Baudax Bio Inc (BXRX) 2021 Q1 法說會逐字稿

Good morning and welcome to Baudax Bio first-quarter 2021 financial results conference call. (Operator Instructions). As a reminder, this conference is being recorded at the company's request. I would now like to turn the call over to Claudia Styslinger, Investor Relations. You may begin.

Good morning and thank you for joining us on today's conference call to discuss Baudax Bio's first-quarter 2021 financial results. This is Claudia Styslinger and I am joined today by Gerri Henwood, President and Chief Executive Officer; and Rick Casten, Chief Financial Officer.

On today's call, Gerri will begin by providing some introductory remarks; Rick will then discuss the financial highlights from the quarter; and Gerri will follow with a business update and discuss the continued progress around the commercialization of ANJESO.

Earlier this morning, we issued a press release detailing our financial results for the first quarter of 2021. The press release along with the slide presentation that we will reference for today's call is available on the events page of the News and Investors section of our website at baudaxbio.com. Please note, the slides for today's presentation are viewer controlled.

Before we begin our formal comments, I will remind you that various remarks we make today constitute forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our financial outlook. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations and forecasts and can be identified by words such as anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will and other words of similar meaning.

The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward-looking statements: the ongoing economic and social consequences of the COVID-19 pandemic, including any adverse impact on the commercialization of ANJESO or disruption in supply chain; our ability to maintain regulatory approval for ANJESO; our ability to successfully commercialize ANJESO; the acceptance of ANJESO by the medical community, including physicians, patients, health care providers and hospital formularies; our ability and that of our third-party manufacturers to successfully scale-up our commercial manufacturing process for ANJESO; our ability to produce commercial supply in quantities and quality sufficient to satisfy market demand for ANJESO; and our ability to raise future financing for continued product development and ANJESO commercialization.

This list of important factors is not all-inclusive. Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described in the risk factors and the management's discussion and analysis section of Baudax Bio's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and any quarterly reports on Form 10-Q, which are on file with the Securities and Exchange commission and available on the SEC's website.

Any information we provide on this conference call is provided only as of the day of this call, May 5, 2021, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise.

In addition, any unaudited or pro forma financial information that may be provided is preliminary and does not purport to project financial positions or operating results for the company. Actual results may differ materially. I would now like to turn the call over to Gerri Henwood. Gerri?

Thank you, Claudia, and good morning, everyone. We hope that all of you joining us are keeping safe and healthy. This morning, we're looking forward to updating you on the continuing progress of ANJESO. But first, I'll pass the baton to Rick Casten, our CFO for the financial update.

Thank you, Gerri. Good morning, everyone. Since we issued a press release and filed our Form 10-Q early this morning outlining our full financial results, I will just touch on some of the key highlights. As of March 31, 2021, we had cash, cash equivalents and short-term investments of $38.2 million reflecting the two financing transactions in the quarter mentioned in our Q1 recent business highlight section of our earnings release, net of our operating cash spent.

On slide 3, you can see our net product revenue for the first quarter of 2021 was $0.2 million and was related to sales of ANJESO in the US. There was no product revenue recognized during the first quarter of 2020 as we received FDA approval for ANJESO in February 2020 and began to sell product in the subsequent quarter.

Cost of sales for the first quarter was $0.8 million and consisted of product costs, royalty expense and certain fixed costs associated with the manufacturing of ANJESO including supply chain and quality costs. We expect that over time, cost of sales will increase as sales increase and inventory values change to include all costs and expenses post FDA approval. There was no cost of sales for the first quarter of 2020.

Selling, general and administrative expenses for the first quarter of 2021 were $12 million, compared to $8 million for the first quarter of 2020. The increase of $4 million was primarily due to the commercial launch of ANJESO, specifically, an increase in personnel related costs, medical affairs and regulatory support, marketing and public company costs.

