Baudax Bio Inc (BXRX) 2020 Q3 法說會逐字稿

Good morning and welcome to the Baudax Bio third-quarter 2020 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 of Investor Relations. You may begin.

Good morning and thank you for joining us on today's conference call to discuss Baudax Bio's third-quarter 2020 financial results. This is Claudia Styslinger. And I'm joined today by Gerri Henwood, President and Chief Executive Officer; Ryan Lake, Chief Financial Officer; and John Harlow, Chief Commercial Officer.

On today's call, Gerri will provide some introductory remarks and corporate updates. John will discuss the progress made on the commercial launch of ANJESO. And Ryan will discuss the financial highlights. Following today's prepared remarks from Gerri, John, and Ryan, we will open the call for your questions.

Earlier this morning, we issued a press release detailing our financial results for the third-quarter 2020. The press release along with a slide presentation that we will reference for today's call is available on the Events page of the News & Investors section of our website at baudaxbio.com.

Before we begin our formal comments, I'll 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, project, predict, 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 commercial launch 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 financings 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, 2019, 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 date of this call, November 9, 2020. 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 we may provide is preliminary and does not purport to project financial positions or operating results of 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 those joining us today are keeping safe and healthy as we all continue to navigate through the ongoing COVID-19 pandemic. I'm happy to report this morning that ANJESO continues to deliver on the profile that we have had for it.

The vast majority of those who use the product have described that they believe the product is meeting or exceeding their expectations and that many of them have had positive feedback from patients who've received the product to that extent as well.

We are making progress in spite of the pace that is impacted by COVID-19. It has disrupted formulary meetings and has impacted elective surgery rates. That's all over the media; I am not telling you anything new. John will go through a little bit more of the specifics of those impacts.

But where we are able to get on formulary and get into the electronic records for post-op care, we see good progress. And all of that has prompted us to move to an even more focused and sustainable footprint around accounts where we have received early traction where we can begin to see an opportunity for deepening of usage.

We believe this success that we've seen is a good base on which to model forward progress as we try to navigate the pandemic in a sustainable way. We're going to also continue to pursue BD opportunities. There are still a few opportunities to out-license ANJESO. In some of our further pipeline products, there is interest. We continue to work forward with those and try to bring some of those to a conclusion in the next six months or so, if we can do so on reasonable terms.

In addition, there are a few in-licensing opportunities that could add to what we have in the bag, absorb some additional costs. Those are not in hand, but those are potential projects that we could do and that we are actively pursuing as well.

We are also working to manage the balance sheet and expenses in this period. And that's why we've taken the steps that are announced in our release this morning about reducing the force and focusing where we are reducing the whole of the company by about 40 persons.

So with that as an intro, I'm going to pass the baton to John to talk about commercial launch highlights.

Thank you, Gerri. And good morning, everyone. While reported third-quarter sales were modest, we're encouraged by several other metrics that we are seeing associated with the ANJESO launch, which I will highlight in a moment.

ANJESO became available through wholesalers in June of this year. And in just over five months on the market, ANJESO has been utilized across a wide variety of surgical procedures. During the third quarter, we secured two major group purchasing agreements with Vizient and Premier. And collectively, these agreements significantly expand the commercial reach of ANJESO.

In July, CMS granted transitional pass-through status for ANJESO, which facilitates separate reimbursement across the outpatient settings of care. And in August, CMS established a unique J-code which took effect on October 1 and simplified billing for ANJESO across settings of care.

Now turning to slide 7 of our earnings presentation. It's encouraging for us that ANJESO appears to be satisfying customer needs. The vast majority of customers using ANJESO state that the product is performing very well across many different surgical procedures. And equally important, ANJESO is now beginning to be incorporated into surgical protocols and electronic health record order sets.

