VYNE Therapeutics Inc.

to the Vine Therapeutics Third Quarter 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Michael Wood, LifeSci Advisors. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us this morning. Before we begin the formal remarks, let me remind you that some of the information in the press release that was issued by the company this morning and on this conference call contain forward-looking statements that involve risks, uncertainties, and assumptions. that are difficult to predict. Words that express and reflect optimism, satisfaction with current progress, prospects and projections, as well as words such as believe, intend, expect, plan, anticipate, and similar variations identify forward-looking statements, but their absence does not mean that a statement is not forward-looking. Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences include are described in detail in the company's filings with the SEC. These forward-looking statements speak only as of today to today's press release and conference call, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this call. In addition, the financial portion of the call will include certain non-GAAP financial information. The company has provided a reconciliation for such numbers in the earnings release. Participating in this morning's call are Dave Domzalski, Chief Executive Officer of Vine Therapeutics, Andrew Sake, Chief Financial Officer, and Matt Wiley, Chief Commercial Officer. At this time, I'd like to turn the call over to Dave Domzalski. Dave, please go ahead.

Thank you, Michael, and good morning to everyone. This is our first quarterly call since we announced our rebranding to Vine Therapeutics in September, with the corresponding update of our ticker symbol to VINE. Having achieved FDA approval for our two commercial products, Amzeek and Zilxy, we thought that this was a good opportunity to take a look at our corporate branding and make sure this was aligned with our vision and the positive image we wanted to project to our customers and various stakeholders. The symbolic meaning behind our new name reflects our core values, strength, growth, endurance, and resilience, and is a testament also to the value of our proprietary technology. We are excited to have launched Zilxy on October 1st, which is our 1.5% minocycline topical foam for the treatment of inflammatory lesions of rosacea in adults. We received FDA approval for Zilxy in May, and this is, in fact, the first minocycline product in any form to be approved for use in rosacea. Our immediate priorities for Zilxy are to leverage physician experience with ANSI as well as our MST technology in order to drive rapid trial and experience with Zilksy and to gain broad payer acceptance and reimbursement. We already made progress right out of the gate on the payer front with the signing of a contract with Express Scripts just after launch. Matt Wiley will expand on this. The organization market remains an area of significant unmet medical need, and we believe that Zilksy should receive broad market acceptance. Within just a few weeks of launch, we are already seeing excitement from healthcare providers relating to the availability of Zilce as a new treatment option for patients. Turning now to Amzeek, the overall blended acne market continues to recover and prescription counts for Amzeek continue to grow. I'm pleased to report that both weekly and monthly prescriptions have now eclipsed pre-COVID levels for the first time since the shutdown in March, and then we are gaining market share. we continue to see both interest and enthusiasm among healthcare providers as trial and utilization of Amzeek continues to increase. Also on October 1st, we hosted a physician symposium for investors featuring three dermatologists, which highlighted the way in which these doctors are currently using Amzeek and how they plan to use Zilxie in their practices. They shared that they were pleased with the performance of Amzeek in their patients and expect continued broad utilization of Amzeek in acne. We were also delighted to hear that these doctors believe that Ziltsy could become their first-line therapy fluorization. If you missed the event, a replay can be found on our website at bindtherapeutics.com under the Investor section. So if it goes to the Events and Presentations section, click on the Investor Event Physician Symposium dated October 1, 2020. Fill out the registration form, and you can view the replay. Regarding FCB 105, which is our investigational combination minocycline and adapalene foam for moderate severe acne, we will have our end-of-Phase II meeting with the FDA this quarter and intend to share our Phase II data along with our plans for our Phase III development program. Recall that in June, we announced positive results in the 447-patient Phase II trial, showing potentially best-in-class improvements, on both IGA treatment success score and inflammatory lesion counts. Finally, in September, we announced the appointment of Patrick Lepore to our board of directors. Pat has an extensive record of creating shareholder value both organically and through strategic M&A as a board member and a former CEO of several life science companies. We're thrilled to have Pat on our board. His experience will be enormously helpful as we continue to execute on the launch of our commercial products and grow our business. With that, let me now turn the call over to Matt Wiley, our Chief Commercial Officer, who will provide an update on our commercial activities. Thanks, Dave. We are pleased with the commercial execution for both Amzeek and the recent launch of Pillsy into the rosacea market. Although the pandemic has had impact on both the acne market and physician access for our sales team, I'm encouraged by the resilience and fortitude of our team to continue to sell through these obstacles. AMZ prescription volume in the third quarter came in at 26,900 NRXs and 32,700 TRXs, representing 49% and 52% growth over Q2, respectively. Additionally, in our most recent weekly data, ending the week of October 23rd, we equipped 3,500 TRXs for the first time. We continue to expand our reach and trial of Amzeek with a number of unique prescribers exceeding 5,500 through Q3, representing a 31% increase over the previous quarter. Additionally, since launch, we've educated approximately 1,300 healthcare providers on the features and benefits of Amzeek through virtual and live speaker programs with the ambition of educating over 2,000 healthcare practitioners total in 2020. With respect to market access, our coverage for AMZIC has increased to 67% of total commercial covered lives, with one major PBM negotiation in process. Our goal is to complete negotiations before the end of the year, which would take our covered commercial lives to over 80%, which has been our target. Turning to ZILTI, the Rosacea brand of prescription market appears to have largely recovered from COVID-19 impact. Zilci was launched on October 1st with over 7,500 calls made to date. We've already reached 55% of our Zilci target universe and educated over 500 healthcare providers through peer-to-peer programs in the month of October. Conversations with payers on Zilci continue to be encouraging, with payers expressing strong interest in the brand and acknowledging a significant unmet need in the rosacea population. Express Scripts, one of the nation's leading PBMs, made the decision to cover Zildjie effective October 2, 2020, on its national preferred flex and basic commercial formularies. This is an important step towards broad pair coverage as it represents millions of additional covered lives in the U.S. that follow these formularies. With this successful contract execution, we now have just over 50% of commercial lives covered across the country. We expect additional PPM contracts to execute over the next few months. I will now turn the call over to Andrew, who will provide the financial update.

