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spk02: Good morning and welcome to the Better Therapeutics fourth quarter 2022 financial results and business update conference call. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Mark Hindman, Chief Financial Officer. Please begin.
spk06: Thank you, Operator. Good morning, everyone, and welcome to the Better Therapeutics conference call. Our press release was issued this morning and can be found in the investor section of our corporate website, bettertx.com. Joining me on the call today is Frank Carva, our president and chief executive officer, Dr. Mark Berman, our chief medical officer, and Diane Gomez-Dennis, our chief commercial officer. During today's call, we'll provide a business update, a financial overview of the fourth quarter and fiscal year 2022, and provide our outlook for 2023. A Q&A session will follow our prepared remarks. Before we begin, I'd like to remind everyone that any statements we make or information presented on this call that are not historical facts are forward-looking statements that are based on our current beliefs, plans, and expectations and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual events and results may differ materially from those expressed or implied by any forward-looking statement. With that, I'll pass the call over to Frank Harbaugh. Frank?
spk03: Thank you, Mark. Good morning, everyone, and thanks for joining us on the call today. The fourth quarter and full year 2022 were marked by significant progress for better therapeutics, and that momentum continues into 2023 as we advance our preparations for the anticipated commercial launch of BT-001 in type 2 diabetes, if authorized by the FDA. Now, before I recap our accomplishments in 2022, I will address the recent actions we took to ensure the long-term success of the company. On March 23rd, we announced a reduction in force, impacting approximately 35% of our colleagues. I also shared that we are implementing other cost savings measures to extend our financial runway so we can reach our critical milestones. I want to underscore our long-term outlook for the potential of our digital therapeutics platform, and that is not just in type 2 diabetes, but potentially many other cardiometabolic diseases, remains unchanged. We continue to believe that we will demonstrate the significant medical and commercial potential of our therapeutic approach. And furthermore, our guidance for potential FDA authorization remains unchanged, and we continue to prepare for commercial launch. were structured in a way to preserve all key capabilities across the company to meet our critical milestones. However, where we did lose bandwidth, the speed at which we expand into new indications may be impacted. Now, I'll recap our accomplishments in 2022 and in the first quarter of this year. Last summer, we completed the largest randomized controlled pivotal trial to date for treatment of type 2 diabetes, by a prescription digital therapeutic. The trial met both its primary and secondary endpoints, showing statistically and clinically significant durable decreases in A1C, as well as positive results across a range of exploratory endpoints. We subsequently submitted a de novo classification request to the FDA, seeking marketing authorization for BT001. to potentially become the first prescription digital therapeutic for the treatment of type 2 diabetes in adults. And if authorized by the FDA, this would give physicians a clinically validated prescription solution delivering cognitive behavioral therapy from a mobile device with a promise to help patients make and sustain the behavior changes that the type 2 diabetes treatment guidelines are already calling for as the foundation of therapy. CBT in its traditional in-person setting has been well researched and shown to be effective in type 2 diabetes and related cardiometabolic conditions, but it lacks scalability, which our investigational digital therapeutics is designed to overcome. It is worth noting that the underlying behaviors causing type 2 diabetes are largely the same for many other cardiometabolic conditions, supporting our belief that our investigational digital therapeutics platform has the potential to be rapidly scaled across many other cardiometabolic conditions. Our groundbreaking approach and BT-001 pivotal trial results were published in one of the largest peer-reviewed diabetes journals, Diabetes Care, in the fourth quarter and presented at several medical conferences, including at the American Heart Association last year and most recently at the American College of Cardiology earlier this month. In December 2022, we also completed and reported positive results from a pilot study, evaluating the feasibility of using our investigational prescription digital therapy platform for the treatment of NASH and NAFLD. The VITA liver study met its primary endpoint and showed statistically significant and consistent improvements in magnetic resonance imaging proton density fat fraction, or MRI PDFF, and a broad range of liver biomarkers. These results support our belief in the potential for our PDT to become standard of care, either alone or in combination with future pharmacotherapy treatments, as currently there's no FDA-approved treatment for these conditions, which affect approximately one in four Americans and cost approximately $100 billion in direct medical costs annually. Now, as we look to the first quarter of 2023, the review of our de novo submission has steadily progressed since the FDA accepted our submission in October of last year. We've had multiple rounds of interactions with the agency, including a request for additional information, which