Vials sold to end users, meaning hospitals and ambulatory surgical centers, is growing monthly. And over 50 institutions have added it to their formulary, with the number of upcoming reviews increasing. Despite these positive signs, COVID continues to impact our rate of uptake as Gerri highlighted. Many hospitals and ASCs has limited access for non-patients, including our sales professionals.

So building champion support is taking more time than anticipated. Unfortunately, we anticipate further restrictions through at least the first half of 2021 as spikes of COVID-19 cases are occurring around the country. Therefore, we are restructuring our sales team to maintain necessary critical mass in key areas and strategic accounts.

Slide 8 highlights the growth of vials sold to end customers in Q2, Q3, and October. Vials sold increased almost threefold in Q3 from Q2. And we've seen a significant step-up in October from Q3. Additionally, the average monthly units per account is up approximately 125% since launch.

And this is an indication that our repeat customers and our newer accounts are starting to make larger monthly purchases.

Lastly, our hospital sales are growing. While ASCs remain an important strategic entry point into hospitals, it's an encouraging sign that our percent of usage from hospitals, both inpatient and outpatient, is increasing. The total number of hospitals ordering has tripled, and the number of orders from hospitals have quadrupled since launch.

Slide 9 is a reminder of the typical formulary process for acute care product launches and the impact that COVID has had on each step of the process. We are seeing physician usage increase once ANJESO is placed on formulary and the product is implemented into protocols and order sets.

But the ongoing pandemic has further dampened the naturally slow adoption curve seen historically with most hospital product launches. Despite there being a backlog of agents scheduled to be reviewed, we are seeing the number of accounts at each step of this process increase. We believe we will make steady progress getting ANJESO added to further hospital formularies in the months and quarters ahead.

Moving to slide 10. As our earnings release highlighted, we are restructuring the organization to be more focused and sustainable during the ongoing pandemic. We will focus on strategic accounts with early formulary wins, pull-through opportunities, and where physician champions are preparing for upcoming P&T reviews. With this strategy, we should demonstrate deepening usage once ANJESO is implemented on formulary, and then can gradually add that territory as product usage expand and COVID cases recede.

Our customer facing team, who is even more critical now, will be supported by a televirtual sales team, and other tactics, to increase awareness and drive formulary reviews. This allows us to flex in areas where COVID-related customer access is more restrictive and adapt to any future COVID-19 surges.

I'd like to convey my gratitude to every Baudax Bio employee, especially those who will be leaving today and who have contributed to the accomplishments of the company to date. It's because of the collective efforts of the team, including those departing, that ANJESO has made progress with the GPO organizations, formularies, and health care providers. The vast majority of users report a high level of satisfaction with ANJESO. And all these factors give us reasons to believe that the product can continue to deepen usage, grow, and ultimately fulfill its promise as a product.

With that, I'll turn the call over to Ryan.

Thanks, John. Good morning, everyone. Since we filed our 10-Q earlier this morning, I'll cover the third-quarter highlights for the quarter.

Net product revenue for the three months ended September 30, 2020 was $0.1 million and the year-to-date period is $0.4 million related to sales of ANJESO in the US. This primarily represents in what we recognize at the time of shipment into the wholesale chain versus what's sold through the channel to the end user, as John described earlier.

Our cash and cash equivalents at the end of September were $24.6 million as of September 30. And during the quarter, you'll recall that that includes approximately just under a $3 million payment to Alkermes for a milestone payment that was under the amended milestone agreement. As John also highly highlighted, as of today, November 9, we're reducing our workforce. And this is expected to result in annualized savings of just under $11 million in personnel and other related costs.

And there's also significant cost reductions being made for 2021, both in manufacturing and other launch-related activities. As of October 19, we did restructure our cap structure with the warrant exchange. As of November 5, there was 26.2 million shares outstanding, and there's 1.9 million warrants remaining outstanding that have not been exercised from the transaction.