Baudax Bio reported a net loss of $16.9 million or a negative $0.27 per share, including non-cash charges of $5.1 million for the first quarter of 2021. The non-cash charges primarily relate to stock-based compensation, depreciation, amortization and changes in fair value of our contingent consideration. This compares to a net loss of $40.3 million or negative [$4.03] per share, including non-cash charges of $32 million for the first quarter of 2020. With that, I will now hand the call back to Gerri. Gerri?

Thank you, Rick. I'm now going to take some time to walk you through some recent highlights. If you look at the slides, I'm starting with slide number 4. So during the first quarter of 2021, launch progress was made. There is still COVID around; it varies by location of course, but that does provide some degree of disruption of access into hospitals or to certain physician groups.

Formulary meetings are still not normalized in many places. And elective surgeries are coming back, but not back in full. And certainly, in certain geographies, I'm sure you've all heard about what's going on in Michigan and certain other geographies, things have had a downturn. But overall much better than what we were looking at in the fourth quarter in terms of some access.

Vials sold grew by about 40% in the first quarter compared to the fourth quarter of last year. Sales to existing hospitals and ambulatory surgical accounts doubled from Q4 to Q1. And end user reorders were at a 59% rate in the first quarter.

If we go to the next slide, you see the quarter-over-quarter growth in units sold to end users. We think this is an important indicator of progress because, as you may know, hospitals do not typically order and stock. They order and are using in a very short period of time, usually days. So we are very happy to see this kind of growth. Obviously, we want to see more growth in it and think that as we are getting more and more formularies and deepening usage within accounts, we will have an opportunity to see such change.

If we look at slide 6, this looks at the percentage of end customers who have reordered in Q1 and you can see that the size of those average orders is growing nicely, needs to continue to grow; but this is good. We've got physicians using the product, that are beginning to talk to their colleagues in these same specialties. And we think that's responsible for some of the deepening of those uses.

If we look at slide 7, we continue to try to use the most cost-effective means possible. So we are continuing to use telesales, which is very inexpensive, does not lead us to conversion to usage and does not impact formulary approvals, but does get us access to certain physician groups that we cannot meet with otherwise.

So we get the telesales group to help us to get them -- and get the office staff open to whether it's a visit in the office or a full-on profile of the product from one of our ASCs that we can pull into the field, but with all that prep time being taking care of much less expensively by the telesales side, so that we can spread our reps tinner.

We also have an orthopedics group that has past orthopedics experience. These are the groups that had come from their support of DePuy's efforts in association with a great product Exparel. And so they have experience in this space and also in relationships with a number of clinicians. And we are leveraging that again to try to get more appointments, try to build advocacy, so that we can then help accelerate the time to getting formulary approvals.

Our field team continues to be pretty modest. But we did add three territories in Q1, as we had said, both in Q4 and in Q1 when we spoke with you, we are adding territories based on further movement builds of advocacy and formulary committee meeting schedules. And in a number of cases, formulary committee approvals and then needing reps on the ground to help with the pull-through.

The pull-through is pretty intensive in terms of labor. You have to go to the hospital, you've got to work through getting into the electronic record sets in their electronic medical records. And you also need to be doing in services in conjunction with the medical affairs group, who is scheduling some of those in services for the nursing groups and the surgical groups and the anesthesia groups are pulling it through.

Territory advisors are what we call a group of folks who are not full-time employees. They are 1099 people who have a lot of experience on the device side. Often, they are working for several smaller device companies, not usually the behemoths, but very close relationships with orthopedic surgeons, who seem to be the earliest adopters of our product usage and seem to have liked it and continuing to deepen their usage of it.

We had approximately eight territory advisors. We have added to that over this period of time. Again, they are pretty inexpensive. So that helps us, we're leveraging those relationships. They have to get ourselves deeper into relationships with certain practices that we have not had relationships with or that our reps have not known as well.

