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spk16: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1. the conference will begin shortly to raise and lower your hand during q a you can dial star one one ladies and gentlemen good afternoon i'd like to welcome everyone to the theravance biopharma fourth quarter and full year 2022 conference call
spk22: During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks. To ask a question, press the star key followed by the digits 1-1 on your telephone. Again, that's star 1-1 to ask a question. If listening via webcast, please mute audio on your webcast device before asking a question over the phone. I will repeat these instructions after management completes their prepared remarks. Also, today's conference is being recorded. And now I'd like to turn the call over to Rick Winningham, Chief Executive Officer. Please go ahead.
spk06: Good afternoon, and thank you for joining the Garavance Biopharma fourth quarter and full year 2022 conference call to discuss our business. I'll remind you that this call will contain forward-looking statements that involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, anticipated timing of clinical trials, regulatory filings, and expected financial results. Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in our filings with the SEC. I direct your attention to slide three. Joining me today are Rhonda Farnham, Chief Business Officer, Rick Graham, Research and Development, and Aziz Swaf, Chief Financial Officer. Before I get started, I'd like to make a brief statement regarding the public announcement that Irenic made earlier today. The board and management are committed to acting in the best interest of the company and all of its shareholders, and we're open to evaluating all ideas to maximize shareholder value, including those from IRENIC. We're disappointed that IRENIC has chosen to make a public announcement of this nature as we have engaged in substantive constructive dialogue on multiple occasions to work cooperatively with them. We even offered to speak with them under a non-disclosure agreement in order to discuss their ideas and our upcoming plans, but our offers were refused. Our nominating and governance committee has regular board refreshment process in place to thoroughly evaluate all potential candidates and their skill sets, including relevant industry experience and public board experience. Our committee and other members of our board management team met with Andy Dodge to consider him good faith as a candidate to join our board. But given his lack of healthcare and relevant public company board experience, we ultimately determined that he was not the most suitable candidate for the board. We remain focused on the business and continuing to execute the ongoing transformation. The Theravance board and management team believe that today's announced strategic actions And the path that's set forward for 2023 will indeed continue to drive value creation. We won't take any questions during the Q&A regarding IRENC's public announcement. Now, moving to slide four. The Saravans board management team has a demonstrated track record of taking action to create near and long-term shareholder value. As the company's evolved over the past 18 months, we're continuing to take strategic action, but build on our focus, execution, and performance. We remain committed to acting in the best interests of the company and all of its shareholders. Today, in addition to financial results for the fourth quarter and full year ending on December 31st, 2022, we announced three additional strategic actions to sharpen the company's focus and drive value creation. Those are outlined on slide four. First, we've increased our capital return program by $75 million to $325 million in total. The expansion of the open market share buyback program was a strategic decision, following consultation with shareholders on both the quantum and the instrument, market analysis, and continued assessment of our balance sheet and cash needs going forward. We will discontinue investments in research, including the inhale jack inhibitor program, to focus exclusively on ampryloxetine and upelry. This means that we've made the difficult yet necessary decision to reduce head count by 17%, and we plan to complete the reductions by the end of March 2023. We thank the exceptional research team for their valuable work and dedication to the company. We will seek a strategic transaction to continue the progression of their work on the Inhale Jack program. As our company transforms, our board regularly evolves as well. I'm delighted to welcome Susanna Gray to the board of directors as our newest independent director. The board was introduced to Susanna while working with a leading independent search firm in connection with our nominating and governance committee's regular evaluation of the board of directors and board refreshments. Her deep expertise in our industry, as well as her experience in value creation and strategic transactions, will augment the established board's and management's capabilities. In addition, our lead independent director, Bill Young, will not be standing for reelection to the board of directors at the company's 2023 annual general meeting for shareholders. I'd personally like to thank Bill for his tireless service to the board and the company. I'll miss Bill's guidance and mentorship. Following the appointment of Susanna and Bill's departure, the board will continue to be comprised of eight highly qualified directors, seven of whom are independent, all of whom are committed to maximizing value for shareholders. As we continue to execute on the vision for the company set forth in our restructuring, our board also considers the company's governance structure and needs and is determined to put forth a proposal at the May 2nd, 2023 annual general meeting for shareholders to declassify the board of directors over time. We'll be providing more details in our proxy statement. Moving to slide five, I'm proud of what the TheraVance team has accomplished this past year. We're successfully positioned the company to create value from a foundation of financial strength. no debt a strong cash position having ended the fourth quarter with 327 million of cash and cash equivalents since announcing the trilogy royalty transaction and the capital return program the company's driven total shareholder return of 14 versus the s p biotech index of the negative two percent and the s p 500 of six percent over the same period representing an outperformance nearly 17% and 9% respectively. And this TSR period was calculated with the market close as of February 23rd. Our path forward for 2023 is clear and focused as outlined in slide five. I'll now hand the call over to Rhonda in a moment to review UPelry's 2022 performance, results of which give us both the momentum and the confidence to deliver in 2023 and beyond. Rick will discuss how we are well-positioned to enter a new era in treating NOH and multiple systems atrophy patients with the potential to offer a unique first-in-class treatment benefit with ampryloxetine. And Aziz will share the details on the financials. I'll now turn the call over to Rhonda to discuss upelry.
