Q3 2023 scPharmaceuticals Inc Earnings Call
Thank you for standing by this is the conference operator welcome to the F. C Pharmaceuticals third quarter 2023 earnings Conference call. As a reminder, all participants are in listen only mode and the conference is being recorded.
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I would now like to turn the conference over to P. J curve of her life say advisors. Please go ahead.
Thank you operator before turning the call over to management I would like to make the following remarks concerning forward looking statements. All statements on this conference call other than historical facts are forward looking statements within the meaning of the federal securities laws, including but not limited to statements regarding Etsy pharmaceuticals expected future finance.
All results and management's expectations and plans for the business in Peru.
The words anticipate believe estimate expect intend guidance confidence target project and other similar expressions are typically used to identify such forward looking statements. These forward looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties.
Important factors that may affect the pharmaceuticals business financial condition and other operating results.
These include but are not limited to the risk factors and other qualifications contained in <unk> Pharmaceuticals annual report on Form 10-K.
Quarterly reports on Form 10-Q, and other reports filed by the company with the SEC to what's your attention is directed.
Actual outcomes and results may differ materially from what is expressed or implied by these forward looking statements.
Any forward looking statements made in this conference call, including responses to your questions are based on current expectations as of today, and Etsy pharmaceuticals, especially disclaims any intent or obligation to update these forward looking statements except as required by law.
It is now my pleasure to turn the call over to Mr. John Tucker Chief Executive Officer of Etsy Pharmaceuticals.
Thank you P. J. Thank you to everyone listening to this afternoons call and webcast to review our third quarter 2023 results.
This afternoon I'm pleased to provide an operational update before turning the call over to Steve Parsons, Our senior Vice President commercial for a more detailed update on the <unk> launch and then Rachel knows our Chief Financial Officer for a review of our financials. We will then open the call for your questions.
The third quarter of 2023 represents our second full quarter of <unk> commercial availability as we launch the product in late February.
Demand has continued to grow reflected in our key indicators, including number of prescriptions and number of total prescribers and doses spilled per prescription.
Robotics is meeting the needs of heart failure patients suffering from fluid overload. We believe specialists are quickly gaining comfort prescribing it.
The third quarter, we reported net revenue of $3 8 million, representing a sequential increase of 138% from $1 6 million for the second quarter of 2023. This was driven predominantly by units shipped to patients through our specialty pharmacy network.
Also cash and our net sales for the first time I have a direct sales approach multiple integrated delivery networks as we mentioned last quarter and sales to I D ends increase we will be reassessing the kpis that we report.
Inventory levels at the end of the third quarter were consistent with inventory levels at the end of the second quarter.
Our gross to net discount from launch through the end of Q3 is running at approximately 21% down from 23% through the end of Q2, we expect this to increase over time as contracting with payers at ball.
In response to positive demand trends, we added an additional 12 sales territories towards the end of the third quarter.
This brings our current field sales force of 66 territories, and we anticipate seeing the positive impact of these additions beginning in the fourth quarter.
Shifting now to payers, we continue to have productive discussions with commercial and Medicare part D and Medicaid payers and a continuing effort to make for US it's broadly available to patients at the most favorable terms possible.
Indicative of our progress in late October we reached an agreement with one of the largest closed integrated delivery networks in the U S.
Providing unrestricted access to <unk> without prior authorization to over 8 million lives at a fixed co pay ranging from $16 $75 per prescription.
Also as of November one for Ross extends that added on formulary as a preferred brand with one of the largest government retiree payer formularies, increasing the number of lives with preferred access for us it's by an additional one 1 million lives.
These payer decisions expand the population of heart failure patients and access to for us and moves us towards our previously stated goal of having 75% or more heart failure patients nationally with fixed co pays at $100 of what.
We anticipate that this could positively impact corrosive copays as early as the fourth quarter.
We are progressing with many other health plans and we hope to test several more announcements like these in the months to come.
Staying on the topic of payers for a moment recall that we announced national Medicaid coverage for us from <unk> effective July one.
We have since added an additional specialty pharmacy to our network to maximize access to throw six in these states that require a waiver that we can address the needs of Medicaid heart failure patients as quickly and efficiently as possible.
Turning now to our lifecycle management initiatives during the third quarter, we received FDA feedback on three key initiatives that we view as critical to our long term growth strategy.
In August we announced favorable type C meeting feedback from the FDA regarding the potential expansion of the Farone six indication to allow for use in New York Heart Association class four heart failure patients.
