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spk08: 2021 earnings call. This call is being webcast live on the event page of the investor 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 AccelerEx's website. I would now like to turn the call over to Rafi Azadorian, AccelerEx Chief Financial Officer. Please go ahead.
spk04: Thank you for joining us this afternoon. Earlier today, we announced our second quarter financial results and some business updates in a press release. This press release and the slide presentation accompanying this call are available in the Investors section of our website. With me today is Vince Angotti, our Chief Executive Officer, and Dr. Pam Palmer, our Chief Medical Officer. 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 AccelRx. 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. I'll now hand the call over to Vince.
spk05: Thank you, Rafi, and good afternoon, everyone. We appreciate you taking the time to join the call. We've accomplished a lot during the second quarter, despite the uncertainties that remain about the COVID pandemic. The highlights for today's call include, one, the solid Desuvio sales momentum and where we're seeing success, two, the addition of two new complementary late-stage product candidates to our portfolio, three, the addition of a commercial partner for Desuvio in Europe, and four, the agreement reached with the FDA regarding the promotional materials warning letter. These accomplishments are aligned with our four-pillar strategy, supporting both organic and inorganic revenue growth to drive the value of XLRX. After I review these accomplishments, Rafi will take you through the Q2 financial results, so let's get started. The studio revenues in the quarter were $.4 million, a 117% increase over the first quarter of the year. We're expecting continued growth this year, assuming we do not encounter returning restrictions from COVID. During the second quarter, we saw many of the restrictions on visitors to hospitals, surgery centers, and surgical suites lifted. Now, with the recent resurgence of COVID, we're beginning to see certain areas of the country again institute restrictions. Fortunately, we have some insulation given that plastic surgery is one of our fastest growing specialties and tends to have fewer COVID limitations since these procedures are often completed in surgical suites separate from the hospitals or surgery centers. As you can see on the slide, plastic surgery, followed by orthopedics, is our fastest-growing specialty. We're getting solid momentum with plastic surgeons, given the unique characteristics of the subia and its use during awake surgeries. In fact, several nationally recognized plastic surgery thought leaders are supporting the education of physicians in this specialty. which has resulted in an increasing number of plastic surgeons trialing Dissuvia. We don't have a large commercial team, and the word of mouth about Dissuvia has been encouraging, as Plastics is a concentrated community of physicians. For these physicians, patient comfort and satisfaction coupled with safety are key measures of success. Orthopedic surgery is the next fastest growing specialty. Again, some nationally recognized thought leaders have supported the education process. Published studies of real-world data in August and December of last year have been key contributors to the initial adoption by orthopedic surgeons. We expect the number of ongoing investigator-initiated studies and future publications will further support education regarding the key advantages of Dissuvia in this specialty, as well as more broadly across the perioperative environment. Adoption in the oral surgery specialty has been slower than that of plastics and orthopedics. Overall, surgery centers and procedural suites continue to adopt the SUVIA more quickly than hospitals. We believe this has mainly been driven by the pandemic leading to a slowdown and often cancellation of the P&T committee meetings held at hospitals. Regardless, our pipeline of potential hospital network approvals remains robust, and overall, we're on track to exceed our goal of 615 approvals by year end. Now moving to our first pillar, the Department of Defense remains the largest short-term sales growth driver for AccelerEx. The US Army continues to work through their administrative and logistics process to distribute to Soviet in all their sets, kits, and outfits for deploying troops. The resolution of the process has taken longer than we had hoped. However, just a couple of months ago, the US Army publicly communicated their support of the SUVIA for battlefield pain management. The US Army Medical Materiel Development Activity, known as USAMDA, stated concerns with the standard intramuscular morphine autoinjectors. They also emphasized that another commonly used battlefield analgesic, oral transmucosal fentanyl citrate, is licensed only for use in chronic pain syndromes found in cancer patients and it is specifically labeled not to be used for acute pain management. We believe this recent public commentary on the currently available alternatives to Desuvia is signaling the Army is moving closer to finalization of all logistics and therefore purchases and packing out of the SKOs. Another objective we achieved recently was the successful out-licensing of Desuvia, or Desuveo, as it is named in Europe, to Agaton. We believe Agaton is an ideal partner to commercialize the Zuvio across Europe given its broad commercial coverage of the territory as well as its focus on the acute care setting with its existing product portfolio. They are well known for their strong hospital market access capabilities and have a presence across more than 70 countries. We're working on the operational aspects of the partnership to ensure smooth transition of commercial knowledge as they focus on the regulatory and other aspects until they are prepared for their commercial launch, which we expect will be in the first half of 2022. AccelerX is responsible for manufacturing the product, and Agatant will perform secondary packaging, regulatory, and commercial activities. So we're thrilled to be partnering with an established organization which we believe is a strong fit with AccelerX. Separately, we agreed with Agaton to commercialize in the U.S. two of their ready-to-use patented pre-filled syringe product candidates, one with ephedrine and another with phenylephrine, subject to FDA approval. Ephedrine and phenylephrine are common medications for use in the perioperative setting in both ASCs and hospitals, as well as intensive care units in the emergency room, resulting in a strong commercial overlap with our current sales team. Now I'll hand the call over to Pam to briefly explain these two additions to the portfolio. Pam?
spk01: Thanks, Vince. I'm excited we added both these product candidates to our portfolio. Treating clinically significant hypotension or low blood pressure is an emergent issue. Both ephedrine and phenylephrine are used to treat hypotension in different settings. Ephedrine is used when both heart rate and blood pressure need to be increased, such as after anesthetic inductions. Phenolephrine is used when the peripheral vascular resistance has dropped, often due to spinal anesthesia, and only the blood pressure is needed to be increased by vasoconstricting the peripheral vasculature. It is important to realize that during clinically significant hypotension, clinicians cannot take the time to pull out a vial of concentrated drug, drop the medication in a syringe, dilute to the standard concentration, and then label the syringe before dosing. Yet all of that, in fact, needs to be done with the concentrated vials, which were the only form of these drugs available for so many decades. So anesthesiologists, such as myself, would always prepare the syringes ahead of time, just in case they were needed. As they had no shelf life beyond the day they were drawn up, we would throw them away whether we used them or not. Due to this excessive cost over time, it became popular for hospital pharmacists to pay a premium price to obtain these pre-filled and labeled syringes from a compounding pharmacy. Another reason for paying a premium for compounded pre-filled syringes is that dosing errors can often occur with the previous syringe preparation methods I just described. And joint commission inspections would show time and again that in the rush to draw up these syringes, dosing errors were made and syringes were not properly labeled, leading to drug mix-ups. the compounding pharmacy syringes still have a limited shelf life. And since pharmacists must always have these life-saving medications on hand, they tend to over-order and then destroy the unused syringes after expiration. So the dosing errors are reduced, but the cost of wasted drug is still a significant issue. Sterility issues at compounding pharmacies are also a concern and have been widely publicized. Only very recently, in April of 2020, did the first pre-diluted vial of ephedrine get FDA approval. Note, this is a pre-diluted vial, not a pre-filled syringe. So this saves only one step in the process, possibly avoiding having to draw up the syringes ahead of time in certain cases when the use of the drug might be a low probability. But in many cases, such as operations on elderly patients or patients with known cardiac risk factors or stroke risk, any time spent preparing a syringe to treat life-threatening hypotension is undesirable. In general, FDA-approved prefilled medication syringes are ready to use and also benefit from extended shelf lives compared to compounding pharmacy syringes. Therefore, you would expect less waste of drugs and the pre-labeled, pre-filled, ready-to-use nature of these syringes should also mitigate against dosing errors and drug mix-ups. The two product candidates from Aguton are approved in Europe, but have not been approved in the U.S. If approved by the FDA, these products would be an exciting step forward in anesthesia care, as there currently are no FDA-approved, pre-filled, ready-to-use syringes for either ephedrine or phenylephrine. In evaluating the FDA approval of Imerfed, which is the first prediluted vial of ephedrine that was approved in 2020, and the subsequent approval of another prediluted vial of ephedrine, Reziprez, which occurred earlier this year, there is a precedent for a straightforward filing of a 505 NDA with no additional clinical trials being required. We expect to submit NDAs for our pre-filled syringes within the next 12 months, and we believe an approval will follow within 10 months of these submissions. I'll now hand the call back over to Vince.
spk05: Thank you, Pam. These products are indeed a great addition to the portfolio from both a clinical and commercial perspective. And importantly, we don't believe there's a significant cost to getting these products, these product candidates to an FDA approval. And again, we're excited to partner with Agaton on both the out-licensing of Desuveo and commercializing the pre-filled syringes in the United States. On the operations front, our fully automated manufacturing line has been installed at our contract manufacturer, and we're currently completing final site acceptance testing. We remain on our previously communicated timeline and expect to have initial commercial batches being produced in the third quarter of 2022. We also expect the regulatory batches that will be produced before this time will be able to be sold. We're excited to finally get this phase of operations moving, as we believe this will significantly reduce our cost of sales as we prepare for increased orders from the Department of Defense as well as our commercial customers. As previously communicated, the FDA has agreed with AccelerEx's proposed plan to update certain promotional materials, including providing a letter to healthcare professionals, the DHCP letter, explaining the corrections to the discontinued promotional materials. AccelerEx has included this DHCP letter on the dsuvia.com website, which will be available for a period of eight months. All promotional materials currently in use by AccelerEx's commercial team have been updated to address the FDA's concerns. AccelerEx expects to receive a closeout letter from the FDA after the DHCP letters have been sent to the identified healthcare professionals and the letter has been posted on the website for a duration of eight months. Finally, before handing the call over to Rafi, I'd like to address the securities lawsuits that have been filed. To be clear, we believe that these lawsuits are without merit and intend to vigorously defend them against them. We believe they will be dismissed in due course. I'll now hand the call over to Rafi to take you through the second quarter financial results.
spk04: Thank you, Vince. Our financial position remains strong with $55.3 million in cash at June 30 and $17.2 million in senior debt. In addition, we expect the upfront payment from Agaton to be received shortly here in the third quarter. We're thrilled to have finalized a partnership with Agaton that will support further D'Souvia growth outside the U.S. and also adds value to our U.S. commercial efforts with two unique pre-filled syringe product candidates for the U.S. market. Gross profit remained negative as the revenues have not exceeded the fixed overhead cost. However, this gap was reduced in the quarter as the higher product sales led to an improvement in the gross margin compared to Q2 2020. We're excited that the automated packaging line has been installed and look forward to the efficiencies expected to be realized as volumes ramp. Operating expenses, or combined SG&A and R&D expenses, were $9.4 million in the second quarter of 2021, compared to $8.4 million in 2020. Excluding stock-based compensation, second quarter 2021 cash operating expenses were $8.3 million. The increase in operating expenses in Q2 2021 was attributed to the benefit in Q2 2020 from the transaction break fee received from Tetra Phase. We expect quarterly cash operating expenses to remain around the same level as they were in the second quarter of 2021 for the rest of the year. We continue to remain prudent with our cash and control our spending as the Desuvia launch progresses into new specialty areas and further penetrates hospitals and ASEs. I'll turn the call now back to Vince.
spk05: Thank you, Rafi. Again, we're pleased with the very strong progress over the past several quarters, including publications of real-world data supporting the significant clinical advantages of Desuvia in the perioperative setting, the solid growth in Desuvia sales, and the recent addition of two late-stage assets through business development and the commercial expansion of the Suvia into Europe. All of this done while prudently managing our cash. And I'd like to open the lineup for any questions you may have. Operator?
spk08: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then 2. Your first question comes from Brendan, folks, from Cantor Fitzgerald.
spk07: Please go ahead. Pardon me, Brendan. Your line is now live. Please go ahead.
spk08: Hi.
spk06: Thanks for taking my question. Can you hear me now?
spk05: Yes.
spk06: Okay. Fantastic. Thank you. I guess, you know, very positive feedback. on a number of fronts. I'm just going to focus on two of them. Firstly, on the Army, any color on when we may see significant orders coming through there? And then secondly, you've done very, very well on the formulary approvals. You remain on track for that 615. As you look out to sort of 2022 and beyond, is the strategy continued formulary adoption, I guess, or going deeper into these accounts? I'd imagine it's a combination of both, but just any color in terms of where you see the value drivers, just given the success you've had on the folder approvals in 2021.
spk05: Thank you. Sure, Brandon. So there's two segments to that question, and thank you for them. The first on the DoD, we can't give you insight, but we were heavily encouraged by that public commentary they made on the USOMDA website regarding battlefield pain management. And the fact that that's the first time we've actually seen them put Desuvia at a significant, what I'll call, premium in their mind to what they have currently been using over the last number of decades. And so for them to put that out public with confirmation of other material in there being their Milestone Sea meeting last year, the fact it's on the Joint Deployment Formulary, the fact that the wholesaler has been affirmed, we thought was very, very positive momentum for us. So we're excited to help them achieve the fulfillment of these SKOs in the coming future quarters. I cannot give you the exact timeframe of that. But again, I want to reiterate that we were excited to see that public commentary relative to Suvia versus the other products in their battlefield acute pain management basket. On the second question, with the formulary approvals and deeper into accounts, or just to continue to expand maybe initial use with formally approvals. It'll be both, but we'll end up in future putting a priority on deeper utilization with the account so that it's more protocolized within their different procedures and outpatient operations moving forward. I can tell you in the second quarter, we had our highest quarterly number of new REM certifications since the fourth quarter of 2019. when we had almost three times as many reps. In the second quarter of this year, we also achieved historical highs in unique orders, repeat ordering customers, and new ordering customers. So there was a nice balance of getting some depth of use as well as having new accounts come on to play. And about 78% of our doses shipped to the end user in the second quarter, 78% of them were repeat doses, 22% being first-time orders. So we're excited about the blend and we're seeing a lot of momentum in plastics right now. And they're really utilizing it for the awake surgeries because they want to move away from the IV opioids or other opioids they've traditionally been using. Pam, maybe you can comment on that quickly.
spk01: Sure. I mean, you know, it's popular to have plastic surgery. It didn't diminish much during the pandemic. In fact, what we kind of joke, everyone's staring at themselves on Zoom videos, realizing maybe they could look a little bit better. So that's the exciting thing. It's a market that's not diminishing during COVID. They love the product because it avoids all the problems with the IV peaks and troughs, gives them a nice, smooth period of analgesia, and again, very wake and alert for them to be able to quickly be discharged home.
spk05: I think another comment that I'll make to you relative to your question about this mix of formularies versus depth of use is while the hospital approval process has certainly slowed down as we discussed in the script, the body of the script, hospitals are one of the main sources on a per account basis of utilization of Dysfuvia. For instance, while the minority of accounts They represent close to 50% of all doses utilized with the end user. So they will certainly remain a key priority for us moving forward, and the depth of use as they start to use it across different disciplines within the hospital, being same-day surgery, being emergency room, and being other disciplines within that institution. I hope that helped answer the question, Brandon.
spk06: Yes, very helpful. I appreciate all the color. Thank you very much.
spk05: Thank you.
spk08: Thank you. Your next question is from Ed Arc from HG BrainWide & Co. Please go ahead.
spk02: Hi, everyone. Thanks for taking my questions. A few for me. First starting with your new partner, Agatant. Congratulations, by the way. Just wanted to ask about the milestone to be received in the third quarter. I don't think you you break that out along with the sales-based milestones. So wondering if you can give us the upfront number that you expect this quarter. And then secondly, turning to the two new late-stage assets, you cite a size of commercial opportunity of over $100 million. Wondering if you could help us understand how you arrive at that figure between the two assets. And just overall, what do you think are the key value proposition points as you prepare to file your MDA? And then lastly, regarding the automated packaging line, if you could remind us again, quantitatively how you think this could impact the COGS line going forward. Thanks so much.
spk05: Yeah, okay. So let me start with question one, which was the new partner, Agatant, and the structure of the deal, Rafi.
spk04: Yeah, Agatant is a private company. We've not yet disclosed that. That will be disclosed in our revenues in the third quarter. But we can tell you it's mid to low single digit millions of dollars that would be received as an upfront.
spk05: Offset by the addition of two new products in our portfolio as well. So it's been a nice upfront package between both the cash and the two new products. So for the two new late stage assets, you asked how do you quantify $100 million opportunity?
spk04: Yeah, I mean, we haven't broken that out either, but I would say it leans slightly more towards the ephedrine in terms of the size and the opportunity. What's difficult is not available, actually, is the compound pharmacy is the largest provider of the pre-filled syringes today, and there's not a lot of information there. So if you look at some of the comparable products out in the markets, MRFED being one that was launched last year, and that is ephedrine. So it's a ready-to-use vial of ephedrine, and the first ready-to-use vial of ephedrine that was made available and was approved in April 2020. That's running at a gross sales run rate based on the Symphony data that we have available of about $30 million already within one year. So if you think about that and these two products being pre-filled syringe candidates, that opportunity to take even more share of the overall ephedrine market, we believe it's very exciting for us. We've spoken to many pharmacists who believe it's also very exciting to have these pre-filled syringe products on the market.
spk05: And you asked, and I think beyond that, the key value proposition points. Pam, maybe you can reiterate some of the information that we've communicated.
