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spk01: Good day, and thank you for standing by. Welcome to CanXX Pharmaceutical's second quarter 2024 earnings conference call. At this time, all participants are on listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1, 1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that this conference is being recorded. I will now hand the conference over to your speaker house for today, Rachel Frank, Head of Investillations. Please go ahead.
spk08: Thank you, Operator. Good morning, everyone, and thank you for joining Connexus Call to discuss our second quarter 2024 financial results in recent portfolio execution. A press release highlighting these results can be found on our website under the Investors section. As for the agenda, our Chief Executive Officer, Sanj K. Patel, will start with an introduction. Next, Ross Moat, our Chief Commercial Officer, will provide an update on the ARCLOS commercial execution. From there, Mark Ragosa, our Chief Financial Officer, will review our second quarter 2024 financial results. And finally, Sanjul will return for closing remarks and to kick off a Q&A session for which Eben Tesari, our Chief Operating Officer, and John Paolini, our Chief Medical Officer, will also be on the line. Before getting started, please know that we will be making forward-looking statements today that are subject to risks and uncertainties that may cause actual results to differ materially from these statements. A review of such statements and risk factors can be found on this slide as well as under the caption risk factors contained in our SEC filings. These statements speak only as of the date of this presentation, and we undertake no obligation to update such statements except as required by law. With that, I will turn it over to Sanj.
spk06: Thanks, Rachel, and hello to everyone listening in. In the second quarter of the year, we've continued to execute and make significant progress across our portfolio. We've driven strong commercial performance and advanced our clinical stage asset, Abiprubat, into a Phase IIb study in Sjogren's disease. The full clinical development plan for this program is fully funded within our current operating plan. We've also maintained a strong financial position, and we expect to be cash flow positive on an annual basis. All of this positions us for continued success in the second half of the year and beyond. Starting on the commercial side, since launching Arclist in recurrent pericarditis just over three years ago, Connexa has built an effective commercial operation allowing us to reach an increasing number of recurrent pericarditis patients. We've introduced and advanced a fundamental shift in the treatment paradigm for this disease. And this has been pivotal in establishing Arclist as the standard of care for recurrent pericarditis. We've also consistently driven Arclist collaboration profitability. This allows us to invest in further commercialization. It also includes our recent Salesforce expansion, the American Heart Association initiative, and the Henrik Lundqvist partnership that we announced last month. In the second quarter, ArcoList net product revenue grew to $103.4 million, which is 90% year-over-year growth. This growth was supported by continued strength across several key commercial drivers, including increasing prescriber adoption, high physician and patient satisfaction, and over 90% payer approval of completed cases. The second quarter also benefited from higher compliance and lower grossness. both of which we do not expect to improve at the same rate going forward. With regard to prescribers, the total number since launch has increased from approximately 2,000 in Q1 to approximately 2,300 in Q2. Importantly, these prescribers are demonstrating a growing appreciation of the need to treat to the duration of underlying disease. And that's reflected by the total average duration of therapy increasing from 23 months at the end of 2023 to approximately 26 months at the end of Q2. Additionally, at the end of the second quarter, approximately 11% of the 14,000 target population were actively on ARC-List treatment. As we look to grow this penetration number and ultimately help more patients, we continue to evolve our commercial efforts and initiatives. And we now expect 2024 full year Arculus net sales to be between $405 and $415 million. And Ross will cover in more detail this in a moment. Ultimately, it's our commercial execution that's helping to drive our strong financial position and our ability to drive further growth across the Connexer business. With that in mind and looking to our pipeline, we're really excited about the potential of Abbey Proubarth to provide another growth opportunity for the company. We recently announced that we started enrollment in the Phase 2b study of Abbey Proubarth in Sjogren's disease This is a debilitating chronic autoimmune disease that has no FDA-approved therapies. Based on the clear biological activity demonstrated by ABI-Provost, potential for convenient subcutaneous administration, and the external proof of concept of the inhibition of the CD40 and CD154 interaction, we believe that ABI has the potential to provide meaningful benefit to patients. I do want to mention that today is World Sjogren's Day. This is a day that's dedicated to raising awareness of this life-altering disease. We're very excited to be working closely with both the Sjogren's Foundation and Sjogren's Europe to help raise awareness. With that, I'll turn it over to Ross, who'll provide an update on how we plan to continue driving patient and physician adoption. Ross? Thank you, Saj.
