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 morning, ladies and gentlemen, and thank you for standing by. Welcome to Thera Technologies' first quarter 2024 earnings call. We would like to remind everyone that all figures on this call are quoted in US dollars. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session with analysts. Instructions will be provided at that time for you to queue up for questions. Following the analyst Q&A session, investors wishing to submit a question may do so by clicking the Ask a Question link on the webcast platform. If anyone has difficulties hearing the conference, please press the star key followed by zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, Wednesday, April 10, 2024, at 8.30 a.m. Eastern Time. I will now turn the call over to Julie Schneiderman, Senior Director, Communications and Corporate Affairs at Thera Technologies. Julie, please go ahead.
spk07: Thank you, Operator, and good morning, everyone. On the call today will be Theratechnologies President and Chief Executive Officer, Mr. Paul Levesque, and Senior Vice President and Chief Financial Officer, Mr. Philippe Dubuc. During the Q&A session, we will be joined by Dr. Christian Marsolais, Senior Vice President and Chief Medical Officer, and Mr. John Leisure, the company's Global Commercial Officer. Before we begin, I'd like to remind everyone that remarks today contain forward-looking statements regarding the company's current and future plans, expectations, and intentions with respect to future events. Forward-looking statements are based on assumptions, and there are risks there are risks that results obtained by Thera Technologies may differ materially from those statements. As such, the company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on them. The company refers current and potential investors to the forward-looking information section of Thera Technologies' management discussion and analysis issued this morning and available on CEDAR Plus at www.cedarplus.ca and on edgar at www.sec.gov. Forward-looking statements represent Theratechnology's expectations as of this morning, April 10, 2024. Additionally, today, the company is using the term adjusted EBITDA, which is not a financial measure under International Financial Reporting Standards, IFRS. or U.S. generally accepted accounting principles, U.S. GAAP. Adjusted EBITDA excludes the effects of items that primarily reflect the impact of long-term investment and financing decisions rather than the results of day-to-day operations. Thera Technologies believes that this measure can be a useful indicator of its operational performance and financial condition from one period to another. The company uses this non-IFRS measure to make financial, strategic, and operating decisions. Reconciliation of adjusted EBITDA to net loss is found in our MD&A issued this morning and available on CEDAR Plus and on EDGAR at the web addresses mentioned earlier. Investors can also follow the company on LinkedIn and X, formerly Twitter, and sign up for alerts on Theratechnologies' investor website at at theratech.com. With that, I would now like to turn the conference over to our President and CEO, Paul Levesque.
spk04: Thank you, Judy. Hello, everyone, and good morning. I am pleased to be reporting on TheraTechnologies' financial results for the first quarter ended February 29, 2024. Today, I will be brief, as we were together not that long ago for our fourth quarter and full year 2023 call. You may recall that we ended 2023 with a very strong second half. This rounded out a six-month positive trajectory with Agripta SV as our engine of growth and a robust adjusted EBITDA number to set us on a path to profitability in 2024. I also alluded to the fact that we should expect some variability in revenue growth reporting in 2024, especially in the first half of the year, based on the buildup and subsequent drawdown of inventory. For Q1, to little surprise, this has been the case. Our first quarter 2024 sales results are a stark contrast to those reported in the first quarter of last year, which I will elaborate on shortly. Looking forward, a reverse trend is unfolding. In fact, we expect a stronger second quarter for 2024 versus the unusually weak second quarter reported in 2023. We also expect second half reporting to better reflect our overall performance. While sales reporting has been erratic, enrollments and unique patients show consistent growth, particularly when it comes to our priority brand, Agripta SV. First quarter momentum in new prescription growth continued, with new enrollments up 21%, and the number of unique patients up 14% compared to the first quarter of 2023. Interestingly, the number of unique prescribers is also steadily increasing, up 13% this past February alone as compared to the same month in 2023. We've also continued to demonstrate strength on the bottom line, making this our third consecutive quarter of near flat to positive adjusted EBITDA. Our new cost structure, together with our strategic focus on commercial capabilities, puts Athera Technologies on