spk01: Sure. I mean, so this is, as I mentioned, it's decreased waste. And I mentioned why we have to usually waste ephedrine and phenylephrine now. Decreased errors, that's huge. Products are constantly getting mislabeled when you have to draw them up quickly. Decreased time to save anesthesiologists and intensivists and ER docs time. And it's important also, while ephedrine and phenylephrine are used commonly in the perioperative setting, they're also used a lot in intensive care and emergency room as well. So it is quite diverse across the medically supervised settings there. And also what's really neat about these syringes is they're plastic, not glass. And so that's a huge advantage as well.
spk05: So relative to your questions, Ed and Agaton, you know, very excited about them as a partner. When you take a combination of both the upfront, as Rafi mentioned, in our and our deal with them on the two new late-stage assets. We're very excited. It's transformational for the company moving forward, really expanding the portfolio and moving to Zuveo into Europe. The opportunity is pretty significant, and we're going to really prioritize speed to market on these as best as we can. We mentioned in the script, the pre-prepared remarks, that in total it'll be, we believe, 22 months or under to be able to get these products to market. So very, very neat diversification for our company in the same call points where we're calling today. I think your final question, Ed, was on the automated packaging line and the potential effect that'll have on COGS.
spk04: Yeah, Ed, there's two parts to it. One is obviously the efficiencies we gain from the automated line and then the increasing volumes that we're seeing. And So both have an effect because it's going to be the fixed cost base being covered by those additional volumes that we've had. And based on some of the numbers we've run for this automated packaging line, we expect it to be a close to 60% reduction in the unit cost of Desuvia once this is up and running and we're running commercial batches. So it's going to be important, especially as The DOD begins their ordering for the U.S. Army SKOs, which, you know, the signal is, as Vincent mentioned, the signal is things are starting to move there. So that's what we're excited to start seeing.
spk02: Great. That's all very helpful.
spk04: Yeah, it'll also be important. Yeah, it's too rough, right? That's right. That's right. And this volume's because we expect Agaton to be launching here in the first half of 2022. Did that help, Ed?
spk02: Yeah, that's great. Very helpful. Congrats on the deal.
spk05: Yeah, really have to give Rafi credit on that one to package the two deals together for both the monetary aspects of the Desuvio deal and the asset aspects of the pre-filled syringes was very well done.
spk07: Thank you. Your next question comes from Michael Higgins from Leidenberg-Tolman.
spk08: Please go ahead.
spk03: Thanks, operator. Hey, guys. Thanks for taking some questions here. Just to follow up a bit on the pricing, if I could, on the concentrated drug. Maybe, Pam, you can help with this a bit to try and understand the differences in the pricing of the concentrated drug versus the prediluted vials and then versus the potential pricing that is for the prefilled syringe. We're certainly ahead of NES per type data yet, which you're really, really good at. But just trying to get a sense on the pricing of these different products. Thanks. We'll have Rafi comment on that.
spk04: Yeah. Hi, Michael. There's certainly an opportunity for the pre-filled syringes. We're not going to comment, obviously, on the pre-filled syringe pricing. We can give more details on that once we file the NDA. but the pre-filled vials compared to the concentrated version, the generic concentrated vials, there's a significant premium. I don't have the exact data. We've got the gross sales, the WAC amounts, but there's a significant premium over those generic vials that you're able to charge, particularly when you look at the... the milligrams per ml pricing of that. So it's a significant premium they're able to charge because there's a significant value that's provided to the hospital on that.
spk05: Yeah, so you'd expect, obviously, versus the generics, we'd come out of the premium, but we won't give you that band of pricing until we get much closer to launch.
spk04: Well, over, sorry, no, over even the branded versions of the ready-to-use. I was, just to be clear, I was referring to the vials, the ready-to-use vials. compared to the generic versions of the concentrated vials.
spk03: Yeah. Makes sense. Appreciate that. And then, am I catching a potential priority review? Is that what you're looking at with these things?
spk04: No, we are not. We're not looking at a priority review.
spk01: No, it'd be the standard 10-month 505B2 review time.
spk05: And again, Pam, we don't expect any clinical trials involved based off historicals.
spk01: Yes, correct.
spk05: Very good. Appreciate it. Thanks, guys. Thanks, Michael.
spk08: Thank you. This does conclude our question and answer session. I would now like to turn the conference back over to Vince Sangotti for any closing remarks.
spk05: Well, thank you for those of you who joined us today and for your continued support of AccelerEx. Again, we believe we're very well positioned for future growth while continuing to control our expense lines. We look forward to sharing more developments in the future, and we do believe that business development is an important part of our future as well. So thank you again, and we look forward to the continued updates.
spk08: Thank you. This does conclude our conference for today. Thank you for participating. You may now disconnect.
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