scPharmaceuticals Inc.

Greetings and welcome to the SC Pharmaceuticals second quarter 2024 earnings conference 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 and then zero on your telephone keypad. As a reminder this conference is being recorded. It is now my pleasure to introduce your host PJ Killehoe. Investor relations. Thank you. You may begin.

Thank you operator. Before turning the call over to management I would like to make the following remarks concerning poor looking statements. All statements on this conference call other than historical facts are poor looking statements within the meeting of the federal securities laws including but not limited to statements regarding SC Pharmaceuticals expected future financial results. Management's expectations and plans for the business, the ongoing commercialization and marketing of POROSIX and the potential label expansion and other regulatory approvals of POROSIX. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project and other similar expressions are used typically to identify such poor looking statements. These poor looking statements are not guaranteed as a future performance and may involve and are subject to certain risks and uncertainties and other important factors that may affect SC Pharmaceuticals business, financial condition and other operating results. These include but are not limited to the risk factors and other qualifications contained in SC Pharmaceuticals 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 poor looking statements. Any poor looking statements made in this conference call including responses to your questions are based on current expectations as of today and SC Pharmaceuticals expressively disclaims any intent or obligation to update these poor 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. John

Tucker Thank you, PJ. Thank you to everyone listening to this afternoon's call and webcast to review our second quarter 2024 results. As it's been our practice, I will begin with an operational update for turning the call over to Steve Parsons, our Senior Vice President of Commercial for a more detailed commercial update on ferocity and then Rachel Noakes, our Chief Financial Officer for a view of our financials. We will then open the call for your questions. I would like to begin this afternoon with a recap of the financing up to $175 million that we announced earlier this week. Upon closing of these transactions, approximately $75 million was added to the company's balance sheet which extends our cash runway through profitability. Through this financing, the company also has access to an additional $50 million through debt and or royalty facility. The financing is comprised of three parts. First, $75 million of senior debt facility with perceptive advisors of which $50 million was funded at closing to repay $50 million of existing debt with Oak Tree. An additional $25 million will be available subject to the achievement of certain pre-specified commercial and regulatory milestones. The debt carries a five-year term of which the four years are interest only with a bull of repayment in year five. The facility lowers our interest rates and pushes out the amortization as compared to the retired Oak Tree facility. Second, a synthetic royalty agreement of up to $50 million also with perceptive advisors. $25 million of the royalty financing was funded at close and the additional $25 million we made available subject to the achievement of certain pre-specified commercial milestones. And finally, a public offering of approximately $50 million of equity led by leading life science investors. Together, we believe this financing extends our cash runway through profitability. Turning now to our launch programs. During the second quarter, we generated sequential net revenue growth that we believe reflects increasing awareness and utilization of for osix by cardiologists and heart failure specialists. As Steve will detail shortly, our leading indicators suggest that providers are increasingly more comfortable prescribing for osix to their heart failure patients during critical intervention windows which are pre-hospital admission or post-discharge. We reported net revenue of $8.1 million representing sequential growth of 33% as compared to the first quarter of 2024. Our gross net discount during the second quarter was approximately 8% down from 19 in the first quarter. We expect the GTN discount to increase over time as contracting with payers evolves and IDN demand grows. Looking to the back half of the year, we currently anticipate our GTN to range from 10 to 15% for the next two quarters. Over the longer term, we continue to believe that a GTN in the 30 to 35% range is appropriate although there will be some variability from quarter to quarter as we continue to expand our roster of payers and IDNs. I would like to now provide an update on several long-term growth initiatives that we previewed last quarter that we view as critical to our long-term growth strategy. We announced that the FDA has approved our supplemental new drug application seeking to expand the 406 label to include all heart failure patients, including the most symptomatic patients and those with the greatest limitation on physical activity categorized as New York Heart Association Class 4. 406 was previously indicated for treatment of congestion due to fluid overload in adult patients with New York Heart Association Class 2 and Class 3 chronic heart failure. By expanding the label to include New York Heart Association Class 4, which accounts for approximately 10% of heart failure patients and 30% of heart failure hospitalizations, we estimate that as many as 40% of these patients may potentially benefit from ferocity. Given ferocity's ability to improve signs and symptoms of congestion, which may lead to a reduction in unnecessary hospital admissions and readmissions with the potential to improve patient-quality life while reducing overall and heart failure related health care costs. We believe uptake among cardiologists and heart failure specialists who treat these very symptomatic patients could be meaningful. Turning now to the low volume autoinjector that is in development. We announced earlier this week positive top-line study results from a PK study which demonstrated that ferocity achieved primary pharmacokinetic and secondary pharmacodynamic endpoints. Some of the highlights from the study results include, SCP-111 demonstrated bioavailability of 107.3, achieving the 90% confidence interval limit of 80 to 125%. Participants that received SCP-111 had similar urine output, urinary sodium excretion, and urinary potassium excretion at 6, 8, and 12 hours compared to IV ferosemide. Participants reported a median pain score of zero across all time points assessed. The most common adverse events with SCP-111 were localized at the injection site and systemic adverse events were consistent with those reported in the describing information for intravenous and oral ferosemide. With these results, we continue to work towards our target of an SNDA to the FDA by the end of the year. As we stated previously, we believe an autoinjector, if approved, will reduce our manufacturing costs compared to the current on-body infuser, infer environmental advantages, and give treating providers and their patients treatment flexibility. Finally, we announced that FDA has accepted our filing of a supplemental new drug application, speaking to expand the ferosix label to treatment of edema due to fluid overload in patients with chronic kidney disease, or CKD. The FDA had previously indicated that no additional clinical studies were required to expand the ferosix indications to include CKD if we can demonstrate an adequate PK and pharmacodynamic bridge to the listed drug, which is the ferosemide injection. CKD is a progressive disease characterized by worsening renal function over time, resulting in frequent episodes of fluid overload that are treated with loop diuretics. It is estimated there are 6.6 million Americans with CKD that are treated with loop diuretics, and it's made 50% of patients with CKD do not have a diagnosis of heart failure. This resulted in a potential incremental increase of 3.1 billion to the already existing 9.4 billion addressable market opportunity in heart failure, with fluid overload being one of the most common complications in CKD, which worsens with disease progression. We believe ferosix would be beneficial to patients with CKD who have worsening symptoms due to fluid overload and are not responding to oral loop diuretics. The FDA has signed a FDUFA date of March 6, 2025. If approved, we would make investments in our sales and commercial infrastructures to expand our reach to nephrologists. At this point, I will turn the call over to our Senior Vice President of Commercials, Steve Parsons, for a deeper dive into our launch metrics. Steve?

