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.
spk03: Good afternoon, and welcome to Sopranos Pharmaceuticals' third quarter 2022 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. As a reminder, this conference call is being recorded, and I would now like to turn the conference over to Peter Vazzo of ICR Westwick, Investor Relations Representative for Sopranos Pharmaceuticals. Sir, you may begin.
spk01: Thank you, Chris. Good afternoon, everyone, and thank you for joining us today for Sopernos Pharmaceuticals' third quarter 2022 financial results conference call. Today, after the close of the market, the company issued a press release announcing these results. On the call with me today are Sopernos' Chief Executive Officer, Jack Katar, and Chief Financial Officer, Tim Deck. Today's call is being made available via the investor relations section of the company's website at ir.sopernos.com. During the course of this call, management may make certain forward-looking statements regarding future events and the company's future performance. These forward-looking statements reflect Sopernos' current perspective on existing trends and information. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the risk factors section of the company's latest SEC filings. Actual results may differ materially from those projected in these forward-looking statements. For the benefit of those of you who may be listening to the replay, this call is being held and recorded on November 8, 2022. Since then, the company may have made additional announcements related to the topics discussed. Please reference the company's most recent press releases and current filings with the SEC. Superntis declines any obligation to update these forward-looking statements, except as required by applicable securities laws. I will now turn the call over to Jack.
spk05: Thank you, Peter. Good afternoon, everyone, and thanks for taking the time to join us as we discuss our 2022 third quarter results. During the first nine months of 2022, we continue to execute on our long-term growth strategy, focusing on successfully transitioning from our legacy and mature products to our growth products. Products acquired or launched since 2020 accounted for 42% of our total net product sales, slightly surpassing Trekendi XR's net product sales contribution in the third quarter. For the first nine months of this year, total revenues were $500 million, representing a 19% increase over the same period last year. Adjusted non-GAAP operating earnings of $91 million reflected continued significant investment in Calgary. During the third quarter, the company increased its commercial efforts, including a direct-to-consumer campaign to build more momentum behind the adult launch and to support the important back-to-school season. Calvary's launch continues to progress well with increased momentum in prescription growth and shipments due to the launch in the adult population and the back-to-school season. And during the third quarter of 2022, total IQVIA prescriptions for Calvary reached 94,328, representing an increase of 50% compared to the second quarter of 2022. Prescriptions in the most recent month of September reached 34,633, the highest monthly total since the launch. Based on weekly IQVIA prescription data by age, at the end of the third quarter, adult prescriptions represented approximately 23% of total Calvary's prescriptions. During the third quarter, which was the first full quarter after the launch in adults, Adult prescriptions grew by 77%, and pediatric prescriptions showed solid growth of 43%. Calvary continues to expand its base of prescribers with over 14,265 prescribers in the third quarter of 2022, up from 9,276 prescribers in the second quarter of 2022. We continue to receive positive feedback from prescribers regarding the performance of Calvary in patients. A recent survey among prescribers for adult patients showed a 90% overall satisfaction level with Calvary compared to only 51% for Stratera. Regarding recovery, the product delivered another quarter of solid growth with net sales reaching $27.9 million in the third quarter of 2022, a 16% increase compared to the third quarter of 2021. For the first nine months of 2022, GoCoverie net product sales were $75.2 million, an increase of 22% compared to net product sales reported by Adamus in the first nine months of 2021. AccelerXR continues to perform well with net product sales of $88 million for the first nine months of this year, representing a 7% increase compared to the same period last year. For the nine months of 2022, nut product sales of Trocandy XR were $204 million, down from $232 million in the same period last year. The company has significantly reduced its in-person sales efforts in the second half of the year, but continues to provide support to physicians and patients through various sales and marketing programs. Moving on to the pipeline, as we announced last month, the FDA issued a complete response letter for the SPN830 new drug application. The CRL didn't request additional efficacy and safety clinical studies, but rather required additional information and analysis related to the infusion device and drug product across several areas of the NDA, including labeling, product quality and manufacturing, device performance, and risk analysis. The FDA mentioned that approval of the NDA requires inspections that could not be completed in a timely manner due to COVID-19 travel restrictions. We will continue to work closely with the FDA and our partners to address all questions and to provide clarity regarding the potential timing of a resubmission of the NDA. FDA has made an initial determination that the amendment to the company's application in response to the CRL will be subject to a Class II or six-month review timeline. For SPNA20, our first-in-class orally active mTORC1 activator, the Phase II multicenter randomized double-blind placebo control study in adults with treatment-resistant depression is ongoing. The study will examine the efficacy and safety of SPNA20 over a course of five weeks of treatment in approximately 270 patients. Primary outcome measure is a change from baseline to end of treatment period on the Montgomery Aspect Depression Rating Scale total score, a standard depression rating scale. We're on track also to initiate an open-label Phase II clinical study with SPN817 in the fourth quarter of this year in patients with treatment-resistant seizures. SPN817 represents a novel mechanism of action for an anticonvulsant and utilizes synthetic form of fuprazine A, which is a potent acetylcholinesterase inhibitor with pharmacological activities in CNS conditions such as epilepsy. And finally, we continue to be active in corporate development, looking for strategic opportunities to further strengthen our future growth and leadership position in CNS. With that, I will now turn the call over to Tim.
spk02: Thank you, Jack. Good afternoon, everyone. As I review our third quarter 2022 results, please refer to today's press release. Total revenue for the third quarter 2022 was $177.4 million, a 19% increase compared to $148.5 million in the same quarter last year. Total revenue in the third quarter of 2022 was comprised of net product sales of 172.7 million and royalty revenue of 4.7 million. The third quarter revenue is the highest quarterly revenue in the company's history. The increase was primarily due to net product sales of GoCoverie from the acquisition of Adamas in November of 2021 and growth in net product sales of Kelbree and Oxfeller XR. For the third quarter of 2022, Combined R&D and SG&A expenses were $131.9 million as compared to $91.7 million for the same period in 2021. This increase was primarily due to activities to support the launch of Calgary and the investment in the Calgary direct-to-consumer campaign. As Jack mentioned, the DTC campaign and associated expenditures were substantially complete in the third quarter of 2022. Amortization of intangible assets for the third quarter 2022 was $20.6 million compared to $6 million for the same period in 2021. The increase is due to the Adamas acquisition. Operating loss on a GAAP basis for the third quarter 2022 was $1.5 million as compared to an operating gain of $32.6 million in the same period of 2021. The decrease in GAAP operating earnings, which was expected, is primarily attributable to higher expenses to support the launch of Calgary, the investment in the DTC campaign, and the aforementioned amortization of intangibles associated with the Adamas acquisition. Income tax for the third quarter of 2022 was a tax benefit of $2.2 million as compared to income tax expense of $7.4 million for the same period in 2021. This benefit was primarily due to a quarter-to-date loss and a windfall benefit from stock-based awards as compared to the prior quarter-to-date expense. GAAP net earnings were $1.7 million for the third quarter of 2022, or $0.03 per diluted share, compared to $21.6 million, or $0.40 per diluted share in the same period last year. On a non-GAAP basis, which excludes amortization intangibles, share-based compensation, contingent consideration, and depreciation adjusted operating earnings were $25.4 million compared to $43.3 million in the third quarter of 2021. Total revenue for the nine months ended September 30, 2022, was $500 million, a 19% increase compared to $420.7 million in the same period last year. Total revenue was comprised of net product sales of $485.6 million and royalty revenue of $14.3 million. The increase was primarily due to net product sales of GoCovery from the acquisition of Adamas in November 2021 and growth in net product sales of Calgary AnnexDollar XR, all set in part by a decline in net product sales of Trekendi XR and Apiken. For the nine months ended September 30th, 2022, Combined R&D and SG&A expenses were $360 million as compared to $272.4 million for the same period in 2021. The increase in expenses is primarily due to activities to support the launch of Calgary, the investment in the DTC campaign, and costs to support recovery. Amortization of intangible assets for the first nine months ended September 30, 2022, was $61.9 million. compared to $18 million for the same period in 2021. Operating earnings on a GAAP basis for the first nine months ended September 30, 2022, was $11.8 million, as compared to $79.9 million for the same period in 2021. The decrease in GAAP operating earnings is primarily attributable to the higher expenses to support the launch of Calgary, the DTC campaign, and the aforementioned amortization of intangibles. Other income expense for the first nine months of September 30th, 2022 was $13.8 million of income as compared to $8.8 million of expense in the first nine months of 2021. The increase is primarily due to a gain recognized on our share of a distribution from a sale of the subsidiary of Navitur and a decrease in interest expense due to the adoption of a new accounting standard in the first quarter of 2022. Income tax for the first nine months ended September 30, 2022, was a tax benefit of $9.6 million as compared to an income tax expense of $20.1 million for the same period in 2021. The benefit was primarily due to a corporate reorganization of the Adamas entities in the first quarter of this year. GAAP net earnings were $35.2 million for the first nine months ended September 30, 2022, or $0.62 per diluted share, compared to $51 million or $0.94 per diluted share in the same period last year. On a non-GAAP basis, which again excludes amortization of intangibles, share-based compensation, contingent consideration, and appreciation, adjusted operating earnings for the first nine months of 2022 were $91.9 million, compared to $106 million in the same period in 2021. As of September 30th, 2022, the company had approximately $523.7 million in cash, cash equivalents, and marketable securities, compared to $458.8 million as of December 31st, 2021. This increase is primarily due to cash generated from operations. For the full year 2022, the company is raising the midpoint and narrowing the expected ranges of full year 2022 financial guidance for total revenue and for GAAP and non-GAAP operating earnings. As such, we expect total revenue to range from $650 million to $680 million, compared to our prior guidance of $640 to $680 million. For the full year 2022, we expect combined R&D and SG&A expenses to range from $460 million to $475 million. compared to our prior guidance of $460 to $490 million. Overall, we expect 2022 GAAP operating earnings to range from $35 to $45 million, compared to our previous guidance of $20 million to $40. We expect our non-GAAP operating earnings to range from $135 million to $155 million, as compared to our previous guidance of $130 million to $165 million. With that, I will now turn the call back to our operator for Q&A. Operator? Thank you, sir.
spk03: To ask a question, you will need to press star one one on your phone. Please stand by as we compile the Q&A roster. One moment for our first question. Our first question will come from David M. Sellem of Piper Sandler. Your line is open.
spk04: Hey, thanks. So just had a few first on Calgary. Can you just talk about the gross to net in 3Q? Looks like it was a stable or trended down a little bit. So talk about those dynamics. And are you still sticking to your aspirational target of 50 to 55 percent? over time, and then related to that, talk about your payer slash PBM contract negotiations and where things may stand there. So that's number one. Number two is on, for Kendi, might be a little bit early to talk about this, but can you give us some of your latest thoughts on what you think the erosion might look like or ask differently how you are thinking about generic market formation and overall erosion of volumes and sales next year. That would be helpful as well. Thank you.
spk05: Yeah, sure. Regarding the first question on Calvary, the gross to net in Q3 is fairly stable, a little bit better than Q2, but that's a quarter-to-quarter type of fluctuation. So yes, it did trend down. It's more in the 60% in the third quarter. The target, yeah, absolutely is still in the 50% to 55%. That would be great. You know, we're working pretty hard to get to that target as soon as we can within, you know, reasonable contracting parameters if we can achieve those. So we will continue to have discussions with the various PBMs on hopefully reaching something that could be reasonable that will also help us on the gross to net eventually. As far as fricandia XOR and the erosion, we are planning at this point, obviously we're getting very close to next year and we'll talk more about it hopefully in February, but we're going to plan at this point and we ask people to look for, as we said earlier, erosion, probably around 90% erosion by December, so over 12 months, kind of 90% erosion by the end of 2023. It might be a little bit slower in the first quarter, and then it will later dip quicker. The timing is really difficult to predict on whether you have a second generic and on how many SKUs out of the four different SKUs or product strengths that we have. So it looks like there will be a first generic that will come in January 1 as the settlements allow on three product strengths. But there is still a very open question on 180-day exclusivity on these three product strengths, as well open question on the 180-day exclusivity on the fourth product strength. There is a second generic who has approval on all four product strengths. So depending on the 180-day exclusivity status of these product strengths, it will determine then the timing of the entry of the second generic. So all that is still at this point not 100% clear or certain, but that's where we are at this point, and that's the latest information we have on that.
spk04: Okay, that's helpful. Thanks.
spk03: Thank you. As a reminder, to ask a question, you'll need to press star 1 1 on your phone. One moment, please, for our next question. The next question will come from Annabelle Samimi of Stifel. Your line is open.
spk00: Hi, this is Jack calling in for Annabelle. Thanks for taking our questions. Two from us. So, first on Calvary, we've seen a pretty meaningful uptake in prescription since the adult launch. Is this early penetration primarily from a growing desire for non-stimulant options or more due to either a rebound from the back-to-school season or a lack of availability from Adderall given manufacturing delays? Just wanted to know if you think this is a sustainable trend or one that you could see reversal of when stimulant supplies return. And secondly, on GoCoverie, I know you've mentioned previously that your intentions with the effective relaunch were to essentially rework the narrative and focus on dyskinesia first and off-episode second to better differentiate it from competitors. Do you have any early indications on how receptive physicians have been to this new strategy and if they've begun to more meaningfully understand the advantages of the dual profile? Thanks.
