RVL Pharmaceuticals PLC (RVLP) 2019 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the Osmotica Third Quarter 2019 Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference over to your speaker today, Lisa Wilson, Investor Relations at Osmotica Pharmaceuticals. Please go ahead, ma'am.

Thank you, operator. Welcome to Osmotica Pharmaceuticals Third Quarter 2019 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.

The company issued a press release detailing financial results for the 3 months ended September 30, 2019, yesterday after the close of market.

This press release and a webcast of this call can be accessed through the Investors 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 statements 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 yesterday'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. The archived webcast of this call will be available for 30 days on our website at osmotica.com.

For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on November 15, 2019. 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.

Thank you, Lisa. Good morning, everyone, and thank you for joining the call. I'm very pleased with the progress we are making on many fronts, most notably around our investigational product, RVL-1201, for the treatment of acquired blepharoptosis or more commonly known as droopy eye. In September, we submitted a new drug application for RVL to the U.S. Food and Drug Administration, and we are engaged in productive communications with the FDA and believe we are on track for an acceptance to file in the fourth quarter of this year. Our outreach to potential partners outside of the U.S. has picked up momentum, and we remain confident in our ability to enlist a great partner through this effort.

In recent weeks, we've had the opportunity to present Phase III efficacy and safety data for RVL at several global eye care conferences, where the feedback from KOLs has been unanimously positive. We are now planning to build out our medical education strategy for RVL and turning our focus to messaging and prelaunch preparation and activity.

We look forward to sharing our progress with you associated with multiple sclerosis. Based on the promising results from our clinical trials, we remain confident in our baclofen and plan to submit an amendment to our NDA in the first half of next year. The baclofen extended-release clinical development program presents the largest, most robust data set in MS spasticity in the world. The clinical trial evidence strongly demonstrates the efficacy and utility of our baclofen ER in 2 divided doses. We are excited about the potential of our baclofen extended release and believe it can bring meaningful relief to MS patients suffering from spasticity.

We also recently welcomed Michael DeBiasi to our Board of Directors last month. Mike's perspective and expertise particularly in consumer launches will help guide us as we scale our commercial infrastructure to support our existing pipeline of promising products.

Our financials are strong, and we continue to focus on executing our strategic plans, advancing our late-stage pipeline and supporting our promoted products. The company's plan to transition to a specialty pharma company remains firmly on track.

Now I'd like to turn the call over to Andrew Einhorn who will discuss the company's financial results. He will be followed by JD Schaub, our Chief Operating Officer, who will discuss the company's promoted products in more detail. Andy?

Thank you, Brian. Total revenues were $65.5 million for the 3 months ended September 30, 2019, compared to $66.3 million for the 3 months ended September 30, 2018. Net product sales decreased by $1.4 million to $64 million for the 3 months ended September 30, 2019, as compared to $65.4 million for the 3 months ended September 30, 2018. Net sales of methylphenidate ER, including M-72, decreased 46% during the quarter due to additional competitors entering the market, resulting in significantly lower net selling prices and volumes, partially offset by lower than estimated product returns.

Net sales of venlafaxine ER tablets increased 41% during the quarter as a result of higher realized net selling prices due to lower than estimated product returns combined with higher volumes. Methylphenidate and venlafaxine net sales were favorably impacted by approximately $11.6 million in the aggregate, primarily related to adjustments of product returns reserves during the quarter based on actual product returns experience. We expect that additional competition for both methylphenidate and venlafaxine from current competitors as well as additional generic product approvals and launches in the future, if any, will continue to negatively affect sales of these products during the remainder of 2019 and in future years.

Favorability arising from adjustments to reserves for product returns and other adjustments, if any, may not recur in the remainder of 2019 and in future years. Selling, general and administrative expenses increased $7.3 million during the 3 months ended September 30, 2019, to $24.8 million as compared to $17.5 million in the 3 months ended September 30, 2018. The increase in our selling, general and administrative expenses reflects addition to salesforce headcount and marketing cost associated with the launch of Osmolex ER in the first quarter of 2019 and severance cost associated with our sales force realignment during the third quarter of 2019, together with share compensation expense and higher costs associated with being a public company.

Research and development expenses decreased by $3.7 million in the 3 months ended September 30, 2019, to $8.3 million as compared to $12 million in the 3 months ended September 30, 2018. The decrease reflects the completion of the Phase III clinical trial for our baclofen ER during the first quarter of 2019, partially offset by share compensation expense and the cost of manufacturing development batches of Osmolex in the 3-month period ended September 30, 2018, which costs were not present for 2019.

During the quarter, $128.1 million of intangible asset impairment charges were recognized related to the write-down to fair value of methylphenidate due to price and volume decreases resulting from competing generic products. Net loss for the third quarter of 2019 was $112.7 million compared to a net loss of $3.6 million in the third quarter of 2018.

