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spk04: Welcome to the Accelerex fourth quarter and full year 2020 conference call. This call is being webcast live on the events page of the investor relations section of Accelerex's website at accelerex.com. This call is the property of Accelerex and any recording, reproduction, or transmission of this call without the express written consent of Accelerex is strictly prohibited. As a reminder, today's call is being recorded. You may listen to a webcast replay of this call by going to the investor section of XLRX's website. I would now like to turn the call over to Rafi Asadorian, XLRX Chief Financial Officer. Please go ahead.
spk03: Thank you for joining us this afternoon. Earlier today, we announced our previously released fourth quarter and full year 2020 financial results in a press release. This press release and the slide presentation accompanying this call are available in the investor section of our website. With me today is Dr. Pam Palmer, our chief medical officer. Unfortunately, Vince Angotti, our chief executive officer, is unable to join us today due to a family emergency. Before we begin, I'll remind listeners that during this call, we will make forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties regarding the operations and future results of Accelerex. Please refer to our press release in addition to the company's periodic current and annual reports filed with the Securities and Exchange Commission for a discussion of the risks associated with such forward-looking statements. Let's get started as we have a long call today. Like most companies during this pandemic, we have adapted and found ways to continue advancing the long-term value of Accelerex and commercial launch of Desuvia, despite the obvious challenges with access to hospitals, physicians, and decision makers. As a result, we've successfully achieved many of the objectives set out at the beginning of 2020 and believe that in the post-COVID environment, Desuvia is well-positioned for success due to the need for efficiencies at ASCs and hospitals, the progress of our partnerships, and the readout of additional clinical data through the course of 2021. We've learned from the real-world use of Desuvia that in addition to Desuvia being an effective and well-tolerated analgesic to manage acute pain, Desuvia also supports opioid stewardship in that it reduced overall perioperative opioid requirements in patients from two separate peer-reviewed published studies. Importantly, these studies showed data that supported for the first time economic benefits to hospitals and surgery centers, which is resonating with physicians as well as hospital administrators. Later, I will discuss the importance of this data and our continued focus on supporting investigator-initiated studies where we see significant potential for Desuvia to help new patient populations. I will also update you on the progress in each of our four pillars providing a foundation for revenue growth. In addition, we have a special guest with us today who is one of our physician experts in oral and dental anesthesiology, Dr. Steven Yun. Zimmer Biomet is gearing up for its formal launch of Desuvia. into the oral and dental surgery space, and we thought it would be helpful for our investors to hear about Dr. Yun's experiences with Dissuvia. Pam will provide a further introduction to Dr. Yun later in the call. The pandemic has had many unanticipated effects on the world and impacted each of us in different ways. With regards to Accelerex, the three main impacts we have experienced are one, cancellation or delays of formulary committee meetings, two, restrictions on pharmaceutical representatives or any outside visitors entering the institutions to educate healthcare providers, and three, delays of elective surgeries. With regards to the last point, the elective surgery backlog has grown significantly over the last year. A May 2020 study of orthopedic surgery volumes by the Journal of Bone and Joint Surgery suggested that even under the most optimistic scenario, the United States may face a cumulative backlog of more than a million total joint and spine surgery cases. With the rollout of vaccines, many industry insiders believe these elective surgeries will start ramping in the second half of 2021. We believe this expected return of surgeries provides an opportunity as the surgical environment has been the initial primary use for Desuvia. I'll provide an update on some 2021 guidance that includes this growth expectation and the number of expected formulary approvals by the end of the year. Before looking forward, let's review the progress made and objectives achieved in 2020 in each of our four pillars. The first pillar is centered on the Department of Defense. We made significant progress in 2020, with Milestone C approval received in April, joint deployment formulary approval received in September, and finally, a four-year, $3.6 million contract received from the U.S. Army to develop clinical practice guidelines. In addition, we continued to penetrate the military treatment facilities, or hospitals, based here in the U.S., as the benefits of DSUVIA across the military are being better understood. As a reminder, the Milestone C approval means DSUVIA will be packed out in the U.S. Army SKOs, or sets, kits, and outfits for all deploying troops. We continue working with the Army on all the complex logistics and administrative matters to improve this process, which