spk07: As Sanch noted, Q2 represented a solid quarter of growth, which was marked by strength across a number of key revenue drivers. As of the end of the second quarter, the number of active commercial patients reached approximately 11% into the 14,000 multiple recurrence target population, compared to around 9% as of the end of 2023. We're proud to be helping many recurrent pericarditis patients. We believe there is a massive opportunity ahead if we continue to execute our strategy to further build the recurrent pericarditis market. A key component of continuing to build the market is disease awareness, which ultimately impacts all of the other underlying commercial growth drivers. As a rare chronic flaring disease, recurrent pericarditis is often misdiagnosed and undertreated due to a lack of access to expert care. In a Harris Poll survey, 96% of patients reported that they were incorrectly diagnosed with other conditions prior to their recurrent pericarditis diagnosis. In fact, they had an average of 2.7 misdiagnoses before their recurrent pericarditis diagnosis. Additionally, once a diagnosis is reached, our aim is to evolve the physician's mindset to recognize interleukin-1 alpha and beta as the underlying driver of the disease and to be proactive in moving away from continued systemic treatments and utilize ARCLIST. Based on our learning since launch, we've made a number of investments focused on improving the awareness and understanding of the disease. This includes evolving digital marketing materials and expanding our field force to approximately 85 representatives with the goal of achieving greater reach and frequency of engagements with healthcare professionals. Additionally, we recently announced two exciting initiatives. Firstly, we're sponsoring the American Heart Association's Addressing Recurrent Pericarditis Initiative, which is a multifaceted national effort to improve quality of care for recurrent pericarditis patients through building centers of excellence and disseminating best practices for the diagnosis and management of the disease. Under this initiative, the AHA has identified 15 champion sites that will establish a learning collaborative to improve referral pathways, identify gaps, and develop solutions that can be shared with regional healthcare practices across the country. In addition to creating a scalable national model of care, this initiative will also develop educational materials and digital media for both patients and physician audiences. Finally, we also recently announced a partnership with Henrik Lindqvist, National Hockey League Hall of Famer and former goalie of the New York Rangers, to raise awareness of the realities of suffering from recurrent pericarditis. and the importance of proactive early treatment to prevent future flares. We look forward to providing more details when the awareness campaign formally kicks off in September. In Q2, we saw a growth of around 300 new prescribers versus the prior quarter. This takes the total prescriber base to more than 2,300 since launch and demonstrates solid growth in the breadth of prescribing. Additionally, the depth of prescribing is growing, with the number of repeat prescribers now reaching around 550. Looking year over year, we're seeing an acceleration in the step-up of both prescribers and repeat prescribers, which bodes well for the future as physicians continue to share their positive prescribing experiences and patients report the magnitude of effects from being treated with Arclist. Furthermore, with the growth in repeat prescribers over time, they're starting to account for a meaningful size of the new patients starting Arclist. Year-to-date, repeat prescribers accounted for greater than 40% of all new enrollments over the same time period. And we're still nascent in the overall recurrent pericarditis market opportunity for Arclist. One measure to demonstrate this is that our recently increased sales force are targeting around 11,000 prescribers, covering approximately 85% of the recurrent pericarditis patients nationally. Clearly, with around 2,300 prescribers launched to date and considering some of those doctors are not within our target base, We're only just getting going, and we have a huge opportunity to further expand both the breadth and the depth of the prescriber base. Turning to the next slide, our market research is also pointing to the opportunity ahead. When interviewing healthcare professionals, both current prescribers and those who haven't previously prescribed Arcalist, both overwhelmingly expect prescribing of Arcalist to grow, with zero expecting a decrease. In addition, and unsurprisingly, given the positive experiences they're having, rheumatologists and cardiologists are considering