Thank you, John. As John indicated, we continue to be pleased with our progress since launch. From launch in February 2023 through June 30, 2024, we've had 2,713 unique prescribers. That's up 24% from the 2,183 prescribers we had from launch through March 31. We are encouraged by the prescriber growth in this quarter, and we believe this reflects our strategy of establishing a broad prescriber base. Importantly, more than half of these prescribers have written multiple prescriptions. During the second quarter, approximately 9,300 doses were filled. That's up 15% sequentially from approximately 8,100 doses in the first quarter of 2024. During the second quarter, the average number of doses per prescription filled was 6.3 doses, which remains higher than our long-term expectations and up slightly from the 6.1 doses per prescription in the first quarter of 2024. With the label expansion to now include Class IV heart failure patients, we anticipate that the average number of doses may rise further as those patients may need additional doses to treat more severe symptoms. Our sales force has conducted 3,324 in-services from launch through June 30. That's up from 2,938 in-services from launch through March 31. In-services provide important training to offices on the prescribing process of heuristics, and this ensures office readiness. As we open more new accounts, the execution of in-services remains fundamental to heuristic success. And we regard the number of in-services conducted each quarter as an important leading indicator. Regarding our field sales force, we have said previously that we stand ready to add additional territories as demand warrants. As demand continues to grow, we plan to add 22 territories for a total of 90 territories by the end of the third quarter. This will support the expanded label and increase our reach and frequency with more targeted cardiology and some nephrology specialists that treat chronic kidney disease patients who also have comorbid heart failure. At the beginning of the second quarter, we made the decision to change our patient services hub. This transition took several weeks to get up and running effectively, but by the end of the quarter, the hub was operating very well and has been an asset in increasing the number of fill doses for Q3 and into the future. From a marketing perspective, we continue to execute a broad multi-channel marketing campaign to drive brand awareness, adoption, and commitment. Our marketing encompasses many different activities, including a significant patient awareness component. Other ongoing activities include engagement and development of key opinion leaders, conference presidents, message evolution, and medical education programs, among other critical tasks. We plan to have a very large presence at the Heart Failure Society of America conference coming this September in Atlanta. Overall, we are pleased with our continued progress and we are excited about the opportunity and the path ahead. This concludes my update. I'd now like to turn the call over to our Chief Financial Officer, Rachel Nutz, for a review of our financials. Rachel.