has taken time. Regardless, once the logistics are finalized, we still believe that the initial stocking for all SKOs will approximate $30 million in revenue over three years. We do not yet have any guidance on what this will translate into for revenues in 2021, but we expect these final logistics to be worked out in the near term. Our focus will remain on educating and training the U.S. Army teams so they are prepared as D'Souvia ships to deploying troops. Separately, military treatment facilities continue to be a focus as many of these physicians rotate into deployment, which provides an opportunity for more healthcare providers within the military to learn about the benefits of D'Souvia. The second pillar is concentrated on large specialty markets accessed through partnerships. A significant accomplishment in 2020 was the exclusive Zimmer Biomet oral and dental surgery partnership announced in July. Zimmer Biomet has just started to begin promotion with the trained 31 sales representatives that is expected to expand to the broader 200-plus sales representatives later this year, particularly after Zimmer Biomet Dental receives their wholesaler drug licenses. As a reminder, this opportunity approximates 7.5 million applicable Desuvia procedures. We believe the potential is significant to reach a large proportion of these customers given Zimmer Biomed Dental's customer base and established relationships in this space. Once a full promotional effort is made with their sales force, we believe growth will ramp quickly. Dr. Yun will discuss his experience with Dissuvia in this setting to provide a better idea of the types of procedures that can benefit from Dissuvia. Also within this pillar are other potential specialties such as plastic surgery, emergency medical services, and many others. Plastic surgery has been one of our fastest growing specialties in the first quarter of this year given the unique pharmacokinetic characteristics. of D'Souvia and how these procedures are being performed. And this has been accomplished with only two sales representatives making virtual sales calls initiated in the fourth quarter. Our third pillar, which is the primary focus of our internal commercial organization, is hospitals and surgery centers. While COVID has certainly had an impact on our progress in this pillar, the publications of the new real-world clinical data have provided a rationale of how Desuvia can help address the backlog in elective procedures moving forward. Importantly, in 2021, we believe the ongoing investigator-initiated trials at some of the most prestigious hospitals in the U.S. and new studies being evaluated will provide further evidence of Desuvia's potential to change the paradigm of pain management for surgeries. Selling into hospitals and surgery centers has a long lead time, and this was only exacerbated during the pandemic. With the data showing real-world use of Desuvia supporting opioid stewardship and efficiencies in the perioperative setting, now there is more information that healthcare providers are able to evaluate for upcoming formulary and purchasing decisions. One example of the benefits of this data was our recent partnership with the National Rural Health Association, which identifies opioid stewardship as one of their four critical priority areas. After reviewing the available publications with this clinical data, they decided to enter into a partnership with us to help support this effort. As we've previously announced, there are ongoing investigator-initiated studies being performed at Harvard Brigham and Women's Hospital, the Cleveland Clinic, University Hospitals of Cleveland, as well as at the Newport Plastic and Reconstructive Surgery Center. These are well-regarded institutions, all focused on different studies in patient populations. We believe the data from these ongoing studies will demonstrate the effectiveness and benefits DeSuvia provides over current standards of care. We expect data from these studies to read out later this year. And coupled with the opening up of elective surgeries expected in the second half of the year, we believe it will provide further momentum for the use of Desuvia. Knowing how important new data is for driving adoption by healthcare providers, we are reviewing many other study requests with several focused on orthopedic surgeries, which has been one of the fastest increasing specialties along with plastic surgeries. The benefits being seen from orthopedic surgeons while using Desuvia include faster discharge time for patients and overall reduction in opioid utilization in the PACU. These physicians also report patients are more clear-headed, which is consistent with Dysuvia's lack of cognitive impairment as assessed in our registration trials. The orthopedic surgery market will be a key specialty for Dysuvia in 2021. In addition to orthopedic studies, we continue to receive strong interest for investigator-initiated trials in other areas, including proposed studies in sickle cell patients presenting to the emergency department and retinal surgery in the elderly. With COVID delaying formulary reviews, as mentioned on our last quarter call, we shifted our commercial team's focus to the accounts that had already reviewed and approved to SUVIA for use. As a result, in the fourth quarter, 90% of all orders shipped were for reordering customers. Before providing a further operational and financial update, I would like to hand the call over to Pam to introduce Dr. Young.
