Q3 2024 scPharmaceuticals Inc Earnings Call
[inaudible]
[inaudible]
[music]
Speaker Change: Good afternoon and welcome to SC Pharmacy School's 3rd Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will hold the question and answer session.
Speaker Change: To ask a question at that time, please press star followed by one on your touchtone phone. If anyone has difficulty hearing the conference call, please press star zero for operator assistance.
Speaker Change: As a reminder, today's conference call is being recorded. I would now like to turn the conference call over to Nick Colangelo of Vesta Relations to cover forward-looking statements.
Nick Colangelo: Nick, please go ahead. Thank you, Operator. Before beginning today's earnings call, we would like to highlight the following forward-looking statements.
Nick Colangelo: 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 SC Pharmaceuticals' expected future financial results,
Nick Colangelo: Management's expectations and plans for the business, the ongoing commercialization and marketing of Puro6, and other regulatory approvals of Puro6.
Nick Colangelo: The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used typically to identify such forward-looking statements.
Nick Colangelo: These forward-looking statements are not guarantees of the future performance. It may involve and are subject to certain risks and uncertainties and other crucial factors that may affect SC Pharmaceutical's business, financial condition, and other operating results.
Nick Colangelo: These include but are not limited to the risk factors and other qualifications containing SC Pharmaceuticals annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed by the company with the SEC to which your attention is directed.
Nick Colangelo: Actual outcomes and results may differ materially from what is expressed or implied by these four looking statements.
Nick Colangelo: Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today and SC Pharmaceuticals expressively disclaims any intent or obligation to update these forward-looking statements except as required by law.
Speaker Change: With that, I will now turn the call over to John Tucker, Chief Executive Officer of SC Pharmaceuticals.
John, please go ahead.
John Tucker: Thank you, Nick, and thank you to everyone who has dialed in to this afternoon's call.
John Tucker: I will begin today's call by discussing the company's operational and business highlights for the third quarter of 2024, before handing the call to Steve Parsons, our Senior Vice President of Commercial, to provide a more thorough, ferocious commercial update.
John Tucker: We will then provide a detailed review of our financials from Rachael Nokes, SC Pharmaceuticals Chief Financial Officer, before closing the call out with a question and answer session.
Rachael Nokes: In the third quarter of 2024, we generated net revenue of $10 million. This represents an approximately 24% increase in net revenue from the second quarter of 2024.
Rachael Nokes: While we were disappointed with where the third quarter ended, given the strong demand at the beginning of the quarter, we are pleased with the growth we have seen so far in the fourth quarter.
Rachael Nokes: We see this growth being driven by the Salesforce expansion, the Indication expansion to include Class IV patients, and continued growth in the IDN business. I will give a more comprehensive update on our longer-term growth initiatives momentarily.
Rachael Nokes: Ferocious Corrosive Net Discount was approximately 15.7% just over the high end of the range of 10 to 15 percent that we got into during our second quarter results.
Rachael Nokes: The increase in our GTN is largely due to lagging CMS reporting on coverage cap rebates and to a lesser degree on ferocity sales, integrated delivery networks, and hospital system pharmacies.
Rachael Nokes: For the balance of 2024, we anticipate the GTN to stay in the 10-15% range. And in 2025, we anticipate the GTN discount to increase up to 35% by the end of the year, driven by the Medicare Part D redesign.
Rachael Nokes: Please keep in mind we feel the impact on the GTN to be more than offset by the lower patient co-pays due to the Medicare Part D redesign. We feel we are uniquely positioned to take advantage of the redesign and the lower patient out-of-pocket costs in 2025.
Bye-bye.
Rachael Nokes: Looking towards our future growth opportunities for Ferosix. One of our long-term initiatives has been the Ferosix Indication Expansion.
Rachael Nokes: to cover all heart failure patients, including class four patients that present more severe symptoms more frequently and have the greatest limitation on physical activity.