spk15: Thank you, Rick. Looking to slide six, we are very pleased to share the latest performance update on upelry. In Q4, net sales of upelry reached another quarterly high launched to date. As a reminder, TheraVance and Vietris co-promote upelry in the U.S. TheraVance's commercial and medical teams cover the hospital segment, and Vietris is responsible for the outpatient-based community healthcare needs and promotion for the product. Slide 7 shows Farrah Vance's implied 35% share of net sales for UPelry during the fourth quarter of 2022 of $19.5 million, up 27% from Q4 of 2021. I am also pleased to highlight that the implied 35% of UPelry net sales for the full year of 2022 was $70.7 million, which represents a 25% year-over-year net sales growth. The significant growth for the brand was again driven by strong overall customer demand from hospital and community outlets. In Q4 of 2022, demand increased by 6% quarter over quarter and by 19% year over year. Looking specifically at the TheraVans hospital efforts on the right side of slide 7, in Q4 of 2022, Doses sold exclusively in the hospital setting represented an increase of 22% from the previous quarter, demonstrating the highest quarterly hospital volume launched to date, which led to full year growth of 53% over 2021. We have continued to see significant growth in UPelry's hospital business every quarter since Q3 of 2020. 580 secured hospital formulary wins launched to date have led to approximately 1,200 purchasing hospital outlets through the end of 2022 driving that growth. Also, additional adoptions are increasing weekly. We believe these wins and forthcoming system additions will yield continued growth through 2023 as UPelri will be the first llama of choice in many hospitals due to the growing recognition and acceptance of UPelry's clinical benefits and once daily value proposition. Turning to slide eight, UPelry's share of the hospital setting decreased to 12.5% in Q4 of 2022, although UPelry's hospital volume continued to set a new quarterly high as seen on the previous slide. The hospital market share drop can be attributed to the largest quarter-over-quarter growth in the long-acting nebulizer market since UPelry's introduction. This growth was driven by an increase in hospital census associated with the tridemic, which is the confluence of RSV, influenza, and COVID at the end of 2022. As the hospital long-acting nebulizer market volume has stabilized so far in early 2023, UPelry's hospital share has returned yet again to its highest level. Eupolri's quarterly market share in the community setting increased to 27.1% through November 2022, which is our latest data point. Data continue to show that approximately 90% of patients who receive Eupolri in the hospital setting are discharged with a prescription to continue their treatment in the outpatient setting, allowing for continuity of Eupolri maintenance therapy post-hospitalization. We have also been encouraged by the growth trends seen in the retail script data where total prescriptions in Q4 of 2022 have increased 18% year-over-year and new patient starts increased 30% over Q4 of 2021. Both metrics once again reached new quarterly highs launched to date in Q4 of 2022. The growing new patient starts and overall demand are seen as key indicators and growth accelerators for 2023 performance. While recognizing the seasonality trends that typically soften performance in the first quarter of each year, we believe the team's historical ability to execute through the pandemic in addition to the remaining sizable niche opportunity for additional UPowery patients equates to significant upside potential for the brand in 2023 and beyond. Turning to slide nine, the phase four PIFR 2 study continues to actively enroll and will potentially provide further competitive upside. And we continue to anticipate that top line results will be available in the second half of 2023. I'll now turn the call over to Rick Graham.
spk09: Thanks Rhonda. For those of you following the slides, I'll begin on slide 11. Amproloxetine is a norepinephrine reuptake inhibitor being developed for the treatment of symptomatic neurogenic orthostatic hypotension in patients with MSA. In MSA patients with NOH, blood pressure falls when upright owing to impaired release of norepinephrine, leading to debilitating symptoms which can have a profound impact on quality of life. MSA is a rare disease affecting approximately 50,000 people in the United States. Approximately 70 to 90% of MSA patients experience NOH symptoms, and we believe the addressable patient population for amproloxetine is in the range of 35 to 45,000 patients in the U.S. We are seeking orphan drug designation for the treatment of MSA patients with symptomatic NOH. Neither of the two approved therapies to treat orthostatic hypotension have demonstrated durable effectiveness in mitigating the debilitating symptoms for patients with MSA. There exists a significant unmet need, and amproloxetine has the potential to provide a unique treatment profile, including effectiveness on multiple symptoms, durability of effect, once-daily dosing, and a favorable safety profile. As we enter into a new era in treating MSA symptoms, the potential of amproloxetine offers hope to MSA patients with symptomatic NOH. On slide 12, I will explain the unique benefits of amproloxetine treatment. Starting with the figure on the left, in the Phase 3 study, 170, Amproloxatine was effective at treating a constellation of cardinal symptoms in MSA patients. These symptoms include dizziness, vision impairment, weakness, fatigue, trouble concentrating, and head and neck discomfort. The magnitude of changes for these items was clinically meaningful, and the durability of effect was maintained over the length of the 22-week study. In addition to a favorable impact on symptom scores with amproloxetine treatment, there was an improvement in activities of daily living that require walking and standing for a short time. For someone with MSA suffering with symptomatic NOH, even standing for a short time can have an enormous impact on quality of life. Moving to the upper right-hand section of the slide, amproloxetine is a single 10-milligram tablet administered once per day. which is especially beneficial to MSA patients with dysphagia or difficulty swallowing. This is a frequent and disabling symptom of MSA. A single tablet administered once daily is a key differentiating factor from current therapies that require multiple tablets administered several times each day. Moving to the bottom right section of the slide, patients with NOH are at risk for a dangerous increase in blood pressure while in the supine position. This is known as supine hypertension. The two FDA-approved therapies for NOH each have black box warnings on the label highlighting the risk of supine hypertension. In a safety database of more than 800 patients and healthy subjects, the signal for supine hypertension has not been observed with ample oxygen treatment, offering the potential for yet another important differentiating feature relative to the current therapies. Slide 13 shows a study design for the Registrational Study 197, or CYPRS, in MSA patients with symptomatic NOH. We will begin enrolling patients in the CYPRS study imminently. This study includes a 12-week open-label period followed by an 8-week double-blind period. It's a placebo-controlled randomized withdrawal study with a primary endpoint of change in the OHSA composite score. Taking learnings from our prior study, we have streamlined the operational infrastructure and optimized the country and site selection. Importantly, we have aligned with the FDA on the primary endpoint and the overall study design. We look forward to sharing progress as we start enrolling the study. I'll now turn the call over to Aziz to review the financials.