<unk> is currently indicated for the treatment of congestion due to fluid overload in adult patients with New York Heart Association class II and class III chronic heart failure.
We estimate that as many as 10% of all heart failure patients are class four and a meaningful percentage of these as many as 40% may benefit from for us.
If we are successful class four represent a meaningful expansion of our market opportunity.
For us it can be prescribed to the most severe heart failure patients.
Upon the feedback that we received from the agency we filed for the class for indication in early October.
More recently, we received type C feedback from the FDA pertaining to the development of an 80 milligram by one ml auto injector intended to provide an additional option to the on body infused there for treatment of congestion due to fluid overload in eligible adult patients who do not require hospitalization.
We believe that our auto injector has successfully developed and approved and reduced manufacturing costs compared to the current on body of user and confirm our environmental advantages.
We plan to report data from our pivotal PK study in 2024, and if successful we are targeting the submission of a supplemental new drug application to the FDA by the end of 2024.
Finally, we announced feedback from a type C meeting with the FDA pertaining to the potential expansion of the borough six indications to include treatment of Indiana due to fluid overload in patients with chronic kidney disease or C. J D and his feedback the FDA confirmed that no additional clinical studies are needed to expand the indications provided that we.
Can demonstrated adequate PK and Pharmacodynamic bridge to the listed drug which is for Rosa mine injection LNG per in that.
<unk> is a progressive disease characterized by worsening renal function over time.
It's a frequent episodes of fluid overload that are treating with Luke directs.
This estimated at 12 to 15 million Americans are aware that they have kidney disease and 50% of patients with CK D. Do not have a diagnosis of Parker.
With fluid overload being one of the most common complications and CK D, which worsens with disease progression.
I believe <unk> to be beneficial to patients with CK D.
Worsening symptoms due to fluid overload and are not responding to Oregon directive.
Planning advanced for all six as we work towards our goal of introducing a new treatment option for C. J D patients with the demerger as efficiently as possible.
At this point I'll turn the call over to senior Vice President of commercial Steve Parsons for a deeper dive into our launch metrics Steve.
Thank you John.
John indicated the third quarter was our second full quarter of <unk> commercial availability and we are pleased with our progress.
Our results continue to be very encouraging in Q3.
From launch through September 30th He's had 1119 unique prescribers almost doubling from the 631 acquired through June 30th.
During the third quarter, we had 1579 total prescriptions written and 877 of those prescriptions have already been felt.
There were another 442, it was still pending as Q3 ended pending.
Pending prescriptions are not canceled they are still in process with the payers. Some are approved and waiting in the queue, while others are in prior authorization.
We continue to feel more pending prescriptions written in Q3 into the field category every day.
There are some prescriptions that get canceled for various reagent needs <unk>.
Including unreachable patients who are hard to contract had been hospitalized or a small number that are now deceased.
Of those that are reached to cancel a high co pay is the main reason given.
In Q3, the percentage of Euro six prescriptions filled increased to 55% from 52% in Q2.
We anticipate that the show rate will continue to increase.
<unk> is expected to become better positioned on more health plan formularies lowering patients out of pocket costs and providing quicker coverage decisions.
During the third quarter. The average number of doses per prescription filled was five six which remains higher than our long term expectations.
Our sales force conducted 1806 in services as of September 30th compared to 1129 as of June 30th in services provide important training to offices on the prescribing process for sure Asics and this ensures office readiness.
As we open more new accounts the execution in services remains fundamental to <unk> success.
We've said previously that we stand ready to add additional territories as demand warrants and we did so at the very end of Q3, we added 12 territories, bringing our total field force as of today is 66 territories.
It is important to note that the territories. We added during Q3 were added towards the end of the quarter and as such did not contribute meaningfully to future results. The new sales representatives are now trained and conducting face to face selling in cardiology offices from a marketing perspective, we.
We're engaged in a broad multichannel marketing campaign to drive brand awareness adoption and commitment is programming campuses many different activities, but some of the key ongoing activities include engagement and development of key opinion leaders.
Cardiology conference presence.
In electronic collateral and the development of both provider and patient websites among other critical tasks.
<unk> also begun reaching out the heart failure patients and their caregivers with patient education materials for cirrhosis. Overall, we are very pleased with our continued progress in the past that we are on that.
That concludes my update.
Like to turn the call over to our Chief Financial Officer, Rachel notes for a financial update mutual.