spk01: Thank you, Rafi. We are fortunate to have with us today the anesthesiologist who first recognized the important benefits that Desuvia could bring to oral surgeons and their patients. And we're also excited about the collaboration with Zimmer Biomed. Dr. Steven Young is a board-certified anesthesiologist who specializes in providing dental office anesthesia for complex oral surgery cases. He is an examiner and expert consultant for the Dental Board of California, clinical professor of Western University of Health Sciences, and a lecturer at the Loma Linda School of Dentistry. He is also a safety inspector for the American Association for the Accreditation of Ambulatory Surgical Facilities. Dr. Yun knows firsthand how important consistent and effective levels of opioid analgesia are for the oral surgeon performing a lengthy surgery in his or her procedural suite. Usually, patients are not under general anesthesia during these lengthy procedures. and throughout the case, the oral surgeon will have to repeatedly stop to administer low-dose IV opioids. This is because the peaks and troughs of IV-administered drugs are inherently ineffective at providing stable levels of analgesia for cases lasting hours. Dr. Yun's direct observations during surgical cases of the unique pharmacodynamic profile of sublingually-administered dysovia and his knowledge of the high therapeutic index of sufentanyl make him uniquely qualified to discuss with you today the use of Desuvia in these oral surgery procedures. Before Dr. Yun discusses his experience with utilizing Desuvia in his dental anesthesia practice, I will cover some safety information about Desuvia. The following information is intended for investors, not healthcare professionals or patients. Desuvia is a Schedule II controlled substance that may only be dispensed to adult patients in a certified medically supervised healthcare setting for the management of acute pain severe enough to require an opioid analgesic and for which alternative treatments are inadequate. Risks include life-threatening respiratory depression, addiction, abuse, misuse, cytochrome P450-3A4 interaction, and risk from associated use with benzodiazepines or other central nervous system depressants. The most commonly reported adverse reactions are vomiting, dizziness, and hypotension. Insufficient data are available on the use of Desuvia in patients with severe liver or kidney impairment. Desuvia should be used with caution in such patients due to the importance of these organs in the metabolism and excretion of sufentanyl. Accelerex ensures proper use of Desuvia via physician education and the Desuvia Risk Evaluation and Mitigation Strategies, or REMS, program. Desuvia is only available to facilities that are part of the Desuvia REMS program. Facilities that administer Desuvia must be able to manage acute opioid overdose, train relevant staff on Desuvia, and implement policies and procedures to ensure the appropriate administration of Desuvia. Full safety information and the black box warning for Desuvia can be found at desuvia.com. Now I would like to hand the call over to Dr. Yun to share his insights into the use of Desuvia in oral surgery practices.
spk06: Great. Thank you, Dr. Palmer. Hello. I'm Dr. Steve Yen. I'm pleased to be able to share my observations on the use of Desuvia in patients undergoing oral surgery. I'll note I am a consultant and speaker for CellRx. I am being compensated for my time to speak with you today. Almost two years ago, I was attending a talk by Dr. Palmer on dysthymia that was unrelated to oral surgery. But given my focus in this field of anesthesia, I immediately realized the potential impact dysthymia could have on the oral surgeon's practice. Oral surgeons train not only in oral surgery, but also anesthesia. So the vast majority of these cases do not have an anesthesiologist like me present. I am only brought in for the more complex or difficult cases, such as patients with many comorbidities or difficult IV access. Therefore, oral surgeons have to provide both the sedation and the analgesia, as well as perform the surgery, which is no easy task. While dental local anesthetic blocks provide a substantial amount of pain control, these alone are often inadequate for larger surgeries, especially those that involve the upper arch. Nitrous oxide or laughing gas can slightly blunt the sense of pain, but it really isn't that effective for moderate to severe pain, and it is cumbersome to administer and can often get in the way of the surgeon's operative field. Now, oral surgeons often rely on intravenous opioids, such as low-dose intravenous fentanyl, to supplement the local anesthetic blocks. I say low-dose since these patients are not intubated, but rather they are under a moderate level of sedation and breathing on their own. The pharmacokinetic profile of intravenous fentanyl is a rapid high peak followed by a fairly rapid drop. We can only give low doses in these awake cases because the rapid peak plasma concentration can cause respiratory depression if it rises too high. Following the peak drug levels, the distribution happens of IV fentanyl is only 1.7 minutes, which essentially means it quickly leaves the plasma and doesn't maintain a consistent plasma concentration that is delivered to the brain. The duration of action of these typical low doses of fentanyl, such as 25 micrograms, is about 30 minutes at most. So you can imagine the roller coaster of fentanyl plasma concentrations throughout a two to three hour case. The interruptions to the surgeon and the breakthrough pain are not optimal to say the least. In patients who are especially risky from an airway standpoint, such as patients with sleep apnea who have excessive soft tissue in their airway, these high peak opioid levels can really be problematic as these sedated patients can have an obstructed airway and drop their oxygen levels more rapidly than a patient without sleep apnea. Now before recommending Vesuvia to my oral surgeon colleagues, I wanted to dose it in my own challenging oral surgery anesthesia cases to really get a feel for the safety and efficacy of the drug. My first case was a morbidly obese patient weighing 350 pounds. For full mouth