Turning now to slide 13. As it relates to the selling and general administrative expenses for the three months ended September 30, they were $13.8 million compared to $4.5 million for the same prior-year period. The increase in $9.3 million was primarily due to the increased sales and marketing expenses in connection with the commercial launch of ANJESO.

Another couple of items to highlight here are the non-cash charges included within the third quarter of $11 million -- or $11.2 million and $17.4 million. Those non-cash charges relate to mark-to-market expenses on the warrants and then the change in the net present value of the risk adjusted discounted cash flows for contingent consideration reflecting current estimates as of September 30.

With that, I'll turn the call back to Gerri.

Thank you, Ryan. So just to summarize what we said, we think that in spite of COVID slowing of certain steps of the process that we are making progress with it, that the progress is accelerating, even if not in a perfect way. We are accelerating and showing progress and deepening usage. And customer satisfaction with the product is high. All those are very important, we think, to our ability to ultimately achieve the goals that we have for this product.

We have reduced our expense rate as of today. And we think that's going to help us to be more sustainable in our efforts to live through the pandemic and get this further acceleration of growth that we need to have with this product, continuing to pursue some out-licensing opportunities as a possible way to generate some cash coming into the company, as well as looking at select modest in-licensing opportunities for same point of sale, where they may be available, and obviously managing the balance sheet and expenses through this process.

So in closing, I would like to say that we remain committed to the physicians and institutions and patients that receive our product as well as to our business partners, our employees, both those going forward with us and those who have helped us to get to the point that we're at today, and committed to delivering on the upside for our shareholders here at Baudax Bio.

In the meantime, we'd like to turn it over to the operator for any questions that may be pending.

(Operator Instructions) Jason Butler, JMP.

Hi, thanks for taking the questions and appreciate all of the clarity on the launch (technical difficulty) this morning. The first one for me just on the [broad] utilization. Can you just give us a sense of what proportion of the 50 or so accounts where you have formulary approval that are using the product regularly?

And I guess for the growth in October, is that reflective of a concentration of accounts or is it more broad? And then just -- can you give us a ballpark of how many more formulary decisions that you think could happen by the end of the year? Thanks.

So before John jumps in to answer those questions, I'll just attack your last question first and say, if you could give me a little more clarity on what COVID is going to do in the fourth quarter, it would be easier for us to forecast formulary decisions because we have seen some formularies sliding a little bit to the right because of COVID outbreaks in their institutions.

But I'll let John sort of circle back and give a little more quantitative response.

Yeah. So, Jason, thanks for the questions. For the first two questions, what we're seeing is about a 75% reorder rate right now from hospitals and ambulatory surgical centers to all accounts. That is varying based on when they come on board.

The other thing that we are seeing is it is taking about two to three months from the implementation process from once we secure a formulary win. So things are moving in the right direction (multiple speakers) to get into the electronic records in the order sets and protocols and what have you. So things are moving in the right direction.

From the early October signs, we are seeing probably the majority of those -- a handful of those, I should say, are coming from repeat accounts. And then we've had some large purchases in the month of October that were formulary wins that happened two to three months ago. So now they are on line and starting to place their initial orders. And we hope and anticipate that those orders will increase as the product gets pulled through the institution.

So hopefully that gives some color commentary around number one and number two. And as Gerri said, on formularies, we are anticipating an uptick in the number of reviews that we believe are pending in the months of November and December. But as Gerri alluded to, we are seeing meetings get shuffled and moved as it relates to COVID impact in local geographies.

Okay. All right. That's really helpful. I appreciate taking the questions.

Thanks, Jason.

Thank you.

David Amsellem, Piper Sandler.

Hi, this is Zach on for David. Thank you, guys, for taking my question. Just a couple from me. I know we've asked this a couple of different ways before, our team, but we were just hoping to get a sense of the mix between ASCs and hospital usage so far, and how you expect that mix to sort of evolve over time, looking longer term?

And then similarly, based on the -- looking at the procedure mix, how do you see that mix between bone and soft tissue sticking out over time also? Thank you.