So those are the approaches that we are using to try to keep ourselves cost-effective. We do see that it does require personal relationships and involvement to convert to action. We can raise awareness, we can give educational information, but we really have to have more of a personal relationship in order to get that call to action and get the product tried and used in the treatment setting and surgeries.

If we go to slide 8, so where are we in summary right now? So we are on formulary right now at approximately 90 accounts at the end of the first quarter. We continue to see that the largest percentage of our uses is in orthopedic procedures, variety of orthopedic, total hip -- total knee, total hip, complex foot and ankle, podiatry shoulder.

And we have of late begun to see more usage in plastic surgery by plastic surgeons, who are happy with the lack of opioid complications in their particular patient population. And soft tissue procedures such as intra-abdominal surgeries are beginning to gain a little momentum.

The field is focused on formulary reviews because that is a gating factor to getting access and being able to deepen usage. Then pull-through, so that once we are on formulary, we're going to take what turns out to be typically six to eight weeks, in COVID time that's turned out to be 8 to 12 weeks to get it present in the electronic medical records. So it is part of their drop-down menus to choose and then expanding the usage within accounts.

We are supplementing, as we mentioned, with the telesales team, the territory advisors and we are really very, very targeted on limited, but hopefully very effective on personal promotion. We will be doing some more market research in the next month to look at whether that targeted promotion is being productive, and in the ways that we hope that it will be. And we will be reporting on that in the next quarter.

The internal teams have expanded very modestly to support areas where momentum has developed, as I said, with three reps added during -- really by the end of the first quarter, so that they will be on board and effective during this quarter.

COVID-19 does continue to have some customer impact. We're doing our very best and I think the team is being very creative in working around a lot of those limitations. The formulary reviews are sliding. And this has in our experience not been that the formulary won't review ANJESO. It's been that the formulary meeting itself is postponed and pushed out a month or in some cases a quarter.

So that has impacted us. But again, we think we're making progress. We would expect that over time, we'll be able to see this progress accelerating. So thank you very much for the opportunity to go through some of that.

So just as a takeaway, we think the commercial rollout is progressing well. And we do see formulary listings and usage patterns increasing and units increasing, and ultimately resulting in more vials sold.

We talked about the cash position. As Rick has gone through, we ended the quarter with just over $38 million. We remain confident in our ability to educate physicians and healthcare professionals about the benefits. And from their feedback, once they try the product, in the vast majority of cases, they are enthused, they have good results, that leads to deepening of usage.

This does take some time, more time than usual because of COVID. But we are seeing what's beginning to look more like a typical hospital launch we believe. We look forward to increased usage as we see more ambulatory and surgical centers across the US increasing their surgery rates again, and we look forward to keeping you updated on our progress over the year. I will now turn the call over to the operator for any questions. Operator?

(Operator Instructions). Leland Gershell, Oppenheimer.

Good morning, Gerri. Thank you for this update and for taking my question. I wanted to ask as we look at the sales numbers over time, it looks fairly linear and regular. Obviously, COVID has been an issue for some time now and maybe a little bit up and down over that time. I wanted to know if you could just talk about the differences in the trajectory between what's in the sales and the pull-through versus the formulary acceptances and making progress at various centers.

And perhaps if we were in a more normalized environment to what degree would you have expected to see perhaps more pull-through, more in terms of sales over that time versus what we've been seeing because of COVID. And any commentary on the most recent trends in that area? Thank you.

Sure. Thanks. It was a pretty loaded question -- History of the World Part One. I'll do my best to try to parse it. So I think it's fair to say that we are not impressed by the economic value of the sales that we have at this moment in time.

But we also are really seeing this as the first quarter that looks anything like a normal launch quarter. And we think that's because the environment is beginning to get back to normal. I don't know how to put a percentage on that, but I would say that we are somewhere between like 30% to 50% of normal right now depending on what region of the country you are in.

