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spk00: Greetings, and welcome to the SC Pharmaceuticals third quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star, then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hans Wittstum. Thank you, Mr. Wittstum. You may begin.
spk06: Thank you, operator. Before turning the call over to management, I'd like to make the following remarks concerning forward-looking statements. All statements on this conference call, other than historical facts, are forward-looking statements within the meaning of the federal securities laws. including but not limited to statements regarding SC Pharmaceutical's expected future financial results and management's expectations and plans for the business and furosics. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other important factors that may affect SC Pharmaceutical's business, financial condition, and other operating results. These include, but are not limited to, the risk factors and other qualifications contained in SC Pharmaceutical's annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed by the company with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Any forward-looking statements made on this conference call, including responses to your questions, are based on current expectations as of today, and SC Pharmaceuticals expressly disclaims any intent or obligation to update these forward-looking statements except as required by law. It is now my pleasure to turn the call over to Mr. John Tucker, Chief Executive Officer of SC Pharmaceuticals. John?
spk07: Thank you, Hans, and thanks to everyone listening to this afternoon's call and webcast, our first in the history of our company. I will begin with an operational overview, including a recap of recent developments, and Rachel Noakes, our SVP of Finance, will follow with a brief review of our financials. The October FDA approval of Ferosix, the first and only self-administered subcutaneous loop diuretic for the at-home treatment of congestion and chronic heart failure, represents the culmination of years of unwavering effort on behalf of the entire SC Pharmaceuticals team. We have successfully developed what we believe is to be a truly significant advancement in the management of heart failure. Ferosix offers a treatment option outside of the hospital, either pre- or post-admission. By reducing preventable hospital admissions and readmissions, we have the potential to effectively treat patients in the comfort of their own homes and potentially deliver significant cost savings for payers. Given that the benefits of Ferosix can accrue to multiple healthcare stakeholders, we anticipate positive uptake in our preparing for a robust commercial launch of Ferosix. It is worth noting that we are very pleased with the final approved package insert and label which we believe allows us to pursue the large population of New York Heart Association Class II and III heart failure patients who may stand to benefit from this novel treatment. For those who may be new to the SC pharmaceutical story, Ferrosix is our proprietary formulation of furosemide that is designed to be administered by an on-body infuser, West Pharmaceutical Services' proprietary smart dose on-body drug delivery system technology. Furosemide is the most widely used oral and parental diuretic available for patients with congestive heart failure. But the bioavailability of oral furosemide decreases and becomes highly variable during episodes of worsening symptoms. However, by enabling subcutaneous administration via the West Smart Dose On-Body Delivery System technology, we have been able to achieve greater than 99% bioavailability comparable to that of an IV bolus, which is typically administered in a hospital setting. So with furosix, the patient can receive IV-comparable treatment in the comfort of their own home when oral furosemide isn't sufficient. It has been estimated that up to 90% of patients presenting to the emergency department with symptoms of worsening heart failure are admitted to the hospital, and 50% of these admissions may be potentially avoided. Heart failure is therefore a significant pain point for healthcare payers. The average cost of a heart failure-related hospital admission for a Medicare patient is nearly $19,000, and heart failure is a top condition that is being targeted by the Centers for Medicare and Medicaid Services under its Hospital Readmission Reduction Program, or HRRP. Heart failure is also a significant burden to hospitals. The average length of stay is 5.2 days, while CMS reimburses just 3.9 days under the current DRG. Hospitals also face significant exposure to financial penalties resulting from readmissions under the HRRP program just referenced. So to demonstrate the magnitude of the cost savings that can potentially be realized with 406, we ran a prospective clinical trial, Freedom HF, the results of which we read out in July of last year. To summarize the key takeaways, Select patients who presented at the emergency room with a worsening heart failure event were treated with furosics at home as opposed to being admitted to the hospital. Heart failure-related costs were then tracked for 30 days. As compared to historically matched comparators, patients treated with furosics at a heart failure-related cost that were lower by an average of $16,995. Though this figure excludes the cost of furosics which had not been established at the time of the study completion, the conclusion is unchanged. By more aggressively treating patients outside of the hospital, where possible, significant