Rachael Nokes: Despite consisting of roughly 10% of the overall chronic heart failure market, CLASB4 patients are responsible for over 30% of the hospitalizations for heart failure and CLASB4 patients are more likely to benefit from furosics to manage their increased fluid events outside of the inpatient setting.
Rachael Nokes: Ultimately, we are focused on getting patients back to their maintenance therapies without the costly hospitalization and delay in patients having symptom resolution. This is a message that resonates strongly with both physicians and their patients.
Rachael Nokes: We are already filling prescriptions for class 4 patients and are seeing an uptick in the size of our prescriptions reflecting larger script sizes in class 4 patients.
Bye!
Rachael Nokes: Another key objective we accomplished this quarter that relates to the ongoing franchise expansion in thoracics was the acceptance of our SNPA filing by the FDA to expand the indication to include the treatment of edema due to fluid overload in patients with chronic kidney disease or CKD.
Rachael Nokes: We believe Ferosix, if approved, has the potential to play an important role in the CKB market, again being utilized by the patients who are comfortable with an at-home treatment option for their fluid buildup until their everyday oral loop diuretic treatment regime begins to work again.
Rachael Nokes: Well, these oral loop diuretics are the current standard of care and fluid overload for CKD patients.
Rachael Nokes: They do have limitations, particularly around acute spikes in fluid levels, given that these oral loop diuretics have less predictable bioavailability.
Rachael Nokes: It is crucial that CKD patients' fluid levels are well-controlled, that fluid overload in CKD is associated with both significantly increased mortality, as well as a faster decline in renal function and dialysis initiation.
Rachael Nokes: We've undertaken several steps to prepare for a potential launch of ferrocysts and CKD.
Rachael Nokes: These initiatives include establishing a cross-functional team that has been field-testing, positioning, conducting exploratory market research, identifying key opinion leaders, and calling on high-impact high-impact nephrologists who are already treating heart failure patients that also have CKD.
Rachael Nokes: While we await our PDUCA date of March 6, 2025, we are undertaking every pre-launch activity to enable rapid commercial uptake should Ferocex receive approval for CKD.
Rachael Nokes: The final growth initiative we were focused on executing over the course of the third quarter is our low-volume autoinjector.
Rachael Nokes: which we announced positive top-line results from a PK-PB bridging study in August.
Rachael Nokes: Importantly, the autoinjector demonstrated bioavailability 107.3% and participants receiving the autoinjector had similar urine output and urinary sodium and potassium excretion compared to IV furosemide.
Rachael Nokes: The auto-injector, if approved, has the potential to meaningfully reduce manufacturing costs compared to Ferosix's current on-body infuser and offers a compelling treatment option for HCPs and patients.
Rachael Nokes: We are continuing to work through our SNDA package and currently anticipate submitting to the FDA in January of 2025.
Speaker Change: Before I hand the call to Steve Parsons for a more comprehensive overview of Ferocious Launch Metrics.
Speaker Change: I wanted to quickly highlight the transformative financing that we completed in early August.
Speaker Change: that resulted in the net addition of roughly $75 million to SC Pharmaceutical's balance sheet and bolsters our projected cash form rate through expected profitability. In addition to the $75 million that was immediately available, SC Pharmaceuticals has the ability to pull down an additional $50 million.
Speaker Change: The both a debt and royalty stream facility that we put in place with perceptive advisors
Speaker Change: In summary, we are pleased to have the validation and continued support from a great roster of both our new and existing equity investors.
Speaker Change: I will now turn the call over to Steve Parsons, SV Pharmaceutical's Senior Vice President of Commercial. Steve?
Steve Parsons: Thank you, John. We remain encouraged by the continued progress achieved during the third quarter. From launch through September 30th, 2024, approximately 3,100 unique health care providers have prescribed flurosics.
Steve Parsons: representing a 13% increase compared to the second quarter and is reflective of our efforts to expand the Ferosix prescriber base while still increasing utilization with existing repeat riders.
Steve Parsons: During the third quarter, we filled approximately 10,800 doses of Furosix, up 16% from the previous quarter.