we received in February, and is a typical part of the de novo review process. Also in February, we had a meeting with the FDA to clarify several of the items noted in the request. The work to address the FDA's questions is well underway And our previously provided guidance that we anticipate the FDA's decision by the middle of 2023 remains unchanged. And we've made substantial progress in preparing for the potential commercialization of BT-001. Specifically, in the last quarter, we completed our health economic models, conducted several studies to inform our value proposition to payers, and advanced contract negotiations for hub and distribution services. In addition to these key accomplishments, there are many other areas where we have advanced our business. And we believe our platform technology, intellectual property portfolio, and groundbreaking clinical research puts us in a leadership position in this rapidly evolving prescription digital therapeutics category. The digital therapeutics market as a whole is seeing tremendous growth. And with recent research by Global Market Insights projecting revenues to hit 100 billion by 2032, we believe Now is the time to be innovating in this space. This and recent use of the bipartisan Access to Prescription Digital Therapeutics Act of 2023 being reintroduced in Congress underscores a recognition of the promise of PDTs and is an important next step towards gaining coverage of PDTs by Medicare and Medicaid, helping millions of Americans receive innovative care to treat a growing range of conditions and illnesses. I will now hand the call over to Diane to provide a more in-depth update on progress in preparing for potential commercial launch. Diane?
spk01: Thanks, Frank. I'd like to take the next few minutes to outline what we've accomplished since our last update with regards to our commercialization plan. First, as it relates to market access, I'm pleased to report that we have developed our health economic model, including both a comparative effectiveness analysis, or CEA, and the budget impact model using data from our pivotal randomized control trial. The CEA evaluates the long term or lifetime economic impact of an intervention with an incremental cost effectiveness ratio, which describes the cost for quality adjusted life year gains. And results from our initial CEA model for the intent to treat population were positive. Through its observed impact on A1C reduction and other health outcome variables, BT.001 was associated with greater life years, greater quality adjusted life years, and lower costs over the model time horizon. So said differently, the analysis suggests that BT-001 achieves additional health gains at a lower cost. And this means that it is defined as a dominant intervention. Its incremental cost-effectiveness ratio is below the willingness-to-pay threshold, and as such is considered to represent a good use of healthcare resources. Comparative effectiveness analyses offer one input for payer decision-making and are often used by national healthcare systems to evaluate the relative importance of treatments and their benefit to society. And we're excited about these initial results since we believe they add an important component to our value proposition to payers. Using inputs from the CEA, we've also developed a budget impact model, which evaluates the budgetary impact of a new treatment in a shorter timeframe, usually about one to five years. Shorter-term costs, such as the direct cost of the new treatment, adjunct pharmacotherapy costs, hospital and ER visits, and costs associated with complications weigh more heavily in a budget impact model. and the initial results in the intent to treat population demonstrates the potential to see cost savings within the first two years. Next, we plan to submit our health economic model data for publication while also initiating our pricing research. This all will ultimately feed our National Association of Managed Care Physicians dossier. Now, let me share some payer research data since our last update. In December, we conducted a blinded study to test the value story for BT001 with payers. Participants were current voting members, chairs, or co-chairs of committees for coverage decision-making, both for pharmacy and medical. The elements of the value proposition tested included the disease burden of type 2 diabetes, a review of the current treatment landscape the unmet needs, along with BT001's product and clinical information. The value story tested very well with payers, and the feedback is in line with prior research. The final element of our payer value story undergoing testing with payers is related to our health economic model, along with results in our intent to treat populations. And the findings from this research will allow us to further refine our overall value proposition. And we believe we are in an excellent position now to commence meaningful pre-authorization information exchange meetings with payers beginning in April and over the next few months ahead of launch. Beyond this payer messaging study, we conducted another research study in February with payer decision makers to understand the role value-based agreements might play in coverage discussions. We tested several variables upon which agreements could be structured, including patient engagement metrics, clinical outcomes, and financial targets. As in prior studies, overall, payers reacted positively to BT-001's target product profile and the pivotal trial results. Study conclusions suggest that value-based agreements will indeed be important to payer negotiations and yield important insights to guide our pricing and contracting strategy. So while our focus