the brink of producing stronger cash flow and value for shareholders. As such, I'm pleased to reaffirm our guidance for full year 2024 of revenues between $87 and $90 million, and it just stood a bit down in the range of $13 to $15 million. Let's take a moment now to circle back on the inventory challenges we have faced so that I can provide clarity on the disconnect we are seeing between our key performance indicators and top-line results. To illustrate the situation, I want to highlight how sales of Agripta SV to a few specialty pharmacies has been out of sync with demand, resulting in a historically low number of days on hand. When we take a closer look at the slide, you can see that inventory on hand at the end of first Q23 was approximately 55 days. In contrast, the inventory on hand at the end of first quarter 24 was only about 27 days. The difference in days on hand has impacted our first quarter revenues and growth. We are actively monitoring our distribution network with the goal of maintaining 30 to 35 days on hand at the pharmacy level. At the same time, I want to reiterate that patient demand remains strong, with total patient numbers up significantly from the same quarter last year. Together, these factors should lead to more stable revenue growth. Now, before we move on to oncology, allow me to provide an update concerning recent FDA submissions and how we are moving forward the lifecycle management of our products with the F8 formulation of Tesamorelin. During our last earnings calls, I shared an overview of the complete response letter we received from the FDA in January and our plan of action for a type B meeting with the FDA. The meeting took place several weeks ago. And we received important feedback on our file. We are now awaiting the FDA's minutes of the meeting and remain on track with our resubmission and to receive an FDA decision before the end of 2024. Finally, I want to touch on the intramuscular administration of the Trogarzo maintenance dose. The refusal to file letter received from the FDA in February indicates that it would require the conduct of a new study to pursue the registration of the IM method of administration. Given the cost of the study and the evolving competitive landscape, we have decided to deprioritize this project for the foreseeable future. It is important to know that the IV push method of administration for Trigarzo is already simplified or simplifying the treatment burden for patients and their healthcare providers as a quicker and more convenient option. Trigarzo remains a vital therapy for a small subset of people with HIV who have very limited treatment options at their disposal to address multi-drug resistance. Equally, it is an important companion to a Grifta SV. Now on to oncology and the acceleration of our Phase I clinical trial on pseudocetaxel's endosortide. The recent announcement that the enrollment of the new cohort of patients at the increased dose level is underway is an important milestone. The first patient has already been treated with the 2.5 mg per kg dose, the equivalent of 1.5 times the dose of docetaxel when used alone, sets us well on our way to further characterizing pseudocetaxel xanthosortide as a potentially viable therapy for individuals with advanced ovarian cancer. Earlier this week, our team presented two preclinical posters at ACR in San Diego. I want to highlight the results of our new chemtothesin peptide conjugates in the treatment of sirtulin-positive colorectal cancer, and in particular, the PDC with an exaticant payload. We have also completed the preliminary characterization of several additional novel PDCs. In addition to the human data we have on pseudocetaxel's endosortide, these latest preclinical data highlight the promising tolerability in anti-tumor effects of our new PDCs, further demonstrating the versatility flexibility, and effectiveness of our SORT1 positive technology platform. Now that we have significantly advanced our oncology program with important evidence on multiple PVCs with different payloads, coupled with the more than 40 patients already treated with pseudocytac cells and Dusortide, we believe we are in a position of strength to continue engaging with a partner for additional developmental steps. We are now accelerating these activities. Turning to commercial business development, as we move further along our journey as a bottom line focused biopharma company, I know there is a great deal of anticipation for further details around product acquisitions and future growth. I want to reiterate that our growth trajectory for both the top and bottom line has put us in a position of strength. This should facilitate the acquisition of new assets, which could be instruments of value creation for shareholders. With M&A more important than ever for third technologies, the timing is ideal to welcome two new board members, Jordan Zwick and Elina Qi, both with an abundance of expertise and experience in this area. With this, I'd like to turn the call over to Philippe, who will go over the periods, financials, and details. Philippe?