health care costs can be avoided. Notably, this result was achieved with a very high level of statistical significance, and in fact, based on the results from a planned, pre-specified interim analysis conducted to confirm the final sample size, and following input from statisticians, principal investigators, payer advisors, and health economics and outcomes research experts, Enrollment was terminated early at 24 subjects versus the original enrollment target of 34. The final analysis therefore included 24 subjects treated with Ferocix and 66 matched comparators based on seven variables associated with hospitalization. More recently, we announced positive results from a phase two pilot study at home HF. This study compared Ferocix with a treatment as usual approach in chronic heart failure patients presenting to a heart failure clinic with worsening congestion requiring augmented diuresis. The study enrolled 51 subjects, of which 34 received furosics and 17 received treatment as usual. Among the key findings, subjects randomized to furosics had a 37% reduction in the risk of a heart failure hospitalization at day 30 relative to patients randomized to treatment as usual. In addition, all predefined secondary endpoints measuring symptoms of congestion, quality of life, and functional status favored the furosics group. Needless to say, we were very pleased with the results of these studies, which added significantly to the growing body of clinical and pharmacoeconomic evidence favoring the furosics versus the current standard treatment protocol. Our presence at important medical meetings is key to our efforts to drive awareness of furosics as a new element of the heart failure treatment paradigm. To that end, last month we presented two posters at the 2022 Annual Scientific Meeting of the Heart Failure Society of America. This is among the most important, well-intended gatherings of heart failure experts each year. We also had a large Coming Soon campaign that allowed us the opportunity to drive both brand and name awareness in anticipation of the Fero6 launch. Turning now to the total addressable market, there are approximately 7.2 million heart failure patients in the U.S., who experience approximately 4.1 million heart failure episodes of fluid overload per year. Of these, we estimate 2.1 million episodes to be addressable by Ferosix. If we assume an average cost of Ferosix of approximately $3,300 per episode, the equivalent of four doses at a WAC price of $822 per dose, that yields an addressable market opportunity of $6.9 billion. So we believe there is a substantial amount of opportunity here, and we believe Ferosix, once launched, will be adopted rapidly. Turning now to our launch preparation activities, we are working towards a broad commercial launch of Ferosix in the first quarter of 2023. We have completed or are in the process of including several important activities associated with the launch. Beginning with distribution, we've identified Cardinal Health as our third-party logistics provider. We are building a limited specialty pharmacy network with Biomatrix serving as lead specialty pharmacy. In terms of reimbursement, we have held productive discussions with the largest provider of Medicare Part D plans. With our compelling pharmacoeconomic data, such as those that we obtained from our Freedom HF study, we have P&T committee meetings arranged with a number of the top payers this quarter. As we indicated previously, given the strong clinical and pharmacoeconomic case we made for Ferrosix, As a key component of an updated heart failure treatment regimen, we anticipate few obstacles in securing favorable formula replacement. From a marketing perspective, we rolled out our comprehensive Coming Soon campaign at both the recent Heart Failure Society of America annual meeting and the American Heart Association scientific sessions that generated encouraging interest. Our MSLs have been busy in the field and have already made contact with over 500 key opinion leaders in the heart failure space in 2022. Finally, in terms of sales team and infrastructures, we have hired a highly qualified VP of sales and what I regard as top tier regional sales directors. We also have contingent offers out to approximately 40 field territory sales representatives. We're advancing a comprehensive multifaceted launch plan that we believe positions us well to maximize our reach broadly both heart failure physicians and patients. To ensure that we have the resources available to support our launch and commercialization plan, we entered into a $100 million secure debt facility with funds managed by Oak Tree Capital Management on October 13, 2022, at which point $50 million became available to us immediately. The remaining $50 million becomes available in two $25 million tranches, each tied to the achievement of pre-specified commercial milestones. The debt facility carries an interest rate equal to the three-month secured overnight financing rate, SOFR, plus 8.75, with the interest rate capped at 11.75 per year. Following the achievement of $100 million in trailing 12-month U.S. net sales of 406, the SOFR premium will be lowered to 8.25%. The debt facility is expected to mature five years from funding and carries a 36-month interest-only period. We believe these terms are favorable to our company, and we are very grateful for the support of Oaktree at this transformational time. At this point, I'll turn the call over to our Senior Vice President of Finance, Rachel Noakes, for a review of our third quarter results and financial position. Rachel?
