Q1 2023 Heron Therapeutics Inc Earnings Call
Speaker 1: I I.
Speaker 2: Ladies and gentlemen and thank you for standing by. Welcome to the Heron Therapeutics Q1 2023 Earnings Conference call. Before we begin, I would like to remind you that this call will contain forward looking statements. Concerning Herons future expectations, plans, prospects, corporate strategy and performance, which constitute forward looking statements for the purposes of the Safe Harbor provision under the Private Security's litigation reform act.
Speaker 2: as of any subsequent date. Paron specifically disclains any obligations to update such statements. Now I'll turn the call over to Craig.
Speaker 3: Thank you, operator. Good afternoon, everyone, and welcome to the Heron Thunder Putics first quarter 2023 earnings call. I'm Craig Collard, the new CEO of Heron Thunder Putics, and I'm thrilled to be leading this organization as we continue to make headway in the hospital and in college markets.
Speaker 3: Today I'll provide an overview of our recent performance, highlight key achievements, but more importantly, give some insight into my assessment of the business in my first four weeks and discuss our strategic vision moving forward.
Speaker 3: Total product net revenues for the first quarter were $29.6 million up from $23.5 million in the same quarter last year.
Speaker 3: and increase of over 26%.
Speaker 3: We continue to make steady progress on the oncology side of our business.
Speaker 3: But we remain excited about the market opportunity for both Zen Relief and our newly approved product upon V, which was launched in March of this year.
Speaker 3: Starting was in relief. I realized the product has had a slow uptake since launch for a variety of reasons.
Speaker 3: Despite competing in a huge market, the product has a differentiated clinical profile that works well when used.
Speaker 3: The label has limited our ability to be the drug of choice across a variety of indications. To counter that, we filed an SNDA with an October 23rd for Dufodate.
Speaker 3: that if approved, we'll expand our indications and number of procedures we can treat.
Speaker 3: The viscous nature of our product has slowed the withdrawal from the vial compared to other drugs. To improve the handling, we recently started multiple enhancement programs to address some of the issues we have faced in the surgery suite during preparation including a vial access needle or van
Speaker 3: and ultimately a pre-filled syringe that could be game-changing.
Speaker 3: Since joining the company, I've been able to get in the field and work with our sales representatives.
Speaker 3: which always find helpful when trying to assess product performance issues.
Speaker 3: I'm having a report that so far I've seen Zen Relief use in five knee surgeries.
Speaker 3: I was trying to understand what really happens in the application of the product.
Speaker 3: Previously, I had heard mixed messages about the time to draw the product out of the vial, product viscosity, and general issues that would make it more difficult to use our product. What I determined from watching these surgeries is that we can replicate the success I saw on this day.
Speaker 3: The application requires training of the staff as it is different but not complex.
Speaker 3: The nursing staff even admitted that after using the product a few times, it became second nature and is now just part of the normal routine and prep before the surgeon arrives.
Speaker 3: I think early in the launch of the product, our company did not address this issue head on. It didn't understand that this was going to require more training of our reps and highlighted our own inefficiencies. All products generally have challenges when launched, and the companies that are prepared and they can move quickly are generally the companies that ultimately succeed. Thank you.
Speaker 3: The good part here is that it's not too late.
Speaker 3: The good part here is that it's not too late to get this launch back on track.
Speaker 3: Now moving to upon V. The product was launched a month prior to my joining the company. Upon V, an injectable emulsion is the only IV substance in K1 receptor antagonist indicated for post-operative nausea and vomiting. As was in relief, this is a product with a great clinical profile and marketing advantages and competes in a very large market.
Speaker 3: We believe that upon V will be a very successful product in our portfolio and his great call point overlap was in release. While the receptivity to the initial launches encouraging we will look for ways to maximize this potential and update our shareholders as we progress throughout this year. Before turning the call over to David for a financial review I thought it might be helpful to get some insight into the business as a whole.
Speaker 3: and a view into the strategic direction as we move forward. Since joining the company, I have spent much of my time trying to understand each department headcount, spin, and how the company functions as a unit.