Steve Parsons: Of note, the average number of doses per prescription has risen to 6.8 in the third quarter compared to an average of 6.3 doses in the second quarter.
Steve Parsons: We anticipate this upward trend will continue, driven by the expansion of the Furosics Indication to include class 4 and some health care providers writing larger prescriptions for patients.
Steve Parsons: Also, we have increased efforts over the past quarter to further penetrate advanced heart failure clinics now that the NYHA class restrictions have been removed.
Steve Parsons: We have seen that advanced heart failure patients typically receive a higher number of doses per prescription.
Steve Parsons: The new Furosics Direct Patient Services Hub continues to perform well following the transition.
Steve Parsons: The Hub allows for streamlined online prescription submissions and offers a real-time data dashboard that all prescribers value.
Steve Parsons: The prescribers and their staff can now track key information, including the patient's prior authorization submission, approval status, the patient's co-pay amount, and the shipment date to the patient.
Steve Parsons: This improved hub is intended to reduce friction from the prescribing process.
Steve Parsons: and we have received encouraging feedback from the health care providers thus far. They've highlighted the convenience and ease of access which we believe will drive future increases in patient treatment volumes over the medium to long run.
Steve Parsons: Convenience and ease of access is also what we are hearing from the IDN hospital system customers.
who are seeking to bring forensics.
into their internal distribution systems.
Steve Parsons: which connect to the e-prescribing system and captures Ferozic's treatment data for all system specialists to see. Internal distribution can also support early discharge planning and meds to beds in addition to the normal home delivery service.
Steve Parsons: To conclude, we've expanded our number of territories to approximately 90 for the fourth quarter and we feel with reach and frequency on more customers during the highest treatment opportunity of the year that these factors will shift.
should have positive impact on our revenue.
Speaker Change: With that, I would like to hand the call to Rachael Nokes, Etsy Pharmaceuticals' Chief Financial Officer.
Thank you, Steve, and good afternoon, everyone.
Speaker Change: Product revenues were $10 million for the third quarter of 2024 compared to $3.8 million for the third quarter of 2023.
Speaker Change: Cost of product revenues were $3.3 million for the third quarter of 2024 compared to $1.1 million for the third quarter of 2023.
Speaker Change: The increase in both product revenues and cost of product revenues for the quarter ended September 30, 2024, was due to an increase in demand of Furo6 further into commercial launch and related manufacturing costs.
Speaker Change: Research and development expenses were 3.5 million dollars for the third quarter of 2024 compared to 3.4 million dollars for the third quarter of 2023.
Speaker Change: The increase in research and development expenses for the quarter ended September 30, 2024, was primarily due to an increase in clinical study costs, offset by a decrease in pharmaceutical development, quality, regulatory, and employee-related costs.
Speaker Change: Selling general and administrative expenses were $21.3 million for the third quarter of 2024 compared to $14.1 million for the third quarter of 2023.
Speaker Change: for the quarter ended September 30, 2024, was primarily due to costs associated with entering into the Credit Agreement and Revenue Purchase and Sale Agreement in August 2024, employee-related costs, commercial costs, patient support, and professional service costs, offset by a decrease in taxes and insurance.
Speaker Change: SC Pharmaceuticals reported a net loss of $35.1 million for the third quarter of 2024 compared to $15.6 million for the third quarter of 2023.
Speaker Change: The increase in net loss for the third quarter of 2024 was primarily due to one-time charges related to the extinguishment of debt and accounting for the new financial instruments that the pharmaceuticals entered into in August 2024.
Speaker Change: SC Pharmaceuticals ended the third quarter of 2024 with $91.5 million in cash and cash equivalents compared to $76 million in cash, cash equivalents, and short-term investments as of December 31st, 2023.
Speaker Change: The transformative debt and equity financing that was completed in August funds the company through expected profitability.
Speaker Change: As of September 30, 2024, SE Pharmaceutical's total shares outstanding was $50,040,134. That concludes our financial update, and I will now hand the call back to John for closing remarks before beginning our question and answer session.
John Tucker: Thank you, Rachael, and thank you, Steve. This concludes our prepared remarks. At this point, we will open the call for questions. Operator?
Speaker Change: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.
Speaker Change: You may press star 2 if you would like to remove your question from the queue. We ask that you leave your questions to one in a follow-up so that others may have an opportunity to ask questions.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.
Our first question comes from
Rowana Ruiz
Just one second.
Speaker Change: Our first question comes from Ronna Ruiz with Lee Rank Partners. Please proceed with your question.
Speaker Change: Hi, this is Mazion for Ruano Ruiz. We just have a couple of questions.
Speaker Change: Curious as to what you think the doses per prescription could look like for for Rho 6 and CKD relative to heart failure.
Steve, do you want to answer that?
Steve Parsons: Yeah, our early research suggests it'll be similar. It won't be as high as class four heart failure patients, more like the class two, class three heart failure patients. So, you know, in the six to...
6.5 range.
Speaker Change: Okay, thank you for the added color. And then, you know, with the potential auto injector, if approved, what do you think the rate of on-body diffuser versus auto injector could shake out to in the long term?
John Tucker: This is John. We've modeled this based on some initial market research. We think, at the end of the day, 90 plus percent of this will be in the auto-injector.
John Tucker: Now the you know the transfer rate or the or the adoption rate will be driven by a number of things We don't think it'll get to 100%. We know there's some patients who
John Tucker: You know, for years, I've struggled with fluid overload and going back and forth to the hospital, the IV clinic found something that works.
John Tucker: and we'll stay with it. But we think the vast majority will move and new patients will adopt the auto-injector. So we think by the end of the convergence, 90 to 95% auto-injector.
Speaker Change: What do you think about the holiday season? Is there any expected seasonality that we could see in Q4?
Yeah, I'll turn that over to Steve.
Steve Parsons: Yeah, the fourth quarter of the year is the biggest opportunity of the year based on how many patients.
Steve Parsons: Get a minute to the hospital, visit ERs, throw it over, it's a big problem around holidays and so our model predicts that we'll have the most sales on the fourth quarter, that's where the most opportunity is for these patients, so there is cheese now, yeah and you know some some doctors will actually preempt.
Steve Parsons: understanding that the patients are going to have too much salt, too much turkey, too much Chinese food, whatever, and they will preempt by writing a script just in case that patient does get in trouble. So we see an opportunity both in that pre-admission or even prophylactic.
Steve Parsons: Therapy. And as I said in my prepared remarks, you know, we are seeing, you know, a good start to this quarter. We haven't even really gotten close to the holidays yet.
Speaker Change: Okay, great. Well, you know, actually to follow up on that, when do you usually see that with the kind of stocking up, maybe physicians like prescribing for the holidays? Does that come in Q3 or is that something that you expect to see more in the November-December period?
Speaker Change: It's a Q4 phenomenon, so we'd expect to see it in November and December.
Okay, okay, great. Thanks, that's all from us.
Thank you.
Speaker Change: Our next question comes from Stacy Kuh with the TD Cowan. Please proceed with your question.
Speaker Change: Thanks for taking our questions. We had a few so just first regarding class for patients as you exit the year What percentage do you think?
Speaker Change: will be class four, and long term, where do you think it could stabilize? And then for CKD, still early days, but can you comment on how the initial nephrology detailing is going and what you're learning about the upcoming CKD launch?
Thank you.
John Tucker: Sure. Hey Stacey, it's John. I'll take the class four. So we think it's right now about ten percent. Now we didn't really launch it until September so, you know, it's early. I think what we have seen though is an increase in the script size. So there might be about ten percent of our scripts.
John Tucker: As we're sitting here today, we think that will grow through the quarter and into next year. What I think is as impactful to us is going to be the size of the scripts.
Thank you. Bye bye.
Speaker Change: We're seeing about 8 doses per prescription on class 4, so we're, you know, enthused about
Speaker Change: how many Scripps we're seeing for these patients, but also the size of the Scripps. And as we've stated before, we think a lot of that could be palliative care where patients kind of use an IV clinic.
Speaker Change: to go in three times a week to get IV treatment. Now they can do that at home, as well as preventing using the hospital as an IV clinic.
Speaker Change: I'm just kind of curious what the reception is to, right now it's kind of concomitant heart failure and CKD patients, but I'm sure that's kind of giving the Salesforce and you all an idea of what the receptivity will be when you launch CKD.
A little bit of both.
Yes, okay. Well, it's pretty positive.
Speaker Change: We got a lot of inbound requests to go see a nephrologist. Like, they weren't on our original target plan for this year. They were going to be built in for next year.
Speaker Change: We do get inbound requests for opening the account. They hear about it from Cardiology, so it's been pretty positive. They don't have access to IV in their offices, outpatient IV, so they need a product like Furosix. Their adoption has been...
Speaker Change: I'd say a little faster than cardiology in the offices that we've been to.
Nephrologists really don't have access.
Thank you for joining us today.
Speaker Change: You hear a lot of them using non-loop diuretics, like MutolaZone, out of sheer, they have nothing else to use. So we've been enthused about the reception, our market research in CKD. We just had the American Society of Nephrology meeting a week ago, and they were very positive about the use.
Okay, incredibly helpful. Thank you.
Thanks, Stacey.
Speaker Change: As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Our next question comes from Doug Sal with HC Wainwright. Please proceed with your question.
Speaker Change: Hi, good afternoon. Thanks for taking the questions. John, I guess...
Speaker Change: I'm just trying to understand a little bit around some of the dynamics that led to a little bit of a slower end of the quarter than you expected. Was it that your prescribers started to write...
Speaker Change: less frequently as individuals, or did the breadth of your scriptwriting sort of diminish a little bit through the quarter?
Speaker Change: Yeah Doug we were we were disappointed with how the I guess a second half of the quarter went and and it really was you know something we didn't fully you know you really can't
two places. One in our GTN, which was...
Speaker Change: that that hurt us. And then the flip side of the coverage gap rebate is when patients get in it.
The ones that can afford to pay the higher co-pay.
are saying.
Two good things about that, if there are any.
Speaker Change: Silver Linings is in Q4, these patients have typically all gone through the gap and are now in catastrophic where their co-pays are lower and our responsibility is lower so it helps our GTN and helps the fill rate and then again next year you don't have any coverage gap at all as you go to the redesign with patients out of pockets.
Speaker Change: if they smooth, cannot be more than $166. So it's really a phenomenon of coverage gap. It's always hard to anticipate early in a quarter what the rebates are going to be and what that coverage gap co-phase going to be, but that that's what
Speaker Change: We didn't anticipate that level of coverage gap. We thought the patients had gotten through it in the second quarter, early in the third, but they clearly hadn't as we were looking at the co-pays coming in. They were higher than we had anticipated.
Speaker Change: But the script demand was there, it continued to grow, it's just that, you know, the fill rate in the first half of the quarter was much higher than it was in the second half of the quarter.
Beep
Okay, great. Thank you.
Thanks, Doug.
Speaker Change: Our next question comes from Chase Knickerbocker with Craigshelm. Please proceed with your question.
Speaker Change: Good afternoon, thanks for taking the questions guys. Just first, and sorry if I missed it, jumping around on some calls here, what was the conversion rate in the third quarter and I guess what kind of improvement did you see kind of sequentially there?
We end up at 53% fill rate of our excess.
Speaker Change: compared to about 48% in Q2 of Rxs. It was higher, as we said earlier in the quarter, and moderated by the end of the quarter with the coverage gap patients, some of them declining.
25% cost of the treatment. And keep in mind...
Speaker Change: you know, are full rate still. We have the dynamics of.
Speaker Change: of doctors putting product on layaway and also of just doing coverage determination.
Speaker Change: So, it's always noisy, but it did go up about 10% from Q2 to Q3, but clearly challenged a bit by coverage gap rebate patients in the quarter.