extraction, and full arch implants. These cases typically last five to six hours, and this patient not only had a difficult airway to protect, but many comorbidities, such as coronary artery disease and diabetes. In fact, I felt the patient was at too high a risk to put under general anesthesia in the oral surgery suite. And instead, I opted to use only intravenous Versed, which is a sedating volume-like drug, and Desuvia for analgesia throughout the case in order to keep the patient only lightly sedated and breathing on his own. So with a total of three doses of Desuvia, each one spaced two to three hours apart, and a total of six milligrams of intravenous Resed dosed throughout the case, I was able to provide the patient with a quality level of sedation and analgesia with no bile sign or hemodynamic concerns. After a number of cases where I've dosed Desuvia in similar patients with difficult airways and underlying comorbidities, I believe there are two attributes of Desuvia which provide the stable pain control with minimal side effects that I'm observing these patients. The first is the blunted and extended duration of su-fentanyl plasma concentrations following dosing of Desuvia. which is quite differentiated from the intravenous bolus profile. And the second is the high therapeutic indexes to fentanyl, which is a measure in animals for the safety of the drug. These attributes of dysthymia are above and beyond the additional benefit of not requiring an IV for administration of the drug. There are many times where patients either put off dental procedures or completely avoid the oral surgeon's office for fear of needles. Having a non-invasive method to effectively administer analgesia to allow the surgery to proceed without an IV or as an analgesic bridge to allow an IV to be inserted in a patient who will require multiple attempts due to difficult to access veins is really a leap forward in the dental field. In addition, the analgesic onset of 15 minutes and the duration of approximately three hours allows only one to three doses to cover up even the longest of oral surgery cases, which is well below D'Souvia's label limit of 12 doses in a day. The lack of Coddington impairment, as shown in Dr. Miner's published phase three study of D'Souvia's use in emergency trauma or injury, is also a key attribute for dental analgesia. The oral surgeon's office is busy and rapid recovery following the case is critical to keep the daily flow of patients moving efficiently through to discharge. Consistent with the recently published real-world evidence on Vesuvia use, we are finding that patients are recovering quite quickly when Vesuvia is utilized as the opioid analgesic. I am excited about the collaboration between the Thalarex and Zimmer Biomed. Zimmer has a trusted relationship and broad outreach to oral surgeons throughout the U.S. as well as top-rated educational courses that provide ongoing training in dental and oral surgery procedures. Adding the Cydia to their offerings to the oral surgeon and IV sedation certified dentist will truly be beneficial to both the surgeons as well as the patient. Whether it's impacted third molar extractions, multiple dental implants, or the large full-mouth dental implant cases, Kasubia is a uniquely effective analgesic option that minimizes frequently dosing, minimizes CNS impairment, doesn't require IV access, and is a much needed advance in this field. Thank you.
spk03: Thank you, Dr. Yuen, for those great insights. And apologies if you were unable to hear Dr. Yuen on some of that, given the difficulties with the line. But we're very excited about the launch into the oral surgery space. And Dr. Yuen will be available for Q&A at the end of our call. I would like to provide a few other important updates before going into the financial review. First, our high-volume automated packaging line that has been held up in Europe because of COVID has finally shipped. We expect to receive the packaging line at our contract manufacturing facility by the end of the month. After the equipment has been received, the next steps are to assemble at our contract manufacturer, complete final acceptance testing, and then begin producing validation batches, which, importantly, will be able to be sold after all approvals are received. Subsequent commercial production batches are expected beginning in the third quarter of 22. This will have a significant reduction on our unit cost of production and increase our capacity to meet expected demand from the DOD, Zimmer, and growth in hospitals and surgery centers. Importantly, this also clears a path to finalizing discussions on outlicing Desuvia or Desuveo in Europe. We plan to have an agreement later this year with a potential partner for Europe. As part of our fourth pillar, we continue to explore additional product licensing or acquisition opportunities, which we believe will complement Desuvia and improve efficiency and leverage our commercial team. We remain committed to adding at least one complementary product to Desuvia in our portfolio. This does not replace our priority with Desuvia, but simply provides our commercial team with additional sales opportunities on the same call. We've completed a lot this year, but much more is expected in 2021. We've had some questions about the recent FDA warning letter. We take their communications very seriously. As such, we responded to their letter promptly and have already received confirmation of the response receipt and that they will schedule a requested meeting. Our intention has always been to partner with the FDA and be the model citizen of proper promotion and education. And importantly, considering Desuvia is an opioid, I'd like to mention the data that has been collected with respect to D'Souvia being kept in the hands of qualified personnel and not adding to the outpatient opioid abuse issues we have all heard about over the past 10 years. We work with Denver Health's RADARS program, which is the top surveillance program for prescription drug abuse, misuse, and diversion. And this data which is reported annually to the FDA, shows a clean track record for Dysubia. I'll now take you through the financials. We believe we will see improved access to