Baudax Bio Inc (BXRX) 2020 Q2 法說會逐字稿

Good morning and welcome to the Baudax Bio second-quarter 2020 financial results conference call. (Operator Instructions) As 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 second-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, John will provide an overview of the ANJESO commercial launch thus far, and Ryan will discuss the financial highlights. Following today's prepared remarks from Gerri, John, and Ryan, we'll open the call up for your questions.

Earlier this morning, we issued a press release detailing our financial results for the second quarter 2020. The press release is available on the News & Investors page 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 expect, plan, will, may, anticipate, believe, estimate, upcoming, should, intend, 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, healthcare providers, and hospital formularies; our ability, and that of our third-party manufacturers, to successfully scale up our commercial manufacturing process for ANJESO; and our ability to produce commercial supply and quantities and quality sufficient to satisfy market demand for ANJESO. 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 day of this call, August 10, 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 may be provided 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 continuing to keep safe and healthy as we all continue to navigate through the ongoing global COVID-19 pandemic. For Baudax, the second quarter of 2020 saw the full commercial launch of an ANJESO meloxicam injection.

ANJESO is indicated for use in adults for the management of moderate-to-severe pain, alone or in combination with other non-NSAID analgesics. ANJESO is the first and only once-daily intravenous COX-2 preferential NSAID that provides up to 24 hours pain relief with demonstrated safety and tolerability.

I'm pleased to report that the ANJESO launch is off to a solid start, and the team is executing on our previously shared launch plan, considering the impact the COVID-19 pandemic is having on hospitals, elective surgeries, and our people. As a company, Baudax would like to thank all healthcare professionals who are on the frontlines in these times.

We deployed 50 experienced acute care sales reps across key US territories in June and generated $350,000 in net product revenue in Q2. We have been pleased with the reception of ANJESO thus far and have received positive feedback from clinicians that the product is performing as expected for patients.

Before I turn the call over to John to discuss a few more highlights from the ongoing launch, I would just like to say that the launch of ANJESO marks a major advancement in the treatment landscape for managing moderate to severe pain. With our nation still currently in the midst of a national opioid epidemic, we are thrilled to be able to offer a novel non-opioid therapeutic option with the potential to meaningfully impact the acute pain treatment paradigm. With that, I'll pass the call to John.

Thank you, Gerri. In Q2 and to date, we accomplished many critical launch activities and early launch feedback from clinicians has been positive, which I'll highlight in a moment. Even with this early positive feedback, our efforts to commercialize ANJESO have been impacted by the COVID-19 pandemic.

Due to the continued uncertainties of the pandemic and the recent regional outbreaks that are impacting the recovery, we cannot estimate the full impact on our commercialization efforts. However, we are very encouraged by the early positive signals, including deploying an experienced acute care sales team while ensuring adequate product availability at wholesalers and specialty distributors.

Following the full commercial launch of ANJESO in June, we are hearing positive feedback from patients, and early demand from a wide range of acute care providers from orthopedics to general surgery to anesthesiologists and interventional pain specialists, who have begun using this novel non-opioid analgesic for the management of moderate to severe pain in a wide variety of surgical and non-surgical procedures, with early usage coming predominantly from the outpatient setting.

On our last call, we talked about our outside-in approach to building early clinical experience, and that appears to be playing out, while in parallel, the team works through the formulary review process, which has been somewhat impacted by COVID-19 in terms of delays in scheduled formulary meetings.

It is still very early into our launch, and one promising indicator that we see is account reordering. Several early users have not only purchased and tried ANJESO, but they have reordered multiple times. We see early reorders as a positive signal.

In July, we entered into an agreement with Vizient, one of the largest group purchasing organizations, also known as a GPO, in the US. The agreement provides Vizient members with enhanced savings based on formulary placement. Vizient's diverse membership includes more than 50% of the nation's acute care providers, 95% of the nation's academic medical centers, and more than 20% of ambulatory care providers.