Speaker 3: The goal has been to do a thorough internal review to determine the company's business practices and strategies to develop a long-term plan that allowed the company to maximize value for all shareholders.
Speaker 3: Although my review is not complete, I can tell you that I have a much better understanding of the company and many changes will be coming soon, including a reduction of cash burn and improvement of operational efficiency and the implementation of a realistic product forecast to more accurately determine our capital requirements moving forward.
Speaker 3: Shortly after I joined the company, I implemented the first major change which was to flatten the executive reporting structure in the company.
Speaker 3: I hired Jason Grillio, whom I have worked with in the past to lead our sales and marking efforts.
Speaker 3: Jason will be improving many things with the commercial structure, including targeting, Align the Accountant Team Support, Marketing Message, and Data to the Salesforce and Management Report.
Speaker 3: I believe these changes and many others to be updated later will continue to improve the uptake of our products. Other expense cuts will be implementing include less outsourcing and dependency on consultants and reduction in headcount.
Speaker 3: Again, I will provide more detail in the near future. As you know, I've been assessing all aspects of our business to ensure we are well-positioned for the future.
Speaker 3: I recognize that this process may be causing some uncertainty and concern among our shareholders. We are committed to providing you with as much information as possible about the strategic direction changes that will be coming.
Speaker 3: We understand that you've invested your time and resources in our company and we value your input and support.
Speaker 3: We want to keep you informed every step of the way as we navigate this process.
Speaker 3: We plan to share more details with you soon about the changes we will implement and the reasons behind them.
Speaker 3: Our goal is to create a stronger, more sustainable company that is better equipped to meet the needs of our customers and stakeholders.
Speaker 3: I appreciate your patience and understanding as we work through this process. We are confident that our changes will position us for long-term success and we look forward to sharing more information with you soon. Go ahead, David.
Speaker 3: Thank you Craig. As Craig mentioned in his remarks, our net product sales for the first quarter of 2023 were 29.6 million compared with 23.5 million in the first quarter of 2022.
Speaker 3: For the first quarter of 2023, our Xeneral FNF product sales were 3.5 million. In March 2023, APOMD became commercially available in the US. For the first quarter of 2023, APOMD NNF product sales were 244,000. Our oncology care franchise net product sales for the first quarter were 25.8 million, which was an increase of 15% over the same quarter in the prior year. For the full year of 2023, we expect oncology care franchise net product sales of 99,203 million.
Speaker 3: Culture product sales for the first quarter of 2023 were 16.9 million.
Speaker 3: compared to $11.4 million for the same period in 2022. For Q1 2023, cost of product sales included a one-time charge of $5.3 million, resulting primarily from the write-off of short-dated Zinareloff inventory.
Speaker 3: primarily due to a decrease in external development costs related to Zinrolyph. Our sales and marketing expense decreased slightly from 23.4 million to Q1 2022 to 21.2 million for the first quarter of 2023. Primarily due to decrease in costs to support the ongoing commercialization of Zinrolyph. We are reporting a loss from operations of 33.1 million for the first quarter of 2023, which compares to an operating loss of 62.9 million for Q1 2022. Our balance sheet at the end of March 2023 shows a cash balance of 60 million.
Speaker 3: down from 84.99 at the end of December 2022. Craig back to you. Thanks, David.
Speaker 2: Operator, we'd now like to open things up for questions and go ahead please. At this time if you would like to ask a question simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Brandon folks with Kendra Fitzgerald. Please go ahead.
Speaker 4: I think that's my question and congratulations on the appointment. Maybe just firstly from me.
Speaker 4: How quickly do you think we can do a return on the training of staff? And then secondly, I know it's early stage and we perhaps need to be just a bit of a patient, but any more granularity in terms of going forward and deeper into these accounts and sort of
Speaker 4: Maybe some of the specifics that you think you can do to change the trajectory of the leaf.
Speaker 4: And then lastly, maybe just any color, and I know this wasn't given during your time Craig, but I think we were looking for 10% volume growth in 1Q23 over 4Q2022 when we report a year-end earnings. So just any color, did that volume growth materialize? Were there any movements on price? Just any color there on VIN release. Thank you very much.