on market access is a priority, it does take more to drive strong patient and provider adoption. Our recently completed provider and patient journey work confirms the fit of BT-001 into clinician workflows since it is intended to be treated as a prescription product whose benefits will be recognized as follow-up patient visits, as would be the case with drugs. What is unique is one, the digital fulfillment and delivery of this novel investigational therapy, which we aim to keep simple for both providers and patients. And two, the ability to expedite time to treatment and track adherence to therapy by the inherent nature of this investigational digital prescription therapy. And to continue our efforts in raising awareness and educating the market, we have made progress expanding our publication and podium strategy to communicate the body of evidence supporting BP001 and its underlying science and mechanism of action. As Frank noted, on March 4th of this year, Dr. Mark Bonacca, principal investigator for our pivotal clinical trial, delivered a poster presentation at the American College of Cardiology's annual meeting, which garnered tremendous press with more than 80 outlets picking up the study headlines. And with regards to our publication plan, we expect to submit the 180-day data from our BT001 clinical trial for publication as a follow-up to our published 90-day primary endpoint results last year. Finally, I would like to provide an update on our go-to-market strategy. Last quarter, we laid out a targeted plan informed by a patient claims analysis that mapped the highest concentration of uncontrolled type 2 diabetes patients to providers in 50 integrated delivery networks or health systems, which overlap with approximately 25 regionally dominant payers. Further segmentation of this targeted patient set reveals that about 25% of these patients can be reached by about 5% of providers in this mapped cohort, which we believe makes this a reasonable target group to support a strong initial launch with a modestly sized sales force deployed in key geographies. And a deeper analysis indicates that about one-third of this provider group is made up of endocrinologists further focusing our efforts. This map provides a view of the initial areas for us to prioritize based on the data. We have recently acquired profiles of our targeted list of health systems to characterize their readiness to evaluate and consider BT001 system-wide, while also identifying key champions in these health systems and focus geographies. Overall, we continue to make progress on pre-launch preparations, and I look forward to sharing additional updates next quarter. Mark Hyman, our Chief Financial Officer, will now review our year-end financial results. Mark?
spk06: Thank you, Diane. I'll begin by discussing our year-end operating expenses. R&D expenses for the fourth quarter were $3 million. This compares to $6.4 million for the same period in 2021. The decrease was primarily related to a $1.8 million decline in clinical trial costs as the company completed its pivotal trial for BT-001 in the third quarter of 2022, and a $1.6 million decrease in incentive compensation expense compared to 2021. Prior year incentive compensation expense was dependent on completion of the SPAC business combination, and as a result, the full year incentive compensation was recorded in the fourth quarter of 2021. For the fiscal year 2022, R&D expense was $16.4 million compared to $19.4 million in 2021. The decrease was primarily related to lower pivotal trial costs. This was offset somewhat by an increase in personnel costs related to expanding our software development capabilities and an increase in capitalized software amortization. Sales and marketing expenses for the fourth quarter were $1.7 million compared to $1.2 million for the same period in 2021. For the fiscal year 2022, Sales and marketing expenses were $7 million compared to $2.3 million in 2021. The increase in sales and marketing expenses primarily reflects an increase of $3 million related to the advancement of our real-world evidence program, which was launched in late 2021, and higher personnel costs to support the potential commercial launch of BT-001. G&A expenses were $3.6 million for the fourth quarter of 2022 and $4.6 million for the same period in 2021. The decrease was primarily related to lower incentive compensation costs compared to last year, driven by the completion of the SPAC business combination as described earlier. For the fiscal year 2022, G&A expenses were $14.8 million compared to $8.8 million in 2021. The increase is primarily related to the additional cost of being a publicly traded company, with $3.4 million of this increase related to our D&O insurance. The remainder is related to an increase in headcount, legal, and other professional fees. We incurred a net loss of $8.8 million for the fourth quarter of 2022, compared to $13.9 million for the same period in 2021. On a per share basis, net loss is $0.37 for the fourth quarter, compared to $0.71 for the same period last year. For the fiscal year 2022, we incurred a net loss of $39.8 million, compared to $40.3 million in the prior year. On a per share basis, net loss was $1.69 for the year compared to $3.11 for the same period in the prior year. Now, turning to our balance sheet, we ended the fourth quarter with 15.7 million in cash and cash equivalents compared to 22.3 million in the third quarter. As a result of the workforce reduction and other cost savings initiatives, we expect cash burden for 2023 to be lower than previously forecasted by approximately 10 million. With that, I'll turn the call back over to Frank for some closing comments. Frank?