spk04: Thanks, John. As of September 30, 2022, we held $45.4 million in cash, cash equivalents, restricted cash, and investments. This excludes any net funds received from Oaktree per our debt financing agreement as previously discussed. Now I will cover a few income statement items. We reported a net loss of $10.2 million for the third quarter of 2022 compared to a net loss of $6.6 million for the comparable period in 2021. Research and development expenses were $3.7 million for the third quarter of 2022, compared to $3.7 million for the comparable period in 2021. General and administrative expenses were $6.3 million for the third quarter of 2022, compared to $2.2 million for the comparable period in 2021. The increase in general and administrative expenses for the quarter ended September 30th, 2022, was primarily attributable to an increase in employee-related costs and commercial preparation costs. Based on our current operating plan, we have adjusted our 2022 net loss to $38 to $41 million, a decrease over prior guidance of $43 to $48 million. As of September 30, 2022, we had 27,402,121 total shares outstanding. That concludes the financial update. John?
spk07: Thanks, Rachel. This concludes our prepared remarks. At this point, we will open the call for questions.
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star then 1 on your telephone keypad. A confirmation turn will indicate your line is in the question queue. You may press star and then 2 if you would like to remove your question from the queue. For participants using speak equipment, it may be necessary to pick up your handset before pressing the star keys.
spk10: One moment please while we poll for questions.
spk00: Our first question is from Rowana Ruiz of SVP Securities. Please go ahead.
spk05: Great, thanks. And afternoon, everyone. So a couple of quick questions on 406 and the patient types that you expect in the beginning of the launch. Could you just go over what the features you expect to see in the early adopter patients in first quarter when 406 launches?
spk07: Sure, Rowana. I'll have Steve answer that question. Steve?
spk03: Yes, I think the largest absolute patient volume for furosics is the patient's pre-hospitalization who are worsening. They are on oral diuretics despite that background therapy. They're still increasing in symptoms and signs and the severity, and that will be the best opportunity for furosics to intervene and reset their fluid status and help them stay at home and avoid having to go to the ER or the hospital. There's also a good population of patients who do reach the hospital. They've been treated, stabilized, and they're discharged. We know a significant portion of those, 25, 30% of them, are readmitted within 30 days, and those patients would also benefit from furosix in the post-discharge setting if there's any increase in signs and symptoms of fluid overload.
spk05: Got it. Helpful. And I was also curious, anecdotally, what are you hearing from KOLs and physicians regarding furosix's label? I'm also particularly curious what you're hearing about the monitoring recommendations, because my sense is it did seem fairly flexible, so if you could elaborate on that, that'd be great.
spk07: Okay, thanks, Rowan. I'll, Steve, answer that again.
spk03: Yeah, the folks who've looked at the label are very pleased with it. They don't see anything that is out of the ordinary. It's routine monitoring, as they do now with an escalation of oral diuretics or You know, addition of, you know, non-loop thiazide direct. So when they see the label, they just see it as routine and normal. They'll do what they normally do today without furosics when they do prescribed furosics. And that's to order labs, you know, within a couple days of escalating care.
spk05: Got it. Makes sense. And the last one for me, I was curious on the commercial scale-up side, how many devices do you plan to have ready for launch in first quarter?
spk07: Yeah, so we plan to, when we launch, have about six months of inventory ready to go at launch and then continually, you know, update that as we sell through it.
spk10: Great. Thanks a lot. Thanks for your time. Our next question is from Glenn Santangelo of Jefferies. Please go ahead.
spk02: Yeah, thanks for taking my question.
spk11: John, you know, last time we spoke, I think you sort of talked about already having roughly a 40-person sales infrastructure for Salesforce ready to go. I was wondering if you can give us an update there and then maybe – you know, if you're expecting, you know, what are you expecting to start incurring the expenses around that? And do you expect to start generating revenues in the first quarter? Because I think you said you already chose, you know, Cardinal health as your distributor with, uh, to distribute to specialty pharmacy networks. Will you start booking revenues immediately once you start selling to Cardinal? So I'm just trying to get a sense for, you know, how we should think about, um, you know, the income statement sort of evolving right around the launch.