Thank you, Steve. As of June 30th, 2024, we held $38.5 million in cash and cash investments compared to $76 million in cash, cash equivalent, and investments as of December 31, 2023. This excludes the funds we raised through the financing that John discussed earlier. Now I will cover a few income statement items. We reported a net loss of $17.1 million for the second quarter of 2024 compared to a net loss of $14.2 million for the second quarter of 2023. Product revenues were $8.1 million for the second quarter of 2024 compared to $1.6 million for the second quarter of 2023. Costs of product revenues were $2.3 million for the second quarter of 2024 compared to $0.4 million for the second quarter of 2023. The increase in both product revenues and cost of product revenues for the quarter ended June 30th, 2024, was due to increased demand for Furo6 further into the commercial launch and related manufacturing costs. Research and development expenses were $2.7 million for the second quarter of 2024 compared to $2.9 million for the comparable period in 2023. The decrease in research and development expenses for the quarter ended June 30th, 2024 was primarily due to a decrease in pharmaceutical development costs offset by clinical study costs and employee-related costs. Selling general and administrative expenses were $17.5 million for the second quarter of 2024 compared to $12.1 million for the comparable period in 2023. The increase in selling general and administrative expenses for the quarter ended June 30th, 2024 was primarily due to an increase in employee-related costs, commercial costs, product samples, and patient support. As of June 30th, 2024, we had ,139,802 total shares outstanding. That concludes the financial update.

John? Thanks, Rachel. This

concludes our prepared remarks. At this point, we will open the call for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone 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 speaker equipment, it may be necessary to pick up your handset before pressing the star keys. It is requested that questioners skip to one question and one follow-up.

One moment, please, while we poll for questions. The first question we have is from Rana Rees of

Lerink Partners. Please go ahead.

Great. Afternoon, everyone. A quick couple of ones from me. First, how much could the average number of doses per prescription for ferro-6 actually increase with the new label for class 4? And just to that, how are you thinking about clinicians, how fast they can prescribe ferro-6 for class 4 patients? Are there any hurdles or logistics that they might need to get through before they can really get off to the races and prescribe?

Hi, Rowan. This is John. I'm going to have Steve answer those two questions, okay?

Yes. So it will be hard to predict what the impact on average number of doses is across the whole population, but we do think the class 4 patients will need nine doses or even up to 12 doses based on the severity of their symptoms, and we do think they'll get prescriptions more often than the average heart failure patient as often as, you know, every month or every other month. So that could impact the average doses per prescription over a quarter. And then back to...

How fast will we...

Yeah, we should start to see prescriptions for heart failure for class 4, you know, starting next week. Our saleswores will be trained. They'll be in the field. We've been in contact with the payers to make sure they update their systems to reflect PA to label, and the label now will not limit the use of class 4 patients. So we're expecting to see it immediately as we get around to those doctors who have a concentrated population of class 4 patients, as the heart failure specialists and

the advanced heart failure clinics.