spk06: Thank you, Paul. Good morning, everyone. Consolidated revenue for the three-month period ended February 29, 2024, was below our expectations, reasons I will be getting into, but I wanted to stress that further to the readjustment of our cost base over the past nine months, we have recorded our third straight quarter of near-flat to positive adjusted EBITDA, an improvement of $3.6 million over the first quarter of last year, even though we recorded a drop in revenues. The rightsizing of the organization bodes well for the future and is the basis for our confirming the adjusted EBITDA guidance of $13 to $15 million for 2024. For the first quarter of fiscal 24, net sales of Vigrifta SV reached 9.6 million compared to 12.7 million in Q1 of last year. As Paul explained a few moments ago, net sales of Vigrifta SV were affected by the significant realignment of inventory levels at our pharmacy partners and do not reflect the growing demand that we are seeing based on level of dispense to patients, the ultimate factor reflecting demand for the product. As mentioned, we are working closely with pharmacies to ensure stable inventory levels going forward. IGRIFTA SV sales were also impacted by larger government rebates and returns in the first quarter of fiscal 2024. For Garzo, net sales in the first quarter of fiscal 24 amounted to $6.7 million compared to $7.2 million for the same quarter last year, representing a decrease of 7.4% year over year. The decrease was mainly due to lower unit sales in the quarter as compared to last year. Lower unit sales in the first quarter were also a result of inventory buildup in late 2022 and early 2023, a situation which has resolved throughout the rest of the fiscal 2023 year. This being said, we are expecting a stronger performance in 2024 from Egrifta SV rather than Orto Garza. In the first quarter of 24, cost of sales were affected by an $837 provision related to the production of the F8 formulation since the product is not yet approved. As such, cost of sales came in at $5.3 million, up from $4.7 million in the same quarter in fiscal 2023. While Tragarzo margins were stable during the quarter, EGRIFTA SV cost of goods was also affected by slightly higher production-related costs. We are expecting stable margins for EGRIFTA going forward. I'm happy to report that, again in the first quarter, through rigorous management of spending, R&D, selling, and G&A expenses were all lower this year when compared to the first quarter of 23, helping us achieve our third straight quarter of near flat to positive adjusted EBITDA as established as an objective early in the 2023 fiscal year. R&D expenses decreased substantially in the first quarter of 2024 compared to the same period last year, mostly due to lower spending on our oncology program as well as lower expenses following the near completion of our lifecycle management projects for Higrista SV and for Togarzo. R&D expenses came in at $3.8 million versus $9.4 million last year, or a 60% decrease. Selling expenses came in at $5.7 million for Q1 2023, compared to $6.8 million for the same three-month period last year. Selling expenses should stabilize in the future, as our focus on top and bottom line growth remains our main objective, and hence, we will not be compromising on customer-facing activities. G&A expenses in Q1 of 2024 amounted to $3.8 million as compared to $4.5 million last year, or a 15% decrease. The decrease in G&A expenses is largely due to our decision to focus on our U.S. commercial operations and our focus on controlling expenses. Again, these expenses are expected to stabilize going forward. As you can see from our reduction of expenses in R&D, selling, and G&A in both Q3 and Q4 of 2023, and again in Q1 of 2024, we now have right-sized the organization to ensure that we are well on our way in our journey towards showing strong growth in adjusted EBITDA. As a result of this, We are pleased to report adjusted EBITDA for the first quarter of 2024 of negative $247,000 versus negative $3.9 million in the same period last year, a significant improvement considering that revenues in Q1 were lower than in Q1 of last year. Net finance costs in the first quarter of 2024 amounted to $2.1 million and included interest of $2.3 million on the marathon loan facility. As Paul briefly alluded to in his remarks, we are confirming our guidance this morning for revenues of $87 to $90 million for fiscal 2024 and adjusted EBITDA of $13 to $15 million, which includes the spending on our ecology program this year pointing to the strong performance of our commercial operations for the remainder of the year. As previously mentioned, any additional spending on oncology after the completion of the Phase 1 trial will be carried out through partnerships, so this program will no longer affect our adjusted EBITDA in 2025 and beyond. We ended the first quarter on solid financial footing with cash, bonds, and money market funds at the quarter end amounting to $38.5 million, while we ended the quarter with $60.6 million drawn on the marathon facility. As a reminder, the repayment of the marathon facility will begin in August of this year over 36 monthly installments. Restrictive prepayment penalties will also start easing in July of this year. With that, Paul will be back for final comments, but first we'll open the line for questions.
spk03: Thank you. We will now begin the question and answer session. To ask a question on the phone, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Investors wishing to submit a question may do so by clicking the ask a question link on the webcast platform. At this time, we will pause momentarily to assemble our roster. The first question comes from Louise Chen with Cantor. Please go ahead.
spk02: Hi, good morning, everyone. This is Carby on for Louise Chen from Cantor. Thank you for taking our questions. Our first question is on TH1902. How many patients are you going to enroll at a higher dose level? When will we see data from the phase one? Our second question is on NASH. With the recently approved NASH treatment, how should discussions with potential partners change for tesamorelin? Thank you so much.
spk04: Thank you for the question. So, first, I will turn to Christian to answer the TH1902 question. So, Christian, how many questions are we going to have in the higher dosage cohort?