Thank you, Steve we generated net product revenue of $3 $8 million during the third quarter of 2023, and the cost of revenue was $1 $1 million, yielding a gross profit.
$7 million project.
Research and development expenses were $3 $4 million for the third quarter of 2023 compared to $3 $7 million for the third quarter 2022.
The decrease in research and development expenses for the quarter ended September 30th 22023 was primarily due to a decrease in claim related cost in clinical study and medical affairs.
The decrease was partially offset by an increase in device and pharmaceutical development.
Selling general and administrative expenses were $14 $1 million for the third quarter of 2023 compared to $6 $3 million the third quarter of 2022.
The increase in selling general and administrative expenses.
Quarter ended September 32023 was primarily due to an increase in employee related costs and commercial costs.
We reported a net loss of $15 $6 million for the third quarter of 2023 compared to $10 $2 million for the third quarter of 2022.
We ended the third quarter of 2023 with $92 million in cash cash equivalents and short term investments compared to $118 $4 million as of December 31st 2022.
Finally as of September 32023, and see pharmaceutical total shares outstanding were 35 million 850 945 shares.
That concludes the financial update John.
Thanks, Rachel This concludes our prepared remarks at this point, we will open the call for questions.
Yes.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question.
Please press Star then two.
Sure.
The first question comes from Joanna Ruiz.
<unk> partners. Please go ahead.
Hi, Good afternoon. This is Nick gastric onshore Rwanda and thanks for taking the question maybe.
Maybe first from US could you discuss or talk a little bit about how we should think about the size and frequency of potential direct purchase agreement that could come from.
And in the future and I guess to what extent could the IBM drive broader prescribing of Euro six going forward. Another quick follow up.
Sure. Nick This is John I'll, let Steve talk to.
Yeah, you know so in this in this last quarter Q3, we did have direct purchases from from IV and.
Indirect represent that much most of it was still go on to our specialty pharmacy, who did sign up with the largest IDM here at the end of the quarter.
And we anticipate that's going to be a meaningful part of our business now keep in mind, we have and our internal forecast had at.
Taking into account that that we will receive that business, so, but I do think it's going to spell.
Especially starting this quarter and.
Really into next year be a meaningful part of the total revenue and as we I think we've said and we tried to articulate again, we can't we.
Can see scripts serve units per script, we sell that net to them.
To their their warehouse and they'll distribute it to their hospitals throughout the throughout the country. So, but we do think it wasn't really that meaningful in this quarter, but moving forward and especially into next year, we'll be there.
Helpful. Thanks, very much John and then just a quick follow up on the sales dropped. So I guess, how you mentioned you added 12 territories in the quarter, how are you thinking about future sales.
Sales Rep addition, going forward into 2024.
This flow through a mature assets of scale.
Yeah. So we.
Again, we added another 12 reps at the end of the quarter that are just really hitting that feels a little bit late last month.
We've said all along that we plan to get to around 110 reps. So we haven't.
Articulated yet when will one won't make the next expansion, but it will be it will be it'll be next year, probably in the first half of next year that when we do another.
But another increase I think we want to absorb these make sure we're still thinking up territories, the right way size of territory in the balance of cutting a territory that's.
A little bag versus calling into wide area. So we're going to stay opportunistic, but I think you'd see more sales reps hitting the ground versus the first half of next year.
I will hop back in the queue.
Thank you.
The next question comes from Douglas Tsao with H C. Wainwright. Please go ahead.
Hi, good afternoon, and congrats on the progress I guess.
Maybe as a starting point.
You know the the the units per scrap has continued to go up and I and I think it's considerably or not considerably higher than what you anticipated I think being ahead of launch talked about four units for per course of treatment and it sounds like docs are or may be going with a little bit more I'm just curious if there's any color.
In terms of what's been driving that and even since the launch. It's it's continued to sort of increase.
Hey, Doug, it's Jon I'll, let I'll, let Steve handle that one yes.
So what we think is driving it is there arent quantity limits.
Doctors are.
China optimize the number of doses and they can get for patients also the mix of our patients right now is more in the preventative preadmission, where there's more fluid to get off and if if there was a higher proportion that were being discharged after already being treated they might not need as many doses as they got into trouble again.
We think it may continue.
<unk> continued to increase incrementally in the short run, but we also think it'll moderate down back into the four to five dose range.
As quantity limits our utilization management.