I think we would like to see an expanded and accelerated rate of formulary reviews and approvals. I think that there are a couple factors behind that. Hospitals suffered a $102 trillion loss according to the US Hospital Association last year. And so hospital pharmacists, often the keeper of the purse in hospital systems, they are not anxious to have formulary meetings where there could be additional adds to their expenses that they have to regulate.

It is happening though, as we build advocacy, as we get more clinicians to often trial usage is possible in hospitals before we are on formulary. So we are getting more of those opportunities. Building that advocacy does help us to go back and have other internal pushes on pharmacy to expand and to be open to having formulary meetings. So we have expanded that. We would like to see that expand at a greater rate over the rest of this year and beyond.

In terms of the product potential, I think key fundamentals that we see are important for the success of any product are that when a clinician uses the product, they are spontaneously telling you that the product is living up to its profile or more, that is they are experiencing a product that does last for an extended period of time. And in their experience, typically they are getting 24 hours of efficacy from the product and that they are not having onerous or untoward or unexpected side effects, and that seems to be the feedback.

The product is well-tolerated and it's working well. And they like it and it's convenient. And in their experience, again, not every physician, as we don't touch every physician to talk to them, but a high percentage of the user population is telling us that it has helped them to have ability to manage their patients better.

So we think that augurs well for the ultimate success of the product. I think we wish we weren't in an altered environment. But we are going like hell, fast feet, keep moving. We have a small team. As you know, we have 20 people on the street, now added another three to that. So we are pushing very hard with what we have and trying to get the most out of it.

We think ultimately the product has the opportunity to still live up to its potential. But because of the effects of COVID last year and intermittently this year, we do expect it will take us a little bit longer to reach that peak year sales.

So we're looking forward to more momentum, pushing hard, trying to get more formularies. To get approved, we did make it through with more than 28 very meaningful formularies during the first quarter. And we're looking forward to continued progress hopefully at a higher rate as we move forward. So I hope that answers your questions, Leland.

That's very helpful. Thank you.

Jason Butler, JMP Securities.

Hi. It is Schwab for Jason. Thanks for taking our questions. I guess to kind of follow up on that question. The institutions that you are in now, the 90 institutions, are there any restrictions on use within these institutions once you get on formulary. And I guess can you categorize how many are using the product readily?

Yes. So I mean an excellent question and a complicated one because it is -- I would say it is unusual these days that one would get onto a formulary of a reasonable size institution with zero restrictions. That would probably be very terrifying for most clinicians.

And that was not part of our forecast assumptions for this product. Much like Ofirmev, which was our market target comp as we look at it, we saw that product was restricted to certain indications and did very well. Staying in that lane, it would get usage outside of those, but that was more by exception regularity.

So the two areas that we've been targeting from the outset, as I think your team knows, have been orthopedic uses, in particular major orthopedic procedures and then major intra-abdominal procedures. And that is where we are seeing usage heaviest in orthopedics right now. I think in part because orthopedic surgery can be done at the outpatient setting as well as the inpatient setting.

And so its surgery rates coming back a little bit faster in some cases than other elective intra-abdominal surgery rates. But I would say in those places we are on for those two indications. There may be one or two where it's orthopedics only.

And then if we look at -- there's a couple, some of them big institutions where we are on unrestricted. But we think it is in our interest and the interest of the institutions that we are partnering with to keep the usage in the major pain procedures, because they're going to get the best results there. And over time, we think there will be spin off from that.

But focusing on these, which are very deep opportunities, more than 11 million surgeries in the orthopedic procedures we are categorizing and a similar number in intra-abdominal once they return to normal levels again.

Okay. Great. That's helpful. Thank you. And then you mentioned it in the last question, but I missed it. Can you remember -- remind us the number of field reps? And it sounds like you're going to add reps as you get on formulary throughout the year. Can you just give us some implications for the expenses for the year? Thanks.

So we haven't given guidance for expenses. We are managing things very carefully. But we do believe that as we have more opportunities to get on formulary at significant institutions that could be the nexus for a territory that it makes sense.