spk03: Thank you, Mark. Before I wrap up, I would like to provide an update on our financing strategy and then share a preview of our critical milestones for the year ahead. So first, we are pursuing a three-tiered financing strategy, which consists of capital markets-based financings, business development, and structured non-share diluted financings, such as royalty monetization transactions, for example. With this financing approach, we aim to achieve multiple objectives. First, extend our financial runway through potential FDA authorization, several quarters of commercial launch, and potentially initiate a pivotal trial in another indication, such as fatty liver, hypertension, or hyperlipidemia. Second, add new high-quality shareholders. Third, alleviate some of the technical trading parameters that are weighing on our stock, and fourth, seek one or several partners to help us potentially launch our product in the U.S., expand our geographic presence, and or accelerate the expansion of our pipeline. We're pursuing all elements of this financing strategy simultaneously, and we're making good progress on all fronts. Secondly, we anticipate the following milestones for 2023. One, FDA authorization and subsequent successful launch of BT-001 in type 2 diabetes in the middle of the year. Two, apply for breakthrough device designation from the FDA for our investigational CBT-based treatment platform for NASH NAFLD, also by the middle of the year or early in the third quarter, depending on bandwidth issues I mentioned earlier. Three, strengthening our financial position by executing on multiple elements of our three-pronged financing strategy. Four, pending our financial situation and resourcing bandwidth, potentially launching another pivotal study to expand our pipeline of commercial products. And five, share the first data set from our BT.001 Real World Evidence Program in the fourth quarter of this year. Reflecting on the progress we've made throughout 2022, I hope what stands out is how the sophisticated and methodical approach we're taking reflects the quality of talent we have at the company. I truly believe this differentiates us, and I want to thank the entire Better Therapeutics team for their commitment to challenging the status quo and their passion for driving change in how cardiometabolic diseases are treated. I also want to sincerely thank our colleagues who were impacted by the layoffs for their many contributions. I'm grateful for their dedication and passion. And I'm excited to continue on the path we've set for a breakthrough year ahead. The prescription digital therapy space needs a success story, and we are working all out to be the company that demonstrates at a large scale the promise and commercial viability of PDTs. And with that, we're now ready to take your questions. Thank you.
spk02: Thank you. If you'd like to ask a question, please press star 1-1. If your question hasn't answered and you'd like to remove yourself in the queue, please press star 1-1 again. Our first question comes from Thomas Flatton with Lake Street. Your line is open.
spk07: Yeah, good morning, guys. Thanks for taking the questions. Just back to the cash runway situation, Mark, you mentioned you expected there would be 10 million less than you previously forecast, but relative to the operating cash use in 2022, can you just give us some directional guidance on how you expect that to look relative to 2022?
spk03: Hey, good morning, Thomas. Thanks for participating. Thanks for the question. I'll hand it over to Mark in just a second. But, you know, overall, of course, with the actions we have taken, you should expect operating cash burn to be lower than what you saw in the prior year. And the actions we've taken, I think, impacted a number of different elements of our cost structure. Part, of course, related to hiring. Some of it relate to temporarily slowing down the enrollment in our RWE study, and, of course, implementing the reduction in force. So a combination of all of these, you know, has resulted in the reduction in operating expenses that Mark was mentioning in his prepared remark, and they will result in overall lower burn rate.