healthcare institutions as well as a stronger return to elective surgeries in the second half of this year after a year filled with COVID restrictions. I'll first provide an overview of our historical results and provide some guidance for 2021. Q4 revenues were $0.7 million, a 55% increase over the $0.5 million in the same quarter in 2019. Total 2020 product sales were $2.5 million, a 38% increase over the $1.8 million in 2019. This growth, despite the challenges we've encountered with COVID, was encouraging, but is expected to accelerate once elective surgeries return in the second half of 2021 and the backlog begins to be reduced. At the same time, we expect many of the restrictions still in place at hospitals and surgery centers to be lifted. This, combined with the expected acceleration of the rollout of DSUVIA to deploying troops, SKOs, should be a catalyst for much stronger revenue growth beginning in the second half of 2021. Gross profit was negative during the quarter and the year as revenues did not cover the fixed overhead costs within cost of sales. The loss narrowed compared to 2019 and is expected to continue to do so as sales growth accelerates. We're excited that our automated packaging line has finally shipped and will be installed later this year. Once our automated packaging line is approved for commercial production in 2022, the direct unit production cost with our contract manufacturers are expected to significantly reduce. This, combined with the expected revenue growth to cover our fixed costs, will have a favorable impact on overall gross margins. Cash operating expenses, or combined R&D and SG&A, excluding stock compensation and depreciation, in the fourth quarter was $7.5 million, compared to $12.5 million in the same quarter in 2019. The decline is across all functional areas, but primarily driven by our sales and marketing spend as we continue to be mindful of our expenses and closely manage them during the extended Dissuvia launch period and while in COVID. Looking forward to 2021, as mentioned, we're expecting elective surgeries to start returning in the second half of this year as the vaccines continue to get rolled out across the U.S. We believe This also will have a favorable impact on new hospital and surgery centers adopting DSUVIA on formulary. We expect to have 615 hospitals and surgery centers that have approved DSUVIA for use by the end of 2021. Quarterly combined R&D and SG&A expense excluding stock compensation and depreciation in 2021 is expected to range from $8 to $8.5 million. Annual debt service is expected to approximate $10 million as we continue to pay down amounts outstanding under our senior debt facility that matures in June 2023. Capital expenditures in 2021 are expected to range from four to $5 million attributed mainly to the final installation of our new high volume automated packaging line at our contract manufacturer. We expect initial packaging batches to be produced at the end of this year, with commercial batches beginning after regulatory approvals are received in Q3 2022. With a path now cleared to finalize installation of the automated packaging line, we also plan to close on an agreement to out-license Desuvio for Europe later this year. In summary, 2020 was challenging for many people, but we've been able to make solid progress despite these challenges and are set up nicely once many restrictions are lifted in the hospitals and surgery centers. There are many different opportunities for sales creation, and this is unique for companies in our sector. We expect to capitalize on this beginning in the second half of the year as COVID restrictions begin to be lifted, and one, we benefit from the 90% reorder rates we're seeing from our hospital and ASC customers, two, the DOD logistics and administrative issues get cleared, and three, the clinical data from the approved investigator-initiated studies is received. I would now like to open the lineup for any questions you might have.
spk04: Operator? We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Brandon Foulkes with Cantor Fitzgerald. Please go ahead.
spk07: Hi, thanks very much for taking my questions. Maybe just the first one. I think you talked about sort of three headwinds that COVID had created, but any color where there's sort of hostile protocol is a limiting factor for dysthymia in the current environment. And in that, I mean, maybe sort of, you know, getting close to a patient to actually administer it under the tongue versus sort of putting an IV in. Is there any sort of headwind there that may reverse as we come out of COVID? And then secondly, you talked about the new formulary wins in 2021 and the goal, the cumulative goal for the end of the year. Any color in the terms of institutions we should expect coming out of that? Thank you very much.
spk03: Yeah, Brad, I'll take the second part first. You broke up a little bit on the protocol question, but let me answer your first one. I mean, What we've been seeing is about a quarter of the formulary approvals to date have been hospitals, and the rest are surgery centers. We're seeing a lot more hospitals up for approval, for formulary approvals, but those have been the ones that have been really delayed because of COVID. So we're expecting that to come back once things open up. So the hospitals will see that mix shift a bit more to the hospital side of things. But the surgery centers, with the big backlog of elective surgeries, will continue to be a primary place that will see approvals and orders coming in with an increasing share coming in from hospitals. And as you know, the volumes... from those hospitals are usually much, much larger than those surgery centers. Does that answer the second part of your question?
spk07: It does, yeah, and hopefully you can hear me now. So my first part of the question was more just have you heard any feedback that perhaps given that Vesuvia is administered sublingually in the COVID environment, has that maybe been a bit of a challenge to uptake in institutions where you have formulary approvals rather than just, you know, sticking an IV in the arm. Got it. So do you think that's something that may reverse as we come out of COVID and everyone's vaccinated?
spk03: Got it. I've not heard that. Pam, I don't know if you've heard that at all, but I've never heard that.
spk01: No. No, and in fact, it's very common. Multimodal analgesia right now in the perioperative setting involves giving oral medications. It's very common for oral COX-2 inhibitors, oral acetaminophen, oral gabapentin is given. So giving Desuvia as another type of oral medication is no more invasive or close contact for the nurse than injecting an IV. So I've never heard of that as being a differentiating aspect of the dosage form.
spk07: Okay.
spk01: That's fine. Thank you very much. Sure.
spk04: The next question is from Evan Seigerman with Credit Suisse. Please go ahead.
spk08: Hey guys, thanks for taking the question. Congrats on the results. So I know in your guidance, you kind of have this goal for what is it? 615 formulary approvals this year. Can you just remind us where you are with formulary approvals and I guess what the pace is? I know a lot of it's weighted to the back half of the year, but just more color on that. And then as a followup, so there's a lot of discussion about reopening and how that impacts your business. It seems that things, at least in parts of the country, are getting better and folks are actually getting back into medical facilities for surgeries. Can you provide some numbers as to where we are compared to pre-COVID and where you hope to be by the end of the year to achieve some of the results you outlined? Thank you.
spk03: Sure. Yeah. So where we are at the end of February, Evan, was 387 approvals. So that pace to get to the 6-15, I mean, obviously in that second half of the year when elective surgeries are opened up, that's going to be the biggest. But the pace continues in terms of we're starting to see in some areas open up, but it's still largely restricted. So we would expect the second half of the year to be the biggest in terms of that pace. But we're still getting, it's taking a lot of work and effort, but we're still getting a lot of good formulary wins from large hospitals. But the pace will certainly be in that second half of the year. I don't know if that answers your question or not, Evan, that first part.
spk08: Yeah, that's helpful. And then the second part just on kind of this reopening and how you think about it.
spk03: Yeah, the reopening, I mean, it's a couple things that have, as we said, that have really had an impact. It's the formularies, the formulary meetings have really just been delayed. And it's not just accelerics. It's, you know, we talked to others in the same space, cancellations, delays. So it's really that impact and then the elective surgeries coming back in the second half of the year. I think those two issues that we've encountered as they start improving and start opening up and lifting those restrictions, and even just our reps getting into the hospitals is going to make a big difference in the pace of those approvals.
spk08: Excellent. Thank you, guys.
spk04: The next question is from Michael Higgins with Lattenburg-Thalmann. Please go ahead.
spk02: Good afternoon. This is Edward from Michael. I appreciate you guys taking our questions. Just piggybacking on those last couple of questions, are you planning any additional marketing efforts to boost those formularies from 387 to 615 by the year end? And then are there any formulary decisions that are currently pending?
spk03: We have all the time, formulary meetings being scheduled. We've had a lot also delayed, but yes, there's always constantly, we're working on hospitals and surgery centers, but we don't comment on what that backlog is in terms of the numbers, but there's always some in the pipeline for approvals. In terms of marketing efforts, I mean, We mentioned on the call the investigator-initiated studies. The real-world data that's coming from these has been the strongest voice for us, showing how is Dissuvia being used and the benefits that we're seeing. And that has really provided us a boost. I mean, the August and December publications that came out from those two studies gave us a great boost in that third pillar that we talked about in the hospitals and surgery centers. So that's been the primary benefit of that data is really this is what doctors want to see is physicians want to hear from other physicians and how they're using the product. And that's been the biggest benefit for us. So there's no new marketing efforts or promotional efforts or things like that that we're planning. It's really having this data come out. And we're confident in Desuvia and the benefits it provides that the data will be will be just as good as we've seen in the previous two clinical studies. And it's important information for us to see and to get out there. So we're eagerly awaiting that data.
spk02: Thank you for that. And then as things are starting to open up a little bit here, are you noticing any trends in the communities? For example, are outpatient procedures picking up more than inpatients? Are certain types of surgeries picking up a little bit more than other types? And how are you expecting this to change as we move into the back half?
spk03: Well, it hasn't opened up yet. So, I mean, we've seen pretty much the same. We keep hearing about things starting to open up, but it has not opened up yet. The restrictions are still in place. I think soon, as we said, second half, we're expecting elective surgery. That's what we've heard from others as well. It's pretty consistent information. Right now, it hasn't really been opening up. A couple different regions, maybe you hear more in a certain state or others, but we still haven't seen that pick up. In terms of the types of surgeries, we mentioned plastics and orthopedics has been the strongest performers and the strongest increasing specialties. Pam, I don't know if you want to comment on anything in terms of certain specialties that you've heard from our physician customers, but those are the ones we're hearing in terms of the strength and the ones that have been returning because those are a lot of elective surgeries, those orthopedic type surgeries.
spk01: Yeah, absolutely. And I think that the few sites that are starting to open up are starting to work through their incredible backlog. that they have and we're starting to hear surgeries are being now scheduled on Saturdays. And that's why the efficiency, they're really eager to have something that can get these patients out, keep them awake and alert in the PACU and be able to discharge quickly so they can get through these surgeries. So they're looking for anything that will enhance their efficiency. And specifically also, there's a huge move for total joints to be performed in the outpatient sector and get them out of the hospitals and especially with COVID around, no one really wants to be hanging out in hospitals right now. So we've had orthopedic surgeons reach out to us saying, hey, you know, if you've got data that Desuvia can possibly help me discharge more patients same day from total joints, that will be just a really terrific asset for them in their practice. So like Rafi said, not everything is loosened up, but the few places that have, you can see they're eager to learn about this new analgesic and how it can help their practice.
spk03: Yeah. And I'll just add to that. I think one of the other things I failed to mention, but we talked about on the prepared remarks, is the oral and dental surgery. I mean, that specialty, you know, with the efforts that will be behind that from Zimmer Biomed's dental division, you know, as they roll out and they get their licenses in place and really roll it out to their full sales force, I would say that's going to be a very strong pickup, and they put their educational efforts behind that. It's a great partner that we have, and they've got an established relationship with those dental customers. But I think that is also going to be a specialty that we see in the second half of the year is really going to pick up.
spk06: Yeah, this is Dr. Steve Unigan. If I could add, In the dental and oral surgery market, we've seen a huge explosion in demand, even with the fears of COVID. And I can tell you personally, in April, when all our dental and oral surgery offices basically shut down for routine care, I essentially was not working in April and half of May. And yet the demand for our services and for dental implants and oral surgery was so high that in 2020, my case volume was still 30% higher than it was in 2019, even though I took essentially six weeks of the year off. And so far in 2021, we continue to see tremendous demand. When people can't eat, when they're in pain, it doesn't matter. They want to have their oral surgery done. They want to have their implants. And the fears of COVID notwithstanding, they're willing to come into the dental and oral surgery office to get those procedures done.
spk03: Right. So we're eager to get Zimmer Biomed out there to begin really promoting this. I think it's going to be a great opportunity as they get out there.
spk02: That's really interesting. I appreciate all that detail. If I could squeeze in a couple more here. Just in terms of the out-licensing that you're talking about for Desuvio in Europe, what type of structures are you expecting, especially as it compares to Zalviso, for example? And one question about the presentation on the investigator-initiated studies. Do you expect all of them to be started this year? For example, do you have an annual target for these? What qualifications are you looking for before agreeing to some of these studies?
spk03: I'll let Pam take that second one. In terms of out-licensing, I'm not going to comment on potential structures, but I would expect it's a... As you know, the European market, very low-priced market, and we've said that. That's why the automated packaging line, having that installed is so important to get the unit cost down. So we think it's a good opportunity for us, but we can't comment on the structure. Pam, do you want to take the question on the IITs?
spk01: Sure. Yes, of the ones that we've listed, we are expecting them to all start this year. Some have already started. The rest we are expecting to start this year. And what we look at is, you know, the subject matter. Is it some of the areas that we're interested in evaluating? We look at the quality of the investigator. We look at the cost of the overall study. So those are some of the things, and of course there's usually a lengthy contracting process that always has to occur. So everything takes longer than you think, but we're really excited that we've had such interest from these investigators regarding many different ways of utilizing Desuvia. So as Rafi said, the data that's come out of these real world investigator initiated trials, real world studies that aren't investigator initiated, The data that's come out has really been our best marketing tool yet for the use of Desuvia.
spk02: That's great. I appreciate all this detail, and thanks for taking all the time. Sure.
spk04: Sure. The next question is from Ed Arson with HC Wainwright. Please go ahead.
spk05: Hi, Pam and Rafi, and thanks for... giving all this guidance for the next year, and also congrats on the continued real-world data supporting the SUVIA. Three questions for me. First is, on the DoD Milestone C approval, obviously that's been something we've talked about in the past, sort of given the department's own cadence with things. I realize it's sort of difficult to to know when this is expected. But I guess the question is, would you expect any procurements at some point this year? That's one. Two is regarding the target of 615 formulary approvals by the end of this year. I'm wondering what proportion is that of your total targeted between the ASCs and the hospitals. And if you could share with us what proportion to date have you seen of formulary declinations? And then lastly, regarding the Zubio in Europe, I'm wondering as well if you would expect whatever form this ultimately takes in terms of an agreement, whether you would expect an upfront milestone as part of that obviously could be another potential non-dilutive source of capital in addition to the milestone C payment. Thank you.