spk07: Yeah, sure. Glenn, this is John. So I'll try to take all of those. So we would recognize the revenue we sell to not to Cardinal. Cardinals are a third party logistics, but when it's sold to the specialty pharmacy and they take title. And as far as the reps, yeah, we have contingent offers out to all of those representatives. We're planning to launch in Q1, so we anticipate having revenues in Q1 and having that Salesforce cost hit us in Q1 as well.
spk11: Right. All right, so just, you know, back to sort of the inventory question, I mean, if you're going to start generating revenues once these specialty pharmacies take title, I mean, will Will you start shipping in one queue? So we should see the revenues, you know, start, you know, right in one queue. And then, you know, consistent with that, should we, you know, or you have the agreements already in place with the salespeople. Should we start to see the expenses matching that in the first quarter?
spk07: Yes. Yes. We would book the revenue in the first quarter and see the Salesforce costs hit us in the first quarter as well.
spk11: And any, I know you don't want to give 23 guidance at this point, but any sort of high-level thoughts in terms of how we should think about the cadence of the launch as we roll through 2023?
spk07: Yeah, so we haven't given guidance. We are planning to give updates. We'll give updates as they come along on big managed care plans, and then we'll have a series of key performance indicators that we'll announce quarterly. Steve, do you want to kind of hit some of those high-level KPIs?
spk03: Sure. Yeah, of course, gross sales and net sales. We'll talk about the number of total doses, the average number of doses per prescription. You know, the payer formulary covers the percentage of lives that have access. We'll talk about out-of-pocket costs to our patients, the number of unique prescribers, as well as the number of new prescribers, the number of unique patients. and the number of repeat patients. So, we'll update that each time we talk with you guys.
spk02: Okay. Thanks a lot.
spk10: I appreciate it. Great. Thanks, Glenn.
spk00: Our next question is from Douglas Tull of H.G. Wainwright. Please go ahead.
spk01: Hey, good morning. Thanks for taking the questions. And just maybe, John, as a starting point, in terms of the field force, once they get out into the field, how long do you think it will take for them to make initial contact with the target audience? Hey, Doug, it's John.
spk07: I guess I'm going to have Steve answer that one too. Steve?
spk03: Yeah, there's some pent-up demand already. People are reaching out to us, you know, asking when they can begin to prescribe, when they can get access to it. So, we'll make contact with the prescribers, with the HCPs, you know, in the first week on the job. And there's a lot of interest here. This is not a me-too. It's very disruptive. There's a big unmet need, and we've had a lot of time to, you know, increase awareness of the product. So right away.
spk08: Yeah.
spk03: And, Doug, you know, we did – Well, no, no, I –
spk08: We're doing a coming soon campaign to drive awareness of the name and the brand. And, again, the Ferosex name really tells people what it does, right? Ferosemide SC for subcutaneous. So we've been doing that digitally. We were big at the HFSA meeting. And so we think that we've driven.
spk07: And our MSLs have been out in the field, made over 500 contacts with KOLs over the last couple of months. So we think we're doing a lot to drive awareness now.
spk01: And I get it, but I guess how long before, you know, your target number of docs or providers do you think you'll have that initial, you know, sort of face-to-face interaction? Do you think you can accomplish that all in the first quarter, several weeks? I'm just curious about how you're sort of mapping out that.
spk03: Yes, yes. We intend to reach our entire target list soon. with a face-to-face conversation in the first three months of promotion.
spk07: Okay. A lot of them two and three times. Yeah, we super target for the real high prescribers, and we'll see them at launch as often as weekly, Doug.
spk01: Okay, great. That's helpful. And just maybe some color on some of the initial interactions with payers now that you are an approved price, you have a whack in the market, and and just how those are going and how we should think about the reimbursed access landscape.
spk03: Yeah, the interaction with payers has exceeded our expectations. We'll have P&T formulary meetings and decisions made with a couple of the biggest Medicare Part D PBM plan combinations in November. um and they don't have to do that they've all scheduled expedited meetings typically it's three months four months five months we're getting you know we were just approved in october and we'll have meetings p t decision meetings in november and and more in in december before we launch in q1 we'll have we'll have formulary decisions and we expect those to be positive all indications are that they're going to be positive They recognize the unmet need. They see the cost effectiveness of this product relative to the alternative, which is going to ER and hospitals. So, yeah, we're pretty bullish about it.