the use of Arcalis in patients earlier in their disease course than they were compared to a year ago. More broadly, this tells us that we're succeeding in our efforts to evolve physicians' mindsets to appreciate that recurrent pericarditis is a serious and debilitating disease that requires a proactive treatment with an interleukin-1 approach. This underscores that we're starting to establish a new standard of care for recurrent pericarditis with ARCLIS. Sands mentioned earlier that Q2 was a particularly strong quarter, mainly driven by an increased number of patients on therapy due to an acceleration of patient starts and longer durations of therapy. A portion of the growth was also due to metrics that improved in Q2 compared to Q1, where we don't anticipate the same magnitude of growth in subsequent quarters. For example, higher compliance rates resulting from Q1 payer plan changes and a new compliance and adherence program that we launched to support patients even further on their journey on ARC-List. Additionally, year-to-date gross to net decreased from 13.5% at the end of Q1 to 10.8% at the end of Q2 due to better than expected copay utilization with more patients reaching their out-of-pocket maximums earlier than forecast. As a result of the strong Q2 performance, we are delighted to increase the net revenue guidance for 2024 from $370 million to $390 million to $405 million to $415 million. I'll now turn it over to Mark to discuss the second quarter 2024 financial results. Mark.
spk04: Thanks, Ross. A detailed second quarter 2024 financial results can be found in the press release we issued earlier today. There are several items on this slide that I'd like to call your attention to this morning. First, total revenue in the second quarter of 2024 was $108.6 million, including ARCLIS net product revenue of $103.4 million, representing 90% year-over-year growth, and collaboration revenue of $5.2 million, representing the recognition of milestones earned under the Genentech License Agreement for Vixarilumab, including a $5 million development milestone received this quarter related to a third indication. ARCLIS collaboration operating profit in the second quarter grew 114% year-over-year to $59.9 million and drove collaboration expenses to $30 million. Third, higher cost of goods sold in collaboration expenses, both of which are largely driven by ARCLIS revenue growth, as well as investment related to ARCLIS commercialization drove year-over-year operating expense growth in the second quarter. Net loss in the second quarter was $3.9 million compared to net income of $15 million in the second quarter of last year when we recognized a non-cash tax benefit related to the treatment of our deferred tax assets. And lastly, net cash flow in the second quarter was $5.2 million, bringing our end-of-period cash balance to $218.8 million. We continue to expect our cash reserves, as well as strong commercial execution and financial discipline, to support our current operating plan. We expect to remain cash flow positive on an annual basis. With that, I'll turn the call back to Sanj for closing remarks.
spk06: Thanks, Mark. As you've heard, we're focused on accelerating Knicks' growth through our commercial execution with Arclist and by advancing our pipeline. Importantly, we expect to remain cash flow positive on an annual basis while continuing to invest in value-creating opportunities. I am jolly excited about the strides we're making to provide life-changing medicines for patients and to building sustainable value. With that, I'll now turn the call back to the operator for questions. Operator?
spk01: Finally. Ladies and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 1-1 again. Please stand by while we compile again your roster. Now, first question coming from the line of Anupam Rama with JP Morgan. Your line is open.
spk02: Hey, guys. Congrats on the quarter. Just a quick one from me. As you're thinking about ART-List treatment duration now over two years, where would you say physician and payer understanding about ART-List being more of a chronic therapy versus a product used for sort of a defined treatment duration is currently? Thanks so much.
spk06: Thanks, Anupam. This is Sanjay. I'm sure I'll hand it over to either Ross or John. But, you know, certainly we see recurrent hepatitis as a chronic flowing disease, and certainly our education to both Payers, physicians, prescribers have been very much along that line. I think there's a growing understanding that this is definitely a chronic disease, and you've seen the duration increase since the launch just over three years ago. But I'll maybe hand over to Ross, who's obviously in close contact with the payer community via his payer group.