spk06: Got it. Yeah, and... Let me just add on there. As Frank mentioned earlier, we're pursuing that three-pronged financing strategy, and with that, we do anticipate it should provide us sufficient capital to get through several of those milestones he mentioned as well throughout the rest of 2023. Got it.
spk07: And then, Frank, I was wondering if you could provide some color on the requests made by FDA in your interactions, anything you could share with us there in terms of
spk03: nature of what you needed to uh to do to respond to those any new work or is it just you know simply submitting paperwork i'm just trying to get some color online yeah and then maybe just uh take a step back as i answer this and remind everyone so receiving such a request from the fda is a typical part of the de novo process and one that we had absolutely expected you recall we had mentioned on prior calls that the fda has the self-declared mandate to review de novo submissions within 150 days but when the ball is in our court meaning when they put questions to us that we have to answer then that clock stops and so when we provided our initial guidance back in late September when we submitted our our de novo that it would take about nine months for the review to be completed we took into account that there would be these types of uh, delays, if you will, to, to answer questions. So it's just, you know, to make clear to everyone, this, this is a typical part of the process. And look, we, we don't want to get into the details of, of, uh, our interactions with the FDA, but I will say this. Um, we believe the questions that we received are readily addressable. The work to address them is well underway. And, uh, We are reiterating our guidance today on when we expect a decision from the FDA. Great.
spk07: Appreciate you taking the questions. Thank you.
spk02: Thank you. Our next question comes from Charles Rye with Cohen. Your line is open.
spk04: Yeah. Hey, guys. Thanks for taking the questions. You know, Frank, you know, you obviously outlined some strategies for financing. You know, maybe is there – You know, you know, maybe can you give us a sense for how some of your discussions are going with potential partners? And, you know, maybe just a little bit more on, you know, which of the kind of strategies that you're pursuing currently, you know, seem, you know, closer maybe than others, maybe a little bit more around anything that you could add that'd be helpful.
spk03: Sure. So again, there's three different elements to this financing strategy, capital markets-based financing, business development, and structured financing. And as I mentioned, we are and we have been pursuing all three of those elements in parallel for quite some time. And as I further said, we have made good progress on all fronts. So we're actually confident that one or several of these elements of the financing strategy will bear fruit. It's obviously a difficult environment at the moment, which I think particularly calls for great diligence in evaluating all the options available to us, and that's exactly what we're doing. So we're very carefully and diligently evaluating all options available to us. And, you know, if I... I can't tell you exactly in what order we will execute all of these things, but I think one thing that might come first is perhaps a capital market-based financing and that might then be supplemented by other elements of the strategy.
spk04: Thanks. I appreciate that. I guess because maybe I was just a little bit more focused on royalty monetization given sort of the The data that you've been presenting here, you know, I can imagine this would translate well, you know, into other countries where you probably don't have the resources yet to really launch on your own. Just curious, like, you know, if you were to do something, I mean, A, you know, are you finding interest in that, you know, maybe into Europe, for example? You know, would it be difficult to translate the program into other languages? Has any of that already been done? i'd imagine maybe i mean is it currently you know is it available let's say spanish for example um anything like that uh maybe on that side any kind of color you can provide there yeah so you touched on two things you touched briefly at the beginning on the royalty monetization transaction so there i will just say the the um
spk03: the optimism that we have that this is a viable option to us really goes back to the projected peak revenues in our lead indication type two diabetes. And, you know, here we expect peak revenue to be in the 1.5 to two plus billion dollar range. And on a revenue projection of that magnitude, I think there is a, good chance to be able to structure a reasonably sized royalty monetization transaction. And there are plenty of examples in the biotech sector, I think, that are precedent for that. So we're confident about that. With regards to the business development opportunities, let me just say more broadly, here the universe of options available to us is actually quite broad because we are talking on one hand you know, to big pharma companies. And there's, I think, an obvious value proposition if you