We are incredibly pleased to be working with Vizient as they represent more than 1 billion in annual purchasing volume nationwide. We are also working to complete additional agreements with some of the other top national GPOs in the coming months.

Also in July, we signed a direct purchase agreement with one of the top three integrated delivery networks, or IDNs, in the country. This agreement opens the doors for the approval process at regional formularies and sets the stage for potential inclusion in standing surgical order sets over the coming months.

We believe our entry into these agreements with sophisticated parties in the GPO and IDN arenas are additional early and positive signs of the value that ANJESO can provide. We believe that additional agreements will follow as the team continues to build advocacy and early usage.

In addition to our work with the GPOs and IDNs, we are pleased that the reimbursement landscape for ANJESO is proceeding as planned. Let us look at the two main payer groups for outpatient product usage, Medicare and commercial.

For Medicare, we secured passthrough status and were granted a unique C-code that became effective on July 1. This provides access for traditional Medicare patients to use ANJESO and for eligible outpatient facilities to bill separately for the product.

Another important milestone that was recently achieved was the establishment of the new permanent J-code for ANJESO by CMS. The new J-code, J1738, will take effect on October 1, 2020, and will replace the previously issued C-code.

With the J-code, all hospital outpatient departments, ambulatory surgical centers, and physician offices in the US will have one consistent code that standardizes and simplifies the submission and payment of ANJESO insurance claims across Medicare, Medicare Advantage, Medicaid, and commercial plans. These steps will further enhance ANJESO's access in the marketplace, making it easier for accounts to use ANJESO.

Even with early positive launch feedback, our ability to access customers face-to-face has been limited because of the COVID-19 pandemic. However, we have adapted to new ways of engaging with potential customers. The team has been engaging customers in many different ways, whether it be with virtual interactions or face-to-face. And we've seen the percentage of live interactions versus virtual interactions increase from June to July, and we will continue to monitor this closely as COVID hotspots continue to shift with regional outbreaks.

As an example, where the Northeast was very restrictive in June, it has become more open in late July. So our team will continue to be nimble and appropriately engage customers as the access landscape shifts. To date, we have over 20 accounts that have placed ANJESO on formulary. We have many more accounts that have ordered the product. And as I said before, we now have several accounts reordering routinely.

We remain focused on building advocacy, driving early experience, and working through the formulary review process. Although some accounts have pushed new product decision making out until later in the year, I'm proud of our experienced team pivoting to those accounts that are willing to move forward faster while [we] continue to pursue progress in gaining additional formulary access. With that, I'll turn the call over to Ryan to review the financial highlights. Ryan?

Thanks, John. Since we issued a press release and our Form 10-Q earlier this morning outlining our full financial results, I'll just review some of the key highlights. As of June 30, 2020, we had cash and cash equivalents of approximately $39.4 million.

First, the second-quarter financial results. Net product revenues for the second quarter were $350,000 following the full commercial launch in June 2020. There was no product revenue recognized during the three months ended June 30, 2019.

Cost of sales for the second quarter was $0.7 million and consisted of product costs, royalty expense, and certain fixed costs associated with the manufacturing of ANJESO including supply chain and quality costs. Certain product costs of ANJESO units recognized as revenue during the three months ended June 30, 2020, were incurred prior to FDA approval of ANJESO in February of 2020, and therefore, not included in cost of sales during the period.

We expect cost of sales to increase as we build new inventory not expensed during the pre-approval period, validate a larger manufacturing suite, and deplete our initial inventory levels. No cost of sales was recorded for the three months ended June 30, 2019.

Research and development expenses for the second quarter were $1.4 million compared to $7.2 million for the same prior year period, a decrease of $5.8 million. Excluding $2.6 million of costs associated with the strategic restructuring initiative recorded during the second quarter of 2019, our R&D expenses decreased $3.2 million, primarily resulting from a decrease in pre-commercialization, manufacturing, and clinical costs for ANJESO of $2.3 million. And a decrease in personnel costs and overhead expenses of $0.9 million as we allocated or recharacterized certain expenses related to supply chain, regulatory, quality, and medical affairs associated with the support of the commercial launch of ANJESO.

