Q1 2023 Fennec Pharmaceuticals Inc Earnings Call

Yeah.

Good morning, ladies and gentlemen, and welcome to Sonic Pharmaceuticals, first quarter 2023 earnings and corporate update conference call.

This time all participants are in a listen only mode. Later, we will conduct a question and answer session instructions on how to participate will be given at that time.

A reminder, today's conference call is being recorded.

Now I would like to turn the conference over to Chief Financial Officer Robert.

Please proceed.

Thank you operator.

And good morning, everyone.

We are delighted that you could join us today for Fedex Pharmaceuticals first quarter 2023 earnings conference call.

During which we will review our financial results as well as provide a general business update joined.

Joining me from connect this morning, Rusty right, Bob our Chief Exec.

I Could've officer.

Before we begin I would like to remind you that during this call. The company will be making forward looking statements that are subject to risks and answered uncertainties that may cause actual results to differ from the results discussed in the forward looking statements.

Reference to these risks and uncertainties are made in today's press release and disclosed in detail in the Companys periodic and current event filings with the U S Securities and Exchange Commission.

In addition, any forward looking statements made on this call represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.

We specifically disclaim any obligation to update or revise any forward looking statement.

This conference call is being recorded for audio rebroadcast authentic website www dot panic pharma dot com.

Where it will be available for the next 30 days.

And with that it is my pleasure to turn the call over to Rusty Rykoff Rusty.

Thank you Robert and good morning, everyone.

We appreciate.

This time youre, giving us today.

We will be discussing.

The market opportunity ahead of us our recent progress.

We have achieved many significant milestones over the past several months.

The focus of today's call is to review updates on the recent launch efforts underway for Mark in the U S.

Whether it's detail our first quarter 2023 financial results all of which were outlined in our earnings press release issued this morning prior to this call.

First I'd like to discuss the market opportunity ahead of us.

Each year in the U S. There are about 5000, new cases of pediatric solid tumor cases.

Who would be candidates for platinum based therapy.

70% of these patients are roughly 3500 of them.

Have localized non metastatic disease.

These platinum based chemotherapy to standard of care for the majority of these patients as their first.

Therapeutic option.

This localized tumors, we are generally very good prognosis with five year survival rates of greater than 80%.

Further emphasizing the importance of quality of life after treatment is completed.

Permanent hearing loss can be seen in roughly 60% of children treated with cisplatin.

And can be as high as 90% with many requiring lifelong hearing AIDS and technically difficult news from optimal copier your implants.

Infants and young children at critical stages of development, we even mild hearing loss.

<unk> speech language development and literacy.

While all of our children and adolescence locked social emotional development educational achievement.

The most common solid tumors indications.

Include neuroblastoma, CNS tumors, including magical about Stormont, BNET osteosarcoma germ cell tumors with some examples of less common tumors, which are recognized lymphoma and <unk>.

So there are many others as well, but those are the main ones.

Mark is the first and only FDA approved therapy to reduce the risk of cisplatin induced hearing loss in pediatric patients one month of age and older with local lifestyle metastatic solid tumors.

The availability of fed Mark represents a critical breakthrough for the pediatric oncology community.

Which was enthusiastically awaiting a rigorously tested an FDA approved option.

To safely increase the potential long term quality of life for these young patients.

So that and our commercial strategy has been centered around a few critical components istar.

Establishing spread mark as the necessary complement agent when prescribing cisplatin based therapy for a child with localized non metastatic solid tumor.

<unk> the barriers to access and ensuring rapid responses.

Product questions and establishing <unk> as a premier partner of choice among the pediatric oncology community.

To address these goals, we have established a best in class patient services and support offering called <unk>, which.

Which is a comprehensive single source program designed to connect benchmark patients to both patient patient financial and product access support.

The program offers this systems and resources, regardless of insurance site that can address co pays or lack of coverage when certain eligibility requirements are met.

<unk> also provides access to care coordinators that can answer insurance questions about coverage for bad markets provide deeps and resources for managing treatment.

