RVL Pharmaceuticals PLC (RVLP) 2021 Q1 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Osmotica Pharmaceuticals Quarter 1 2021 Earnings Conference -- Earnings and Business Update Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Ms. Lisa Wilson, Investor Relations for Osmotica Pharmaceuticals. Please go ahead.

Thank you, operator. Welcome to Osmotica Pharmaceuticals' First Quarter 2021 Business Update Call. This is Lisa Wilson, Investor Relations for Osmotica. With me on today's call are Osmotica's Chief Executive Officer, Brian Markison; Chief Operating Officer, JD Schaub; and Chief Financial Officer, Andrew Einhorn.

This afternoon, the company issued a press release detailing financial results for the 3 months ended March 31, 2021. This press release and a webcast of this call can be accessed through the Investor section of the Osmotica website at osmotica.com.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Osmotica's management as of today and involve risks and uncertainties, including those noted in this afternoon's press release and our filings with the SEC.

Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Osmotica specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.

During this call, we refer to non-GAAP measures such as adjusted EBITDA. For a reconciliation of adjusted EBITDA to net income or loss, please see the tables at the end of our press release. The archived webcast of this call will be available for 30 days on our website, osmotica.com.

For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 13, 2021. Since then, Osmotica may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings.

And with that, I'll turn the call over to Osmotica's CEO, Brian Markison.

Good afternoon, and thank you for joining our call today. We have good news to share, and I'd like to begin with Upneeq. First, paid prescriptions through our exclusive pharmacy continued to ramp. In the first quarter, paid RXs grew 74% over Q4 2020, and April prescriptions grew 17% over March. This is the beginning of a growth trajectory that we can expect as we move forward.

Another data point of note is at the end of 2020, we had sampled over 4,000 eye care providers. As of the end of April, we have nearly doubled that number to over 8,000 eye care providers sampled. This is a particular note for 2 reasons. First, we have worked down our early launch distribution of nearly 12,000 30-count equivalents and perhaps more importantly, our trained selling organization has grown steadily through the first quarter, and numbers 77 active territories with another 20 in the pipeline.

Coming out of May, we plan to field 100 active territories as we grow the prescriber base. When looking at the market opportunity that we see for Upneeq, this level of sales force spend can only be viewed as modest. However, we are building a market that has no analogs and no competition.

Our approach is strategic, considering that we're about to test an unbranded direct-to-consumer campaign, and our medical education initiatives are still ramping up. We are also getting real-time organic exposure from social influencers and great publications, such as the March edition of Elle, the April addition of Vogue. And also in April, we were featured on newbeauty.com, just to name a few.

Additionally, our 2 YouTube ad videos have reached 1 million views each. We need to see the effects of these different tactics as we titrate our spend in this launch. As we've said before, we're just beginning this journey.

Looking outside the U.S., our partner, Santen, had a highly productive meeting with the PDMA (sic) [PMDA], the Japanese version of the FDA, and are rapidly advancing their plans for the Japanese, Chinese, Korean and European markets. When examining our first quarter performance, in general, the company exceeded its expectations. Andy will provide more detail, but our excellent customer service and manufacturing network ensured an uninterrupted supply chain during the pandemic. Our team is to be congratulated.

Arbaclofen continues to make progress. We are finalizing plans to submit a revised Phase III protocol to the FDA under a special protocol assessment in the coming weeks. We will consider advancing this program after we receive feedback from the FDA, but we are very excited about its future prospects in the treatment of MS spasticity.

And finally, our strategic process is well underway, with keen interest in our legacy portfolio expressed by a number of qualified parties. We hope to update you in the near future with progress on this front.

And now I'd like to turn the call over to Andy. Andy?

Thank you, Brian. Before going into the company's overall performance for the first quarter, I'd like to highlight some additional data points on Upneeq. Since launch, as Brian mentioned, we have sampled over 8,200 eye care professionals. And as of the end of April, nearly 5,000 have prescribed Upneeq at least once. During March, we saw a 76% increase in new-to-brand prescribers, and we continued to add new prescribers in April to see sequential growth in paid prescriptions month-over-month, with April coming in 17% higher than March. This performance reinforces our enthusiasm for Upneeq as we believe we have the -- we've only begun to penetrate the potential market for this product. Finally, we anticipate receiving another milestone payment of $10 million from Santen Pharmaceuticals in the second quarter.