spk07: Thanks, Sanj. Hi, Anupam. Thank you for the question. So I think you're absolutely right, and I think we are starting to see somewhat of a shift, and that's been evolving since the time of launch, as Sanj outlined. Most recently changing from a total average duration of around 23 months to now around 26 months. We're really focusing on making sure people understand the natural history of the disease, which is a median of around three years of disease. And around a third of the patients are still suffering from the disease at five years out. So we're really trying to utilize that. that backdrop as the way of treating for Achilles, and I think we're starting to see the fruits of that, people really understanding it and treating to the natural history. Our clinical experience also mirrors some of that as well, where we have a median of two years treatment duration, a maximum of three years treatment duration under the long-term extension. We obviously have a residence registry ongoing as well to help collect that more long-term longitudinal information from patients. So I guess I can say that we're starting to see it continue to evolve. And we'll see whether that continues along the trajectory for the future or not. But it's obviously a key focus for us and to make sure the patients are treated appropriately throughout the course of the disease that they're suffering from rather than stopping too early, which we do see. And then patients go and restart back on Arclist if symptomology comes back. On the payer side, generally we see payer approvals for 12 months duration and then an attestation from the physician that the patient needs to continue on therapy and is seeing good experience on therapy to just roll over and continue for the next year. So obviously we've had many, many patients go through that re-approval process now as well.
spk02: Thanks so much for taking the question and congrats again.
spk01: Thank you. And our next question coming from the lineup, Paul Choi with Goldman Sachs. Your line is open.
spk00: Hi, everyone. Congrats on the quarter. This is Khalil calling in for Paul. Thank you so much for taking our questions. I guess a couple quick ones from us. One, you talked about the GTN decreasing this quarter. We're just wondering if you had any kind of color on what the steady state should be going forward and how we should think about that. And then secondly, we're wondering if you had any color on the cadence of enrollment in the adiprobaric trial. Thank you so much.
spk07: Maybe, Ross, why don't you start, and then I'll listen to John. Yeah, sure. I'll take the gross to net part to begin with. So maybe just to orientate you to a point of reference, which is through 2023, where we saw the full year gross to net of 9.8% throughout the entire year. At the end of Q1, the year-to-date gross to net was 13.5%, and as we mentioned on the the prepared remarks at the end of Q2 that was reduced quite substantially to 10.8 as the year-to-date number at the end of Q2. So, you know, many of that is coming from the copay dynamics. In Q1, obviously, there's a lot of industry headwinds associated with payer plan changes and copays. We saw that reverse quite substantially through Q2, which kind of accounted for a meaningful amount of the growth that I think was – but obviously we have not provided a forward look into what we expect the full year of 2024 to be from a gross to net perspective.
spk05: And then with regard to your second question, this is John Paolini for the Chief Medical Officer regarding your question for the Phase 2b study for EpiPruvart. Yes, we were pleased to announce that the earlier part of July, that we had initiated enrollment in the Phase IIb Sheridan's trial. And today, of course, being International Sheridan's Day, we really paused to reflect upon the importance of this debilitating disease and, you know, Connexus' contribution to trying to grow the science in this space with the development program in Abbe-Prubart. And so, as was mentioned by Sanj, enrollment has initiated, and at this point, you know, further updates could be provided through the usual mechanisms, clinicaltrials.gov.
spk00: Got it. Thank you so much, and congrats again. Thank you.
spk01: Thank you. And our next question coming from the lineup, with Wells Fargo. Yolanda Salfin.
spk03: Hi, guys. Congrats on the quarter, and thanks for taking our questions. A few from us, so first on Achilles, you mentioned 11% of patients with multiple recurrences were on Achilles treatment. So for this 11%, can you provide a bit more color on how this is split between patients on second and third recurrence and beyond? And also, does this include patients on first recurrence, or how should we be thinking about this patient and how much upside can we expect for the remaining of the year? and on how should we think about the cadence of new trials in new indications?