In addition, we have built out a strong commercial team to execute U S marketing distribution and axis and launch.

Our fed Mark with our original pediatric oncology specialties team that is highly focused on targeting the approximately 200 pediatric hospital.

And those centers.

In oncology group, NCI, NSE and institutions across the U S that drive 80% of this blocking us so it's a very concentrated effort.

<unk> is also responsible for key partnering awareness and education initiatives and we continue to have critical interactions with nursing and pharmacy organizations Audiologist key opinion leaders.

Occupancy groups, but most important the patient parent community.

With respect to the launch we have set for some time that the profile of spend Mark has been well received by healthcare providers and we are pleased to see such enthusiasm Gary.

The commercial launch in the U S.

Early adoption has gone from both major academic centers and regional practices geographically all of our territories have seen hcp's prescribing benchmarks and we have seen nice adoption within our target accounts.

And increasing with every month in terms of patients, which have seen patient utilization across several tumor types, but particularly the habit was Thomas osteosarcoma interim cell tumors.

Regarding reimbursement bed marquee secured both broad and favorable payer coverage, we anticipate and we've seen the pediatric oncology patient community approximately 50% of patients are commercially insured with another 50% in short through government sponsored programs.

We also announced that the U S centers of Medicare and Medicaid services or CMS issued a permanent J code for <unk>, which became effective on April one this year.

This is great news and will help streamline the reimbursement.

Process, we believe that this also lead to additional patient access at several key accounts, we're waiting until the J code became effective to use bad Mark. Additionally, some of our largest academic institutions in the country are not yet prescribing fed remark.

They have formulary processes that can take up to a year and sometimes even more.

Actively working with the distributions on the necessary steps and processes to gain formulary access.

Ordinarily, we see bad market accelerating in the second quarter and second half of the year as these larger centers gain formulary approval. So we feel as though the fed Mark commercial launch is off to an overall solid start we're continuing to execute against our strategic launch plans and are confident in our disciplined and targeted approach.

Two building share within the U S market and.

And again this is a product that.

Not just stay at a 1% market share.

But we're really targeting is 80% of the slot and used 200 centers.

We are confident we have the right team focused in the right places with a drug that we believe provides an attractive profile for physicians patients and payers.

Earlier this year the national comprehensive cancer network updated its clinical practice guidelines for the lessons and young adult oncology most benchmarks.

And although we're very focused on on the.

Young children.

This actually opens the opportunity for <unk> to be treated with some of the other lessons in order kits, which is very important to me personally.

In addition, the FDA granted orphan drug exclusivity for <unk> in January .

This year.

The FDA orphan drug designation program is designed to advance the development of drugs to treat the condition affecting 200000 or fewer U S patients annually. The seven year market exclusivity for bad market began on September .

And the date of the FDA approval would continue some fuel September 2029. Additionally, the approved the approved prescribing label. The FDA has explicitly directed at bedding market is not substitutable with auto sodium <unk> sulfate products.

With regard to expanding in Europe , we announced on March 31.

The committee for medicinal products.

For human use of the European Medicines agency issued a positive opinion and recommended granting a marketing authorization for <unk> Mark.

Which will be marketed at moxie.

In Europe .

When formally approved by the European Commission, but mark will be the first.

And only treatment approved in the European Union to address this area of significant unmet medical need.

The <unk> recommendation is now under review by the European Commission and ratification of the <unk> recommendation is expected by early June .

We continue to evaluate the best commercial pathway for the company in Europe , and the rest of the world either go go it alone.

Or in some of the larger countries go it alone and partners Rs or partner the entire European territories.

As we seek to answer this question.

Coming months to enable European launch later this year once bad market of course is approved.

<unk> pathway, we select we see Europe as a not a significant opportunity to create additional shareholder value by making <unk> available internationally.

With that I will now turn the call over to Robert to review, our financial results for the quarter.

Robert over to you.

Thank you Rusty.

Our press release contains details of our financial results for the first quarter of 2023.

Which can be viewed on the investors and media section of our website.