Our required by by some of the payers like for example, there's a few Medicaid states right now where they have a client limit of four doses.
United Healthcare commercial, which we announced last last quarter and they have a client I'm a four doses per Rx now naked right. Another prescription in the same month, but per Rx for doses. So if you think that might come down a little bit on overtime.
And I think we're also seeing the usage in the.
The Preadmission stage, where I think youre going to see more a higher script level.
The other thing I think if you look at Doug If you look at our G T N.
21%, which which is great. It's a bit of a double edged sword, because we're not paying you know.
Rebates to some of them.
The.
Our plans that won't remains but we do anticipate soon will come on formulary with a number of those and that will drive that G. T N up obviously lower co pays.
Improve adjudication time make more access to more patients, but also probably ever.
Shrinking a fact.
The number of units per script, but I think our thinking now is is a little different we think it moderates, but still stays in the four five to five range, where I think our guidance previously had been or were just seeing doctors being a little more aggressive treating patients than we originally anticipated.
Okay, Great. That's really helpful color and then just in terms of how the IV and plan to use the product is it going to be different than than than sort of the individual physicians and heart failure clinics.
Yes, it's an idea and is responsible for medical costs and drug costs.
They take the whole burden for them it makes sense to use it anywhere they can too.
Reduce the length of stay to prevent prevent the authorization in the first place so they'll have the ability to use it everywhere and anywhere they want right away.
Unlike.
The rest of the World, where you have to write a prescription and you have to do with prior off.
These guys they pay on everything themselves if they want them discharged earlier to finish the job at home, they're going to be able to do that.
I think that's one thing Doug that we've heard a little bit more than we maybe initially anticipated.
Doctors wanting to use this kind of post discharge when a patient is getting ready to get out actually writing a prescription so.
And I think with the idms.
More of that.
Okay, Great that's really helpful color.
Thanks, Doug.
The next question comes from NASDAQ on.
Maxim Group. Please go ahead.
Hey, everyone and congrats on the quarter and thanks for taking my question just two quick questions. The first one I have is your number of unique prescribers seem to be increasing at a faster rate than the number of prescriptions between two three and <unk> can you comment on what that discrepancy is.
Yeah.
Yes so.
Again.
We've still been focusing on especially with some of the new territories is opening new accounts.
And.
Again these in service since take take some time.
And then converting those those first script, so a lot of the new prescribers might be one.
Right and one here early see how it works wait for the patient to come back before are adopting it. So I think that's what you're saying, but we have a number of physicians in and how it usually works Nasa's is there might be three.
Three or four doctors and three or four nurse practitioners or may be just one not nurse practitioner for for doctors and a nurse practitioner ends up being the writer, even though the doctor might have written one.
The nurse practitioner tends to tends to do most of the diabetic doctoring. So I think we're we like where we're seeing the breadth because we're starting especially you know the start of this quarter, we've really seen a lot of the physicians now starting to write more consistently October was a really.
Strong month for Us in November is off to a really good start so I think we're.
We're being successful in converting those doctors, who have one or two and to doctors are their nurse practitioners are really starting to adopt the product.
Thanks that was helpful and my second and last question is on the IV and narrower could you provide some color or commentary on I guess like how many offices or facilities. This represent beyond the number of patients in like how long would it take you to do in services or how many services do you have to do in this network.
Gained traction.
Yeah. So there so that the network we announced today.
Sure.
It's kind of a hybrid IDM, where there is hospitals.
Some of them with pretty big heart failure clinics and they've also got a net have a network of kind of individual physicians that a lot of them practice inside that facility, but some of them are private practice seeing 16 patients there Steve I don't know if you want to add anything to that.
The beauty of an IV energy they can control the training they can they can schedule their employees to be available and they'll do a lot of that in servicing themselves, we won't necessarily have to do it.
One location at a time and fact that they talk about they like to control it like they like to do it their way they like to follow up and so that's not a burden for us.
Got it that's helpful. Thanks for taking my questions.
Thanks, Dan.
Once again, if you have a question. Please press Star then one the next question comes from.
K sticker backer with Craig Hallum Capital <unk> Capital Group. Please go ahead.
Good afternoon, guys. Thanks for taking the question.
Maybe just first for me kind of look with in that.
<unk> Rx threatened alright, Phil.
Maybe with the physicians, who are having more success, where they are right in Australia are you starting to see kind of a percentage conversion of those written scripts being a little bit higher do we see any sort of you know.