Speaker 5: with proper management and beginning to see consistent quarters and growth of our product, I think again that should affect the stock price longer term. I think in the short term, again keep in mind I was not here for this quarter that I'm speaking of, so you know growth of products and that type of thing and depth in the accounts and what happened this prior quarter.
Speaker 5: I can't really speak to other than just to speak to where we are. But again, getting back to, you know, our goal is to get this company to profitability as soon as we can. And we're going to give a lot more detail around that. And that really includes minimizing our spend, you know, being a little bit more of a leader organization and then really maximizing our efficiency in sales.
Speaker 5: speaking specifically you know to generally and getting deeper into accounts and that type of thing i agree i think where we have usage we can certainly get deeper in those accounts uh... i spoke a little bit about you know the day i was in the field and uh... you know the thing that i left with that day really was i'm looking for things we can standardize
Speaker 5: You know, one thing that one person doesn't account, can you really carry that across all the salespeople that we have and create something that can be replicated? And when I saw that day that we can, I think the application issues that I had seen and heard about, again with the proper prep and training, as I had said, it really does go away. And when the service...
Speaker 5: to me that I really like the best cost. And he actually called the product honey. He said, I really like the best cost of this product because it stays where I put it. And again, I think in some ways we sort of ran from that, but I think we should be running towards it. I really do think the product is very under-optimized. And again, the good news is the product works, and it works well.
Speaker 4: Great. Thank you very much for taking my questions. Welcome.
Speaker 3: Your next question will come from the line of a Boris Peaker with TD Cowan. Please go ahead. This is Nick on for Boris. Thanks to take our question. Just quickly on a Ponvey. How are you thinking about marking this moving forward? I know that you mentioned that there are a lot of similarities between like the calls that you'll make with the Ponvey and Jim Relief.
Speaker 3: So I was just thinking about like separately how would you be planning to market this to potentially have a faster growth and then we're left it.
Speaker 5: Yeah, no, that's a great question. I mean, one of the things I was sort of faced with when I walked in to the company was, you know, where do you put your resources to? You continue to pour more resources towards NRELF or do you move things a little bit more towards applying V? I think right now, as I walked in the door, we were a little more weighted towards NRELF. And if you think about it, you know, NRELF is a trickier sell. There's a little bit more time and effort.
Speaker 5: that's easier sell. Now again, how it's been reacted by customers and all that, I just haven't had a chance to really see a lot of that yet. But as part of this sort of plan, as I talked about, you know, communicating more going forward, we're looking at that and we're looking to put additional resources behind upon V.
Speaker 5: The really interesting thing that I've seen from the marketing data thus far on a PONVY though is that the oral Prepetent market is growing with literally no promotion and that's generally unusual.
Speaker 5: The really interesting thing that I've seen from marketing data that's fallen upon is that the oral-prepresent market is growing with literally no promotion, and that's generally unearned. And so the takeaway from that is, you know,
Speaker 5: If I look at that, and then I look at the massive size of the Odandasron market and really just look at patients that are dosed again with the same product. If we could just capture those two markets, I mean this is a multi-hundred million dollar drug. From that perspective, it really doesn't treat you, but what we can actually do with that product. So...
Speaker 5: Again, we're looking at it now and trying to, you know, sort of really look at not only how we comp our rest but the alignment of our sales force and all that. So I think all that is up in the air at this point, but we'll have some decisions here pretty quickly.
Speaker 3: Great, thanks for that. And space. So for the VAN and pre-filled syringe, what are the next steps to get them approved and when do you expect this to be done for each of them?
Speaker 5: I'm sorry, did you say prefilled syringe? And the VAN as well. Yeah. We've got some initial timelines that I've looked at. I'm hoping we can be a little quicker on this. And we've done some work on the prefilled syringe.
Speaker 5: about a year and a half or so and then you know color the year and a half app that you'd have the pre-filts range and I think in the midst of all that as well you've also got the expansion of a label possibly with the S&DA filing.