Selling, general, and administrative expenses for the second quarter were $11.2 million compared to $7.4 million for the same prior year period, an increase of $3.8 million. Excluding $3.4 million of costs associated with the strategic restructuring initiative recorded during the second quarter of 2019, our SG&A expenses increased $7.2 million, primarily due to selling and marketing expenses in connection with the commercial launch of ANJESO.

Selling and marketing expenses of $5.6 million for the three months ended June 30, 2020, increased $5 million due to increased personnel costs of $3.1 million and increased commercial costs of $1.9 million. General and administrative expenses of $5.6 million for the three months ended June 30, 2020, increased $2.2 million, primarily due to increased personnel costs, including over half of which was attributed to medical affairs and regulatory support functions, which had previously been recorded within research and development expense in the prior year period.

For the three months ended June 30, 2020, Baudax reported a net loss, including non-cash charges of $19.8 million or $30.4 million or $1.72 per share. The non-cash charges of $19.8 million were associated with stock-based compensation, non-cash interest expense, depreciation, amortization, change in warrant valuations, and changes in fair value of contingent consideration.

This compares to a net loss of $10.6 million or $1.13 per share for the second quarter of 2019. For the three months ended June 30, 2020, there was $10.6 million in cash-based expenses, an additional $0.7 million use of cash associated with working capital adjustments primarily related to the build of inventory for ANJESO.

Turning now to the six-month financials, for the six months ended June 30, 2020, net product revenue was $0.3 million related to sales of ANJESO in the US. There was no product revenue recognized during the six months ended June 30, 2019.

For the six months ended June 30, 2020, cost of sales was $0.7 million and consisted of product sales, royalty expense, and certain fixed costs associated with the manufacturing of ANJESO including supply chain and quality costs. Certain product costs of ANJESO units recognized as revenue during the six months ended June 30, 2020, were incurred prior to the FDA approval of ANJESO in February of 2020, and therefore are not included in cost of sales during the period.

We expect cost of sales to increase as we build new inventory not expensed during the pre-approval period, validate a larger manufacturing suite, and deplete our initial inventory levels. No cost of sales were recorded for the six months ended June 30, 2019.

For the six months ended June 30, 2020, R&D expenses were $4.4 million compared to $16.7 million for the six months ended June 30, 2019, a decrease of $12.3 million.

Excluding $2.8 million of costs associated with the strategic restructuring initiative recorded in the six months ended June 30, 2019, our research and development expenses decreased $9.5 million, primarily resulting from a decrease in pre-commercialization, manufacturing, and clinical costs for ANJESO of $6.2 million, a decrease in development costs for other pipeline products of $2.1 million, and a decrease in personnel and overhead expenses of $1.2 million as we reallocated costs related to supply chain, regulatory quality, and medical affairs associated with the support of the commercial launch of ANJESO.

For the six months ended June 30, 2020, SG&A expenses were $19.3 million compared to $17.3 million for the same prior year period, an increase of $2 million. Excluding $4.4 million of costs associated with the strategic restructuring initiative recorded in the six months ended June 30, 2019, our selling, general and administrative expenses increased $6.4 million, primarily due to increased selling and marketing expenses in connection with the commercial launch of ANJESO.

Selling and marketing expenses of $8.9 million for the six months ended June 30, 2020, increased $3.5 million, primarily due to increased personnel costs of $1.9 million and increased commercial costs of $1.6 million.

General and administrative expenses of $10.4 million for the six months ended June 30, 2020, increased $2.9 million, primarily due to increased personnel costs of $2.4 million, including over half of which was attributed to the medical affairs and regulatory support functions, which had previously been recorded within research and development expense in the prior year period.