We're not going to benefit from just having a formulary approval if we are not going ahead and getting it extended into the order sets -- the automatic order sets that are part of the EHRs, if we are not actually talking to the clinicians who will use it to the CRNAs and anesthesiologists who will be involved in its administration early on.

And if we can't do those, we don't get the benefit of getting onto formulary. But we are trying to lead with non-personal selling, up to the point of formulary approval. So that's where we got to the three that we added in the first quarter. They actually came on in late March and the beginning of April. So they're on now, we were at 19 prior to that. And then we have added three reps -- we had one opening in the field in the 19 [era], so it's 20 plus an additional three new territories.

So currently, we are at 23.

Right. So we are not looking at going crazy, but we think on this basis -- I'll give you an example. So there is a large hospital in Long Island system that was -- it took us quite a while to get onto formulary. We got onto formulary there with the advocacy of both orthopedics and a number of well-known pain specialists there.

And we had used our key account managers to work that and to get us onto that big formulary. But then you need somebody to do the pull-through. So even though electronic record sets were in process, in order to get business, it is not doable I believe, and we tried through the fall, to use only electronic digital means to get to these clinicians and to convince them of the utility of the product, convince them it is really helping them to get to a point of trial usage.

And the trial usage is what converts them, but that does require some face to face. And again, so that's where we are trying to lead with the business opportunity being proximate, the opportunity to develop ROI is proximate. But we have got to put a rep into that.

We do find that we are able to source well experienced hospital and, in some cases, medical device orthopedics reps who we can bring in and train and have in the field in approximately 30 to 40 days from the inception of the search. So it's a pretty quick and timely thing, but we're looking at it being pretty much just in time.

Got it. That's very helpful. Thank you.

David Amsellem, Piper Sandler.

Hey, guys. It is Isaac on for David this morning. Thanks so much for taking our questions. Just a couple from us. I know you have talked about the challenges associated with scheduling these P&T committee meetings during the pandemic. But now with the worst of it is behind us, can you elaborate more on the pace of these meetings going forward?

Secondly, can you talk about the mix between ASC and hospital usage thus far into the launch? And assuming federal normalization in the near term, how do you envision this mix evolving?

And if I may sneak in another question. I know you touched on early adoption and the mix of procedures ANJESO is being utilized in. But with the product having been on the market for close to a year, how do you envision this dynamic unfolding and where do you see expansion? Thanks so much.

Sure. So maybe let's just talk about where is the environment right now and -- because I think that weaves its way through all these questions. And then I'll come back and try to be more specific on each of the sub questions you've asked on.

So we are not out of the pandemic yet. I want to have that be the case. I want that to be real. I see vaccination rates as a really big help to getting there. But we are not there right now. We are at 20% to 30% of the country immunized, that's great, that's way better than it was. But it is a -- it's still -- COVID is still a thing that's happening everywhere and in most hospitals.

It is like out of hand right now in Michigan for instance and in certain other areas, but it's still a big thing. It is somewhat less of a big thing in the south. And that is an area where we see approaches beginning to get closer to normal, but most P&T committees in many, many hospitals are not meeting monthly, which they might have in normal times.

In some cases, they are meeting quarterly. In some cases, there is one very large southeastern system that we were due to be reviewed in in April and they've decided they're not doing any P&T reviews until third quarter. And it's in what would be more of a southern area. So it's just not done yet.

But I think what's happening is that we are working with that adverse situation and being compliant, but creative about trying different ways to get through things, trying to get approvals for trial usage because the trial usage really helps to build more exuberant advocacy that, when they are having P&T committees, really helps for these clinicians to push for why not only because of national concerns about opioid usage?

But because of the impact of opioid usage in many systems on what they are able to do in terms of patient management and having earlier times of discharge? Which for these systems that are hurting economically helps them to be more prudent with their monies and to operate under the DRG, and not exceed what they are going to get paid on the inpatient side. So that's a real look at the environment that we are in right now.