spk08: Yeah, Doug, you know, and I've been following this. I think we're really bullish on it. The fact that they're scheduling these meetings so quick, these P&T committee meetings, I'm not waiting for a script or anything. They're going. So we're very encouraged by what we're hearing.
spk01: Okay. And any sense of where in terms of what, you know, is it going to be a prior office? Are they going to ask for, you know, presumably failure of oral furosemide first?
spk08: Well, they might on the oral, but that's fine because that's how the product's indicated, right? If they fail oral, they're going to, you know, this is why they need it. Because our goal, again, is to get them back on that generic oral as soon as they can without them being hospitalized. So we don't think that's an issue for us at all because all of these patients would have failed oral diuretics to be there.
spk01: So I guess there are no other sort of burdensome requirements in terms of step edits for you?
spk10: Not that we're hearing, no. Okay. Thank you, and congratulations. Thanks. Thank you.
spk00: Our next question is from Ralph Roman of Maxim Group. Please go ahead.
spk09: Hi. This is my question. Those 10 payers that you're meeting with, could you give us some color on how many covered lives they represent and like what percentage or what amount of the market opportunity they represent relative to the total?
spk07: So what percent of the total lives have we met with on those plans? Boy, that's a big number, Steve.
spk03: Yeah. What I can say is there's about 10 plans that cover about 85% plus percent of Medicare Part D beneficiaries, and we're meeting with all of them. We've had meetings with all of them. We've had clinical presentations. We've submitted bids. So I can't speak to how much of the commercial. There's really not much commercial. There's only 10% commercial for our product based on the age of the patient who have heart failure. And then another 8% that are Medicaid. So yeah, I'd have to say when we're done with this, we'll talk to people responsible for 85 plus percent of the Medicare Part D lives.
spk09: Got it. So I guess on that point, do you guys also plan on addressing the commercials side of the market opportunity? And when do you think those conversations could happen?
spk07: Yes, we do. In fact, I'll let Steve talk about it. You know, we'll have a copay card for the commercial to make sure we're buying down patients' copay. But, Steve, do you want to talk a little bit about the commercial pay?
spk03: Yes. You know, we haven't targeted, you know, the regional commercial plans just yet. But when you're talking to the big PBM plan combinations like CVS Caremark and Aetna, Optum and United, ESI, Cigna, we're talking about the commercial side of their business as well. What we haven't done is gone down to every state level, a Blue Cross Blue Shield of this state or that state. That'll happen before we launch. We're not planning to not do that, but our priority clearly has been the Medicare Part D lives. As I said, commercial will make up 10% of the total opportunity for furosics.
spk09: Now, these 10 pairs and 85% of the lives, do you expect to actually have coverage for them initially at launch in January, or do you think they'll come or trickle in, like, through 1Q?
spk03: I think it'll take until... the end of one queue just based on when they have p t committee meetings um you know we're fortunate we're getting a few done uh with some big ones in uh in november and december but there's others that will take until uh their normally scheduled meeting in in q1 which could be you know january or february i think the latest we'd have to wait would be would be uh would be march but q1 for sure um we'll have had all the meetings scheduled, reviews conducted, and decisions made. And as I said, we expect them to be universally positive. It'll be surprising to us, very surprising, if anyone makes a decision not to cover Ferozix.
spk10: Got it. Thanks for taking my questions.
spk00: Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to hand the call back to John Tucker for any closing comments. Please go ahead, sir.
spk07: Thank you. That concludes our call for this afternoon. We hope we were successful in conveying our enthusiasm for ROSIX following its approval. and the significant advancement that it represents along the heart failure treatment paradigm, a multibillion-dollar market in the U.S. alone. We are well-financed, and we will be initiating what we think is a very robust commercial launch in the coming months. Thank you again for joining our call this afternoon. Have a great evening.
spk00: That concludes today's conference. Thank you for joining us. You may now disconnect your lines.
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