In addition, our public company costs increased approximately $0.5 million as the prior year costs represent an allocated portion of the costs in the historical combined financial statements prior to our separation from Recro Pharma. For the six months ended June 30, 2020, Baudax reported a net loss, including non-cash charges of $51.8 million, of $70.7 million, or $5.11 per share.

The non-cash charges of approximately $51.8 million were associated with stock-based compensation, non-cash interest expense, depreciation, amortization, change in warrant valuations, and changes in fair value of contingent consideration. This compares to a net loss of $14.9 million or $1.60 per share for the comparable period in 2019. I'll now turn the call back to Gerri for closing comments. Gerri?

Thank you, Ryan and John. One other highlight I'd like to mention is that we recently presented new Phase 3b ANJESO clinical data in a virtual poster at the American Society of Colon and Rectal Surgeons 2020 Annual Meeting. These data are important because they support the use of ANJESO when administered to patients preoperatively as part of an enhanced recovery after surgery protocol prior to the start of colorectal surgery.

The key findings from the study include statistically significant reductions in opioid usage as well as faster time to bowel function recovery and earlier hospital discharge. These data continue to build upon the ever-growing body of clinical data supporting the use of ANJESO across a wide variety of surgical settings and will continue to inform our ongoing physician education initiatives as we work to drive adoption during ongoing commercial launch of ANJESO.

In closing, the ANJESO launch is off to what we believe is a strong start, and we are highly encouraged by the early commercial uptake, early reorders, and positive feedback from physicians. This is the period of time, the first six to nine months of launch, where we are laying the bricks that will allow for expanded availability of ANJESO with GPOs, hospital and ASC formularies, IDNs, and for trial usage by clinicians, which we believe reinforces the utility of the product and leads to reuse, reordering, and ultimately, sales growth as we get further through this year and into 2021.

We look forward to keeping you updated in months and quarters ahead. I'll now turn the call over to the operator for questions.

(Operator Instructions) Jason Butler, JMP Securities.

Hi. Thanks for taking the questions, and congrats on the progress and the launch.

Thanks, Jason.

First of all, in terms of the obvious impact of the pandemic and delaying new product decisions at certain institutions, can you just give us a sense of where you are versus maybe where you would have expected to be going in? And then can you give us any more color that you're having with the different types of institutions and to what extent you're getting good traction where you're having virtual-only interactions? Thanks, and I have a quick follow-up. Thanks.

Okay, sure. So I'll start off, where are we versus where we might like to have been? Well, our original plan, as you may recall, was to have launched on the beginning of April, April 1. And we made a decision, based on game time observations in March, that that was not going to make sense, delayed hiring the reps until May 11 as the start date and then have them launch in June. So we're obviously a few months askew from that.

Apart from that, there is some impact, but I think we're pretty close to where we thought we would be in the early -- you know, we've got like one month of experience out there. And so right now, there aren't a lot of tells that would tell us that we're way off of that, but we're always happier if things were going even faster.

But I'll let John talk to some of the specifics of, where are we in terms of -- how is it working with the virtual interactions versus being face-to-face.

Yeah, Jason, good question as it relates to virtual only. And our announcement with the Vizient agreement, that was done 100% virtually, as well as our announcement we haven't disclosed, which IDN, but one of the top three IDNs, all that was done virtually as well.

And currently, in the geographies across the country, where the reps are having a little bit of more limited access virtually, we are seeing things moving in the right direction, whether it's initial accounts ordering the product, using the product, or starting the formulary review process. Our outside-in strategy is working. Predominantly, the majority of our use right now is coming from the outpatient, which we believe will lead to faster formulary reviews and ultimately formulary placements.

Okay, great. And then I guess, just looking ahead, Gerri, you mentioned the new data you presented in pre-op patients. Any thoughts on additional clinical work to continue to bolster the value proposition or thoughts on the need or value of pursuing label expansions for any of these populations or uses?

