scPharmaceuticals Inc.

Q3 2024 Earnings Conference Call

11/13/2024

spk10: Good afternoon and welcome to SC Pharmaceutical's third quarter 2024 earnings conference call. This time all participants are in a listen-only mode. Following management's prepared remarks, we will hold the question and answer session. To ask a question at that time, please press star followed by one on your touchtone phone. If anyone has difficulty hearing the conference call, please press star zero for operator assistance. As a reminder, today's conference call is being recorded. I would now like to turn the conference call over to Nick Colangelo of Vestor Relations to cover forward-looking statements. Nick, please go ahead.
spk06: Thank you, operator. Before beginning today's earnings call, we would like to highlight the following 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, management, expectations and plans for the business, the ongoing commercialization and marketing of FIRO 6, and other regulatory approvals of FIRO 6. 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 the future performance. It may involve and are subject to certain risks and uncertainties and other crucial 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 in this conference call, including responses to your questions, are based on current expectations as of today, and SC Pharmaceutical's expressively disclaims any intent or obligation to update these forward-looking statements except as required by law. With that, I will now turn the call over to John Tucker, Chief Executive Officer of SC Pharmaceuticals. John,
spk08: please go ahead. Thank you, Nick, and thank you to everyone who has dialed in to this afternoon's call. I will begin today's call by discussing the company's operational and business highlights the third quarter of 2024 before handing the call to Steve Barson, our Senior Vice President of Commercials, to provide a more thorough for row 6 commercial update. We will then provide a detailed review of financials from Rachel Noakes, SC Pharmaceutical's Chief Financial Officer, before closing the call out with a question and answer session. In the third quarter of 2024, we generated net revenue of $10 million. This represents an approximately 24% increase in net revenue from the second quarter of 2024. While we were disappointed with where the third quarter ended, given the strong demand at the beginning of the quarter, we are pleased with the growth we have seen so far in the fourth quarter. We see this growth being driven by the Salesforce expansion, the indication expansion to include class 4 patients, and continued growth in the IDN business. I will give a more comprehensive update on our longer-term growth initiatives momentarily. For row 6 gross net discount was approximately 15.7%, just over the high end of the range of 10 to 15% that we guided to during our second quarter results. The increase in our GTN is largely due to lagging CMS reporting on coverage gap rebates and to a lesser degree on for row 6 sales, integrated delivery networks, and hospital system pharmacies. For the balance of 2024, we anticipate the GTN to stay in the 10 to 15% range. And in 2025, we anticipate the GTN discount to increase up to 35% by the end of the year, driven by the Medicare Part D redesign. Please keep in mind, we feel the impact on the GTN to be more than offset by the lower patient co-pays due to the Medicare Part D redesign. We feel we are uniquely positioned to take advantage of the redesign and the lower patient -of-pocket costs in 2025. Looking towards our future growth opportunities for for row 6, one of our long-term initiatives has been the for row 6 indication expansion to cover all heart failure patients, including Class 4 patients that present more severe symptoms more frequently and have the greatest limitation on physical activity. Despite consisting of roughly 10% of the overall chronic heart failure market, Class 4 patients are responsible for over 30% of the hospitalization for heart failure, and Class 4 patients are more likely to benefit from for row 6 to manage their increased fluid events outside of the inpatient setting. Ultimately, we are focused on getting patients back to their maintenance therapies without the costly hospitalization and delay in patients having symptom resolution. This is a message that resonates strongly with both physicians and their patients. We are already filling prescriptions for Class 4 patients and are seeing an uptick in the size of our prescriptions, reflecting larger script sizes in Class 4 patients. Another key objective we accomplished this quarter that relates to the ongoing franchise expansion in for row 6 was the acceptance of our S&TA filing by the FDA to expand the indication to include the treatment of edema through the fluid overload in patients with chronic kidney disease or CKD. We believe for row 6, if approved, has the potential to play an important role in the CKD market, again being utilized by the patients who are comfortable with an at-home treatment option for their fluid buildup until their everyday oral loop diuretic treatment regime begins to work again. While these oral loop diuretics are the current