Kind of similarities between some of those are the places where you have contracted where there's a higher percentage of those patients who are on that.
Fixture co pay and then maybe talk about how different buyer off kind of protocols or maybe higher or lower conversion here as well.
Thanks.
So if I'm hearing correctly. The prescribers are the offices that have a higher percent filled versus others that are at that lower above.
Above above the average of 55.
The more they use the product the more they are they are comfortable with the process of doing is providing the proper prior authorization information the smoother it goes.
The more experienced they have they also now start to look for patients who have better access to the product where it were seeing docs here.
Selecting more Medicaid more commercial and Medicare advantage patients and so for them and now that they believe in the product they've seen the results. They can they can select and they're offering it to folks where it's a little easier, but may not necessarily have a high co pay so we're seeing some of that and I think you know trade I think.
Well I think what we saw and what we're continuing to see is that.
Offices are getting more used to selling out to start form.
And whatever information they need plus.
Specialty pharmacy is doing a better job at finding patients.
You know some of these patients and get a phone call. They don't recognize the number they don't pick up so were taxpaying, we're sending them letters. So I think all of that and I think we've talked about that that this is part of the process of raising the fill rates. The other the other part of the process. Obviously is getting co pays down on adjudication time faster, which is what will work.
On the market access side of it but I do think what drove it increase in Q3 for doctors' offices, and the specialty pharmacy really finding.
Best ways to engage with these patients and we've done market research about that about how best to engage with these patients. So I think that's going to continue into this quarter and into next year and I think when we put on top of that managed care payer wins, which can increase or decrease adjudication time lower co pays it will all drive.
That felt right up.
Maybe digging in there just a little bit what are you seeing from an adjudication kind of timeframe on the ones that you eventually get filled.
I have been tightening just any sort of additional color there would be helpful.
Sure Yes.
It's doctor and patient.
Depending on what it depends on what they want if theyre looking for expedited treatment like they want to get on treatment tomorrow or the next day, we do that very well 24 hours 48 hours of boxes checked the expedited review on the start form.
So that's that's working very well, but what people need to remember is we are docs, who who ordered a product in advance of needing it.
They they submit the form they got an approval for the product they have a they have a known co pay and then they haven't ready in acute until they want to pull it down or.
Released it to the patient and so when you're when you're doing that you have quite a variability in the fill rate, but it's by design it's on purpose.
So I'll just answer the ones, who want to quickly are getting it quickly.
And maybe do you guys kind of have visibility on how what percentage of the.
Building written scripts are you know get up get us get us where else X now versus kind of waiting and waiting.
For when these patients need at any any sort of split there that that you can share.
Okay.
Yeah.
Yeah, It's I don't I don't have the actual numbers. That's a good thing I'll add that for our next next.
<unk> question, but.
Looking at the reports every day, it's like a 50 50 about 50% of the people are seeking it.
As quickly as possible and they're getting they're getting treatment and then about 50% of them are just sending it in getting answers and they are ready for when when the patient needs. It and we think that's going to really play out.
Especially this quarter as we get into the holidays and patients tend to be dietary Noncompliant Madison Noncompliant, we hear from all the doctors are saying, we're going to tease. This out by now Mrs. Jones has kind of got in trouble banks can bang. She always does so we are really seeing a lot of that this quarter.
And think they'll be able to pull them through this quarter as well.
And I'm sure you guys apologies, but.
But of those 400 that are still pending aircrafts to think that all of those are you know kind of the right weight in our scripts that we could still see come through.
I would say if you do the math calculation on what we what we published is about 16% of all the prescriptions that were canceled.
The other 442 or.
A lot of them had been huge in the bunch of them that we are still pending not you'd have been shipped in Q3, I'm sorry, Q4 Hor as Q4 has evolved we've shipped a lot of offending ones.
Helpful. Thanks, guys.
Thank you Chad.
This concludes the question and answer session I would like to turn the conference back over to John Tucker for any closing remarks. Please go ahead.
Okay that concludes our call this afternoon.
We remain very pleased with the trajectory of our Perrot six launch and the meaningful progress that we're making with large payers and that should only add to our momentum has more heart failure patients gain affordable access for growth.
At the same time, we are excited about our lifecycle initiatives after having productive discussions with the FDA and look forward to providing more updates in 2024 overall I'm pleased with our progress and believe that we can build upon our current momentum and look forward to a successful 2024.
You again have a good evening.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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