes, I mean as <unk>.

<unk>.

I noticed that questions around.

The potential of this.

Okay, alright, thanks for that.

Thank you there are no further questions at this time I'd like to turn the call back over to Frank Carbo for closing remarks.

Well. Thank you very much everyone for joining us this morning.

And we look forward to updating you.

In the months ahead on our progress.

Okay.

Thank you. This does conclude the program you may now disconnect everyone have a great day.

Okay.

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