Rather than read through all those details my comments today will focus on some key financial results.

The company reported growth <unk> sales of $1 9 million translating into net product sales of $1 7 million in the first quarter of 2023.

As Rusty mentioned momentum is building in the second quarter as large centers gained formulary access and with the recent issuance of our J code, helping to streamline the reimbursement process.

General and administrative.

<unk> expenses for the first quarter of 2023, or $4 3 million, which compares with $2 1 million for the first quarter of 2022.

The $2 2 million increase on a year over year basis as a result of ongoing support for <unk> as well as increased professional and legal expenses.

R&D expense decreased by $1 4 million as compared to Q1 of 2022.

The company reduced research and development costs when it received FDA approval of <unk>.

The majority of traditional research and development expenses associated with pad market are now recorded as general and administrative expenses or capitalized into inventory and eventually recorded to cost of product sales.

The company recently began recording selling and marketing expenses when it expanded its payroll.

An internal sales force for the launch of bedrock.

Selling and marketing expenses include distribution costs.

Logistics shipping and insurance advertising.

Wages related to commissions.

And out of pocket expenses.

Company recorded $2 $5 million in selling and marketing expenses in the first quarter 2023.

Our GAAP net loss for the first quarter of 2003 with $6 million or a loss of 23 per share compared to a GAAP net loss of $3 7 million in 2022 or a loss of <unk> 14 per share for the first quarter of 2022.

And finally onto our cash position.

We ended the first quarter was approximately $18 4 million in cash cash equivalents and investment securities, which includes $25 million of capital drawn down under our existing petrocorp convertible debt facility.

We believe our available capital when coupled with Petsmart revenue assumptions will be sufficient to fund our planned operations for.

At least the next 12 months.

And operator with that we're ready for questions.

Thank you and ladies and gentlemen, as a reminder.

We are in the Q&A session into ask a question you will need to print stock one one on your telephone and wait for your name to be amounts to withdraw your question simply press Star One again, please standby, while we compile the Q&A roster.

And our first question comes from Jay Knickerbocker with Craig Hallum. Please proceed.

Good morning, guys. Thanks for taking our questions here and congrats on the progress thus far.

So Q4 was well ahead of expectations Q1 here fairly in line.

It was a modest sequential increase in revenue in Q4 to Q1.

Help investors understand the dynamics at play there was there a stocking dynamics in Q4 that pulled forward some demand or smaller customers as you await those PNT wins in the larger centers and children's hospitals, I guess, just help us think about it.

Thank you Jay so our I'll take this one.

So if you look at.

Q4 versus Q1.

Whats interesting there of course, we're starting so by the way there were no stocking.

Issues there at all either in Q4 or Q1.

What's really interesting is that our neighbors specifically.

It's quite broad and so we treat the child from one month of age to really no age limit.

And that includes the various tumor types previously and so keep in mind that those children are treated with various cisplatin regimens.

And they require.

Six hours post each is blocking dose they require.

Sps with Wall Street.

So what's interesting there also is that those children are in various sizes.

And.

Sps is.

Administered based on body surface area.

I think what you're.

What you may be seeing that albeit on a relatively insignificant base.

Initially.

It's a bit of the patient mix.

So if we get a larger and older kit on a lesson you clearly get a higher vial usage and Alternatively, if you are if you are getting.

A small child or toddler of our baby Youre getting significantly less vials, a patient is a patient from us so we cared deeply for both.

But the <unk> I hope I hope that's helpful.

Yep got it.

And then.

And I know, you're not giving guidance here, but you mentioned in the press release and your prepared remarks that you've seen substantial commercial traction so far in Q2, but and you mentioned this but my inference. There would certainly be those larger centers is where we're starting to win those PD committees. What do you think your penetration rate is there at this point in Q2, and those 200 centers that you talk about dosing 80% of patients.

And where could we end the year this year in those centers.

Yeah, Let me, let me just sort of.

Take that as well and maybe Robert can add so so if you look at the landscape across these 200 centers. They are various sizes, we work with roughly 40 of them in the COPD study took place.