Yes, so good questions. Obviously, our focus this year is on supporting the launch. And so our economics are very, very substantially devoted to supporting that launch in a successful way. There are some inquiries coming from outside of the house here, which could be interesting and could involve things as [low] as providing drug supply and things like that. Those are certainly being considered.

We would like to see ongoing flow of publications, well-done trials that describe use in different situations. We think that will help clinicians to get even more comfortable.

In terms of label expansion at this moment in time, no formal plans; there are a number of things that we're evaluating and talking to outside regulatory consultants about whether or not there's an opportunity to address some things more fulsomely in our labeling.

We do think that we have a very broad label currently in terms of being indicated for the management of pain, moderate to severe. And so that's a pretty broad remit, let's go penetrate that market. But in the meantime, there are thoughts and evaluations of things that could be part of a longer-term plan. Is that helpful?

Okay, that's great. Thank you very much, and congrats again on the progress.

Thanks very much for the questions, Jason.

David Amsellem, Piper Sandler.

Hey, thanks. So just wanted to get your thoughts on the mix between ASCs and hospital usage, and how you expect that to evolve over time. I know that these are early days, but if we're thinking about longer-term, steady-state usage of ANJESO, how do you think about where the mix is going to shake out? That's number one.

And then number two is a similar question, but basically procedures mix, in other words, bone versus soft tissue, and how you think about the mix shaking out over the long term? Or maybe ask another way, where do you think early adoption in terms of which procedures you're going to see initially?

And then lastly, do you think that the loss of exclusivity of Ofirmev will have any ramifications for how hospitals look at ANJESO? I know you have your J-code but wanted to get your thoughts on Ofirmev losing exclusivity and what that may mean -- or maybe it means nothing -- but wanted to hear what you have to say on that. Thank you.

Sure. Thanks. Thanks, David. So in terms of the mix of location of usage right now, I think two factors that we're looking at, and I'll ask John to add to these comments. As we look at surgeries themselves, elective surgeries, they are easier to adopt post-COVID in a separate setting, not in the hospital.

So we're hearing -- again, we don't have formal market research on this, but we're hearing that patients feel more comfortable going to an ASC perhaps than to a hospital because, perhaps unwarranted, but concerns that they have about the environment.

And so our strategy, which was developed really independent of that based on generally shorter time to formulary okays at ASCs and hospitals, seems to be going in the direction that's consistent with where the patients are coming back a little bit earlier. So we're happy with that. We think that makes sense.

We do think in the long run -- I don't mean in '20, I mean, in the long run, there is a trend towards surgeries happening in ASCs, except for the most, most complex surgeries. And we think that will continue to increase.

We've seen a big increase over the last three years in the percentage of surgical cases done outpatient versus inpatient. Certainly, CMS movement to reimbursing large orthopedic joint replacements in the outpatient setting is part of that. Those changes don't happen overnight, but they are happening more in big urban settings, which tends to be where we're clustered more.

So in terms of the ultimate mix, I think we do see a desire. We want to be in the hospital. We know hospital formulary committees in many cases in hotspots were delayed because of other priorities taking those folks away from what would have been formulary committee meetings. They seem to be getting a little bit more on track. We expect to continue to go through that process.

And it is a process. It takes quite a bit of time to get all the way through. And in the meantime, to try and get trial usage in the ASCs, which we hope will build advocacy for the hospital side. John, any comments you want to add to that part of the question?

Yeah, David, the other thing that I'll add is obviously, predominantly, our early use is coming from ASCs, although we are seeing a percentage of early use from hospitals, which is promising. I think with our Vizient agreement in place, which provides the Vizient membership with access to the product at a reduced cost, and we are close with a few other GPO contracts as well. We think that that will open up access at the hospital level to then go through the formulary process.

From a procedure mix standpoint, as Gerri was alluding to early use, it's been a lot of different things ranging from orthopedic procedures, general surgeries, as well as interventional pain experts. Because although, a lot of elective procedures are not happening, these patients are still in pain, and there's a lot of procedural pain related to some of these chronic pain procedures. So we're seeing early usage across the board, which is very interesting and promising.