look at how our pivotal trial was structured, where we have demonstrated improvements in A1C on top of the standard of care. And so, you know, obviously there's a value proposition here for pharma companies that have type 2 diabetes medications that are part of the standard of care today. And some of these discussions focus either on perhaps helping us commercialize our product in the US. Some of these discussions focus more on expanding our geographic footprint, as you just mentioned. We believe with the data package that we already have in hand, we could be on the market in several European countries relatively quickly, but we are really not set up internally ourselves to pursue this. So this is where a partnership could come in and accelerate that progress. And then thirdly, I mean, we could also imagine to leverage partnerships to maybe accelerate how we expand beyond type 2 diabetes into other disease states. As you know, we already have proof of concept in hypertension, hyperlipidemia, and national effort. But beyond the discussions with pharma companies, there are other potential partners out there, for example, in the medical device space. You can imagine that manufacturers of certain wearable devices might be a natural fit with the type of digital therapy that we have. And then lastly, you could also imagine that what we do is perhaps of interest for some of the tech companies that have an interest in healthcare. And so it's a broad range. spectrum of discussions that we have. And that gives us some confidence that, you know, one or several of those will ultimately be successful.
spk04: Appreciate that. Going back to sort of the cash burn, obviously, can you remind us what was the early projection of cash burn? And then secondly, are there any one-time, you know, what are the sort of the one-time costs related to workforce reduction we should expect maybe here in the, when you guys report first quarter?
spk03: Yeah, I don't think we had provided prior burn guidance, but obviously our cash burn was available from the prior quarters, right? And that has now been impacted by the cost containment measures that we implemented this month. And for the one-time cost, I'll defer that to Mark Sure.
spk06: Hey, Charles. Thanks for the question. Yeah, I would say a one-time charge will be less than half a million dollars, and you'll see that hitting in Q1.
spk04: Okay. And then when you talk about a overall – should we be – is this – I guess the way – is it we should think of it as a step down in the quarterly run rate, but then it's kind of consistent, or – Do you see rooms for, or should we see continued improvements until maybe approval and then an uptick in some expenses such as sales and marketing?
spk03: Yeah, I think that's the right way to think about it. I mean, what we have implemented now in terms of cost containment measures I think in some part are hopefully just temporary measures. And how our expense structure evolves going forward really depends on how successfully we execute on our financing strategy. And so once we do that, we'll obviously make that public. And if our operating expense trajectory changes, we will then provide additional updates on that as well.
spk04: Okay, great. Thanks for the question. Appreciate it.
spk02: As a reminder, if you'd like to ask a question, please press star 1-1. Our next question comes from Keena Kay with Chardon. Your line is open.
spk05: Yes, thank you. So maybe one of the prongs of the financing, the biz dev part, in your conversations there, I would imagine you're seeing interest, and is it more at this point a discussion about, the potential of the product, the viability of the product as a market, or is it the numbers of how the partnership would be structured?
spk03: Yeah. Hey, good morning, Kay, and I appreciate the question. Look, I don't really want to go into the details of what we are discussing specifically and where we are in those discussions with partners, but I can tell you the discussions are not focused around the viability of the market or the potential of the product. I think that is readily understood. And I think you know pretty much every large pharma company today has a team or a fairly sizable team focused on DTX or digital therapeutics in general. And I think where we stand out is that we have run the largest randomized controlled trial to date. We've generated very broad clinical evidence and we have proof of concept data, not just in type two diabetes, but other indications as well, which speaks to the potential applicability of our platform across sort of the cardiometabolic disease space. So, yeah, I mean, it's not, I know there are questions around the potential of this. Okay.
spk05: All right. Thanks for that.
spk02: Thank you. There are no further questions at this time. I'd like to turn the call back over to Frank Carba for closing remarks.
spk03: Well, thank you very much, everyone, for joining us this morning. And we look forward to updating you in the months ahead on our progress.
spk02: Thank you. This does include the program. You may now disconnect. Everyone, have a great day.
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