In terms of the pace of P&T, I would say that is -- that's right up there as the most problematic. It's just much slower than it would be. Now we keep looking for are there other places where they have perhaps sustained fewer losses because they weren't as large a medical center, and proportionately, they are not as hurt where we can get on, they have big orthopedic practices and they would be good opportunities for us.

So we are looking for where can we play while we are working with bigger institutions, which in normal times, in a normal launch, and there are many folks that you guys know who are familiar with hospital products. Hospital product launches would be slow for the first 18 months, start picking up 18 to 24.

And then you would start seeing more of a growth because you're pulling all of this infrastructure in place, while you're trying to also get pull-through from the places that you have. So we do see P&Ts getting better than they were, they are still not on a totally predictable or close to a normal schedule.

In terms of outpatient versus inpatient, we are looking at right now a higher percentage of usage, not by a lot, probably this is me ball parking it. I don't have the exact latest monthly numbers in front of me at this second, but it's maybe like 60 versus 40 or 55, 45, in that range, skewing to the outpatient side usage.

I think that part of that is economics. It's easier to use this non-opioid product in an outpatient environment with the J code that we have. That makes it easier for them to get reimbursement. And we are able to operate in groupings that are not wholly dependent or tied to what their core institution may have had as formulary.

So I think that's responsible for [a little bit]. But we are getting impatient usage in the product and that is beginning to grow. We have less usage in the intra-abdominal surgeries. And again, I think that's in part because some of those elective surgery rates are not as -- back as they would like them to be. Orthopedics are still not close to 100%; they are closer like 50%, 60% of what they were before.

The mix we would see evolving, I think it is clinicians who have used meloxicam in the outpatient setting, which largely orthopedic guys. They are familiar with the product as an entity. And I think that familiarity gets them a little bit easier to think about trial usage in the IV form at the higher dose and getting this NanoCrystal technology to get them the product characteristics that they are looking for. So we would see that as probably being -- it is still in the forefront, although we are intending to continue to grow those other areas as well.

We've begun to see, which was really not part of the core plan, but we've begun to see plastic surgery practices, and many of them having their own surgery centers, finding this product of good utility because of its both anti-inflammatory properties as well as its pain-relieving properties. And the longer-lasting nature of that to cover the period of most intense pain around plastic -- many plastic surgery procedures. So that's an area that we are evaluating and looking at is there a way to grow that and to grow that a little bit faster as well.

Podiatrists have begun to show adoption of the product I think because of the long-lasting nature of the pain relief and the fact that they -- a lot of their patients tend to be older, they would prefer not to see as much opioid usage in these patients in the immediate perioperative period.

In terms of early adoption, orthopedic surgeons historically are more willing to try new things than a number of other surgical areas are. We think that's part of why we are seeing this adoption. And like I said, I think because they had experience with the molecule in other settings that helps them be a little more prepared for it.

But I think, as we've said before, the opportunity to limit or reduce opioids and get good pain management as part of a multimodal surgical approach using, for instance, a bupivacaine containing product or an Exparel type product for certain types of pain, using a product like ours for some of the deep pain, and some of the other agents that clinicians would typically use in a multimodal analgesia.

We think that's a benefit for colorectal and intra-abdominal surgeons because they don't want to have opioids that are going to further slowdown the bowel after they've had to handle it as part of the surgery. So those are areas where we are in and where we're anticipating that we will see some growing usage of the product. I hope that's helpful.

Great. Thanks, guys.

We are showing no further questions. I will now turn the call back to Gerri for closing remarks.

Thank you very much, operator. And I am very appreciative all of you have joined us at this early hour to hear the progress with ANJESO. I hope you have a great rest of your day and we look forward to talking to you during the coming quarter. Thanks. Bye.

Thanks everybody. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.