spk05: Thanks, Rick. Turning to slide 15, I'll provide an update on our return of capital program. As Rick mentioned earlier, we have increased the program by $75 million and $250 to $325 million. We've completed approximately $155 million today in the form of share buybacks, including $60 million completed in the open market, which was initiated mid-December. This $155 million represents approximately 50% of the upsized capital return program, and we have $170 million remaining as of today. We expect to complete the remainder of the program by end of 2023. To date, we have bought back approximately 15 million shares at a weighted average share price of $10.21. Turning to slide 16, which covers our Q4 2022 financial highlights, starting with the balance sheet items. We ended Q4 with approximately 327 million of cash, and within the quarter, we had two significant cash outflows. First, we paid $118 million of taxes related to the sale of our trilogy royalties. This tax payment was $3 million less than expected when we booked the tax liability at the end of Q3. Second, we had $34 million worth of share buybacks. Excluding these two cash outflows, we incurred $7 million of cash burned in Q4, a substantial improvement versus prior quarters. And a result of the share repurchases, we ended 2022 with 65 million shares outstanding. Our end of 2022 cash balance of $327 million excludes the remaining $197 million earmarked for a return of capital program in 2023, including the amount already purchased in early 2023 and the remaining amount on the program as of today. The board continuously evaluates progress towards achieving towards achievement of our financial targets and other factors, and if appropriate, will update the plan accordingly, as demonstrated by the action today to substantially increase the size of the program. Now, from a P&L perspective, Q4 operating expenses, excluding share-based comp, were 25 million. Note that the R&D spend in the quarter was higher versus prior quarter, driven primarily by startup costs incurred for the Amprolox team phase three CIPRS study. Q4 share-based comp was 6.9 million, which is approximately 60% less than the same period in 2021. For full-year actuals versus our 2022 financial guidance, total operating expenses and R&D expenses were in line with guidance, and SG&A is 2 million above the high end. Turning to slide 17, I'll conclude by covering 2023 financial guidance. In 2023, we are guiding towards R&D OpEx of between 35 and 45 million, and SG&A OpEx of between 45 and 55 million. excluding share-based comp and one-time severance costs related to the 2023 headcount reduction. We expect these one-time severance and termination costs to be approximately 1 to 2 million, a majority of which will be recognized in Q1. The 2023 guidance midpoint for R&D represents a year-over-year reduction of 22%, all while incorporating new costs for the Amprolox Team Phase 3 program. Since we will incur employee-related costs for our discontinued research operations through March and will be required to close out research-related activities into Q2, we expect R&D costs to be relatively higher in Q1 and to a lesser extent Q2 before decreasing more significantly the remainder of the year. And as a result, we continue to expect to generate profitability from a non-GAAP perspective in the second half of 2023. We do not include any potential one-time milestones in this profitability metric. Achieving profitability is dependent both on the cost savings and continued sales growth from the appellary. Relative to this goal, in Q4 2022, we incurred a non-GAAP loss of $7 million, which is the same amount as our cash burn of $7 million, excluding the tax payment and share buybacks. We will begin to break out this non-GAAP metric on our P&L starting Q1 2023. Lastly, while we are not providing formal guidance for this metric, stock-based comp is expected to be materially lower in 2023 versus 2022 due to the elimination of one-time stock-based comp related to the 2021 restructuring, which was completed in 2022, and the lower headcount due to the reductions announced today. With that, I'll turn the call back to Rick for closing remarks.
spk06: Rick? Thanks, Aziz. On slide 19, as we reviewed, we're taking three additional strategic actions to drive near, mid, and long-term value creation. Upsizing the capital return program to $325 million. Discontinuing investments in research, reducing headcount by approximately 17%, focusing exclusively on Amproloxatine and Upelri. And three, evolving the board, which includes the appointment of Susanna Gray as an independent director of the board, And again, we're looking forward to benefiting from her deep expertise and we're committing to declassifying board of directors. Before we open the call up for questions, I'd like to reiterate a few key items. Our team is laser focused on building on last year's growth of upelry and generating important data from the PIPFAR-2 study in the second half of 2023. Additionally, we remain focused on advancing Amprolox's team with study initiation and patient enrollment in the phase three program as well as achieving orphan drug designation. And importantly, we will continue to execute on achieving the important goal of non-GAAP profitability in the second half of the year, all of which should continue to drive shareholder value. Thank you, everyone, for your time and your participation, and I'll now hand the call back to the operator for questions.
spk22: certainly thank you ladies and gentlemen as a reminder if you have a question at this time simply press star 1 1 on your telephone one moment for our first question and our first question comes from the line of david reisinger from svb securities your question please thanks very much and thank you for uh the updates um and uh the commentary on the prospects so i have a few questions please uh first
spk07: With respect to UPelry profit growth, it's obviously been constrained and been well below end market sales growth due to the partnership change. But I'm hoping that you can help us understand when that annualizes, and we should see the positive inflection in UPelry profit growth once it annualizes. And then the follow-on to that is, when should we expect upelry profit growth to approach that of end market sales growth and then a separate financial question please in terms of thinking about r d spending beyond 24 once you're done with piffer 2 any any color you can provide on that i know that you're not going to provide guidance for 2024 at this time but if you could help us understand the outlook for r d spending beyond 23 that would be helpful Thank you.
spk06: Sure. Thank you, David. I'll take the last question, then I'll kick it over to Aziz to provide some color on the first two questions. So, you know, aren't then, you know, post-ampyloxetine, it's, you know, aren't, you know, that's what we're, ampyloxetine R&D, you know, really development spending. and, you know, the regulatory cost in progressing it to approval, assuming success, that's going to contribute a majority of the R&D costs as we assume today. Obviously, through 2023 or part of 2023, we'll have PIFR costs, which we're also absorbing, but with data In the second half of 23, those PIPR costs are going to drop materially. So, Aziz, you want to comment on David's first two questions?
spk05: Yeah. Hey, David. I think when you're saying profitability, maybe you're referring to the collaboration revenue. As a reminder, we achieved an all-time high profitability this quarter, just like the last couple of quarters. In terms of normalization of the amounts that This would have happened in the last couple of quarters. The only time it would have been affected was early on in 2022 after we had the restructuring within Theravance. As you know, since we reduced our commercial footprint a little bit, and that reduction in spend actually reduces our collaboration revenue because the 65% of the cost reimbursement is baked into that number. So that would have washed out in the beginning of the first half of last year. So Q3 and Q4 of 2022 would reflect more normalized spend. So going forward, if you just think about the collaboration revenue and profit, since spend has been somewhat normalized, if you just take 35% of the incremental sales, that should flow to both the collaboration revenue and the bottom line as well.