Thanks, Matt. In my review of the third quarter financials, I will talk about revenues, costs during the quarter, and the nine-month period ended September 30th, and our cash position and our market access program. Revenues totaled $3.3 million for the quarter. our revenues consisted of $2.9 million of product sales, primarily associated with Amzeek, and $.4 million of royalty revenue from Phenacia Foam, our product outlicensed to Leo Pharma. There were no revenues for the three months ended September 30th, 2019. Switching to market access, our strategy has been predicated on leveraging a synthetic access program that allows a patient without commercial insurance coverage to to acquire AMZEEP for $75 while we pursued broad payer coverage. This was done to ensure patient access during the launch phase of our product, and we always anticipated eliminating this temporary and unprofitable program. Given that we are in the final stages of contract negotiation with the one remaining large PBM, we expect that we will be able to end this program in the first half of 2021. With the anticipated attainment of having over 80% of commercial lives covered and the elimination of the $75 cash pay option, we feel comfortable tightening our expected net value per prescription range from $200 to $400 per prescription to $200 to $250 per prescription. We believe that this should be realized sometime in the first half of 2021. Our cash? Cash equivalents and investments totaled $77 million as of September 30, 2020. We believe that the $77 million and our projected cash flows from revenues provide cash runway through the end of 2021. Beginning this quarter, we are going to begin showing our earnings on both GAAP and non-GAAP adjusted basis. We believe this will provide investors with better transparency into our earnings and and make it easier for investors to compare our results to analyst estimates. We have provided a reconciliation for GAAP and non-GAAP adjusted numbers in our earnings release. Our third quarter 2020 GAAP net loss was $24.7 million, or 15 cents per share. This compares to $23.2 million, or 23 cents per share, for the comparable period in 2019. When excluding $2.6 million of stock-based compensation expense, our third quarter 2020 adjusted net loss was $22.1 million, or 13 cents per share. For the third quarter 2020, adjusted operating expenses were $24.1 million. When excluding cost of goods sold, adjusted operating expenses were $23.8 million for the quarter. including SG&A expenses of $17.5 million and adjusted R&D of $6.3 million. This compares to $21.9 million of adjusted operating expenses for the third quarter of 2019, which included adjusted SG&A expenses of $9.9 million and adjusted R&D expenses of $12.1 million. For both periods, adjustments consist entirely of non-stock compensation expenses. Regarding the restructuring we underwent related to the combination of Foamix and Menlo, the restructuring is now complete, and our Q3 cost structure should be more indicative of our expenses and costs going forward. We believe that operating costs of approximately $25 million per quarter are sustainable into the future, but do not include incremental costs that would be required for the anticipated Phase III trials for SCD-105. Moving to the nine-month period ended September 30th, our 2020 GAAP net loss for the period was $232.4 million, or $1.99 a share. Included in the net loss were $154 million of non-cash expenses consisting of $85 million related to contingent value rights, which converted into Q2, $54 million related to Q2 impairment of goodwill IPR&D related to the Menlo merger, and $15 million of stock-based compensation expense. When excluding these non-cash items, our adjusted operating expenses and adjusted net loss were $93 million and $78 million, respectively. Our current share count is unchanged at approximately 168 million shares. For full details on our financial results, please refer to our form 10Q filed today.