Sure. So again, I'll just give a little bit of an umbrella and then John can go into the details.

But in general, our strategy has been that ASCs are a point of entry for working with some of the surgeons, who were a part of high-volume practices at hospitals as a way to get trial usage, trial usage often helping to convert physicians to the functional utility of the drug and its benefits. And the big prize being the hospitals and the IDNs associated with the bigger hospitals.

But John, do you want to give an update on where we are with that?

Yeah. So as you'll see on slide 8 of our earnings release, so in October, about 60% of our unit sales were to hospitals. So the other 40% were to ambulatory surgical centers. We are seeing, as launch progresses, more and more units going to hospitals than ASCs. And again, that's -- when I say hospitals, I'm being inclusive of both inpatient and outpatient facilities.

I think we would anticipate that that trend continues. As Gerri alluded to, ASCs are an important strategic entry point. But the size of a hospital relative to size of ASCs is very significantly in favor of the hospital. So getting on formularies and getting pull-through, both the inpatient and the outpatient settings, are extremely important to the future.

As it relates to surgical mix, the claims data is actually very old. So we don't have any insights yet to point to specific datasets. But what we are hearing from customers and through our field team and medical team is that it's probably about a mix. We're getting a usage in hard tissue procedures and usage in soft tissue procedures.

And we'll continue to look at that closely. But I think it speaks to the broad utility that ANJESO can provide in a number of different types of surgical procedures.

Great. Thank you.

You're welcome.

(Operator Instructions) Trevor Allred, Oppenheimer.

Hey, good morning. Thanks for taking my question. I just wanted to know where your focus was on specific regions. Are you looking at places that are less affected by the coronavirus? And then also, could you elaborate a little bit on the indicators of adoption that you're looking at?

Sure. So let's talk about where we are vis-a-vis COVID. It's a little bit like trying to play whack-a-mole, trying to predict where the next outbreak might be or whether an outbreak in an area may resolve quicker than others. So we are not trying to sort of second guess that.

What we have been looking at are opportunities where we have made progress, where we've had some traction -- those are the center points -- and then areas of high potential.

But John, do you want to get a little more specific?

Yeah, a little more specific. So we're -- trying to predict where COVID is going in the future obviously is very, very difficult, as Gerri alluded to. What we saw and have seen is those states that were less restrictive in June, July, and August, our team had greater access and they were able to build champion support and product on formulary, and therefore we prioritized those geographies.

So it's more of a retrospective view of COVID than a prospective view of COVID. But the factors that we looked at, as we restructured around the country, were things like being on formulary, number of champions, upcoming P&T reviews.

So that really drove the decision-making process to make sure that we can continue to build momentum in those geographies, deepen usage, and then gradually expand, if and when it makes sense, to other parts of the country.

And I think it's also important that we are looking at deploying our account directors and other types of tactics nationally where we can talk to IDNs and other large strategic accounts and work from the top down as well as the bottom up.

In terms of your last question, indicators of adoption, obviously formularies are important, getting into orders sets is important. We look at size of orders, repeat customers, the size of repeat orders. And we've looked at a number of KPIs that would be indicators of adoption.

And what we're seeing are positive signs month over month, albeit, as Gerri and I have alluded to, COVID has had an impact and it has slowed the progress.

Okay, thanks.

Thanks, Trevor.

Thank you.

And there are no further questions at this time. Now I'll turn the call back over to Gerri Henwood for closing remarks.

Thank you very much, operator. Again, we remain committed to our stakeholders, as I described earlier, both those that are using the product, those receiving the product. To our team, to our shareholders who have stuck with us, we appreciate that.

We're committed to being cost efficient, to being in a sustainable mode as we go through this. We still believe in the long-term potential of this product. And we believe that we are seeing reasons to believe in progress. And we will continue to prudently manage the business through this rapidly evolving economic situation.

Thank you very much and have a great day.

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