spk05: Well, the, maybe just start the, as we announced, we already completed the first cohort, which was 1.75 milligrams per kilogram, which was the equivalent for the one we're following before of the 200 milligrams per meter square. In the second cohort, now we're going for a total of six patients, of which two patients so far have been treated or have been enrolled. The dose is 2.5 mg per kg, which is the equivalent of 300 mg per m2, 50% dose enclosed from the first cohort. And after those six patients, there should be an additional four patients to complete the safety requirement as requested by the FDA. Okay.
spk04: When it comes to your next question, and thank you for the question, we see more inbound interest now that there's a product that has been approved. As you know, we have advanced a protocol ready to go for a Phase 2B-3 trial. The last couple of years have been quiet, not because there was no activity, but a lot of parties were basically in a wait-and-see mode to see if one drug would get approved. And with the approval of Madrigal and the new interest in the NASH space, you know, a lot of people are reaching out to us. And as you know, we will stick to our strategic direction of doubling down on the commercial line of business. And therefore, we need a partner to advance that program. We haven't given up. And we're still certainly interested in finding a partner because we do have evidence that that the fundamentals of NASH can be tackled by the mechanism of action of Tesamorelin, both on the NAS score and fibrosis. So, thanks for your question.
spk03: Thank you. The next question comes from Bill Mon with Canaccord Genuity. Please go ahead.
spk00: Good morning. I have a couple. You previously talked about and alluded to today bringing in another potential asset to add to the commercial effort. Just wondering what the status of those efforts is and what the biggest, I guess, hurdle or I guess what you need to see before you can bring in another asset. My next question is on You've had a consistent focus on adjusted EBITDA for the last year or so at least, and obviously have gotten to a level where you're about flat to up. As you approach other metrics, for example, net income or cash flow positivity, do you expect the focus to change towards those metrics going forward? And then finally, on the meeting with the FDA following your CRL, what were the main either misunderstandings or just differences of opinion that were hashed out and that you got on the same page with the FDA on to clear the way to resubmission? Thank you.
spk04: Thank you for your question. So let me tackle the first one on the business development. Philippe, you can take the adjusted EBITDA question and Christiane, the meeting with the FDA and the questions that were discussed as part of the Type A meeting. So on your first question, and I think we have said that before, but let me restate our interest for business development. So obviously we have capabilities in HIV, HIV adjacent, that Tessa Martin is more HIV adjacent, but also in small metabolic, small liver disease. We have hired a lot of people on the ground in sales and in medical that have expertise in small metabolic and small liver disease, providing that we do not have to create a huge new sales force and rather stick to covering the centers of excellence. We believe we could actually undertake such efforts and be successful. This is advancing very nicely. We have opportunities that are moving forward, and I would be more than happy to reveal those once they are finalized, which is not the case yet. But I can tell you, this is key to our activities at the moment, and I'm very optimistic about the outcome being positive within a decent period of time. Next question, Philippe, on the adjusted EBITDA, when are we going to be net income positive?
spk06: Well, I'm not going to comment on when we're going to be, but just on the reporting, you're right, Bill. We are transitioning from being EBITDA negative to EBITDA positive, and if you look at our guidance, you'll see that it will be improving over the year. So at some point, we'll be talking more about cash flow, about free cash flow, and also about the bottom line. We're really turning the corner, and these metrics will become more and more important in the next quarter or two.
spk04: Christian, we had a very important meeting with the agency that we call the Type E meeting. We just wanted to have clarity on some of the questions. So what have we learned, and what is the step forward now?
spk05: Yeah, with the FDA, when we request a Type E meeting, we – proposed to the FDA the plan of action for all of the questions, and there are only two questions that remain to be clarified. The first one was regarding the antimicrobial testing, and since we started discussion with the FDA during the review process, we initiated another study with the final component, the component that will be commercially available, mainly the bacteriostatic water for injection from Pfizer, and the drug product, which is now produced by BCI, and we have good results. We share those results with the FDA, but they couldn't comment during the meeting because there were new data presented to the FDA. They will include their comments in the minutes that should be coming any days, probably by the end of this week. The other one that was very important for us to clarify about their understanding was regarding the immunogenicity risk assessment. We wanted to ensure where the FDA was standing. The question was more related to the degradants. As you know, now in our formulation, it is a lyophilized drug product that needs to be reconstituted and stay reconstituted for a period of seven days. And we have tightened our spec to meet the same values, if you want, as the one that we're for the F4, then we think that those two questions were well addressed, and we're ready to complete the work and submit to the FDA for a decision this year.
spk04: Thank you. So we are awaiting minutes from the type A meeting. We are working on the resubmission, and we expect a decision before the end of the year. Thank you. Thanks for your questions.
