Q2 2019 Earnings Call
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Yeah, the conferences and progress on you now in a moment.
In Q.
This compares to only a 0.4% increase for all branded extended release 80, HD medications in the same time period.
And 3% for the overall 80 HD market.
We were able to realize and as a result, despite our shift away from a prescription volume based strategy. Clearly this is a positive sign for the business.
So all in all we continue to make very meaningful progress in our commercial portfolio and executing on our strategy.
Work remains to be done, but we are well positioned to capitalize on the progress we have made to date.
Now I want to take a moment to turn to our development pipeline.
We believe that Ensco five owed to is a tremendous asset with the potential to address a high unmet need.
Ensco five owed to as a new chemical entity product candidate for the treatment of chronic silo area, a condition, where patients with neurological conditions such as several calls the LSW parkinson disease disease, and mental retardation exhibit excessive celebration or drilling.
We plan to develop MTO five owed to as an easy to swallow orally administered formulation that can be dosed once or twice daily with no complex titration required.
We are actively in formulation development have made additional progress the past quarter in R&D, enabling studies.
And remain on track to initiate pilot PK work in the first half of 2020.
We hope to file an NDA by late 2023.
Antonio five owed to is the first step in our objective to build a broader CNS focused development pipeline. We believe there is a large opportunity to address symptoms associated with neurological disorders.
That exacerbate overall disease burden.
As you can see everything we have done for our business. Since late 2018 is intended to drive both short term and long term growth and progress the company toward profitability.
The plans are in place for what we believe will be successful 80, HD back to school season for Neos, We expect to see continued increases in net revenue per pack and growth in prescription volumes.
And we have demonstrated strong progress in strengthening the financial foundation of the company toward our goal of achieving profitability.
With that I, Thank you and I would like to turn the call over to rich to review our financials. Thank you Gerry.
At June Thirtyth, 2019, we held $30.3 million in cash and cash equivalents and short term investments, excluding the $7.5 million principal payment paid to Deerfield in may our net cash burn for the quarter was approximately $1.6 million.
Total product revenues for the three months ended June Thirtyth, 2019 were $15.6 million compared to $11.4 million in the same period in 2018.
Total product revenues for our 80 HD portfolio were $13.7 million for three months ended June Thirtyth 2019, compared to $10.8 million Navy HD product revenue for the same period in 2018.
As a result of the addition of several new customers net product revenues for generic Tussionex increased $1.2 million to $1.8 million in the second quarter 2019, as compared to $600000 in the same period in 2018.
For the three months ended June Thirtyth 2019, gross profit was $10.5 million compared to $4.4 million for the same period in 2018.
Gross margin as a percentage of net product sales increased 67% in the three months ended June 32019 from 39% in the three months ended June Thirtyth 2018.
R&D expenses for the three months ended June Thirtyth, 2019 were $2 million compared to $2.4 million for the same period in 2018.
Selling and marketing expenses were $7.3 million for three months ended June Thirtyth 2019, compared to $11.6 million for the same period in 2018.
This decrease was primarily as a result of restructuring where sales and marketing organization. The quarter ended December 31.
30, Onest 2018.
DNA expenses were flat at $3.7 million for each of the three months ended June Thirtyth 2019 and 2018.
Loss from operations was $2.4 million for the three months ended June Thirtyth, 2019, and improvement of $10.9 million as compared to a loss $13.3 million for the same period of 2018.
Net loss for the three months ended June Thirtyth, 2019 was $3.8 million or eight cents per share compared to $15.2 million or 52 cents per share for the same period in 2018.
This represents the fourth consecutive quarter, where we have reduced our quarterly net loss.
With that we'd now like to turn to the Q and a portion of the call operator.
We will now take any questions you have if you had a question press star one and you will be could enter the queue. If you will like to cancel your question. Please press star Q.
The first question.
Comes from the line of Mr. Louise Chen from Cantor Fitzgerald. Please go ahead.
Carvey, calling in for Louise. Thank you for taking my questions. First can you provide more color on your neos ours kind of program and how that drive uptake of the product.
It is a competitive advantage. So why do you see a higher rate of yourselves going to Rx come back right.
Secondly, when do we expect the NTD 502, PK data, who does the press conference today, we'll look at the details of the phase one trial design for these assets when the PK data.
Please.
Last year.