spk03: Okay. Yep. So on the milestone C, yes, we've said it's going to be hard to predict how much will be coming in under the deploying troops. We certainly do expect something this year, but we're still waiting to hear what that is. And right now we've been working a lot on, as we said, the logistics and administrative issues to clear all that, which Hopefully, we're close on clearing all the logistics there that are needed. As you can imagine, it's a complex process getting products out to deploying troops. But yes, we do expect something under the Milestone Sea deploying troops this year. In terms of the target of 615, right now, Ed, with the limited reps that we have, we have 15 of our own reps that are focused on this and with some others from the co-promote that we have. We are targeting 300 hospitals and 600 ambulatory surgery centers. And you can even narrow that focus down to even kind of 50% of those surgery centers to really get those high-performing surgery centers. So if we get to that 615, we're making a big dent into that call it 900 institutions. But then that's what we focused. We can expand that, but that makes a big dent into that. And it's really right now focused on those higher-performing ones that in the surgery centers and high volume, high procedure orthopedic types of surgery centers. So it makes a big dent getting to that, and then we'll expand from there. In terms of the declining formularies, it's been a handful of formularies that have been declined. The biggest issue has really been delays because of COVID. It's not been the biggest priority of bringing new products on. for a lot of these hospitals that have just been under pressure, they've really been focused on their own operational and other issues. And quite frankly, when it comes back and the ability for Dissuvia to support operations, meaning throughput and getting patients discharged more quickly that we've seen in some of the recent studies, We think that will help as these surgeries come back. But it's been a handful of declines on the formulary.
spk01: And, Rafi, just to clarify on that, as you mentioned, it's either a cancellation of P&T or usually a deferral of an approval. We've received very few out-and-outright declines. And often what they'll say is, this data looks interesting. Can you please come back to us? with a more definitive healthcare patient population that you're interested in using Desuvia. One thing about large hospitals is obviously when they adopt a new product, they want to test it out in a certain group of patients before having it expand to all of the patients undergoing surgery, for example, or all patients in the emergency room. Is that they really want that P&T champion to come back with a more defined patient population where they can really start trialing it in that institution. So overall, I think the absolute declines have been few and far between.
spk03: Yeah, and I think just to add also to that, you know, the 615, and, you know, a lot of the approvals we're getting are institutions that are not even on that list of targeted 900 institutions. I mean, there's a lot that are coming in from the word of mouth, and that's what we expected if you recall during the launch, that the physicians that use this product love the product and the benefits it brings to them and their patients, so a lot of word of mouth that's been on institutions that are outside our initial targets, and obviously that's great as well. So moving on to your last question, Ed, in terms of an upfront, you know, we can't say. It's going to be, you know, we're working through that now. We're just happy we now have got the automated packaging line in that we can open up that possibility here to close on the Desuvio out-licensing agreement. I think any structure, I think that the...
spk05: Ability to have a good partner over there that is focused on same thing hospitals and surgery centers is the key Right, but it's it's difficult right now to say, you know, whether they'll they'll be an upfront or not Okay, and then one final last one if I may that was very helpful thank you for that Assuming no sort of external cash inflows like for example from DoD What is your? current cash run way?
spk03: So we ended the year, what, $43 million and got in another $36 million through February. So it gives us a pro forma pretty good balance. You know, with our sales projections that we hope to have, we've got a very good runway. I mean, you can do the math, Ed, based on the guidance that we gave to see what our burn is going to be. I mean, it's effectively around, if you just take out even all our sales, it's about $10 million or so a quarter. So it gets us a pretty good runway here to get Desuvia launched and get things moving. So even if there were zero sales, it gets us a good runway.
spk05: So the additional 36 was from ATM?
spk03: No. We did around $30 million of capital raise in January.
spk05: Great. Fantastic. Thank you.
spk04: Yep. This concludes our question and answer session. I would like to turn the conference back over to Rafael Asadorian for any closing remarks.
spk03: Rafael Asadorian Thank you, Gary. We thank everybody for joining us as well today. We see a great opportunity coming in the second half of the year. We believe we're very well positioned for that growth. while we continue to control expenses. So we look forward to sharing more developments in the near future. Thank you. The conference is now concluded. Thank you for attending today's presentation.
spk04: You may now disconnect.
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