spk22: Great.
spk08: Thank you.
spk22: Thank you. One moment for our next question. And our next question comes from the line of Douglas Tau from HC Wainwright. Your question, please. Hi.
spk03: Good afternoon. Thanks for taking the questions, Rhonda. I think in terms of upelry, you indicated that in the hospital there was a slight decrease in share, and that was largely driven by just the overall market growth. So in terms of the accounts that you're selling, was your market share largely unchanged or did you see a drop there as well? Excuse me.
spk08: Thanks, Doug.
spk15: Yes. Thanks, Doug, for the question. So for those particular accounts where we have secured not only the formulary position, but also the llama of choice, we do have a higher market share. But when you look at the overall marketplace, and particularly due to the fact that in December, the entire nebulized market went up significantly, as I highlighted, the highest since the launch of upelry, it affected our overall drop.
spk06: Doug, we continue to see overall very strong overall growth, and that's driven both by the market but also driven very importantly by the work done in achieving both formulary status and LAMA of choice, as Rhonda emphasized.
spk03: And so as we look ahead, because obviously the volume growth has been really impressive, should we see – and you've continued to have these important formulae wins and long-term choice wins in particular, should we see a resumption of that share growth trend that we've seen pretty consistently, you know, for the last three years?
spk15: Yes, and as I commented during the earnings script, we have already seen a return to growth in the first couple of months of the year, so we'll continue to obviously continue to work through Those accounts where we know there are opportunities and we believe with the prior success that we have the ability to continue to capture that llama of choice position.
spk02: Okay, great. Thank you very much.
spk22: Thank you. One moment for our next question. And our next question comes from the line of Eva Privateira from Cowan. Your question, please.
spk10: Hi, congrats on the quarter, and thanks for taking our questions. So with the discontinuation of R&D and the expectation that Upelry will start generating meaningful cash, how are you approaching capital allocation after the $325 million share repurchase is complete? Should we expect accumulated cash balances to be returned, and if so, would this be additional share repurchase, or can we expect something like a quarterly dividend in the future?
spk06: Well, I think, thanks for the question. I think as Eze pointed out, we're going to execute on the 325 capital return if we can, after looking at what's in front of us, if we can increase the returns to shareholders in whatever form it might take, then we will do that. Obviously, we've got, we'll still continue to spend on upelry and a bit on ampryloxetine, but the, you know, we'll certainly look at returning capital, you know, as we can in excess of the 325. Okay, thank you.
spk22: Thank you. One moment for our next question. And our next question. comes from the line of William Humphrey from Morgan Stanley. Your question, please.
spk21: Hey, everyone. This is Will on for Vikram. Thanks for taking our question. Back on upelry, what's your latest thinking on if positive PIFR2 data is going to be increasing sales or share? And if so, how significant of an increase, particularly in that in-hospital share, do you see that driving? Or I guess, how do you see that influencing prescriber behavior?
spk15: Thanks, Will, for the question. In looking at the hospital component specifically, having the ability to be even more definitive on the appropriate patient as well as the role relative to handheld choice in the inpatient environment, a positive PIPR study would certainly help to improve that messaging and pull through. Similarly, you would expect the same to be able to affect the community or outpatient volume, as particularly in that setting, helping clinicians understand not only the importance of reassessing a patient's ability to utilize a handheld device, versus what can be offered with a nebulized therapy, definitely contributing to a competitive advantage in that particular situation.
spk06: Okay. I think the real opportunity here with PEPFAR, as Rhonda indicates, it's really growing beyond what is considered the traditional nebulized market and, you know, making progress going beyond the traditional nebulized market, which is about 1 in 10 COPD patients, to something greater than that, while the foothold would be in the hospital, the majority of the volume will be in the outpatient. And I think that's the real opportunity with the PIFRA program.
spk21: Okay. That's very helpful. Thanks very much.
spk22: Thank you. One moment for our next question. And our next question comes from the line of Lisa Vako from Evercore ISI. Your question, please.
spk11: Hi, there. I just wanted to ask a couple questions about the Cypress study for amproloxetine and MSA. First of all, what are your powering assumptions for this study design as it relates to the OSHA score?
spk08: Yeah. Hi, Lisa. This is Rick Graham.
spk09: We don't disclose powering assumptions, but just assume that it is traditionally powered as a traditional phase three study. I think, you know, one of the things that I can point to is if you look at our data from the 170 study in the MSA patients, we had a statistically significant outcome in the 38 MSA patients using this OHSA composite. That should give you a sense of what we're looking at here.
spk11: And how does that work? Okay, I see what you're saying there. Okay, fine. And then can you remind us of the exclusivity for ampelocetine?
spk06: Yeah, sure. You know, we would expect composition of matter with patent term extension to be out to, I think, 2035. And then, you know, beyond that, for ampyloxetine in the use of NLH.
spk05: Lisa, it's a disease. We have added a new slide to the deck. It's slide 26, which outlines the patent protection for both sepallery and ampyloxetine. Okay.
spk13: All right. I'll check that out. Thank you very much.
spk22: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Mr. Winningham for any further remarks.
spk06: Yeah, I'd just like to thank everyone for joining us today on this important call, you know, outlining both the strategic actions that we've taken and the review of 2022 performance and the outlook for 2023. We're excited about what we can accomplish in the business in 2023 with the focus on upelry and ampryloxetine. And we look forward to bringing you updates as we work through the year and work through the important capital return program and increase of which we highlighted today. So please have a good day and thank you for joining us.
spk22: Thank you, ladies and gentlemen, for your participation in today's conference. This does include the program. You may now disconnect. Good day.
spk16: The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1 1. you Thank you. Thank you. Thank you.