All right, well, thanks, Matt and Andrew, for your detailed updates. That concludes our prepared remarks, so operators, we're happy to open call now for any questions.

Thank you. If you would like to ask a question, please press star followed by the digit 1. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, star 1, and we'll take our first question from Louise Chen with Cantor.

Hi, good morning. This is . Just a few questions here. First of all, after completing the negotiation with the last remaining major PBM, what is your plan on further increasing your coverage level? Secondly, what are some possible scenarios coming out from the end of Phase II meeting with the FDA for FCD105 in the fourth quarter? How much will each scenario impact their timeline and R&D costs? And lastly, are there any plans to progress the development of Serapitin from the reverse merger with Novel?

Thank you. Thanks, Carvey.

I'll provide some thoughts on your last two questions. First of all, regarding Serapitin, Yeah, as we stated in the past and last few quarters, right now we're not putting any direct investment behind Soloponib. So our focus is on the execution of ANSI and Zilci launches as well as progressing FCB 105. That being said, we obviously have an asset. We believe there is value to it. We're certainly open and have had discussions in the past with companies you know, potential partners, you know, nothing at all to imminent to provide any, you know, updates on. But, you know, our focus, obviously, at this stage is on our commercial assets and, again, the advancement for FCB 105. Regarding FCB 105, as I shared, we'll have the end of Phase 2 meeting this quarter. You know, we said that depending on the outcome or assuming a positive outcome, which we would assume such, that would put us on a track to initiate a Phase 3 program sometime the first half or so of next year. There are a lot of variables that go into that. One is just what the environment is going to be in light of the current pandemic. We believe, as we've said in the past, that the data from the Phase 2 studies for STD-105 We're quite encouraging. We're very pleased with the outcome of those Phase II results. We do believe that that can be replicated in a Phase III program. It has the potential to be a best-in-class product for the treatment of moderate to severe acne. Normally, the guidance is quite clear on Phase III programs for acne. And a standard program will require two double-blind vehicle-controlled studies plus an open-label safety extension, and then you have your requisite Phase I dermal safety studies. But as I've said in the past, you know, there's quite a significant body of work around minocycline, obviously through Amzik and Zilxy, and the dose in SCD-105 is bracketed between the dose of Amzik and the concentration of Amzik and the concentration of Zilxy. 3% dose of minocycline in FCD-105, and Zika, as you know, is a 4% dose of minocycline, and Zilk-C is a 1.5% dose of minocycline. So, you know, there's a significant body of data out there for minocycline, and the dose that's in the FCD-105 product for Adapalene is 0.3%, which is the marketed, which is the dose for the marketed product, Epidural and Epidural Forte. So, The team internally here at Vine has done a fantastic job of putting together a comprehensive package for the FDA. We'll have that meeting again later this quarter, and we'll see how it goes in terms of what the ultimate design of the phaser program should be. We're obviously going to put our best foot forward to have as an efficient design as possible, and we'll just take it from there. We'll know later this quarter. But we view it that way. If we do a full comprehensive program, two double-blind vehicle control studies, plus you have some label safety extensions, that's roughly from the time the first patient is initiated. It's roughly, you know, a 20- to 24-month timeline from beginning to end. And then, obviously, factor in roughly 10 months or so for an NDA review. So we can kind of sort out how long the program would go. And the cost of those are, you know, if it's a full program as I've outlined, it's $30 million to $40 million spread out over, you know, a two-plus-year time period. We'll see ultimately what a phase two program will look like after we've concluded our meeting with the FDA later this quarter. I think regarding, you know, coverage, I'll turn it over to Matt for AMC. Good morning, Harvey. So the questions about what we do after we get the remaining PBM under contract, it really comes down to pull through from that point forward. So certainly working with the custom plans underneath the major PBMs to make sure that they are aware of the formulary options that they have and that they take a deal. I think that one of the things that you've probably seen between the last time we reported and today is we had about 63% coverage back – When we did the symposium in October, we now have 67%. And that's a nod to being able to pull through some of those custom plans and the blues plans underneath the payers that we already have under contract. And that's what we'll continue to do after we get the last PBM under contract as well.

Got it. Thank you so much.

Next, we'll move to David Amselen with Piper Sandler.

David, your line is open. David, your line is open. Please go ahead.

And would you like to move on? He's not responding.

Can you hear me? Yeah, we got you now, David. Okay.