They are.

Highly highly bureaucratic institutions, so what I would say is.

They are primarily located on the east coast and the West Coast.

The high volume of patients.

And.

From those early adopters, which is very good to see they are also the ones that are basically taking the time to properly evaluate this and run through the hospital bureaucracy in terms of market share I would say as you can see the market share is relatively insignificant at the mall.

But I don't expect that to stay for long this way.

We are quite actually excited to see this because we're the ones that have already.

Bruce and his gone through PMT.

We are seeing significant level of activity repeat orders.

And.

Different patients as well so.

Different tumor types. So that's really really exciting because when you actually when you step back and you think through what our team is doing.

We're just not only targeting the centers. We're also targeting key opinion leaders that are treating the various diseases and in addition, establishing fed mark in the hospital protocol for each one of these tumors.

So once all of that happens through a very burdensome and.

And bureaucratic.

R&D process and then on the back end of that of course, you have you have access to the product.

Which is the place where we want to do with most of these accounts and we're working towards that and I am.

I am pretty excited on what I've seen so far.

Robert if you want to add anything else to that.

Yeah. Thanks, Jason how are you doing.

Just just to add to that as you know and our teams are working really hard to.

To gain formulary access to build the relationships with these larger centers.

And that takes time.

<unk>.

Within those first six months, we started to really see that.

Towards the latter part of it and now that's translated as Rusty mentioned into the repeat orders into the simplified ordering process even within the centers and then we've also seen some well.

But we believe it can pick up just as well from from the on the J code that we have officially issue for bedrock.

Yes, thanks for the color there guys and then maybe one last one if I can sneak it in you talked about 12 months of <unk>.

Our funding and you can make some pretty modest.

Penetration assumptions and get to a breakeven quarter for you guys with your spend.

Is that still a fair is it a fair way to think about there being a quarter in 2023, where you can be breakeven at this point positive earnings.

Yeah, Robert I'll start I'll take yes.

I'll take that one thanks for the question Jason.

Yes.

Backup.

We are running at roughly a $2 million a month in cash operating.

Expenses or roughly $25 million a year. So internally, we certainly have that as a major milestone for us to accomplish and certainly feasible for us to accomplish during 2023, so to translate that.

That would be.

A little bit north of $7 million in revenue.

At a minimum to get to that breakeven and given the opportunity.

Within.

The market for pet Mark.

We.

It's certainly a goal for us.

Great I'll jump back into queue guys. Thanks.

Thank you for a moment for our next question. Please.

And it comes from the line of rack around Silverado with H C. Wainwright. Please proceed.

Okay.

Thanks for taking my questions just three quick ones here.

I was wondering if we could drill down on the number of early adopters within those 200 centers that you mentioned and if any of them are expected to.

Effectively account for a substantially larger patient pool than others. If you expect any of the early adopters centers to account for proportionately larger patient pool. If you can give us any granularity on that.

Secondly, I wanted to ask about the R&D spending that you expect going forward should the first quarter number which was effectively negligible de minimis.

Be regarded as the new normal.

For 2023, and do you expect this situation, where you're effectively not spending anything on R&D to persist beyond 2023, and lastly, I was wondering if you could make some comments on G&A spending and whether you expect from a G&A perspective to be able to say that the organization as Kirk.

<unk> right sized infrastructure early or if you think that there might be some efficiencies there as you get through into the second half of this year.

Yes, I would just take <unk>.

Ram.

Great.

The proportionate piece of the.

The large centers that where we're working with.

Yes, you can imagine.

Those academic centers, so it's interestingly them right because they have a they see a population that is that is for our label.

But some of these centers also focus on the really tough cases, and those are obviously outside of our label. So this is a metastatic disease or second line disease relapsed patients.

But they also see a good amount of the local explorations as well.

In terms of the existing ones that you've already we have won from a P&A process.

They are they are decent size and so so that's very encouraging.

Average you can see the repeat orders there and also.

The important aspect.

The particular east to east.

To have additional physicians prescribed.

Four additional tumor types.

So and that's in the process and it's already happening. So that's encouraging to see so we just have to open the rest coming up.

And then we have to broaden that into the.

The other tumor types. So that's the opportunity and the challenge in front of us.

And Robert do you want to do you want to take the R&D spending and G&A.

Yes, it'd be my pleasure. Thanks. Thanks Ram for the question. So number two question for you I believe was on the R&D.

You mentioned the first quarter was was de minimis or negligible.

We do expect that to tick up just a tiny bit.

There are some opportunities.

Principally with some investigator initiated clinical trials will provide some some some.

Some support.

And that those opportunities will hopefully afford us label expansion further down the line.

But as a whole when I think of.

The $25 million of cash operating expenses I do include the R&D in that I wouldn't expect it to be more than 10% of that number. If that's if that's helpful. So it will pick up a little bit, but but not not to be more than 10% of that $25 million.

I think your third question was on the G&A.

We have.

Very efficient streamlined organization, we have just a little over 30 employees.

Again thats principally.

99% focused on the U S and on our launch of pet market.

We think we are we have the right fit the right team.

Both from a.

People on the ground with our regional pediatric oncology specialists to our market access team.

Our quality team et cetera.

One one of the the caveat of course is in rescue mentioned to it as the opportunity in.

In Europe , as we evaluate that.

But certainly from a U S perspective.

We feel we have a good fit here.

And then lastly, with respect to European activities the U N.

Anticipating that there might be a possibility that a potential marketing partner comes onboard before had moxie is officially cleared for launch or do you anticipate the actual formal regulatory clearance. Following the positive opinion, you already received to be a gating item for potential parts.

<unk> in Europe .

As you know I'll take this one as you know these processes is formal.

And it's very structured and we obviously want to make sure that.

The European Commission.

Ratified and approved the CGP opinion.

Both of that.

There'll be a period of time, where.

We will have the opportunity as we're doing now as well to evaluate what is what is best for the.

For the European business.

Either do it on a stand alone with just a few countries that of course, we've worked with those key opinion leaders in centers over the years, there as well so we know them well.

Or alternatively.

And part of the rest of Europe .

With different companies, so sort of a puzzle piece if you will.

The second one of course is just do a one large partnership.

And we can certainly do that.

And then.

So.

Those are the things that obviously, we are evaluating or just standalone ourselves, but thats the entire continent, but it's highly unlikely given given the resources involved.

And what it would take.

So what I would say that there is a great amount of interest.

In.

In the European rights for this especially after the positive <unk> opinion.

There is no shortage of suitors and.

We are.

We obviously will do what's best for our shareholders and we will evaluate our proposal and make the best decision that makes more sense.

Thank you.

Thank you.

Next question please.

It comes from the line of knowing.

With capital one Securities. Please proceed.

Hi, Thank you hi.

Good morning, and congrats on all the progress.

Curious.

I know, it's early days, but what are you seeing in terms of repeat customers that prescribers and can you comment on how many hospitals in prescriptions at the current.

Members represent.

Yeah, Let me, let me take that.

No.

Yes, it's really interesting. So so think of it this way so when a physician has to write a script they have to go typically against.

The bureaucracy in their hospital.

This product.

The patients because typically the patients.

In the inpatient setting this would come from the Doj go to the hospital.

So versus once you've gone through a PMT once everything is proposition.

Then it becomes automatic.

So that's sort of the big difference between getting to ride it out.

Early adopter and fight a hospital bureaucracy versus actually.

The whole profit being synchronized and slowing it's really really critical.

Now in terms of in terms of so you can basically again simple math you can you can take.

The WAC prices available you can you can take the revenue and you can you can divide by debt not substantial discounts. So you can kind of roughly get an estimate for <unk>.

For the number of vials that we're basically.

Assault during the first quarter, sorry, the fourth quarter and in the first quarter. So you can kind of judge that and then the third aspect, which I touched on earlier.

The mix of patients right, because some patients require more vials.

Patients required less vial and when you're working with in significant numbers.