What are you doing to expect pipeline and product portfolio will you do that do internal development or M&A.
What areas are you most excited about where do you see the greatest unmet needs. Thank you.
All right well, thanks, I'll take I'll take all those I appreciate the questions and I'll try and take them in order.
Neil SRX connect is a patient access program.
That we launched in January of this year and we're very excited about the prospects for this as a.
Partnership not only with patients, but with healthcare practitioners.
Patient access to medications pharmacy, stocking and other hassles really deter and frustrate.
The ecosystem between the physician and the patient and we developed this to alleviate mitigate a lot of those concerns by proud providing a seamless approach where physician to prescribe the medication our medications whether it be its NSX already its NCR orca templates already and the patient has a lot of confidence that it will be adjudicated correctly to pharmacy and offering very competitive we believe best in class co pay program. So the whole goal is to reduce co pays for patients to give them good access to medication and reduce hassle for health care provider, we're confident that that will help provide loyalty to our brands over time.
And in second quarter as I mentioned in the prepared comments, we had 15%.
Of our prescriptions adjudicated through this system, we expect that to continue to grow in the future as we've been out talking to healthcare providers across the country. They are very energized about this tool and this resource and view it as a partnership so were really excited that this is going to be a key part of our strategy in a fundamental part of our business for a long long time to come going forward.
Turning to your second question about NTS Ivo too.
Were extremely excited about this asset we think it's a perfect marriage of addressing a really debilitating symptom that cuts across a number of neurological conditions.
And what we have with end to FFO FFO to unlike older Nonselective anticoagulant objects highly selective must critic receptor antagonists.
That this preferentially selected for the salivary gland. So we think that will provide an advantage in of itself and it's the perfect marriage with our micro particle delivery technology, where we can take older products that are dose did.
Three times, a day and reduce that dosing to at least twice a day, if not down to one today as well as control the pharmacokinetics to further increase the therapeutic index.
With your question with regard to the timing of the of the PK. The pilot PK data, we expect to initiate that in the first half of 2020. Those are as you know are not relatively long studies and we would expect to present that information.
Either in multiple forms in could be in the form of press release, but also in scientific presentation later that year and we'll keep we'll keep you posted of course as we discussed this on a quarterly basis.
Turning to the expansion of the pipeline. Its a refers back to NPL fiber to a bet. We are really excited to address.
Clinical conditions that are underserved today, we particularly like the CNS area and associated symptoms in that area, where our micro particle delivery technology can provide additional value. So we'll continue to look for ways to leverage our technology.
In the CNS and the support of CNS area. The associated symptoms in CNS disorders. In addition, we are actively looking for ways to leverage we believe as a competitive advantage in our commercial infrastructure in our distribution systems and we're always actively looking at potentially adding on market products to our portfolio that make sense, given our commercial footprint and given our commercial infrastructure. So those are ongoing we don't have anything specific to discuss today, but I can assure you. These these assessments are ongoing as we speak.
Awesome. Thank you so much.
Mr., Ken Cacciatore from Cowen and company. Please go ahead.
Hi, guys. Congrats on all the progress just a couple of modeling questions. First then I'm going to ask on the connect but first on gross margins rich are you going to be normalizing at this rate or is there potential for more improvement. So can you give us a sense of.
But the gross margins will be a needs to and then also on spending is this the right run rate or do we should we look for a little bit of a bump up as you go into the back to school season.
For your Salesforce and then lastly.
On cerium Neos connect program, that's great that 15% are now going through should give us a sense of where you are in terms of actually having the pharmacies in place. So you 100% of the way there. So that they are there and now ready to push the parents in patients too or are you, 50% through kind of getting them established can you give us a sense of where you are in getting those set up thank you.
Thanks, Ken This is rich thanks for joining us this morning so.
Gross margin were.
We have guided previously that we thought we would get into the mid Sixtys throughout 2019 is of course a.
Very much driven by.
Both the net revenue and costs.
I think obviously as.
Q2, and Q1 2019, when we've had higher net revenue per pack, there's improvement when its lower as was the case in Q1 and Q2 last year and again in Q4.
And cost remains constant theres downward pressure. So I think you'll continue to see a little bit of fluctuation in our gross margin.
We do expect we are going to improve our net revenue per pack in Q3, but as we previously indicated Q4 begins to drop off again as we anticipate.