Sorry about that. Just wanted to get some thoughts on where you think you're going to be pulling ZIL-C patients from. Are these going to be patients who are on doxycycline? or doxycycline patients who are naive to doxycycline or patients who have been on other topicals. Just trying to get a sense of what you think the kind of patient mix will be. And maybe I'll ask the same question for Amzik. If you can go through the patient mix, where you think patients are coming from, and particularly the extent to which you're getting treatment naive patients. Thanks.

Sure. So

Let me start with the joke. So, yeah, you've got a pretty good beat on this one. We see from our demand study that primarily we're pulling from metronidazole and doxycycline. And, you know, down the list, obviously, we get to other displacement of products such as Sulantra and Femacia. But, yeah, the two primary ones would be the metronidazoles and doxies of the world. As it relates to AMZ, we're seeing pretty broad disruption in the market, so we are taking from a bit of everything. It's tough to discern from our data whether we're being added to certain products or displacing certain products, but it has been a pretty disruptive market entry as we expected it to be. Yeah, David, I would add, too, in terms of the you know, where we anticipate the potential to pull visits from from Ziltsi, as Matt outlined and Eve outlined, you know, the oral antibiotic arena, whether it's doxycycline or minocycline. And then metronidazole, they're the two biggest, you know, therapies that are utilized in the treatment of rosacea. For metronidazole, there's over a million prescriptions written a year for the treatment of rosacea. So, you know, we're certainly – you know, encouraged by the potential and what we've seen in the market research. Obviously, we're very, very early in the launch, so we'll see how things ultimately play out. But we have seen consistently, both in the research from MZ and the research from Zilch, that these products have the potential to be disruptive. We obviously have to get more traction on MZ. We're nine months into the launch, and as Matt outlined, we're seeing share gain pretty broadly. and we're eager to see how it's going to shake out for Zilty as we continue to launch that driver.

Okay, that's helpful. And if I may just make a follow-up question, to the extent that 105 gets to market, what is your expectation regarding the extent to which you could expand your Acme franchise footprint, or do you expect – you know, a large bit of conversion and some cannibalization, just trying to get a sense of, you know, the extent of expansion or if this is really more of a conversion to the combination product type paradigm. Thanks again.

Yeah, David, so I look at this as a welcome addition to the market.

So obviously there are going to be certain patients who are going to need a combination product versus those who are going to do just fine with antique monotherapy. And so giving the market the choice for those products, I think, is the right way to think about it. FDD 105 certainly is going to be a great addition. We think it's going to be a game changer in the market. So we do think that it's going to be equally disruptive as ANZIC was coming into the market. And we have some market research work to do ahead of us to understand the impact on the market overall. But we feel pretty optimistic about its chances, given what we've seen with the market research for ANZIC and the disruption it's had in the current market.

All right, thanks.

And David, were you done with your questions? Yeah, I'm sorry. Sorry, I'm deep on. Yes, thanks. Thank you.

We'll move on to... And next, we'll move on to Ken Cacciatore with Cowan & Company.

Hey, thanks, guys. Just a couple of questions. I got on a little bit late. I just wanted to hear if you gave an update on Zocacy managed care timing that we could maybe match with... I know you're still outstanding on CBS, but it sounds like this quarter when I came on, you were saying it looks like that could be finally done. So just wondering if you could lay out for us, when do you think we'll have kind of matching coverage on Zilksy? And then is net pricing still going to be roughly the same, the $2 to $2.50 that you're capturing for Zilksy when all things shake out? And then lastly, and don't get angry at me because I'm going to kind of ask you guys to do a little bit of math, but According to my math, you would need kind of at a normalized pricing, once coverage is on board, about 8,500 combined Amzeek and Zilkseed prescriptions per week to get to break even. Just wondering, when do you think you guys will internally model that type of run rate? As I look at an Axon and an Epiduo inferior products to Amzeek, they're doing about $15,000 to $20,000 a week just individually. You have a combination franchise. So as investors try to stare at the balance sheet and the confluence of negotiations with managed care and kind of getting that pricing on board and prescription growth, Are my numbers basically right? I know I just threw a lot of numbers at you. And then if we're on a good run rate, do you think the capital markets in terms of debt would be available to you, not necessarily just equity? So a lot to chew down, but wanted to see if you could help investors as they stare at the confluence of growth, managed care, and your balance sheet. Thank you.