spk03: This concludes our audio question and answer session. I would like to turn the conference back over to Paul Levesque in management if there are any webcast platform questions and for any closing remarks.
spk06: Okay, thank you, operator. So there are a few questions, and the first one is you mentioned that there has been an acceleration in the oncology trial. Can you expand on this?
spk04: So, Christian, we actually released the fact that we had one patient, so what's the update?
spk05: Well, the update is that now all of the sites are active, up and running, and looking for patients. Then we have a second patient that was treated yesterday, which is very good. We also like the sites are active and now trying to recruit the six patients as fast as possible. We have another patient which is in screening at the moment, and we're in regular contact with all of our sites to ensure that those six patients will be recruited immediately. Don't have the date in mind. It's always a bit difficult to give a date, but hopefully in the coming weeks or months. Thank you, Christian.
spk04: And can you expand on the partnering strategy for oncology? Well, we are still extremely active. What I said is very important because this is something that we have not maybe clearly explained before, but there are two things now that are coming together very nicely. We have TH1902 in the clinic. In part three, with a new protocol that is being dosed, and we're doing now the last cohort at a higher dose of 1.5 times the dose of docetaxel when used alone. That is more than 40 patients, human, that have been dosed with the H1902, and some of them with the new protocol. That's one thing. but we also wanted to advance other PDCs with different payloads. Some of them are more potent than docetaxel. We've done that. And in fact, over the weekend, you presented pretty stunning data, you know, with those PDCs, sometimes in combination, sometimes alone, but it's pretty stunning information again. So we think that now with docetaxel and our peptide drug conjugate advancing and showing signs of efficacy, because we have seen signs of efficacy, And we may see even more with the new protocol now with the last cohort that we're dosing at the moment. That combined with the new PDCs that we have advanced, we think that we are in the sweet spot for attracting interest, for getting interest from oncology companies. And you know what those companies are. They are the companies that are very active in oncology. And we are putting our value proposition together with a very clear next step on what we should advance further, and I remain extremely optimistic that we'll find some interest and get some activity going, and we will be reporting in due time.
spk06: Okay, thank you. And there's a question on the impact of GLP-1. So can you expand a little bit on any insights that you're seeing in the market on the impact?
spk04: So thank you for the question. So, John, you know, we've said that the GRIFTA now is recording many quarters of pretty, pretty good performance. So how is that panning out with the GLP-1's pressure? and news that, you know, that category of medicine is making on a daily basis.
spk01: Thanks, Paul. Yeah, we continue to see interest in injectable drugs to decrease fat. And where nobody was talking about this a couple of years ago, now everybody's talking about it. So we think that is creating some tailwinds for us. And the patient type for Egrifta is B. much different than the patient type for GLP-1, where that's mainly a high BMI patient in the GLP-1, where the agripta patient frequently has an increased hip-to-weight ratio. Another major difference is that agripta increases lean mass, and where the GLP-1s have been associated with significant decrease in lean mass, and this is a big problem, especially in the HIV population. So, There are different patient types, but there's increased interest, and, you know, we're continuing to see strong new enrollment growth and total patient growth, and so I think that sort of speaks for itself.
spk06: Thank you, John. Okay, last question is a little bit more information around the plan with Marathon, so I can call address that. Certainly, yes, go ahead. So the facility is $60 million or $60.6 million, and it's reimbursable over 36 equal monthly payments, which works out to $5 million a quarter. So with the cash that we have on hand and the cash that we'll be generating from operations, we believe that we have enough to reimburse the facility in its entirety. This being said, there are some restrictive prepayment penalties such as make whole payments on the facility itself. two years after drawdown. So the first of these restrictive penalties goes away on the first $40 million tranche in July of this year, and the second restrictive penalties on the $20 million go away in a year and a few months in June of 2025. We don't have specific plans right now to prepay, but we are looking at all options available. And when we are ready to proceed with something, we will keep the market abreast. But that is definitely something that we are considering right now. So, Paul, I'll turn it over to you. There are no more questions.
spk04: Thank you, everyone, for attending the call today and for your questions. The second quarter is shaping up nicely, setting the stage for 2024 annual revenues between $87 and $90 million, and it adjusted a bit in the range of $13 to $15 million. We remain confident in our strategy of doubling down on our commercial capabilities, completing part three of our phase one oncology table trial, and acquiring assets to create value for our shoulders in 2024. Thank you again for continuing to be part of our journey. See you soon on the second quarter call. Have a great day.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer