Radius Recycling Inc (RDUS) 2019 Q4 法說會逐字稿

Good afternoon, everyone, and welcome to Radius Health's Q4 Earnings Webcast. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Elhan Webb, VP, Investor Relations at Radius Health. Elhan, please go ahead.

Thank you. Hello, everybody. Thanks for joining us today. Our press release and presentation that we'll use to guide our discussion today can be found in the Investors section on our website. A replay of the call will also be available on our company website 3 hours following this call.

Before we begin, I would like to remind with our safe harbor slide that we'll have some forward-looking statements and include non-GAAP financial measures in our presentation today. You can find a reconciliation of GAAP and non-GAAP at the end of this presentation. Our 10-K and subsequent filings identify factors that would cause our actual results to differ materially from those indicated by these forward-looking statements. Any forward-looking statements represent our views as of today.

Here is our agenda for today. Jesper will start by touching on highlights of the fourth quarter and our achievements in 2019. He will then provide a commercial and R&D update. Following Jesper, Pepe will review our financial results for the fourth quarter and full year 2019. I would like to now turn the call over to Jesper.

Thank you, Elhan. Welcome everybody, and thank you for joining us on the call today. I'm very pleased to report another strong commercial quarter for Radius. In the fourth quarter of 2019 we achieved $56 million net sales for TYMLOS, reaching $173 million net sales for the year. Our market share continued to increase as we exited the year with a majority share in new patient starts on anabolic therapy, NBRx.

On the R&D front, we continued advancing our recruitment in the Phase 3 EMERALD and wearABLe studies. We exited 2019 with a strong cash balance of $161 million, as a result of our productivity initiatives and continued financial discipline. After the completion of a strategic review, we announced our decision to build on our strong scientific foundation and successful commercial franchise in osteoporosis to accelerate our growth and sharpen our strategic focus on bone health and targeted endocrine diseases. With our new strategy, we aim to enhance the value of our assets and allocate our resources efficiently, using our core strength to expand treatment options for patients and maximizing opportunities for our business and shareholders.

We aim to leverage our strong commercial success with TYMLOS to launch our abaloparatide patch and expand our anabolic market opportunity in osteoporosis. Our goal is to complement our pipeline and sales portfolio in targeted endocrine diseases. With our strong commercial infrastructure in the U.S. market, we believe that we would be a partner of choice for ex-U. S. companies that don't have a commercial capability in this region.

Slide 7. Here is a summary of what we achieved in 2019. We believe our achievements last year have put Radius on a good path for growth.

Now I would like to present our commercial update for TYMLOS. Since the launch of TYMLOS, we have significantly increased TYMLOS' market share within the anabolic space in the new patients and in the total market from an NBRx and a TRx standpoint. In Q4 of last year we became the market leader in NBRx. We are confident that this will translate to an overall anabolic market leadership position for TYMLOS in the second half of this year, which will be a great milestone for our company.

As you can see, on Slide 10, we have further increased the overall TYMLOS formulary coverage for 2020. TYMLOS is now covered by both Aetna and CIGNA Medicare Part D plans and will be added to Anthem formulas on March 1, increasing TYMLOS' coverage to 83% of Medicare Part D lives. We believe that our enhanced Medicare Part D coverage will further strengthen healthcare provider's perception and intent to prescribe TYMLOS.

Although we took a price increase of 7.9% on January 1 this year, we expect full year 2020 average net price to be flat versus 2019 due to enhanced coverage and increased manufacturing reimbursement in Medicare Part D coverage gap.

Now I would like to give an update on our R&D programs. As you can see from our pipeline, we have three Phase III studies ongoing, and we expect data results from them in the second half of next year.

Consistent with our new direction, we are exploiting strategic options in order to maximize value for our oncology portfolio. Here is an update from our ongoing Phase III programs. We are advancing recruitment in our Phase III wearABLe study for abaloparatide patch. Our screen failure rate has been improving, driven by higher screening success and targeted bone specialty centers. We have started expanding the number of sites in the U.S., and are making regulatory submissions for an expansion to clinical sites in Europe.

We expect top line data from this study in the second half of next year. For ATOM, our male osteoporosis study with abaloparatide, we expect to complete enrollment this year with expected data readout in the second half of next year as well. If positive, study results will be the basis of a supplement NDA to expand TYMLOS label. Male osteoporosis accounts for about 10% of the U.S. anabolic osteoporosis market.

Our multinational EMERALD trial for elacestrant has been made good progress. And we continue to tack the completion of recruitment of 466 patients in the third quarter of 2020.

I now would like to hand over the call to Pepe to review the financials.

Thanks, Jesper. I will briefly walk through the Q4 2019 revenue growth and income statement. And afterwards, I will share our revenue and cost evolution over the past 2 years and confirm guidance.

As Jesper said, in Q4 2019 we delivered $56 million in revenues, which is a sequential growth of 19% versus Q3 2019, and a 62% growth versus prior year. The sequential growth of $9 million was driven by market share and net price improvements. Market share drove $4 million of growth, as we gain 3 points of market share, averaging 41% share in the quarter. The price seasonality drove $5 million of growth as deductibles reduced along the year, as previously guided.

In Slide 16, we show the financial statements for Q4 and full year 2019 on a non-GAAP basis. In Q4 2019, as said, Radius reported net sales of $56 million, and on a GAAP basis, a net loss of $24.7 million, or $0.54 per share, as compared to net sales of $34 million and a net loss of $41 million with $0.90 per share for Q4 2018.

I will walk through some elements of the financial statements on a non-GAAP basis. The figures on our GAAP basis and reconciliation between GAAP and non-GAAP are in appendix. Radius on a non-GAAP basis for Q4 2019 reported a net loss of $13.3 million, or $0.29 per share, as compared to a net loss of $30 million or $0.66 per share for Q4 2018. Radius investment in R&D grew sequentially and versus Q4 2018, as the wearABLe and EMERALD Phase III trials continued to enroll patients and activate sites.

We have seen a significant increase in enrollment in both trials and expect to continue as we go along the year, which will drive increasingly -- increases in R&D expenses. Last, SG&A continues to decrease as we continue to identify productivity initiatives as committed in our financial guidance. We should expect more stable SG&A expenses as we go along 2020.

On Slide 17, we show continued management of cash flows and expenses, while driving TYMLOS growth. You can see in the bottom of the slide the decrease of SG&A and R&D fixed costs now stabilizing at around $40 million per quarter. TYMLOS revenue is fully covering all SG&A and fixed cost in R&D, and now is significantly contributing to funding our pipeline. This was one of our goals for this year. And we expect this to continue in our full year 2020.

The pipeline related R&D investment is expected to grow in 2020 driven by the 3 Phase III programs which will drive slightly higher cash outflows in the next few quarters. The cash on hand of $161 million and the continued growth of TYMLOS positions the company well to achieve profitability in the next few years. In order to create further financing flexibility for the company, in January 2020, Radius entered into a nondilutive financing of up to $95 million.

The financing has two components, a term loan of up to $55 million and a working capital revolver of up to $40 million, including a $20 million accordion. The uses of proceed are to strengthen our minimum cash position, support the pre-commercialization of the abaloparatide patch and potentially support investment in selected targeted endocrine therapy assets. The minimum drawdown from the nondilutive financing is $29 million, which $10 million was done at the closing. $15 million will be drawn down by March 31, 2020. And $4 million will be drawn no later than September 30, 2020. The rest of the loan is available to the company upon achievement of certain conditions and at company discretion.

On the Slide 19, we show the financial guidance for 2020 and for a 3 years outlook. We expect 2020 revenues to be between $220 million to $235 million. The increase is driven by the continued market share uptake and market growth, while maintaining our net price versus 2019. Radius expects up to $80 million of cash burn in 2020, which includes the financing of the continued progress on the 3 Phase III trials underdeveloped. Our 3 years outlook is to have revenues with over 20% compounded annual growth and expect to achieve profitability. We are very excited about this outlook in which Radius is expected to achieve anabolic market leadership, develop (inaudible) and with 3 Phase III trials, disrupt the anabolic market with abaloparatide patch launch and achieve profitability.

Finally, on Slide 20. We want to reiterate our Q1 2020 revenue forecast. We expect to deliver between $45 million and $48 million, which is a growth of 51% to 61% versus prior year, while a sequential decrease versus Q4 2019 as the expected market and price seasonality impact revenues. We will continue to see market share growth throughout the year and a rebound on the anabolic market and net price in the second half of 2020, as experienced in 2019.

I look forward to your questions at the end of the call. With that, I will pass the call back to Jesper for closing remarks.

Thank you, Pepe. Here are our milestones for this year. 2020 is very important year for us on the clinical front. We are on target to complete recruitment of our 3 pivotal Phase III studies in the second half of this year. With our continued strong commercial performance with TYMLOS, we expect to reach market leadership in the second half of this year and deliver $220 million to $235 million full year net sales for TYMLOS.

As Pepe highlighted, with our continued financial discipline, we expect to have a cash burn lower than $80 million for 2020.

Now I would like the moderator to open the call for questions.

(Operator Instructions) And our first question comes from the line of Jessica Fye with JPMorgan.

This is Yuko on for Jessica. With trends indicating a slowdown in overall anabolic market growth in 4Q, how should we think about that trend over 2020?

It is correct that it has slowed down. We see low single-digit growth for the year as a maximum. Right now, if you're looking at it, it's flat in the first part of this year, which is not that surprising if you also check the seasonality into consideration, as you will always see the beginning of the year being relatively slow.

And our next question comes from the line of Geoffrey Porges from SVB Leerink.

First question is on breakeven. Pepe, given your guidance for this year and your 3 top line guidance, why shouldn't we be modeling that you achieve cash flow breakeven in 2021? It's hard for me to see that your revenue could grow 20% and you wouldn't breakeven.

And related to that, shouldn't we expect that the expenses or the Phase III trials for both patch and for elacestrant should show slowdown next year and particularly the year after?

And then, related to that, Jesper, could you give us an update on the potential sale process for elacestrant indeed for your oncology portfolio. When should we be anticipating that, that would come to resolution? And wouldn't that potentially trigger a significant improvement in your cash position by the end of the year?

Pepe, you take the first one, and I will comment on the second one.

Sure. Thanks a lot, Geoff, for asking the questions. So I'm not guiding specifically to which quarter it's going to be cash breakeven, but definitely the projections you're making are correct. So revenues will continue to grow, and expenses in 2021 will decrease as the full enrollment is happening this year. And then, the 3 Phase III trials are going to wind down the following year. There's always seasonality on expenses. There's several milestones that we need to achieve with the manufacturing ramp-up that need to happen. So, it's a bit more complex to give you the exact, like when is the time that we put the company in a positive trend. The -- what I can say is we are extremely confident that with the cash on hand we can achieve profitability. And we're extremely confident as well of a continuous drop in this. Jesper?

Yes. And your question, Geoff, was on the partnering. And we're currently in late-stage discussions with several companies, as we have been communicating. And we hope to be able to update in the next few months on how that's going. That's our plan currently. But as we keep saying, it takes two to tango.

And our next question comes from the line of Vikram Purohit with Morgan Stanley.

So, two from my side. So first on the Phase III patch study. I just wanted to clarify that if the ex-U. S. sites that you've designated as backup, if those need to be activated and then utilized for enrollment, would that create any risk of pushing back enrollment timelines beyond the end of 2020? Or is that scenario baked into the end of 2020 enrollment completion guidance?

And then secondly, I had a question on business development. So during 3Q '19 earnings, you mentioned that -- your open-end licensing partnership opportunities in the endocrine space. So I just wanted to see if there's been any discussions here. And based on those discussions, if you have a more refined view at this point of what could be interesting and what could be expected over the next couple of years here.

Will you take the first one?

Yes. The pace of enrollment is -- has taken a really positive sign right now. And we are very confident to achieve full enrollment this year. And we don't expect any slippage on that in order to be able to read data in the second half of 2021. Jesper?

Yes, on the BD issue, basically, as I just mentioned, we are in late stage discussions. And we anticipate to report out in the next few months. So all-in-all, that's where we are right now. I cannot really comment any further. Our side was that, what we have also commented on and said is that we are looking more for a backend deal. So have that in mind.

And our next question comes from the line of Mohit Bansal with Citi.

Maybe couple of questions from my side. So one, Pepe, can you please help me -- help us understand little bit more on the guidance you have provided? Are you expecting any price -- net price increase here as well? Or it is mostly volume-driven guidance?

So for 2020, we took a price increase, a wholesale or average cost price increase, a WAC price increase of 7.9%. But that's offsetting 2 things that are impacting net price, which is the increase of the cost of the coverage gap or donut hole, as well as the increase in Medicare Part D access. So this year, the net price should be flat versus prior year. So your modeling shouldn't include any net price accretion. For the following years, we do expect some modest price increases in net, which is part of our 20% -- over 20% compounded annual growth that we have committed to [straight].

And are you modeling for any of the generic FORTEO player coming to the market this year?

Yes, as explained -- it's a great question. Thanks for highlighting that. So we have always modeled that there is going to be 1 or 2 generics coming in the industry or in the market. And we were -- in fact we were expecting them to come earlier. And now, it could happen in the near future through one of the players and maybe at the end of the year or early next year for Teva.

Now, we don't expect any impact to TYMLOS' growth in that path. So they're modeling, but we don't expect -- reality is we don't expect any impact to our continuous growth in the market. At the end of the day, the -- a generic teriparatide will be potentially switch for against teriparatide, not against abaloparatide. And Abalo continues to be the only anabolic player that is in the market being promoted and is preferred right now by prescribers. So, we will continue that to -- we expect that to continue as we go forward.

Got it. Very helpful. And then, if I can -- if I may squeeze one more in. On elacestrant, the kind of deal you are looking for, are you looking for some kind of front-end-loaded deal? Or you're looking for something in terms of royalties, which you can get stretched over a period of time because in good hands this could -- the potential could be bigger if the trial -- if multiple trails are being run. So that's how. Do you think royalties is a better way to go there? Or front-end a lot of cash in the beginning is a better way?

Mohit, you are hitting it exactly where we are looking at it. We really believe that in the hands of the right partner, royalties is the way forward for us. So, anticipate that to be the core of the deal.

And just to be clear, Mohit, it's definitely not happening in Q1. So modeling this for Q1 revenues, that's not going to happen this quarter.

And our next question comes from the line of Paul Choi with Goldman Sachs.

I had two. The first is on the longer-term guidance. And maybe just understanding, just given the timing of the clinical trial readouts, particularly for ATOM and for the -- for the patch. I guess is part of the longer-term guidance, particularly towards the back end, just how much of that is reliant on contribution from indication for men and conversion to the patch there and/or geographic expansion. If you could maybe elaborate a little bit on that versus the U.S. side, that would be helpful.

Pepe, guidance.

I own it. Thank you, Paul. So the guidance is definitely only on TYMLOS. We're not counting on any of clinical trials to uptake -- or drive an uptake in the growth of TYMLOS for the moment even though we are extremely confident. But for both trials, the patch and the male or ATOM (inaudible) will drive growth. The -- right now the guidance is only on TYMLOS growth, as expected.

Okay, thank you for that, Pepe. And then, just in terms of the follow-up with regard to TYMLOS access, while the commercial side more or less fully has access, the Medicare Part D, you guys have noted, it's still not quite all the way there.

Can you maybe just focus on what are you doing to expand access, particularly in the Medicare setting where not all lives are covered, I guess, at this point? And how do you think about that being a factor with regards especially to generic competition coming from FORTEO?

Paul, I personally believe that the access that TYMLOS is having is more or less the best I've ever seen in my time in the U.S., which is over the last 7, 8 years. Just to remind ourselves, in the commercial space we have 99% access, and that's about 45% of the market. And then, if you take the Part D segment, which is about 50% of the market, it has increased now to 83%, which I think is outstanding for any product to have that sort of access.

(inaudible) in the market is also worth noticing. So I do believe that you should not anticipate really that number to go up because you also have to keep in mind that it comes with a caveat of two things. Point one, you have likely to give a small rebate to get that sort of access, at least, because for those who is not covered by the access code of the 83%, they will pay full WAC price for those patients. And that certainly happens in the marketplace, that some of the plans will provide access to TYMLOS also because of the price point that we're having with TYMLOS. So I do believe that is really, really good access that we're having for TYMLOS in the marketplace. And you should not anticipate it really to increase any further because it will (inaudible) cost. Also because the cost of the Part D patients is -- continue to increase.

Our key focus is of course on the commercial space where 99% access is happening and where we have a really big opportunity of treating patients early on with an anabolic product like TYMLOS, which is giving the patients that benefit for the long run.

And our next question comes from the line of Chris Shibutani with Cowen.

Good morning. This is [CJ] on for Chris. So we started to see the effect of Lilly leaving the market toward the beginning, middle of Q4. Can you talk a little bit about what activities you guys have started to address that issue? And can you provide some quantitation on the progress you've made so far? Thank you.

You are absolutely right, that we have seen a slowing of the market as basically Lilly left the market completely. Our attention is really put on the (inaudible) health care prescribers that we're having where we really engaging very strongly with them. We are having our nurse educators out there; we're having our sales force calling on them. And you just see it keep coming through that on the high-prescribing physicians, which is really the top tiers is where we are making the breakthrough where we have a higher percentage prescription than for those in the lower (inaudible). And, all-in-all, our key focus is of course to keep that momentum going, because we do believe that there's an opportunity here for TYMLOS.

All-in-all, we have a number of marketing activities in place also for lower -- that (inaudible) that we are not really calling on, but that we have activities to reach out to. So all-in-all, we will aim at continued growth because it's of course important to see the growth in the marketplace.

And to just to add on Jesper's point, in the lower quintile, in the fifth quintile of the high number of prescribers that don't prescribe too many anabolic, we have put a new effort there. That's the market that has been declining significantly because of the exit of FORTEO. We are right now working with [Telerex] and sample males and things that are going to help those prescribers to have anabolics at their fingertip so they can be supportive of the right treatment for the patients. Those activities factors now in Q1. And we expect that those are going to help in the growth as we go into 2021.

And our next question comes from the line of Douglas Tsao from H.C. Wainwright.

Just maybe as a starting point, when you think about the 20% CAGR growth that you are modeling, just curious if you can let us know what your assumed sort of market share roughly will be from TRx standpoint in the anabolic number. Or what sort of anabolic market share is into that. I'm just curious, we've seen some slowdown in the anabolic market. Just curious, from your perspective, where the biggest growth potential there is with the patch. Is that going to be really from the high-frequent prescribers? Or is it an opportunity to sort of reaccelerate growth with sort of the low-depth prescribers where we've sort of seen a little bit of a taper off in recent periods?

Yes, thanks for the question. So we expect the market to continue to grow as in our projections we expect that the lower quintile the has been decreasing the number of anabolic prescriptions, or since Lilly has left market, to retake the growth as part of our efforts to support those physicians.

On the patch side, and I'm going to allow Jesper to respond to this, but it's definitely going to be about more prescribers to come to the table.

Yes. Douglas, basically we are of course, currently working on preparing the market for the patch as we are continuing the enrollment into the trial and anticipate (inaudible) in the second half of next year. So we have a number of things that we are taking into consideration really to work on for the past. But we anticipate the group to grow for the patches. We at previous calls has also presented data on how we are seeing the market evolving over a period of time. And we see certainly that there is a potential for the market to substantially grow with the patch and yet still being -- subcutaneous injections available at the same time. So we see those two treatment opportunities be available in parallel on the market.

So basically, just to be clear, and I don't know if I didn't answer the question. It was getting corrected here. So in 2020 we expect low single-digit market growth. But in 2021 and 2022, as we fulfil the needs of those low quintile Prescribers, we expect market growth to rebound back again.

Yes, in reality, there's only 3 ways that you can grow top line numbers, that is: point one, pricing; point two, market growth; point three, market shares. And of course, the lion's share of the growth that we are predicting is coming from the market share growth. Forward-looking, all the factors can of course also come into play on the basis of the work we do today that we'll benefit from tomorrow and forward-looking.

And then, in terms of the implied forecast of the 20% CAGR over the next couple years, through 2022, what's your sort of baked-in market share assumption from a TRx standpoint in that forecast?

Yes, so we haven't given specific numbers here because it's -- at the end of the day, if it's -- it -- the growth can come from getting new prescribers to the anabolic space, which we're putting a lot of effort into, and -- or it can be to rebound those low prescribers that -- low anabolic prescriber to prescribe more anabolic. So now, we believe that the continuous growth of TYMLOS will continue to take place in the market, and so NBRx will continue to guide in TRx growth. And we expect that TYMLOS will continue to be the market leader in the anabolic treatment for postmenopausal women in the U.S.

Okay. And then just one final question, if I may, just given obviously your coverage, your -- is -- from a (inaudible) standpoint is very strong, just anything in the scenario where generic enters, sort of tactically that you will do in the next few months to sort of continue to grow, retain your share and grow your market share?

So, basically, as I said earlier on the call, I think we've done what we have to do. You also have to keep in mind that all these deals that we have entered into are not necessarily just for 1 year but are also forward-looking. So they are longer than just 1 year for some of the contracts and things we have been doing. So all-in-all, with 99% and 83%, I think, frankly, it doesn't get any better.

All in all we're 99 and 83% I think, frankly it doesn't get any better, and it shouldn't get any better because then we are leaving money on the table.

Great. Thank you so much.

Thank you. And we have a follow-up question from the line of Paul Choi with Goldman Sachs.

Hi. Good afternoon, everyone. Thank you. just for the team with regard to just thinking about the strategic options or LSL trends. I guess you focus mostly on a sale just with regard to options for clinical partners. Could you maybe just elaborate on where you are in potentially with discussions on that. And potentially developing combination strategies? Thank you.

Yes. Thanks for the question, Paul. For that moment, we are only focus on on monotherapy study, we would expect that some of the partners that work in discussions with my take that followed to go into combination science. But for the moment, we're not planning to make any investment in that space. The value of the assets right now for a partner, it could be in both settings and we would expect that if we partnered the asset and royalties come part of that. We would leverage the value in combination to.

Okay. Thank you for that.

Thank you. And I'm showing no further questions at this time. I will now turn the call back over to CEO, Jesper Hoiland for any closing remarks.

Thank you very much. We have an exciting 2020 in front of us, and we are really looking forward to finish the enrollment for three Phase 3 trials, that will give us the platform for the future in terms of read outs in the second half of 2021. In terms of guidance, we have given strong guidance I feel in terms of sales at $220 million to $235 million with less than $80 million and I can only say we are off to a good start. So thank you very much to everyone and I really look forward to meet you on the road.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may now disconnect.