standard of care and fluid overload for CKD patients, they do have limitations, particularly around acute spikes in fluid levels given that these oral loop diuretics have less predictable bioavailability. It is crucial that CKD patients' fluid levels are well controlled as fluid overload and CKD is associated with both significantly increased mortality as well as a faster decline in renal function and dialysis initiation. We've undertaken several steps to prepare for a potential launch of for row 6 in CKD. These initiatives include establishing a cross-functional team that has been field testing, positioning, conducting exploratory market research, identifying key opinion leaders, and calling on high impact nephrologists who are already treating heart failure patients that also have CKD. While we await our produce for date of March 6, 2025, we're undertaking every pre-launch activity to enable rapid commercial uptake should for row 6 receive approval for CKD. The final grow-up initiative we were focused on executing over the course of the third quarter is our low volume autoinjector, which we announced positive top line results from a PKPB bridging study in August. Importantly, the autoinjector demonstrated bioavailability .3% and participants receiving the autoinjector had similar urine output and urinary sodium and potassium excretion compared to IV ferroceimide. The autoinjector, if approved, has the potential of meaningfully reducing manufacturing costs compared to ferroceps current on-body infuser and offers a compelling treatment option for HCPAs in patients. We are continuing to work through our SMDA package and currently anticipate submitting to the FDA in January of 2025. Before I hand the call to Steve Parsons for a more comprehensive overview of ferroceps launch metrics, I wanted to quickly highlight the transformative financing that we completed early August that resulted in the net addition of roughly $75 million to SC Pharmaceutical's balance sheet and bolsters our projected cash foreign rate through expected profitability. In addition to the $75 million that was immediately available, SC Pharmaceutical has the ability to pull down an additional $50 million via both a debt and royalty stream facility that we put in place with perceptive advisors. In summary, we are pleased to have the validation and continued support from a great roster of both our new and existing equity investors. I will now turn the call over to Steve Parsons, SC Pharmaceutical's Senior Vice President of Commercial. Steve?
spk07: Thank you, John. We remain encouraged by the continued progress achieved during the third quarter. From launch through September 30, 2024, approximately 3,100 unique healthcare providers have prescribed ferroceps, representing a 13% increase compared to the second quarter and is reflective of our efforts to expand the ferroceps prescriber base while still increasing utilization with existing repeat riders. During the third quarter, we filled approximately 10,800 doses of ferroceps, up 16% from the previous quarter. Of note, the average number of doses per prescription has risen to 6.8 in the third quarter compared to an average of 6.3 doses in the second quarter. We anticipate this upward trend will continue, driven by the expansion of the ferroceps indication to include Class IV and some healthcare providers writing larger prescriptions for patients. Also, we have increased efforts over the past quarter to further penetrate advanced heart failure clinics now that the NYHA class restrictions have been removed. We have seen that advanced heart failure patients typically receive a higher number of doses per prescription. The new Ferrosix Direct patient services hub continues to perform well following the transition. The hub allows for streamlined online prescription submissions and offers a real-time data dashboard that all prescribers value. The prescribers and their staff can now track key information, including the patient's prior authorization submission, approval status, the patient's copay amounts, and the shipment date to the patient. This improved hub is intended to reduce friction from the prescribing process and we have received encouraging feedback from the healthcare providers thus far. They've highlighted the convenience and ease of access, which we believe will drive future increases in patient treatment volumes over the medium to long run. Convenience and ease of access is also what we are hearing from the IDN Hospital System customers who are seeking to bring Ferrosix into their internal distribution systems, which connect to the e-prescribing system and captures Ferrosix treatment data for all system specialists to see. Internal distribution can also support early discharge planning and meds to beds in addition to the normal home delivery service. To conclude, we've expanded our number of territories to approximately 90 for the fourth quarter and we feel with reach and frequency on more customers during the highest treatment opportunity of the year that these factors should have positive impact on our revenue. With that, I would like to hand the call to Rachel Nokes, SC Pharmaceutical's Chief Financial Officer.
spk09: Thank you, Steve, and good afternoon, everyone. Product revenues were $10 million quickly for the third quarter of 2024 compared to $3.8 million for the third quarter of 2023. Cost of product revenues were $3.3 million for the third quarter of 2024 compared to $1.1 million for the third quarter of 2023. The increase in both product revenue and cost of product revenue for the quarter ended September 30th, 2024, was due to an increase in demand of furosics further into commercial launch and related manufacturing costs. Research and development expenses were $3.5 million for the third quarter of 2024 compared to $3.4 million for the third quarter of 2023. The increase in research and development expenses for the quarter ended September 30th, 2024, which primarily due to an increase in clinical study costs offset by a decrease in pharmaceutical development, quality, regulatory, and employee-related costs. Selling general and administrative expenses were $21.3 million for the third quarter of 2024 compared to $14.1 million for the third quarter of 2023. The increase in selling general and administrative expenses for the quarter ended September 30th, 2024, was primarily due to costs associated with entering into the credit agreement and revenue purchase and sale agreement in August 2024, employee-related costs, commercial costs, patient support, and professional service costs offset by a decrease in taxes and insurance. SC Pharmaceuticals reported a net loss of $35.1 million for the third quarter of 2024 compared to $15.6 million for the third quarter of 2023. The increase in net loss for the third quarter of 2024 was primarily due to one-time charges related to the extinguishment of debt and accounting for the new financial instruments SC Pharmaceuticals entered into in August 2024. SC Pharmaceuticals' net loss for the third quarter of 2024 was 75 cents per share. The 75 cents per share was burdened by one-time charges of 47 cents per share. SC Pharmaceuticals ended the third quarter of 2024 with $91.5 million in cash and cash equivalents compared to $76 million in cash, cash equivalents, and short-term investments as of December 31, 2023. The transformative debt and equity financing that was completed in August funds the company through expected profitability. As of September 30, 2024, SC Pharmaceuticals' total share outstanding was ,040,134. That concludes our financial update and I will now hand the call back to John for closing remarks before beginning our question and answer session.
spk08: Thank you, Rachel. Thank you, Steve. This concludes our prepared remarks. At this point, we will open the call for questions.
spk10: Operator. Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. We ask that you leave your questions to one in a follow-up so that others may have an opportunity to ask questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes
spk05: from Rowana Ruiz. Just one second. Our first question comes from Rowana Ruiz with LeeRank Partners. Please proceed with your question.
spk04: Hi, this is Maisie on for Rowana Ruiz. We just have a couple of questions. I think first, curious as to what you think the doses per prescription could look like for row six and CKD relative to heart failure.
spk08: Steve, do you want to answer that?
spk07: Yeah, our early research suggests it will be similar. It won't be as high as class four heart failure patients, more like the class two, have several patients in the six to 6.5 range.
spk04: Okay. Thank you for the added color. Then with the potential autoinjector, if approved, what do you think the rate of on-body diffuser versus autoinjector could shake out to in the long term?
spk08: Yeah, so this is John. So we've modeled this based on some initial market research. We think at the end of the day, 90 plus percent of this will be in the autoinjector. Now the transfer rate or the adoption rate will be driven by a number of things. We don't think it'll get to 100%. We know there's some patients who for years have struggled with fluid overload and going back and forth to the hospital, the IV clinic, found something that works and will stay with it. We think the vast majority will move and new patients will adopt the autoinjector. So we think by the end of the convergence, 90 to 95% autoinjector.
spk04: Okay. And then a last one from us. What do you think about the holiday season? Is there any expected seasonality that we could see in Q4?
spk08: Yeah, I'll turn that over to Steve.
spk07: Yeah, the fourth quarter of the year is the biggest opportunity of the year based on how many patients get admitted to the hospital, visit ERs, fluid overload is a big problem around holidays. And so our model predicts it will have the most sales in the fourth quarter. That's where the most opportunity is for these patients. So there is seasonality.
spk08: Yeah, and some doctors will actually preempt understanding that the patients are going to have too much salt, too much turkey, too much Chinese food, whatever. And they will preempt by writing a script just in case that patient does get in trouble. So we see an opportunity both in that pre-admission or even prophylactic therapy. And as I said in my prepared remarks, we are seeing a good start to this quarter. We haven't even really gotten close to the holidays yet.
spk04: Okay, great. Well, actually to follow up on that, when do you usually see that with the kind of stocking up maybe physicians like prescribing for the holidays? Does that come in Q3 or is that something that you expect to see more in the November, December period?
spk08: It's a Q4 phenomenon. So we'd expect to see it November, December. Okay, okay, great.
spk04: Thanks. That's all from us.
spk05: Thank
spk10: you. Our next question comes from Stacy Kuh with the TD Count. Please proceed with your question. Thanks
spk02: for taking our questions. We had a few. So just first regarding class IV patients, as you exit the year, what percentage do you think will be class IV? And long term, where do you think it could stabilize? And then for CKD, still early days, but can you comment on how the initial nephrology detailing is going and what you're learning about the upcoming CKD launch? Thank you.