Got it. Makes sense. And thinking ahead to

potential approval for CKD patients with edema, how are you thinking about possibly stepping up the field force size? You kind of alluded to you consider growth there. What sort of metrics are you looking for to give you a signal that you should meaningfully expand the field force at that time?

Yeah, so we're going to move to 90 reps. We're in the process of it right now based on the increasing demand we've seen, especially into this quarter and with the label expansion into class 4. So that'll have us at 90 reps. With kidney runner, we're going to go to probably 130 reps, and that will be based on how many nephrologists we want to cover and the cardiologists. So our thinking now is this will be one sales force, 130 reps, calling on cardiologists, heart failure specialists,

and nephrologists.

Got it. Super helpful. Thanks.

Great. Thank you.

The next question we have is from Stacy Koo of TD Cohen. Please go ahead.

Hi, this is Vish An for Stacy. Congratulations on a stellar quarter and thanks for taking our questions. We have a couple. So first, I guess following up on the previous question, some of your remarks, can you talk about some of your ongoing preparations for the expansion this month? What sort of level of enthusiasm are you hearing from KOLs? Do you expect some of the early adopters have already identified some key recurring class 4 patients to start prescribing? So that's the first question. And then the second, so you've made some great progress in establishing your launch infrastructure. So could you talk a bit about that skill rate, how it's been performing for Q2, and then how do you expect it's going to improve with some of the improvements that you've made and what your expectations there are? Thank you.

Okay, thank you, Vish. I'll answer the second question first and then turn it over to Steve for your question about the class 4 preparation. So I think Steve mentioned in his prepared remarks that we did a change in a hub. Some of this was due to change healthcare. But we did move our hub to a hub that now has change healthcare and relay. So if anything ever cyber attack one, we can go through the other one. But you know, hub transducer are tough. They get hurt us in April with our fill rate and that hurt us for the quarter. It hurt our net sales. It probably cost us five-ish percent on net sales. You know, shift the patients because again, once we lose that script, we lose that patient because of the acute event nature of the product. So we saw a fill rate in the 40, in the mid to high 40s for the quarter. It was really bad in April when we made that hub move. It was tough. But with the hub change, what we've seen in Q3, and again, it's only five or six weeks here, but our fill rate has moved up dramatically. And that was the whole idea of making the change to the hub. So a little short-term pain was pretty painful. But we're able now to have a hub in place that is really seeing a dramatic increase in our fill rate. So again, in the mid to high 40s for Q2 started out really low. And then for this quarter, you know, right now we're closer to 60 percent, maybe a little over for this month, 60 percent fill rate. So we think that'll have a meaningful impact on our next sales this quarter. Steve, do you want to answer the first question?

I think the first question around our preparation to take advantage of this indication expansion with heart failure specialists. They're a subset of the general cardiology practice. We know them well. We know where the advanced heart failure clinics and office locations are. We know who tried to use 406 in class four early on and was frustrated by the PA, the prior author label that didn't allow that. So I'm sure the reps have been anxious to go in there and give the good news. They'll be able to do that starting next week. We have to do a little training. It's some, you know, we have to update some of our promotional materials and at those. But we everyone has a hit list of folks that they're going to go to first and often. And then we'll do some email blasts and stuff to reach people, you know, in a mass way. So well prepared to do this. It's a good opportunity. It's an unmet need. And, we're going to fill it.

Perfect. Thank you very much.

The next question we have is from Chase Nickerbocker of Craig Hallam

Capital Group. Please go ahead.

Good afternoon, guys. Thanks for taking the questions and congrats on a lot of recent progress here. Maybe just first to start, kind of probably not the hub change. Can you just speak to kind of what the hub is doing differently? Your new hub is doing differently to kind of drive that dramatic of improvement. Obviously, some of it was just, you know, kind of maybe some of that change kind of hangover. But, you know, 60 plus percent is well above what we've seen at any point historically. So what are they doing differently that's really driving that improvement?

Hey, Chase, it's John. Thank you for the question. I'll let Steve answer how the hub is different than the old hub.

Yeah. So our launch hub was all manual. Everything was faxed in paper order. And, you know, that reached, you know, kind of a critical limit to us. We didn't think they could grow with us. And then we had the problems with that, you know, everything going through change. They had one, you know, one processor and we needed two. The new hub is all online. It can be all online. The docs can, you know, submit their orders. They immediately see that it's been received. They immediately see that the prior auth has been submitted, that it's been approved, what the copay is, that it's been shipped to the patient. And they love all of that. And it encourages them to prescribe more. But also things are getting filled well and faster. If something was missing that the doctor needed to provide for the prior auth to go through a clinical notice sometime, they can see that. There's a chat function where our case managers at the hub are speaking to the office, medical assistants and RNs. And so everything's just more modern, more optimal. And it's been effective. So we're very happy. We're very encouraged by that.

And it seems like it's still early days. I mean, just maybe speak to your optimism

that that continues to get better as physicians get more and more confident with the new hub. And then just second, John or Steve, what should we think about for kind of the cadence of growth to net changes? You kind of said we still expect kind of 30 to 35% longer term. I mean, if we look at that next year, do we get there just on some of the Medicare changes that are upcoming or does that assume that we contract with some of these larger PDP Medicare Advantage plans? Thanks.

So on the second question on the GTN, so we do expect it to go up in the second half of this year, driven a lot by the IDNs. So we're seeing more IDN business and it's a discount versus whack. So that will have an impact on our GTN for the balance of this year. I think we think it's going to be in the same range. So stock quarters, Q3, 10 to 15%, Q4 in the same range. So I think we can model it that way. Then I think next year, things change. You have mandatory rebates with Medicare in the early stage and then in the catastrophic stage. And we'll be doing supplemental rebates with the Medicare payers as well. So we still think that long term, and I mean long term being next year, it could be in a 30 to 35% GTN. We think next year sets up well, like spectacular for us, because with the redesign, patient co-pays are capped. They're going to smooth it. So it'll be $166. So where we lost scripts is when a patient has a high co-pay. So we really think next year, with the capping at $166, that our fill rate continues to go up. Now we mentioned it was in the, for August anyways, it's in the 60s, little 60s. No brand's going to get above 80, 85%. We always will have a little gap because we have those scripts that are written and the doctors kind of put them on layaway. So, but we think once those get filled and they get, they do get filled, we fill them all the time, that we can get to 80%. Part of that is the co-pay when that resets next year and some of the progress we're making with the plans. Some of it is continued improvement in the hub. Again, it hurt us in April, but it's helping us now. So it was the right move. But there's still things you learn. There's things the reps can do better in the field with the doctors. There's things the doctors can do better. But

we think that's going to continue to move up, Chase.

Got it. Yeah. And then John, maybe just last one and I'll hop back in the queue. But do

you think it's going to take some time for Medicare beneficiaries to fully understand the changes that happen next year? Will they quickly grasp that their co-pays are essentially now capped monthly and the incentives are kind of different? That's another way. Do you think it can get to that 80, 85% range fairly quickly once that change happens? Or how do you think about that?

Yeah, I don't think it happens overnight with patients and physicians. So we have education we're going to be doing to patients, I mean, to assuming physicians about co-pays and how they've changed. But it's not going to change overnight. But we do think through the year it's going to get better as it rolls out and more patients understand how it works and physicians understand how it works. But we'll be educating. I

think it'll go up pretty significantly once everyone gets in catastrophic after 2000. Yeah. Because there won't be any co-pay drag

and friction.

Great. Thanks, Jason. Thanks, Jason.

At this time, there are no further questions and I would like to

turn the floor back over to John Kerr for any closing comments.

Thank

you. Okay, that concludes our call this afternoon. We are very pleased with our second quarter results and our leading indicators remain strong. Additionally, the financing that we announced is truly transformational for our company and provides the capital necessary to execute our 406 commercial plan while also pursuing long-term growth initiatives. I look forward to a successful year and providing our next quarterly update

in November. Thank you again and have a good evening.

Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.