spk22: Ladies and gentlemen, good afternoon. I'd like to welcome everyone to the TheraVance Biopharma fourth quarter and full year 2022 conference call. During the presentation, all participants will be in a listen-only mode. A question and answer session will follow the company's formal remarks. To ask a question, press the star key followed by the digits 11 on your telephone. Again, that's star 11 to ask a question. If listening via webcast, please mute audio on your webcast device before asking a question over the phone. I will repeat these instructions after management completes their prepared remarks. Also, today's conference is being recorded. And now I'd like to turn the call over to Rick Winningham, Chief Executive Officer. Please go ahead.
spk06: Good afternoon, and thank you for joining the Air Events Biopharma fourth quarter and full year 2022 conference call to discuss our business. I'll remind you that this call will contain forward-looking statements that involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, anticipated timing of clinical trials, regulatory filings, and expected financial results. Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in our filings with the SEC. I direct your attention to slide three. Joining me today are Rhonda Farnham, Chief Business Officer, Rick Graham, Research and Development, and Lizzy Swoff, Chief Financial Officer. Before I get started, I'd like to make a brief statement regarding the public announcement that Irenec made earlier today. The board and management are committed to acting in the best interest of the company and all of its shareholders, and we're open to evaluating all ideas to maximize shareholder value, including those from Irenec. We're disappointed that Irenec has chosen to make a public announcement of this nature as we have engaged in substantive constructive dialogue on multiple occasions, to work cooperatively with them. We even offered to speak with them under a non-disclosure agreement in order to discuss their ideas and our upcoming plans, but our offers were refused. Our nominating and governance committee has regular board refreshment process in place to thoroughly evaluate all potential candidates and their skill sets, including relevant industry experience and public board experience. Our committee and other members of our board management team met with Andy Dodge to consider him good faith as a candidate to join our board. But given his lack of healthcare and relevant public company board experience, we ultimately determined that he was not the most suitable candidate for the board. We remain focused on the business and continuing to execute the ongoing transformation. The Theravance board and management team believe that today's announced strategic actions And the path that's set forward for 2023 will indeed continue to drive value creation. We won't take any questions during the Q&A regarding IRINIC's public announcement. Now, moving to slide four. The Saravan's board management team has a demonstrated track record of taking action to create near and long-term shareholder value. As the companies evolved over the past 18 months, we're continuing to take strategic action, but build on our focus, execution, and performance. We remain committed to acting in the best interests of the company and all of its shareholders. Today, in addition to financial results for the fourth quarter and full year, ending on December 31st, 2022, we announced three additional strategic actions to sharpen the company's focus and drive value creation. Those are outlined on slide four. First, we've increased our capital return program by $75 million to $325 million in total. The expansion of the open market share buyback program was a strategic decision following consultation with shareholders on both the quantum and the instrument, market analysis, and continued assessment of our balance sheet and cash needs going forward. We will discontinue investments in research, including the inhale jack inhibitor program, to focus exclusively on ampryloxetine and upelry. This means that we've made the difficult yet necessary decision to reduce head count by 17%, and we plan to complete the reductions by the end of March 2023. We thank the exceptional research team for their valuable work and dedication to the company. We will seek a strategic transaction to continue the progression of their work on the Inhale Jack program. As our company transforms, our board regularly evolves as well. I'm delighted to welcome Susanna Gray to the board of directors as our newest independent director. The board was introduced to Susanna while working with a leading independent search firm in connection with our nominating and governance committee's regular evaluation of the board of directors and board refreshments. Her deep expertise in our industry, as well as her experience in value creation and strategic transactions, will augment the established board's and management's capabilities. In addition, our lead independent director, Bill Young, will not be standing for reelection to the board of directors at the company's 2023 annual general meeting for shareholders. I'd personally like to thank Bill for his tireless service to the board and the company. I'll miss Bill's guidance and mentorship. Following the appointment of Susanna and Bill's departure, the board will continue to be comprised of eight highly qualified directors, seven of whom are independent, all of whom are committed to maximizing value for shareholders. As we continue to execute on the vision for the company set forth in our restructuring, our board also considers the company's governance structure and is determined to put forth a proposal at the May 2, 2023 Annual General Meeting for shareholders to declassify the board of directors over time. We'll be providing more details in our proxy statement. Moving to slide five, I'm proud of what the TheraVance team has accomplished this past year. We're successfully positioned the company to create value from a foundation of financial strength. no debt, a strong cash position having ended the fourth quarter with 327 million of cash and cash equivalents. Since announcing the trilogy royalty transaction and the capital return program, the company's driven total shareholder return of 14% versus the S&P biotech index of a negative 2% and the S&P 500 of 6% over the same period, representing an outperformance nearly 17% and 9% respectively. And this TSR period was calculated with the market close as of February 23rd. Our path forward for 2023 is clear and focused as outlined in slide five. I'll now hand the call over to Rhonda in a moment to review UPelry's 2022 performance, results of which give us both the momentum and the confidence to deliver in 2023 and beyond. Rick will discuss how we are well-positioned to enter a new era in treating NOH and multiple systems atrophy patients with the potential to offer a unique first-in-class treatment benefit with amproloxetine. And Aziz will share the details on the financials. I'll now turn the call over to Rhonda to discuss upelry.
spk15: Thank you, Rick. Looking to slide six, we are very pleased to share the latest performance update on upelry. In Q4, net sales of upelry reached another quarterly high launched to date. As a reminder, TheraVance and Vietris co-promote upelry in the U.S. TheraVance's commercial and medical teams cover the hospital segment, and Vietris is responsible for the outpatient-based community healthcare needs and promotion for the product. Slide 7 shows TheraVance's implied 35% share of net sales for UPelry during the fourth quarter of 2022 of 19.5 million of 27% from Q4 of 2021. I am also pleased to highlight that the implied 35% of UPelry net sales for the full year of 2022 was 70.7 million, which represents a 25% year-over-year net sales growth. The significant growth for the brand was again driven by strong overall customer demand from hospital and community outlets. In Q4 of 2022, demand increased by 6% quarter over quarter and by 19% year over year. Looking specifically at the TheraVans hospital efforts on the right side of slide 7, in Q4 of 2022, Doses sold exclusively in the hospital setting represented an increase of 22% from the previous quarter, demonstrating the highest quarterly hospital volume launched to date, which led to full year growth of 53% over 2021. We have continued to see significant growth in upelry's hospital business every quarter since Q3 of 2020. 580 secured hospital formulary wins launched to date have led to approximately 1,200 purchasing hospital outlets through the end of 2022 driving that growth. Also, additional adoptions are increasing weekly. We believe these wins and forthcoming system additions will yield continued growth through 2023 as UPelri will be the first llama of choice in many hospitals due to the growing recognition and acceptance of UPelry's clinical benefits and once daily value proposition. Turning to slide eight, UPelry's share of the hospital setting decreased to 12.5% in Q4 of 2022, although UPelry's hospital volume continued to set a new quarterly high as seen on the previous slide. The hospital market share drop can be attributed to the largest quarter-over-quarter growth in the long-acting nebulizer market since UPelry's introduction. This growth was driven by an increase in hospital census associated with the tridemic, which is the confluence of RSV, influenza, and COVID at the end of 2022. As the hospital long-acting nebulizer market volume has stabilized so far in early 2023, UPelry's hospital share has returned yet again to its highest level. Eupolri's quarterly market share in the community setting increased to 27.1% through November 2022, which is our latest data point. Data continue to show that approximately 90% of patients who receive Eupolri in the hospital setting are discharged with a prescription to continue their treatment in the outpatient setting, allowing for continuity of Eupolri maintenance therapy post-hospitalization. We have also been encouraged by the growth trends seen in the retail script data where total prescriptions in Q4 of 2022 have increased 18% year-over-year and new patient starts increased 30% over Q4 of 2021. Both metrics once again reached new quarterly highs launched to date in Q4 of 2022. The growing new patient starts and overall demand are seen as key indicators and growth accelerators for 2023 performance. While recognizing the seasonality trends that typically soften performance in the first quarter of each year, we believe the team's historical ability to execute through the pandemic in addition to the remaining sizable niche opportunity for additional UPowery patients equates to significant upside potential for the brand in 2023 and beyond. Turning to slide nine, the phase four PIFR 2 study continues to actively enroll and will potentially provide further competitive upside. And we continue to anticipate that top line results will be available in the second half of 2023. I'll now turn the call over to Rick Graham.
spk09: Thanks Rhonda. For those of you following the slides, I'll begin on slide 11. Amproloxetine is a norepinephrine reuptake inhibitor being developed for the treatment of symptomatic neurogenic orthostatic hypotension in patients with MSA. In MSA patients with NOH, blood pressure falls when upright owing to impaired release of norepinephrine, leading to debilitating symptoms which can have a profound impact on quality of life. MSA is a rare disease affecting approximately 50,000 people in the United States. Approximately 70 to 90% of MSA patients experience NOH symptoms, and we believe the addressable patient population for amproloxetine is in the range of 35 to 45,000 patients in the U.S. We are seeking orphan drug designation for the treatment of MSA patients with symptomatic NOH. Neither of the two approved therapies to treat orthostatic hypotension have demonstrated durable effectiveness in mitigating the debilitating symptoms for patients with MSA. There exists a significant unmet need, and amproloxetine has the potential to provide a unique treatment profile, including effectiveness on multiple symptoms, durability of effect, once-daily dosing, and a favorable safety profile. As we enter into a new era in treating MSA symptoms, the potential of amproloxetine offers hope to MSA patients with symptomatic NOH. On slide 12, I will explain the unique benefits of amproloxetine treatment. Starting with the figure on the left, in the Phase 3 study, 170, Amproloxatine was effective at treating a constellation of cardinal symptoms in MSA patients. These symptoms include dizziness, vision impairment, weakness, fatigue, trouble concentrating, and head and neck discomfort. The magnitude of changes for these items was clinically meaningful, and the durability of effect was maintained over the length of the 22-week study. In addition to a favorable impact on symptom scores with amproloxetine treatment, there was an improvement in activities of daily living that require walking and standing for a short time. For someone with MSA suffering with symptomatic NOH, even standing for a short time can have an enormous impact on quality of life. Moving to the upper right-hand section of the slide, amproloxetine is a single 10-milligram tablet administered once per day. which is especially beneficial to MSA patients with dysphagia or difficulty swallowing. This is a frequent and disabling symptom of MSA. A single tablet administered once daily is a key differentiating factor from current therapies that require multiple tablets administered several times each day. Moving to the bottom right section of the slide, patients with NOH are at risk for a dangerous increase in blood pressure while in the supine position. This is known as supine hypertension. The two FDA-approved therapies for NOH each have black box warnings on the label highlighting the risk of supine hypertension. In a safety database of more than 800 patients and healthy subjects, the signal for supine hypertension has not been observed with ample oxygen treatment, offering the potential for yet another important differentiating feature relative to the current therapies. Slide 13 shows a study design for the Registrational Study 197, or CYPRS, in MSA patients with symptomatic NOH. We will begin enrolling patients in the CYPRS study imminently. This study includes a 12-week open-label period followed by an 8-week double-blind period. It's a placebo-controlled randomized withdrawal study with a primary endpoint of change in the OHSA composite score. Taking learnings from our prior study, we have streamlined the operational infrastructure and optimized the country and site selection. Importantly, we have aligned with the FDA on the primary endpoint and the overall study design. We look forward to sharing progress as we start enrolling the study. I'll now turn the call over to Aziz to review the financials.
spk05: Thanks, Rick. Turning to slide 15, I'll provide an update on our return of capital program. As Rick mentioned earlier, we have increased the program by $75 million and $250 to $325 million. We've completed approximately $155 million today in the form of share buybacks, including $60 million completed in the open market, which was initiated mid-December. This $155 million represents approximately 50% of the upsized capital return program, and we have $170 million remaining as of today. We expect to complete the remainder of the program by end of 2023. To date, we have bought back approximately 15 million shares at a weighted average share price of $10.21. Turning to slide 16, which covers our Q4 2022 financial highlights, starting with the balance sheet items. We ended Q4 with approximately 327 million of cash, and within the quarter, we had two significant cash outflows. First, we paid 118 million of taxes related to the sale of our trilogy royalties. This tax payment was 3 million less than expected when we booked the tax liability at the end of Q3. Second, we had 34 million worth of share buybacks. Excluding these two cash outflows, we incurred 7 million of cash burned in Q4, a substantial improvement versus prior quarters. And a result of the share repurchases, we ended 2022 with 65 million shares outstanding. Our end of 2022 cash balance of $327 million excludes the remaining $197 million earmarked for a return of capital program in 2023, including the amount already purchased in early 2023 and the remaining amount on the program as of today. The Board continuously evaluates progress towards achieving towards achievement of our financial targets and other factors, and if appropriate, will update the plan accordingly, as demonstrated by the action today to substantially increase the size of the program. Now, from a P&L perspective, Q4 operating expenses, excluding share-based comp, were 25 million. Note that the R&D spend in the quarter was higher versus prior quarter, driven primarily by startup costs incurred for the Amperlox team phase three CIPRS study. Q4 share-based comp was 6.9 million, which is approximately 60% less than the same period in 2021. For full-year actuals versus our 2022 financial guidance, total operating expenses and R&D expenses were in line with guidance, and SG&A is 2 million above the high end. Turning to slide 17, I'll conclude by covering 2023 financial guidance. In 2023, we are guiding towards R&D OpEx of between 35 and 45 million, and SG&A OpEx of between 45 and 55 million. excluding share-based comp and one-time severance costs related to the 2023 headcount reduction. We expect these one-time severance and termination costs to be approximately 1 to 2 million, a majority of which will be recognized in Q1. The 2023 guidance midpoint for R&D represents a year-over-year reduction of 22%, all while incorporating new costs for the Amprolox Team Phase 3 program. Since we will incur employee-related costs for our discontinued research operations through March and will be required to close out research-related activities into Q2, we expect R&D costs to be relatively higher in Q1 and to a lesser extent Q2 before decreasing more significantly the remainder of the year. And as a result, we continue to expect to generate profitability from a non-GAAP perspective in the second half of 2023. We do not include any potential one-time milestones in this profitability metric. Achieving profitability is dependent both on the cost savings and continued sales growth from UPelRI. Relative to this goal, in Q4 2022, we incurred a non-GAAP loss of $7 million, which is the same amount as our cash burn of $7 million, excluding the tax payment and share buybacks. We will begin to break out this non-GAAP metric on our P&L starting Q1 2023. Lastly, while we are not providing formal guidance for this metric, stock-based comp is expected to be materially lower in 2023 versus 2022 due to the elimination of one-time stock-based comp related to the 2021 restructuring, which was completed in 2022, and the lower headcount due to the reductions announced today. With that, I'll turn the call back to Rick for closing remarks. Rick?
spk06: Thanks, Aziz. On slide 19, as we reviewed, we're taking three additional strategic actions to drive near, mid, and long-term value creation, upsizing the capital return program to $325 million, discontinuing investments in research, reducing headcount by approximately 17%, focusing exclusively on Amproloxatine and Upelri, and three, evolving the board, which includes the appointment of Susanna Gray as an independent director of the board, And again, we're looking forward to benefiting from her deep expertise and we're committing to declassifying board directors. Before we open the call up for questions, I'd like to reiterate a few key items. Our team is laser focused on building on last year's growth of upelry and generating important data from the PIPFAR-2 study in the second half of 2023. Additionally, we remain focused on advancing Amprolox's team with study initiation and patient enrollment in the phase three program as well as achieving orphan drug designation. And importantly, we will continue to execute on achieving the important goal of non-GAAP profitability in the second half of the year, all of which should continue to drive shareholder value. Thank you, everyone, for your time and your participation, and I'll now hand the call back to the operator for questions.
spk22: Certainly. Thank you. Ladies and gentlemen, as a reminder, if you have a question at this time, simply press star one, one on your telephone. One moment for our first question. And our first question comes from the line of David Reitinger from SVB Securities. Your question, please.
spk07: Thanks very much. And thank you for the updates and the commentary on the prospects. So I have a few questions, please. First, With respect to UPelry profit growth, it's obviously been constrained and been well below end market sales growth due to the partnership change. But I'm hoping that you can help us understand when that annualizes and we should see the positive inflection in UPelry profit growth once it annualizes. And then the follow-on to that is, when should we expect upelry profit growth to approach that of end market sales growth and then a separate financial question please in terms of thinking about r d spending beyond 24 once you're done with piffer 2 any any color you can provide on that i know that you're not going to provide guidance for 2024 at this time but if you could help us understand the outlook for r d spending beyond 23 that would be helpful Thank you.
spk06: Sure. Thank you, David. I'll take the last question, then I'll kick it over to Aziz to provide some color on the first two questions. So, you know, R and Ben, you know, post-ampyloxetine, it's, you know, our, you know, that's what we're, ampyloxetine R and D's, you know, really development spending. and, you know, the regulatory cost in progressing it to approval, assuming success, that's going to contribute a majority of the R&D costs as we assume today. Obviously, through 2023 or part of 2023, we'll have PIFR costs, which we're also absorbing, but with data In the second half of 23, those PIPR costs are going to drop materially. So, Aziz, you want to comment on David's first two questions?