Great, thank you very much.
You're welcome. Thank you. Your next question will come from the line of Rohit Basim with Needham & Company. Please go ahead. Hi, this is Rohit on for search. Thanks for taking our questions. For the CINV franchise, the previous management provided prior guidance of 99 million to 103 million. Does this guidance still stand?
And then secondly, you mentioned reducing cash burn. Do you have any plans to pull back on the sales horse? Thanks. Yes, I'm going to CMB franchise first. I've seen it be given guidance in the past. And what I can tell you is I think that the CMB franchise is moving along quite nicely.
and it's fairly steady. What I didn't like when I initially saw that, just being perfectly honest, I haven't been involved in a company that gave partial guidance on partial products. So what I would prefer to do is, as we get our hands around this, is give guidance a little more from a company standpoint and less about particular products. So that's sort of the reasoning and that was my decision. But I can tell you that things aren't moving along fairly steadily.
Regarding, I'm sure you're part of your question. Yeah, so you mentioned reducing cashburn. Do you have any place to set the sales force?
Yeah, I'm sorry the Salesforce. We're looking at that again. We want to be more efficient. It may it may be more of a Realignment we're certainly not doing you know anything on the oncology side I think on the acute side. We're just trying to really assess are we aligned in the proper accounts and what does that look like?
you know, would we trim that a bit in the short term? It's possible, but we're really more looking at how better to align to the, you know, where there's a pond, beer, zen reliff, and how we kind of go about that. So it's, you know, that takes a little bit of time. And, you know, Jason, like I mentioned before, was hired just a few weeks ago, and he's on top of that. And so...
I'm hoping we can have something a little more clear on that here very shortly. Great, thank you.
Your next question comes from the line of Carl Burns with Northland. Please go ahead. Thanks for the question and congratulations on the promotion. Considering the one time Zeverlev inventory write off which I think was referenced at 5.3 million, if we back that out it looks like the gross profit margin would have been around 61%. This is a really Es Tube Michael icon.
Does that sound right? And is that a number that you would expect to be sustainable in the second going forward in future quarters?
Carl, it's a great question. You just said something funny when you congratulated me on the promotion. I'm hoping the next quarter or quarters after this what you say is, hey, guys, congratulations on a great quarter. That's what we're striving for. So I'd like to get that out first, I guess. Regarding gross margin, no, we're not ultimately where we need to be..
I would like to see us move towards under sort of a 20% COGS, which will be 80% gross margins. That's where I'd like to strive for it. And I think with what we're doing batch size wise now you're going to see some of that being reflected. I'm also looking into every manufacturing agreement we have and seeing where we can improve upon that. So ideally I would like to get us down and sort of that, you know, I would call it hot teens to 20 range.
Hi, thanks for taking my question. This is Clara on for Kelly. So for the same account you're targeting for upon the end of the run, what would be your strategy to maximize the synergy between those two products and how should we expect the synergy to kind of be reflected on the cells in the common pollers and also for the
For the REN-LAW, for the FMDA, what are some strategies and efforts to help the REN-LAW fully recognize the additional opportunity indicated by this additional indication? Thank you.
it's difficult to plan until you really know what you're going to have. So there'll be more to come on that. And really with the PONVE and ZENRelief, the synergies there, I mean, if you think about it, there's two products that fit really well together. I think the question we're really struggling with right now is, where do we put our resources now? Because when I look at ZENRelief and I think about, you have a van coming, you've got a possible expansion of SNDA, and then you have really what should be game-changing because it changes the whole sterility problem, is the prefilled syringe. And so one could argue that in this period, should we focus more of our resources possibly on a PONVE, which is a much easier sell, quicker, has a bit of an annuity factor to it in a very large market.
And I also really wanted to thank all the employees here. I mean, change is difficult. And again, there's been a lot of things going on here and we're putting a lot of information together. And I think what you're gonna see in the future is a much, much different company that again, will head towards profitability and will be a success. And so I'm excited about that. And again, I just wanna thank everyone here that's being a part of that.