Hi, deductible plans come into place.
So lumpy some variability there I think.
What's important to note is that our for our aviation products and that average net revenue was $121 versus 106 in Q1 and 90 to one year ago. So that's driving a lot of improvement there on the cost side, we had a 10% improvement in cost per unit for our 280 HD products versus the same period, one year ago.
And we also had inventory cleanup adjustment one year ago as well if you remember so we expect we will continue to realize improvements in our cost we have active programs in place to take cost out of the business. So we do expect improvements that I think looking into next year and beyond the gross margin can get into the 70% range.
Regarding spend I think.
We.
Probably should see some increase in sales and marketing expenses as you point out as we are in the back to school season, and also we purposely held off some of our spend.
As far as part of our reconfiguration last year until we got our territories reestablished and the relationships between our representatives and their new HCP contacts it didnt make sense to spend money on peer to peer programs for instance, but we anticipate we will regain some of that out as part of our marketing campaign. This fall. We had previously indicated we thought our sales and marketing expense for the year would be in the low to mid Thirtys and we stole.
Anticipate that Thats, where thats going to show up R&D expense it should.
Remained relatively flat for the near term maybe beginning to pick up later on the year as we get back into spending more money on our post marketing commitments studies for incentives for Cotempla.
Resulting from our PDUFA improvement at Gnh stays fairly flat throughout the year.
And Ken on the SRX connect and just as a reminder for others that it offers commercially insured patients are the lowest possible co pay for their nearest medications and.
It covers 100% of commercially insured lives the maximum low pay is $35 copay and many will pay $0. If it is covered by their commercial insurance.
And as you know its are designed to reduce the paperwork involved in the hassle.
We ended the second quarter with close to 120 pharmacies onboard and that is growing weekly we have a queue that we're processing as we speak.
We expect can to continue to grow the number of pharmacies.
Throughout the remainder of 2019 and likely into 2020, given the success of the program early on so that will continue to be a focus as we go forward and we'll look for ways to continue to expand that so we have sort of universal coverage within our geographies, where we have our target prescribers.
Great. Thanks, guys.
Mr., Jason Butler from JMP Securities. Please go ahead.
Questions just a quick follow up on on that NAS connect program can you maybe speak to what percentage of the pharmacies.
In the network today that you are seeing that the majority of scripts flow through is it broadly across are you seeing concentration in pockets. So far and then secondly, you mentioned the new to brand New brand strategies that you discussed the Salesforce meeting you maybe elaborate a little bit on on on your current messaging for the products.
Yep.
Jason course, I'll handle that like any new initiative in the early days of Neo sorry disconnect you have a highly concentrated U.S right high percentage and a small number of unity 80 20 rule.
Overtime, we are we're pleased to see as a broadening of adoption and utilization and it really that comes down to the efforts of our salesforce communicating the benefits of Neossance connect to providers and it's a classic case of wants to provide or tries the us or disconnect and have a good experience. They begin to adopt it further and further and I've been out in the field and it just about every week since our national sales meeting and we're seeing this adoption really pick up.
So overtime now early on the utilization was highly concentrated and that is beginning to spread as we add additional pharmacies and we have additional adoption across our territories.
And then the second question you had was on the brand strategies.
We are highly confident in our microparticle delivery technology, that's what really differentiates us in the 80 HD space.
And so we really focused on the effectiveness of.
Of our LTAC medication with its NSX already and the Microparticle delivery technology with Cotempla XR OTI as a real highlight on two things the clinical data is outstanding.
Cuts Eplex already helps you win the morning and win the day in that you have rapid onset within one hour and good affect efficacy at one hour.
And thats sustained out through including 12 hour. So you have a patient who is a child is going to school by the time on the bus in the morning, and we can be effective you get affected throughout the day at school and even through the Hallmark hours. In addition, we have outstanding data.
That really highlights performance on.
Math problems and so you combine sort of the overall symptomatology in 80 HD with performance.
And Matt School math problems and that is really we think a good highlight for our brand going forward combining that with our best what we believe is best in class patient access program with your Neossance connect we're very excited about what's going forward for our brands.
Great. Thanks for taking the questions.
Mr., Jason you from Wells Fargo. Please go ahead.
Hey, good morning.
Good.
Quick question on <unk>.
So given the improvement you've seen in that revenue per pack to score.