spk08: Sure. Hey, Stacy. It's John. I'll take the class IV. So we think it's right now about 10%, 10%. We didn't really launch it until September, so it's early. I think what we have seen, though, is an increase in the script size. So there might be about 10% of our scripts as we're sitting here today. We think that'll grow through the quarter and then into next year. But I think as impactful to us is going to be the size of the scripts. Eight doses per prescription. We're seeing about eight doses per prescription on class IV. So we're enthused about how many scripts we're seeing for these patients, but also the size of the scripts. And as we stated before, we think a lot of that could be palliative care. When a patient's going to use an IV clinic to go in three times a week to get IV treatment, now they can do that at home as well as preventing using the hospital as an IV clinic. As far as nephrology, the offices were called on and we just started this initiative month, month and a half ago. But Steve, maybe you can talk a little bit about the reception we've had.
spk07: Is the question about actual prescribing by nephrologists in heart failure or is it market research that your question was about?
spk02: I'm just kind of curious what the reception is to, right now, it's kind of concomitant heart failure and CKD patients. But I'm sure that's kind of giving the Salesforce and you all an idea of what the receptivity will be when you launch CKD. So a little bit of both.
spk07: Yes, okay. Well, it's pretty positive. We get a lot of inbound requests to go see nephrologists. They weren't on our original target plan for this year. They were going to be built in for next year. But we do get inbound requests for opening the account. They hear about it from cardiology. So it's been pretty positive. They don't have access to IV in their offices, outpaged IV. So they need a product like 306. And their adoption has been, I'd say, a little faster than cardiology in the offices that we've been to. They see the need. They see the overlap, cardiorenal, and they prescribe.
spk08: I think Steve made a really good point, Stacy, is that in heart failure, they'll sometimes have IV clinics at the heart failure clinic. Nephrologists really don't have access to that. So you hear a lot of them using non-loop diuretics like metolazone out of sheer, they have nothing else to use. So we've been enthused about the reception and market research in CKD.
spk07: We just had an American Society of Nephrology meeting a week ago. And that was very positive. That's the news.
spk02: Okay, incredibly helpful. Thank you.
spk05: Thanks, Stacy.
spk10: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Doug Sal with HC Wainwright. Please proceed with your question.
spk03: Hi, good afternoon. Thanks for taking the questions. John, I guess I'm just trying to understand a little bit around some of the dynamics that led to a little bit of a slower end of the quarter than you expected. Was it that your prescribers started to write less frequently as individuals or did the breadth of your script writing diminish a little bit through the quarter?
spk08: Yeah, Doug, we were disappointed with how the second half of the quarter went. And it really was something we didn't fully... You really can't handicap how your coverage gap rebates play in. So the coverage gap rebates kind of hurt us in two places. One in our GTN, which was... We had given a range 10 to 15. It came in at 15.7. So we've been a little above the high end. Obviously, every point there cost you over $100,000 in revenue. So that hurt us. And then the flip side of the coverage gap rebate is when patients get in it, the ones that can afford to pay the higher copay, they pay it. It hurts you on your GTN because you're paying a 70% rebate on all of those patients. And that's what really drove the GTN. But on the flip side of that is when patients have high copays, we know they abandon it. So we saw continued growth in scripts written. These patients that were in the coverage gap, a lot of them did not fill the script because of the copay. The good thing about that, two good things about that, if there are any, the silver linings is in Q4, these patients have typically all gone through the gap and are now in catastrophic where their copays are lower and our responsibility is lower. So it helps our GTN and helps the fill rate. And then again, next year, you don't have any coverage gap at all. As you go to the redesign, where patients out of pockets, if they smooth, cannot be more than $166. So it's really a phenomenon of coverage gap. It's always hard to anticipate early in a quarter what the rebates are going to be and what that coverage gap copay is going to be. But that's what we didn't anticipate that level of coverage gap. We thought the patients had gotten through it in the second quarter, early in the third, but they clearly hadn't as we were looking at the copays coming in. They were
spk05: higher than we had anticipated. But the script demand was
spk08: there, it continued to grow. It's just that the fill rate in the first half of the quarter was much higher
spk05: than it was in the second half of the quarter. Okay, great. Thank you. Thanks Doug. Our next question comes from Chase Knickerbocker with Craig's Club.
spk10: Please proceed with your question.
spk01: Good afternoon. Thanks for taking the questions, guys. Just first, and sorry if I missed it, jumping around some calls here. What was the conversion rate in the third quarter? And I guess what kind of improvement did you see kind of sequentially there? Yep, so Steve, what was your?
spk07: We ended up at 53% fill rate of our excess compared to about 48% in Q2 of our excess. It was higher, as we said earlier in the quarter, moderated by the end of the quarter with the coverage gap. Patients, some of them declining, 25% cost of the gym. And
spk08: keep in mind, you know, our fill rates fill, we have the dynamics of doctors putting product on layaway and also of just doing coverage determination. So it's always noisy, but it did go up about 10% from Q2 to Q3. But clearly challenged a bit by coverage gap rebate patients in the quarter.