Sure. So good morning, Ken. It's Matt. Regarding the PBM timing for ZILTI, so first of all, we've engaged with all major and most of the smaller PBMs across the country. We feel very good about the conversations that we've had to date. There are certain PBMs, as you know, that require for their custom plans a new market block for six months. So we're in that window now. but we feel pretty optimistic that we can get these done in a timely fashion and get to similar coverage to AMSEC quicker than we were able to with AMSEC, given the one major PBM that had a contract change during the course of the year. So we feel good about the timing, and we believe that this should be a little quicker than AMSEC has been.

Yeah, sure. And, David, with regard to your – Your math isn't far off. You know, obviously we've given the guidance of about $200 per prescription. To your question, we would expect Zilke to be relatively similar to Amzeek. You know, as you know, the WAC price on both products is the same. As we pursue coverage with the payers, we obviously have precedents. We don't want them to be disparately priced because we don't want switching between the two. We want them each to be on indication. So we're doing our best to keep them at price parity. So I think, you know, your math is correct, and I think your pricing assumption for ZILTI is correct. As to the timing, you know, as you know, we haven't given timing, you know, in our forecast. So I'll allow you to project that out. But I agree with you, and I think Matt and Dave would agree. We believe our products are superior, and we simply need to get the traction in the market and the game out as quickly as we can.

Thanks so much. Did I answer everything, Ken? You did. Thanks, Dave. Yep, thanks, Keith. Thanks, Ken.

And as a reminder, if you would like to ask a question, please press star, follow by the digit 1. Next we'll hear from Patrick Dozo with LifeSci Capital.

Hi, thanks for taking the questions. It's a COVID-related question to start with. You know, as some cases are beginning to rise in certain areas of the country, I'm just curious if there's particular territories that have been adversely affected by tightening restrictions at this point, or is the recovery trend kind of continuing to predominate across the board? And then on a similar note, just in terms of general seasonality, what should we expect with the acclimatization market as we move into winter, and particularly with the new year approaches? Thanks.

Sure. Thanks, Patrick. You know, regarding COVID, I mean, this is obviously the big unknown.

You know, as a follow-up to Ken's questions, our responses, we've been consistent over the last couple of quarters. We're cautious about, you know, putting a line in the sand on when we'll hit certain marks for profitability and the like just because of the uncertainty of the current environment. I think we're all obviously still living with, you know, global macro arena where we've got spikes in cases in various geographic areas that we have to contend with. And, you know, MAC can provide a little more color. In large part, again, our fuel force is fully deployed, but it remains similar, as I've shared in past earnings calls, that It varies by geographic region, the access. More open areas where we're not seeing spikes in cases, representatives have pretty open access getting in. There's obviously the appropriate regulations and rules from the offices, and everybody's taking the appropriate precautions. But there are certain areas around the country that are much more open than others. And so we continue to manage that. Where there's more restrictions on office level, we pivot to more virtual initiatives. And, again, despite all the headwinds, You know, we're quite pleased with the efforts of our team, and I think that's reflected in the numbers that we presented at the top of this call, both in prescription growth as well as our continued increase in number of unique prescribers. So, you know, we're continuing to manage this like any other company out there. I think we've gotten pretty efficient and proficient at pivoting to, you know, more virtual environments as needed. And I'll turn it over to Matt to provide some additional follow-up. Sure. So regarding the markets themselves, let me start with the rosacea market, which has predominantly healed since the COVID-19 impact. We have seen the number of diagnosed patients and NREX volumes rebound significantly, similar to if not ahead of where they were in early Q1. Regarding the acne space, if we look at the TRX volumes, Q3 in 2020 versus Q3 in 2019, still down about 10%, but it has been coming back nicely. In fact, this last week we saw the NRX volume pop up over 70,000 for the first time since the COVID lockdown. So that's an encouraging sign and something that, you know, I think points to better days ahead. Regarding seasonality, so with the acne patients, it's typically driven by when kids go back to school. So we do see some spike volume typically in July and August over the course of the year. With rosacea, it's a little different. There is a true seasonality component. driven by the triggers that these patients have, specifically the change of seasons from cold weather to warmer weather. And we see this in the diagnosed patient volume in March, April, and May. And so that should actually be a slightly higher period of time where rosacea patients are seeking treatment. We also see that in search volume. So we see the same phenomenon, not just with when patients are getting diagnosed, but what they're searching for and triggers that they're searching for related to rosacea. So there is a true seasonality component to that disease and something that is aligned with our strategic thinking.

If there are no further questions at this time, I would like to turn it back to management for any additional or closing remarks.

Thank you, Operator, and thank you to everybody for taking time out of their schedules to join us on this call. We look forward to continuing to provide an update on our progress, and we wish everyone to have a great rest of the week and stay safe and healthy out there. We'll speak soon. Thank you.