spk05: Yeah. Regarding the first question on Calvary and the uptick, in the prescriptions, certainly we have two dynamics on top of each other, you know, working together in growing Calvary and accelerating its growth in the third quarter. As you well pointed out, first the adult launch, which we launched it at the end of May, but then as the summer season, you know, dwindled down, so to speak, and back-to-school seasons start coming up, you had the back-to-school effect on the pediatrics. As I mentioned in the remarks, as far as the adult growth was around 77% growth in the third quarter, which was fairly the first full quarter right after the launch. And we continue to see adult growing. So that is still growing. And then at the same time, we didn't see pediatric slowing down. So pediatric continues to grow in the third quarter because of the back to school season. So we're pretty pleased right now with both patient populations. you know, continue to show solid growth in both sides of the business. As I mentioned, 23% of our prescriptions, you know, per the weekly data that we get, which breaks it down by age, is showing that about 23% is an adult. So we have a long way to go as far as growth potential, because if you remember, the market is split up 67% adult and the remainder of pediatrics. So we have a lot of potential out there that we can tap into. And what really keeps us positive about all this is certainly at the end of the day is the feedback we get from physicians about the performance of the product. So consistent with what we've seen now for almost a year and a half, almost soon will be two years in the pediatric side, We're seeing the same thing on the adult side, you know, with positive feedback from physicians about the use of the product in the adult population. As I mentioned, the overall satisfaction is 90%, which is really high, compared to what they are used to. And these are the same physicians who typically prescribe Stratera or other non-stimulants. And on Stratera, for example, I mentioned there's only 51% overall satisfaction. So clearly, Calvary is separating itself from other non-stimulants. It's also continued to be used, or the primary reasons and the primary type of patients that physicians are putting on Calvary, these are patients who are coming from the stimulant segment. So there is still a lot of dissatisfaction in the stimulant market, despite the fact that stimulants dominate the market, about 90% of the prescriptions. but there's so many patients out there that are dissatisfied and stimulants are not the right option for them. So we continue to bring a lot of the patients and the primary source of our patients, at least all this since we launched it in 2021, seems to be coming from the stimulant segment, as well as, of course, with folks who are not satisfied with the other non-stimulants in the marketplace. So all in all, Looks like the source of the business is coming from different areas of the market, so we're not only seen as one treatment option in non-stimulant, but we're drawing in a lot of stimulant usage. We don't believe the Adderall shortage, for example, which many people have asked us about. A lot of the shortages in the immediate release product and so forth actually may be the wrong patient profile we're looking at here. So we completely focus on selling our product based on the merits of our product, and we want the right patients to be on our product because if you have the wrong patients, they may not end up being, you know, fulfilled with the product that we have because it's the wrong product for what they're looking for. And then finally on GoCovery, regarding the narrative of the positioning, we It is actually one of the unique issues and the attractiveness of recovery in the marketplace in Parkinson's, the fact that we can treat both of episode and dyskinesia. And what we're finding out is that among physicians, whether they're movement disorder specialists or neurologists who are very well entrenched in the Parkinson's space and they're well-versed about treating Parkinson's, And then you have the general, general neurologist. There are differences in how they treat. There are differences in how they look at dyskinesia. Everybody pretty much treats off. That's the most common thing, obviously. But not every physician is as attentive or every patient is as well-spoken about their issues and really raise the issues with their physicians about dyskinesia and other things. It takes a lot of market education, which we've been doing a lot since we took over the product, in really helping folks understand the dynamics between both, the fact that they don't have to have a tradeoff between treating off and dyskinesia, and they can treat both at the same time. But it does require a change in habits, and these things do take time. They take frequency by our sales force to continue to hammer that message. and the importance of looking at the overall condition of the patient, not just of episodes or not just dyskinesia, but you could actually treat both and look at the overall condition and the overall status of the patient. So it's a work in progress. We're pretty pleased with the continued solid growth of the business. Clearly we're doing the right things, and it's resonating with physicians, and we continue to grow the brand.
spk00: Great. Thank you.
spk03: Thank you. Again, to ask a question, you'll need to press star one one on your phone. Please stand by as we compile the Q&A roster. And I am seeing no further questions in the queue. I would now like to turn the conference back to Jack Katar for closing remarks.
spk05: Thank you. In concluding our call this afternoon, I would like to emphasize that Calvary's and GoCoverie's growth are our top priority. We're excited about Calvary's momentum as well as GoCoverie's performance and continued growth since the completion of the Adamus acquisition. We look forward to building on the momentum and finishing the year strong. I would like to thank all our employees for delivering a solid quarter with record revenues for Sopernos and look forward to updating everyone on our next call.
spk03: This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
Disclaimer