spk01: Got it. And so, you know, doses written, decelerated a little bit sequentially from a standpoint of growth. Was that largely this coverage gap kind of dynamic, or is there any other kind of dynamics in the quarter that you call out? And then John, as we kind of are halfway through Q4 here, can you talk to kind of how that conversion rate looks so far on Q4? Thanks.
spk08: Yes, so to go back to Q3, yeah, you know, again, the coverage gap, the thing about that, the script gets written, we did see growth in scripts from Q2 to Q3. We saw, you know, growth in filled units, you know, rise from Q2 to Q3 about 16%. That doesn't include the IDNs as well, which, you know, we added a number of IDNs, and that business continues to grow. In Q4 so far, Steve, on the fill rate, where do you?
spk07: 54,
spk08: 55. 54, 55, I think we're seeing a little tick up as patients get through the gap and into catastrophic. But we still have the phenomenon of coverage, COFA determination, and doctors writing layaway scripts. So, but we are seeing it trending up this quarter versus last, trended up last quarter versus the quarter before. So that's where we are.
spk01: Got it, and that kind of polarizes into kind of my question, kind of around next year. If we think about kind of the Part D redesign and what that can do, you know, again, for kind of improving conversion rates and generating, you know, hopefully, increased demand as well. Can you kind of talk a little bit to kind of any updated expectations as far as where you see that conversion rate going? And then last, guys, I'm sorry for all the questions. Any return thus far on kind of the new reps that were hired in Q3, you know, happy with their progress thus far? No, it's early days, but any, you know, early green shoots there? Thanks.
spk08: Yeah, I think, so let me answer the second question first. Yeah, the new reps, you know, we, one thing we look at every week, every day, is what percentage of the territories are contributing. And the new reps in the new territories have already started to contribute. You know, we didn't get them really out in the field. Until the beginning of October. So there really was zero impact of them in Q3. But we have seen, I think we said it usually takes six weeks or so to get them to make any contribution. They got to call the doctors a number of times to get them to write in new territories. But yes, we've seen a contribution. That's why we're really excited about where we are, because these reps are in the field. They're converting doctors now. The fill rate is ticking up. We think it will continue to tick up a bit this year. And then next year, you know, what I can tell you where our model is. And, you know, we think the redesign, Kishu and I talked about it, is really, really beneficial for us. We're in a category where there's no competitor. And patients will be able to smooth their copay. So those coverage gap copays that are big, and we're talking big, over $1,000, $2,000, some of these copays, they're going to be at $166 a month. And these are heart failure patients, and that's for all of their meds. So we're projecting, you know, 65% fill rate. Now, the fill rate, that's great. But what that does also is you'll get more doctors prescribing as they understand more of their patients can afford the drug. And we're already, you know, we're already out with the forms are out from the payers on how to sign patients up for the smoothing. All the plans, there's a CMS form, but the plans customize it a little bit. We have all of the plans forms. They're in the hands of our specialty pharmacies and our hubs. And we're helping to sign, and we can't sign them up, but we can certainly provide them the form to get them signed up into the smoothing. So we think 65, could that be higher? Yeah, it could be. But I think the impact of that obviously is a big jump in your fill rate, but also a big jump in prescriptions being written. So we look at the tail, our tailwinds coming in, you know, for this quarter, it's the Salesforce expansion. It's a class four labeling for next year. You know, even at January, you're going to have the benefit of the Salesforce expansion. You're going to benefit of class four for the full quarter. And you're going to have benefit of the redesign, which might be the most impactful of all of those things. And then in March, here comes our CKD indication in the beginning of March. So we think it's setting up for a really interesting
spk05: year for us next year. Got it. Thanks. We
spk10: have reached the end of our question and answer session. I would now like to turn the floor back over to John. For closing comments, please go ahead, sir.
spk08: Thank you very much. And that concludes our call this afternoon. As we have stated, we remain encouraged by the ongoing launch of Ferozix and are consistently receiving overwhelmingly positive feedback on how well Ferozix is performing and being accepted in the field. We have a number of tailwinds that are back as we go through the fourth quarter and into 2025, including the expanded Salesforce class for label expansion, the CKD indication in the quarter of 2025, and the Medicare redesign that takes effect January 1st of 2025. I look forward to a successful Q4 and providing our next update. Thank you very much.
spk10: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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