Speaker Change: Got it. And so, you know, DOSA's written decelerated a little bit sequentially from a standpoint of growth. Was that largely this coverage gap kind of dynamic or is there any other kind of dynamics in the quarter that you call out? And then, John, as we kind of are halfway through Q4 here, can you talk to kind of how that conversion rate looks so far on Q4?
Thanks.
yes so um
Speaker Change: To go back to Q3, you know, again, the coverage gap, you know, the thing about that, the script gets written, and we did see growth in scripts from Q2 to Q3. We saw, you know, growth in filled,
and Phil Adai OECD.
Speaker Change: and doctors writing layaway scripts so but we are we are seeing it trending up this quarter versus last it trended up last quarter versus the quarter before so that's where we are
Speaker Change: Got it. And that kind of correlates into kind of my question, kind of our own next year.
as far as where you see that conversion rate going.
Speaker Change: And then last guys, I'm sorry for all the questions, any return thus far on kind of the new reps that were hired in Q3, you know, happy with their progress thus far, know it's early days, but any, you know, early green shoots there? Thanks.
Yeah, I think
So let me answer that.
Speaker Change: Second question first. Yeah, that the new reps, you know, we one thing we look at every every week every day is what percentage of the territories are Contributing and the new reps in the new territories have already started to contribute You know, we we didn't get them really out in the field until until the beginning of October. So there really was zero impact
Speaker Change: of them in Q3, but we have seen, and I think we've said it usually takes six weeks or so to get them to make any contribution.
Speaker Change: We think the redesigned KSU5 is really, really beneficial for us. We're in a category where there's no competitor.
and Patience.
will be able to smooth their copay.
Speaker Change: So those coverage gap co-pays that are big, and we're talking big, over $1000, $2000 some of these co-pays, they're going to be at $166 a month and these are heart failure patients and that's for all of their meds.
So, we're projecting, you know, 65% fill rate.
Now, the fill rate...
Speaker Change: That's great, but what that does also is you'll get more doctors prescribing as...
They understand more of their patients can afford the drug.
Speaker Change: And we're already out with the forms are out from the payers on how to sign patients up for...
Speaker Change: for the smoothing. All the plans, there's a CMS form, but the plans customize it a little bit. We have all of the plans forms.
Speaker Change: They're in the hands of our specialty pharmacies and our hubs, and we're helping to sign them. We can't sign them up, but we can certainly provide them the form to get them signed up into the smoothing. So we think 65, could that be higher?
Speaker Change: Yeah, it could be, but I think the impact of that obviously is a big jump in your fill rate.
but also a big jump in prescriptions being written.
are tailwinds.
Speaker Change: coming in, you know, for this quarter, it's the Salesforce expansion, it's a class four.
Speaker Change: Labeling for next year, you know, even at January, you're going to have the benefit of the Salesforce expansion, you're going to benefit of Class 4 for the full quarter, and you're going to have benefit of the redesign, which might be the most impactful of all of those things. And then in March, here comes our CKD.
Speaker Change: Steve Parsons, John Tucker, Steve Kelleher, Rachael Nokes, Steve Parsons, John Tucker,
Got it, thanks.
Thanks. Bye. Bye. Bye. Bye.
Speaker Change: We have reached the end of our question and answer session. I would now like to turn the floor back over to John.
for closing comments. Please go ahead, sir.
John Tucker: Thank you very much, and that concludes our call this afternoon.
Speaker Change: As we have stated, we remain encouraged by the ongoing launch of Ferosix.
Speaker Change: and are consistently receiving overwhelmingly positive feedback on how well Ferosix is performing and being accepted in the field.
Speaker Change: We have a number of tailwinds at our back as we go through the fourth quarter and into 2025, including the expanded sales force, class four label expansion, the CKD indication in the first quarter of 2025, and the Medicare redesign that takes effect January 1st of 2025.
Speaker Change: I look forward to a successful Q4 and providing our next update. Thank you very much.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.