Do you still see the 75 million. This year at 100 million is that still a stretch or how do you think about the.
Yeah, we we've never.
Jason Thanks for calling in this morning, we've never really guided.
People to 75 and 100 million those are.
Well that's for the Deerfield.
Those are two milestones that are in the Deerfield agreement, where if we hit those numbers than we have an option to slide out our debt payments, but we never really said that that was where we're guiding to for the year.
We havent provided guidance.
Okay.
And secondly on the cash burn ex the Deerfield payment well under $2 million is to decide kind of consistent in the second half or the pick up in the fourth quarter.
Well I think as I indicated earlier with.
Kens question that we expect will spend.
Some more funds.
Geared towards sales and marketing.
There are some expenses that are seasonal but we also expect were going to be growing our revenue and our.
Our gross margin as well so they sort of offset I think it's really a trend it's not necessarily a specific point.
We tend to have good collections in Q2, as we collect from our Phoenix.
Seasonality. So Q2 is always a good quarter, but we expect to continue to see improvements in our burn and as we've indicated before that we have enough cash to get to profitability. So at some point, it's not a burn anymore its cash generated.
Okay. Thank you.
[noise].
Gary Nachman from BMO. Please go ahead.
Good morning, it's rough pay on for Gary can you guys hear me okay.
Yes.
So you've talked in the past about 7000 physicians being in your call audience, you have a sense for what percentage of those tests prescribed and for those positions that physicians that haven't.
Why have they been reluctant to do so.
Second question with respect to price increases he took a 4% increase on Cotempla in April can you help quantify how much of that growth increased flows to net price.
And lastly are you conducting any DTC campaigns, how much of a priority is that whether it's some sort of national campaign or more targeted digital campaign.
So great question, So I'll start with the first on our brand strategy is in the 7000 targets a vast majority has tried and and or in the range of prescribing levels for our brands and.
Yes, I think the question comes up and ran our brand strategy.
And really where were focused our brand strategies are focusing our team where we can win quickly and sustain our business throughout and beyond the back to school season, and specifically focusing on shifting more of the car product adlers within that 7000 target to become more product adopters right. So it's it's about growing our existing prescribers then moving these dabble orders into becoming adopters and we're doing that through our brand strategies and also through our best in class Neossance connect program.
Good but at the same time, we will continue to focus on expanding a prescriber base beyond those existing today. So it's a sort of a three prong strategy and when you look at a gain back once again to our promotional campaigns, how we're able to do that with our micro particle technology and our data.
When you look at it to Dennis XR MDT, our focus will be on providing the proven an effective sdhc symptom management with a focus on the adult patients and this is a slight strategic shift from our historical focus on adolescent.
In fact, I mean based products continually continue to be to predominately prescribed in the adult population and we're really moving our focus in that direction to where the market exists and we think thats going to be a good driver among our prescribers and then with complex. Our Odisi, we'll continue to focus on the adolescent market, which is predominately methylphenidate and I talked earlier about our campaign there about the compelling clinical data that allows the patient to have effective relief.
Not only in the morning, but throughout the day and into the into the evening hours. So.
That's the goal is to move east Adlers, along to become adopters and then continue to identify new prescribers to bring bring into the mix.
Your final question I think was on DTC.
Broad based DTC is not something we're engaging right now we are actively examining select very specific.
Digital non personal type.
Campaigns, and we're examining that not only for later this year, but looking as we look at our longer term marketing strategy.
And regarding your question on revenue growth or most of that in Q2 was related to.
Improved net revenue per pack.
That was an improvement.
Beyond the the price increase we took for Cotempla. It was these strategies, we've been talking about about shifting our focus to more profitable prescription. So that was probably the bigger driver and generating increased net revenue per pack as you know.
The former manufacturer does not retain all that much of any price increase it takes so scripts.
We don't book Office scripts, we book off the sell in the wholesalers.
But scripts are a good indicator that say you can do the math and see that most of the increase from Q2 came from price increase and not necessarily from prescription growth, but we expect going into Q3 with the back to school season. The new strategies, then we return to the growth in our prescriptions as well.
Great. Thank you so much.
And I'm showing no further questions in the queue at this time, ladies and gentlemen, thank you for participating in today's conference. This concludes your program and you may now disconnect.
Everyone have a great day.
Okay.