Those dense lighter touch.

<unk> higher or lower.

But in terms of the number of patients in <unk>.

Pete orders.

Once each BNP.

The repeat orders are absolutely there.

Got it.

And then so you mentioned the commercial insurance versus.

Government well you know what.

What percentage of the patients are actually covered.

So far though everyone's covered.

So we have a we have in the U S. A policy, which is a great policy.

It does not leave a child behind.

And so the question is how are they covered and typically for most states whenever there is no private insurance.

<unk> by the state Medicaid.

And those state Medicaid of course, they have various reimbursement rates.

Based on DRG for at the hospital setting.

And all those vary from region to region.

Okay, and if I can sneak one more in Rob mentioned the investigator sponsored trials.

So how many of these that they and and in one setting.

Potential label expansion for.

Yes, so that's a very good question.

So we're working with Cincinnati on a on a second line treatment.

It's actually a very interesting study in <unk>.

Happy to with Soma.

And these are keeps did basically have relapsed.

Biggest cat lever transplant.

The two markets come back in a metastatic way into the new lever as well.

There is no treatment options for them, they're already being treated with just blocking and there many of them have very difficult time hearing.

And with Dr. Gail are there had discovered is that.

Giving a very high dose of cisplatin and HVAC.

Seems to be very sensitive to the <unk>.

Past disease of the.

The tumors, including the ones that are in the new lever, so he's able to shrink them very well.

So we basically we initiated that study with.

With him you see S M S K.

And so I used to.

Ultra so if you think capital plus nominees rare secondly happen to <unk>.

We've met into the transplanted Libre Steven rare.

What's.

Whats really interesting there of course is that we are it's a small number of patients to be roughly between 20% to 40 patients the company there'll be able to accrue in the next three to four years.

And the idea there of course is to see how are they responding to sloppy and of course measured there.

We're hearing loss.

We expect this is not in response to be strong given the density of the systematic therapy that could be an interesting discussion to have with the FDA.

Sure.

For second line metastatic disease expression, but again, we haven't had any discussion with the FDA.

Need to see the results of the study before we decided to take these tracks.

Okay, great. Thank you that's all for me.

Thank you.

One moment for our next question.

When it comes from the line of David Nearing died.

Securities. Please proceed.

Hey, Thanks for taking the question I just had one more on the.

Mix of prescribing accounts are using accounts.

Accounts that were part of the <unk> study, how many of those which I presume are kind of the low hanging fruit or is there. Some of your first targets for commercialization. How many of those were waiting on the J code or you know how many of those have been.

Signed up and are ready to prescribe. Thanks.

Yes, so David I'll take the psychosis study actually only.

One account in the U S and Dell Stanford.

Okay. Its really the COPD study.

And our phase two study.

Roughly 42 of them.

And.

And out of those.

The vast majority of them were basically waiting to the P&C.

PMT process at the moment.

We can do it so.

I don't expect this to sort of stay kind of where we are at like 1% share right. Because we've got these patients. So we've got at least $3 3500 of these patients that are basically vast majority of them are going through many of these places.

And and against the sloppy needs the Goldman therapy there so.

Once they get through this.

Burdensome PMT process I would expect for them to finish to go into each disease protocol. So remember we're doing the education with the Kols. We are working with your with geology is where we're working with the nurse.

The nurses there we're working with.

In some cases.

The advocacy groups. So it's like it's a whole piece to come together.

Lots of education to make sure that this included in as many disease protocols as possible in each hospital, but you want to start with at least one of course and get to PMT and then you can expand from there.

Okay.

Got it thanks.

Thank you.

And with that ladies and gentlemen, we conclude the Q&A session I will turn the call back to <unk> for final comments.

Yeah, well I would like to thank for everyone for their interest and.

We are very thrilled with.

Especially after April one.

Sure.

The uptick.

The uptake of the fed Mark has dramatically increased and we look forward to discussing that.

During our our next quarter. So thank you all for the time today and the questions.

Thank you, ladies and gentlemen for participating in today's program you may now disconnect.

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