In terms of where we're targeting, David, just to reiterate, we believe that the more natural places for us to focus are with orthopedic surgeons, anesthesiologists, and general surgeons doing intra-abdominal surgery as well as colorectal. And we have substantial data on cost/benefit in those areas. So that's part of where we're focused. But that's not the exclusive areas of usage that we're seeing.

In terms of loss of Ofirmev exclusivity, John, do you want to speak to that?

Yeah, David, we're obviously looking and watching this very closely. We have conducted some market research and talk to customers. I think the first point, and actually a customer last week said this to me, said, if you go to any of the pain guidelines, acute pain guidelines, it's important that they say NSAIDs and acetaminophen should be used together, right? That is true -- assuming appropriate patient type, and that's something that obviously we will continue to reinforce.

The other thing that we've heard is for our targeted accounts, they've been users of branded IV analgesics, including Ofirmev, as well as products like Exparel. These are the accounts that are willing to spend branded dollars because they see the bigger benefit of multimodal approach to treating pain.

And within these institutions, the conversations that we had and with market research is, if I can save dollars on Ofirmev with generic Ofirmev being available, that gives me dollars that I can spend on other new entries into the marketplace, again to provide better outcome.

So I think in those accounts, we see it as a possible positive. And in the accounts which haven't used Ofirmev and haven't used branded products, this just gives them more reason not to use branded products. I really think it will come down, David, to our targeting strategy in those accounts that believe in the value proposition of ANJESO.

Okay. Thank you.

Thanks, David.

Thanks, David.

Trevor Allred, Oppenheimer.

Hey, guys. Thanks for taking my question. I just wanted to ask about the rate of formulary approvals for ANJESO, and in those cases where it didn't get approved, what were the reasons for the turndown by the committee? Thanks.

Sure. So as I mentioned earlier, a number of our targeted hospitals were not having formulary meetings in the months leading up to the present time, just they're getting back on schedule for that now through the fall. But John, do you want to speak specifically to that? And have we had any rejections, and what's been the primary reason?

Yeah, so good question, Trevor. As I said, we have ANJESO on formulary in over 20 accounts right now. It's a mix between hospitals and ASCs that have formularies. We have had some rejections in the very low single digits, and those rejections have really been preemptive reviews. So we haven't had the ability to share the data, build an advocate within the institution.

And they did it on limited information, right. And they see ANJESO and know -- again, very small numbers see that as, oh boy, this is going to be a budget buster as it relates to ketorolac, right. In those areas, where we are starting to see promising direction from a formulary review standpoint, we are able to communicate the value of ANJESO, both economically and clinically, sharing some of the Phase 3b data that Gerri highlighted.

We also were able to build an advocate or advocates within that institution. And then also, we were able to appropriately position the product, whether it was for orthopedic procedures, colorectal procedures, other types of procedures, and not go into a formulary discussion of, I want to use this everywhere. And that's really, I think, critical learning that we've had in the last few weeks as we approach more formulary reviews in the future. But again, I'll highlight the rejections that we have had been in the very low single digits.

And we have quite a number of meetings scheduled as we look out August, September, October. So we hope to have a better end from which we continue to provide that info. But would look to get that number on the negative side to not grow, if we can possibly do that, but see substantial growth on the other side.

Again, because of the targeting strategy, we're not going in our early rounds to these, in many cases, large academic hospitals that don't like branded products, don't have a history of using them, even when you have good cost/benefit data. I think we're going for places that have demonstrated receptivity to those arguments and often a desire to prove it to themselves.

Okay, thanks.

Thank you.

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

Thank you, operator. And thank you, all, for having the time with us this morning. We're very enthused about the ANJESO launch and the team that we have deployed for it. Wish everyone a safe and happy day and future. Take care.

Ladies and gentlemen, this does conclude the conference. You may now disconnect.