spk07: Thanks. Hi there. This is Ross. So thanks very much for the question. I find it a little bit difficult to hear the second part, but if I don't answer it correctly, please just let me know and I'll have another go. But regarding the 11% penetration into the 14,000 multiple current patients, that's obviously the patient group, that have suffered for two or more recurrences. And the 11% is a moment in time how many active commercial patients we have on Arclist within that multiple recurrence number. So out of all the patients that are on Arclist, the vast majority are on two or more recurrences, but we certainly have some patients that were just on their first recurrence earlier in the disease as well. And as a reminder, we do have a very broad label that completely allows for that for physicians to utilize it on the first recurrence. And the graph that I shared in the prepared remarks as well also shows physician's future intent of when they consider prescribing Arclist. And you can see that growing as an intent to consider it within the first recurrence and obviously going up within each recurrence that their patients suffer from. So I think we're making good progress with that regard and hopefully that helps to answer your question.
spk06: Eva, could you repeat the second half of your question? It was very difficult to hear. We heard Abiprubat and Cadence, but was it the Phase 2B Sjogren's trial, or was it the potential new indications you were asking about?
spk03: Yeah, potential new indications. Basically, how should we think about the cadence of the new indications for Abiprobar?
spk06: Yeah, I mean, obviously, we're looking very, very closely at the applicability for Abiprobar. We're very excited about the mechanism. There has been proof of concept in a number of different areas, as you probably understand. And so, obviously, Sjogren's is the first one that we've started with the Phase IIb. We've often said it isn't sort of mutually exclusive, as it were, that we would have to wait for that readout. You know, we've had the proof of concept from the rheumatoid arthritis trial. We're very pleased with that, particularly the RF factor data and the PD marker data. But time will tell. We'll have to obviously, at this point, we've not disclosed what other indications we're considering or when we'll announce them. But we're certainly going to look very carefully and work very hard about thinking about what the next steps are in that program.
spk03: Okay, thanks.
spk06: Thank you, Ava.
spk01: Thank you. And our next question coming from the lineup, Lisa Bingo with Everchrist. Are your lines open?
spk09: Hi there. Thanks for taking my question. Congratulations on a strong quarter in the trajectory of our line of steps. I have a question for you just on, was there any inventory changes or just, I'm trying to reconcile, you know, kind of ending the quarter of 11th percent of patients on therapy. Um, and then, you know, just kind of how it flows. I know you had your growth and that's for a little bit different for this year. Um, so, so any inventory changes or other things that could have, um, sort of given a sort of temporary boost to sales for this quarter. And then also what is supposed to net for the, for the next two quarters and who's paid to be or overall for the year.
spk06: Thanks. Yeah. I mean, I can make some comments. I'm sure Russell jumped in. I mean, there's nothing of repute as far as, uh, inventory changes. Ross had made some comments in regards to some of the one-time growth that we've seen. We certainly haven't commented to our overall guidance for growth to net, but by all means, look at our 10-Q. You'll see some previous disclosures, and certainly you'll see them from this current 10-Q, but nothing to report, and nothing certainly unusual on the inventory side.
spk09: Okay. Maybe it's just timing of the ads or something. But, okay, so there's no inventory changes or anything like that. I mean, you might expect it if you're selling more.
spk06: There's no major untoward inventory changes.
spk08: All right. Thanks. Great.
spk06: Sounds like you're riding in a Jetsons car, Lisa, so there's a bit of a noise coming through, but thank you for the question. Oh, all right. Okay.
spk01: Bye-bye. Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Sanj Patel, Chief Executive Officer, for any closing remarks.
spk06: No, thank you very much. Obviously, we're very pleased with the performance to date. We continue to execute both commercially and from the portfolio side. I appreciate everybody dialing in, and we look forward to providing additional updates in the future. So thank you very much.
spk01: Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation, and you may now disconnect.
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