Now on to the company's overall performance for the first quarter. Total revenues for the 3 months ended March 31, 2021, were $23.9 million compared to $48.6 million for the 3 months ended March 31, 2020, primarily due to a decrease in net product sales.

Net product sales decreased to $22.5 million for the 3 months ended March 31, 2021, from $47.3 million for the comparable period in 2020. Approximately $8.8 million of this decrease is attributable to lower net realized prices, and $16 million was due to lower volumes of products sold.

Cost of goods sold decreased $7.1 million to $13.5 million during the quarter, primarily due to lower amortization expense, royalty and sample expense, partially offset by higher production costs and inventory reserves. Gross profit for the quarter was $10.4 million as compared to $28.1 million in the 3 months ended March 31, 2020.

Selling, general and administrative expenses decreased $2.3 million during the 3 months ended March 31, 2021, to $18.9 million as compared to $21.2 million in the 3 months ended March 31, 2020. The decrease in our selling, general and administrative expenses reflect sales force reductions in the 3 months ended March 31, 2020, offset by higher marketing expenses related to Upneeq.

Research and development expenses decreased by $2.4 million in the 3 months ended March 31, 2021, to $3.3 million as compared to $5.7 million in the comparable period in 2020. The decrease primarily reflects lower spending on arbaclofen, Upneeq and other R&D projects and lower headcount-related expenses during the quarter. During the 3 months ended March 31, 2021, we recognized a gain on the sale of product rights for Osmolex of $5.6 million.

Net loss for the first quarter of 2021 was $9.6 million compared to a net loss of $3.1 million in the first quarter of 2020. Adjusted EBITDA loss for the first quarter of 2021 was $5.8 million compared to adjusted EBITDA of $11.1 million for the first quarter of 2020.

As of March 31, 2021, we had cash and cash equivalents of $109.2 million and borrowing availability under the revolver of $50 million. We also had $219.8 million aggregate principal amount borrowed under our term loans.

With that, I'd like to turn the call back to Brian.

Thanks, Andy. Operator, if you don't mind, we'd like to open up the call to questions.

(Operator Instructions) Our first question comes from the line of Greg Fraser from Truist Securities.

First of all -- Brian, how many paid prescriptions were there in the quarter, if you can provide that?

Yes. Let me back up.

I'm going to give you -- Greg, this is JD. It was about 4,700 for the first quarter.

Okay. And can you speak to some of the feedback that you've been hearing from the field on efficacy and tolerability?

Yes, this is Brian, Greg. I should let JD pile on, but efficacy and tolerability have all been fantastic. I mean some of the efficacy stories we're getting are nothing short of spectacular. And as far as safety is concerned, there are very, very, very few reports of any adverse events whatsoever. So the drug is as well tolerated as we had hoped. In fact, it's quite soothing as an eye drop, and the efficacy is being borne out every single day that we go to work.

So JD, it's...

Yes. I mean, look, what I would add, Greg, is it's been, what, about 6 weeks since we last gave an update to you guys about things. And if anything, we've just continued to accelerate off of that. New prescribers starting to see some turn around the depth within prescribers and offices, where every month, they start to get more and more comfort and utilization with this product. And I think a lot of that stems from the safety and efficacy we've seen.

I mean, remember, this is still one of those -- and we think about it -- if you go back in time, think about the launch of a product like Restasis, first to hit the market in dry eye as a prescription treatment. And out of the gate, a lot of that utilization is in Grade 3, Grade 4 dry eye patients, the most severe, the train wrecks.

And I think you attribute that just classically to training and education. They're the most obvious. They're the most difficult to treat. And now you've got a solution, you're going to throw it at them. And it took a lot of education on Allergan's part. And obviously, over 15-plus years, they've done a tremendous job of building that, but shifting the continuum.

And I think I would liken kind of where we're at and the progress that we're making very similar. I think the difference being the efficacy in the more severely ptotic population, we're still tracking around 61 on average in terms of patient age, has been tremendous.

Got it. That's very helpful. A question on arbaclofen. Are you planning to fund the new Phase III study yourself? And if so, can you comment on how much the study might cost?

Yes. The study range that we're looking at right now is anywhere from, say, $7 million to $10 million to complete a new Phase III clinical trial. And we're not going to commit at this time until after we talk to the FDA, and we are agreed on the endpoints. So as of now, we're not going to spend a dime on it other than our own sort of thought process. But if we get a green light with the agency and a program that we believe we could be successful with, then we'll either look at it internally or look for it externally.

Got it. Okay. And then just a question for Andy. How should we think about SG&A spend in the coming quarters as you ramp up the investment behind Upneeq?

Yes. The -- good question, Greg. Thanks. The way to think about that is going into the first quarter -- coming out of last year and going into the first quarter, we -- from there, we are increasing the size of the sales force and really starting to invest more significantly in Upneeq. So what we would anticipate seeing over the coming year is an uptick in the selling expense as well as the uptick in the marketing expense as we expand the field force and begin to roll out some of the tactics to really grow this brand.

(Operator Instructions) Our next question comes from the line of Daniel Busby from RBC Capital Markets.

Couple of questions on Upneeq. First, can you talk about your strategy to further penetrate the mild-to-moderate patient categories? What needs to happen there to drive greater uptake? And second, how are you thinking about the aesthetics opportunity? I think in the past, you talked about a potential midyear launch, that's right around the corner. Has that changed? And is that an opportunity that you would look to commercialize yourself or are you likely to seek a partner in that market?

So with regard to seeking a partner, not interested. The market potential, we believe, is very, very meaningful to us. I mean, don't get me wrong if someone comes along and wants to help us out, if the terms are right, we're going to do what's best for the shareholders. But we believe so wholeheartedly in the value proposition for this product that we don't see a need to trade off the value to a third party.

So, JD, mild to moderate?

Yes. So I'll start with kind of an anecdote, Dan, that I think captures exactly what you're getting at. And we had a doctor -- an eye doctor that I have a lot of respect for, has been at it for a long time, has been a sounding board, more of a dry eye specialist, big, big practice. And as we were gearing up to launch this product, he's like, "Interesting. I think you've got a neat little product here. Good luck. I'll be anxious to see how you go -- how it goes as you guys go."

And more recently, he happened to have a patient who was in his office for dry eye treatment. And she finished treatment and asked him about Upneeq, and he sort of stopped for a second and I think processed mentally and then started going through what he knew about the drug and all those things. And she asked if she could have it.

And I talked to him after this occurred, and he was very surprised but it completely shifted his perspective about Upneeq. And he said, "Don't underestimate the power of looking awake." And I think that's the exact process that we're going through and working on strategically to shift this paradigm and behavior with a new market and a new condition that most eye doctors have paid little attention to beyond the most severe over time. So hopefully, that gives you a perspective.

Yes. Got it. Okay. So -- and I guess on the first question, just to clarify, is aesthetics a near-term launch opportunity? And then I do have another follow-up. Can you talk a little bit more about which products drove the sequential decline in revenue from the fourth quarter to the first quarter? And should we think of that as the new run rate for the base business going forward? And just lastly on this point, I have to believe that that level of erosion would have some impact on strategic interest in the legacy portfolio. So could you just comment on that?

Yes. So we'll start with finishing off the question on Upneeq, and then we'll bounce over to the second part of your question. And we're pretty much on track heading into the aesthetic market, but we are fine-tuning a bit still as we're going. I think one of the things that we are perfecting as we go are, what type of guidance do we want to give to clinicians in that market that are traditionally not used to or accustomed to giving an eye drop? So on the surface, it seems really simple and obvious. You give a drop, and it lifts the lid and people look more awake. However, how do you use this in the backdrop of all the other products that are being sold through in a physician's office, right? So we have to give them a little more guidance, a little more thoughtfulness there.

So I'd say we're pretty much on track as our plans evolve. And I really can't tell you much more than that right now. It's -- we've had a number of advisory boards. They were great sessions. A number of aesthetic practices really want to embrace this product, and a few have already in sort of our test market phase. So it looks very good and very promising. We're pretty much on track, is what I would say.

JD, anything to add or...

No. I think important context, though, is we are actively working with some more aesthetic-leaning thought leaders, teasing out the total package, if you will, right now. And I think we're seeing everything that you want to see in terms of validation of the opportunity and the market potential within that setting. And it's encouraging because the intersection of patients and a target demographic for this type of product is frequent and often in these settings.

And so I think, Dan, we are moving as fast as possible, understanding that we are going to continue to be very deliberate and thoughtful to ensure that when we're there, we're launching into the highest orbit possible.

And Dan, just to get to the, I think, the first part of your question, the large drivers quarter-over-quarter of the decline were really in -- methyl and venlafaxine were the primary drivers, nitrofurantoin as well. And I think those markets are now very, very crowded. And so what we would expect is that this is going to be kind of a steady state for the base business. And this has been anticipated by us, and it's what forms the basis of anybody who's been taking a look at it.

Yes. And just to add to that a little bit, in the strategic process, we have some very well informed parties looking at it. And as you would imagine, we already reflected this trend in our analysis and theirs. So it's a very complete picture. But again, as Andy said, we believe we're pretty much at steady state here, and, again, have differentiated ourselves with the quality of our supply chain.

Our next question comes from the line of David Steinberg from Jefferies.

It's Ed Chung, on for Dave. Actually, we've noticed some recent magazine covers and articles about Upneeq. And I don't know if you guys can speak to the impact on the recent prescription trends you're talking about, or is it still too early to see any impact from that?

Yes. No, Ed, it's -- we think we're seeing the impact. It's early. We had a nice article in Vogue, another one in Elle magazine, goodbeauty.com (sic) [newbeauty.com] and a few -- actually a few others as well. And every day, there's another influencer on Instagram posting a great before-and-after picture and a great outcome. It's building, I think it's early. It's organic. We're not paying a whole lot for a -- a whole -- much of this other than our YouTube ads, which have quite an interesting hit rate.

I mean, JD, you're a little closer to that aspect of it.

That's great noise. This is raising the awareness and conscience level not just in the ECP community but also spilling over into the aesthetic community and, obviously, the broader consumer base. I can tell you I think we're seeing more patients coming in asking for it. And I think when we look at kind of the continued growth, maybe beyond growth, the acceleration in the number of new prescribers every week, we're adding more new prescribers in recent weeks than we had through the first part of launch when we were really in a very controlled setting, Ed.

And I think those types of things, the Vogue cover and Elle magazine, some of the social activity that's going on and some of the investments that we're also making in that side certainly contribute, and, moreover, allow us to continue to focus on driving depth within the office, getting these doctors comfortable with the protocol change, getting the entire office behind what has to happen to assess lids and really make this a daily part of everything that they're doing.

Okay. That's super helpful. And I think Brian alluded to a DTC program that you're looking to roll out. Is that going to coincide with your push into aesthetics? And can you speak a little bit more about the timing that how this might unfold?

Yes. So, separate, no direct correlation to the push into aesthetics. But the plan right now is to begin piloting some of those efforts through the end or second half of this quarter. I actually just got a chance to see some of the draft cuts recently, and it's great.

Look, this is about raising awareness, educating and elevating the consciousness of both the consumer and the practitioner. And I think it all helps, whether it's the eye care side or the functional aesthetic and aesthetic side. And the one thing we've learned early here is this product has broad applicability across a wide range of patients, age, demographic and also clinician. And so I think when we look at that and how we best kind of build and capture momentum as we go, it's all going to be important.

And Ed, we're also completing a fairly extensive round of consumer market research as well, which is what we're using to feed and inform our DTC pilot. And I think we're going to be presenting at your conference in 1st of June, and we'll be able to come out with a lot more data and a lot more results from this effort at that June meeting, which we chose to switch to a presentation rather than a fireside. So hopefully, we'll make a big splash at your event.

Definitely looking forward to the presentation, come June.

(Operator Instructions) I'm not showing any further questions in the queue. I'd like to turn the call back over to Brian for any closing remarks.

Great. Operator, thank you; and thank you, everybody, for listening in today and taking part in our journey as we continue to advance Upneeq. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.