spk05: Yeah. Hey, David. I think when you're saying profitability, maybe you're referring to the collaboration revenue. As a reminder, we achieved an all-time high profitability this quarter, just like the last couple quarters. In terms of normalization of the amounts that This would have happened in the last couple of quarters. The only time it would have been affected was early on in 2022 after we had the restructuring within Theravance. As you know, since we reduced our commercial footprint a little bit, and that reduction in spend actually reduces our collaboration revenue because the 65% of the cost reimbursement is baked into that number. So that would have washed out in the beginning of the first half of last year. So Q3 and Q4 of 2022 would reflect more normalized spend. So going forward, if you just think about the collaboration revenue and profit, since spend has been somewhat normalized, if you just take 35% of the incremental sales, that should flow to both the collaboration revenue and the bottom line as well.
spk08: Great. Thank you.
spk22: Thank you. One moment for our next question. And our next question comes from the line of Douglas Tau from HC Wainwright. Your question, please.
spk03: Hi. Good afternoon. Thanks for taking the questions, Rhonda. I think in terms of upelry, you indicated that in the hospital there was a slight decrease in share, and that was largely driven by just the overall market growth. So in terms of the accounts that you're selling, was your market share largely unchanged or did you see a drop there as well? Excuse me.
spk15: Thanks, Doug. Yes. Thanks, Doug, for the question. So for those particular accounts where we have secured not only the formulary position, but also the llama of choice, we do have a higher market share. But when you look at the overall marketplace, and particularly due to the fact that in December, the entire nebulized market went up significantly, as I highlighted, the highest since the launch of upelry, it affected our overall drop.
spk06: Doug, we continue to see overall very strong overall growth, and that's driven both by the market but also driven very importantly by the work done in achieving both formulary status and LAMA of choice, as Rhonda emphasized.
spk03: As we look ahead, because obviously the volume growth has been really impressive, should we see and you've continued to have these important formulae wins and long-term choice wins in particular, should we see a resumption of that share growth trend that we've seen pretty consistently, you know, for the last three years?
spk15: Yes, and as I commented during the earnings script, we have already seen a return to growth in the first couple of months of the year, so we'll continue to obviously continue to work through Those accounts where we know there are opportunities and we believe with the prior success that we have the ability to continue to capture that llama of choice position.
spk02: Okay, great. Thank you very much.
spk22: Thank you. One moment for our next question. And our next question comes from the line of Eva Privateira from Cowan. Your question, please.
spk10: Hi, congrats on the quarter, and thanks for taking our questions. So with the discontinuation of R&D and the expectation that Upelry will start generating meaningful cash, how are you approaching capital allocation after the $325 million share repurchase is complete? Should we expect accumulated cash balances to be returned, and if so, would this be additional share repurchase, or can we expect something like a quarterly dividend in the future?
spk06: Well, I think, thanks for the question. I think as Aziz pointed out, you know, we're going to execute on the 325 capital return if we can, you know, after looking at what's in front of us, if we can increase the returns to shareholders in whatever form it might take, then we will do that. Obviously, we've got, you know, we'll still continue to spend on upelry and a bit on ampryloxetine, but the, you know, we'll certainly look at returning capital, you know, as we can in excess of the 325. Okay, thank you.
spk22: Thank you. One moment for our next question. And our next question. comes from the line of William Humphrey from Morgan Stanley. Your question, please.
spk21: Hey, everyone. This is Will on for Vikram. Thanks for taking our question. Back on upelry, what's your latest thinking on if positive PIFR2 data is going to be increasing sales or share? And if so, how significant of an increase, particularly in that in-hospital share, do you see that driving? Or I guess, how do you see that influencing prescriber behavior?
spk15: Thanks, Will, for the question. In looking at the hospital component specifically, having the ability to be even more definitive on the appropriate patient as well as the role relative to handheld choice in the inpatient environment, a positive PIPR study would certainly help to improve that messaging and pull through. Similarly, you would expect the same to be able to affect the community or outpatient volume, as particularly in that setting, helping clinicians understand not only the importance of reassessing a patient's ability to utilize a handheld device, versus what can be offered with the nebulized therapy, definitely contributing to a competitive advantage in that particular situation.
spk06: Okay. I think the real opportunity here with PEPFAR, as Rhonda indicates, it's really growing beyond what is considered the traditional nebulized market and, you know, making progress really beyond the traditional nebulized market, which is about 1 in 10 COPD patients, to something greater than that, while the foothold would be in the hospital, the majority of the volume will be, you know, in the outpatient. And I think that's the real opportunity with the PIFRA program.
spk21: Okay. That's very helpful. Thanks very much.
spk22: Thank you. One moment for our next question. And our next question comes from the line of Lisa Vaco from Evercore ISI. Your question, please.
spk11: Hi, there. I just wanted to ask a couple questions about the Cypress study for amproloxetine and MSA. First of all, what are your powering assumptions for this study design as it relates to the OSHA score?
spk08: Yeah. Hi, Lisa. This is Rick Graham.
spk09: We don't disclose powering assumptions, but just assume that it is traditionally powered as a traditional phase three study. I think, you know, one of the things that I can point to is if you look at our data from the 170 study in the MSA patients, we had a statistically significant outcome in the 38 MSA patients using this OHSA composite. That should give you a sense of what we're looking at here.
spk11: And how does that work? Okay, I see what you're saying there. Okay, fine. And then can you remind us of the exclusivity for ampiloxetine?
spk08: Yeah, sure.
spk06: You know, we would expect composition of matter with patent term extension to be out to, I think, 2035. And then, you know, beyond that, for ampyloxetine in the use of NLH.
spk05: Lisa, it's a disease. We have added a new slide to the deck. It's slide 26, which outlines the patent protection for both sepallery and ampyloxetine. Okay.
spk13: All right. I'll check that out. Thank you very much.
spk22: Thank you. This does conclude the question and answer session of today's program. I'd like to have the program back to Mr. Winningham for any further remarks.
spk06: Yeah, I'd just like to thank everyone for joining us today on this important call, you know, outlining both the strategic actions that we've taken and the review of 2022 performance and the outlook for 2023. We're excited about what we can accomplish in the business in 2023 with the focus on upelry and anthraloxetine, and we look forward to bringing you updates as we work through the year and work through the important capital return program and increase of which we highlighted today. So please have a good day, and thank you for joining us.
spk22: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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