Adjusted EBITDA for the third quarter of 2019 was $22.9 million compared to adjusted EBITDA of $25.8 million in the third quarter of 2018. For a reconciliation of adjusted EBITDA to net income or loss, please see the tables at the end of our press release. As of September 30, 2019, Osmotica had cash and cash equivalents of $98 million and borrowing availability under the revolver of $50 million. We also had debt of $268.1 million, net of deferred financing fees.

Now I would like to turn the call over to JD.

Thanks, Andy. In the third quarter, we continue to see solid prescription trends from our key promoted brands, Divigel, M-72 and Osmolex ER. Importantly, we completed a national field sales realignment during the third quarter and began full promotion of our key products with a larger, unified field team in October. This has allowed us to significantly expand our promotional efforts behind Osmolex and M-72 while maintaining key targets and efforts in support of Divigel. We believe this realigned structure will drive continued growth, while also serving to set the foundation from which we plan to launch RVL if approved later next year.

Specific to key brands, Divigel continued its sequential quarterly growth this year plus 1% versus Q2 '19 prescriptions. Total prescriptions have increased by roughly 11% versus the same period in 2018. M-72 outperformed the market, which was down about 3% quarter-over-quarter as a result of seasonal pressure. M-72 was down a modest 1.5% while showing robust 300% growth over the same quarter last year.

Moving on to Osmolex, through September, 321 unique healthcare providers wrote or enrolled at least 1 patient in our Access Osmolex program since launch for a total of 1344 total prescriptions. When comparing Q3 to Q2, total prescriptions increased 64%. As awareness and experience have grown over the first 9 months this year, we believe that our expanded promotional footprint beginning in the fourth quarter will further accelerate prescription growth and prescriber adoption for Osmolex ER.

We continue to see good overall access through Access Osmolex as well as strong persistency once patients begin therapy. The ability to sample the product is a strong driver of trial and the once a day Osmotic release technology combined with flexible dosing options continue to support Osmolex ER as a meaningful treatment option for physicians and their adult patients suffering from Parkinson's disease and drug-induced extrapyramidal reactions.

Touching briefly on our nonpromoted products. The Trigen business continues to be an important contributor despite increased competitive dynamics, notably in our key legacy generics methylphenidate ER and VERT. We anticipate the competitive dynamic will persist, however, we have built and positioned this segment with a strong commitment to quality and supply with our key channel partners, and believe our investments in our Osmotic manufacturing platform will continue to support the ongoing contributions from this business.

Lastly, while we focus on growth from existing brands, we are also continuing to advance our strategic launch planning for RVL. As we previously shared, we had a meaningful presence at the fall scientific Eye Care meetings, including live podium and poster presentations highlighting our Phase III clinical data.

We had discussions with more than 40 KOLs across eye specialties, including oculoplastics, ophthalmology and optometry, all of which have been overwhelmingly positive. We remain highly encouraged by the potential opportunity to bring a first-in-class product to market and look forward to ongoing updates as we progress through NDA review.

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

Thanks, JD, and thank you for your time this morning we look forward to continuing to update you on our progress in the near future.

And with that, I'd like to turn the call back over to the operator for questions. Operator?

(Operator Instructions) Our first question comes from Randall Stanicky of RBC Capital Markets.

This is Ashley Ryu on for Randall. So now that RVL has been submitted can you talk a little bit more about the commercial preparations for the product? You guys mentioned a recent sales force realignment, following that how many reps do you kind of need to add for the initial launch for RVL? Or how do you think about that commercial build-out? And can you just talk a little bit about your plans for DTC marketing and doc outreach?

It's Brian. Great question, and thanks. I'll start it off and let JD basically finish off the answer. Really our true commercial and medical build-out didn't start until after we had the second Phase III comparative trial completed, and we were very pleased with those results and then also the extended safety study. And we submitted obviously the NDA. From that point, we pivoted, and we started making ourselves known at a lot of the medical conferences that have already occurred this year. We had a great presence in most of them with podium time, poster presentations and a lot of outreach to KOLs and as I mentioned in the prepared remarks, all of those conversations have gone extremely well. On the commercial preparation now it'll -- again focus with our scientific core and that build-out for publications, symposia and awareness, and then we'll begin to focus a little bit more carefully on the top prescribing base, which is ophthalmology and optometry. So JD, you want to take it from there?

Sure. So I think, look, Ashley, on pure commercial planning side, I would reiterate Brian's point in terms of the foundation being the scientific and medical education. There has been ongoing work leading up to and through kind of the initial KOL interactions and outreach throughout the Fall Eye Care Congress schedule, and there's fair amount that we're doing around building the right doses disease education, getting publications and building that foundation because it is a condition with a large unmet need and one where the education and awareness needs to continue to grow. And I think the way to do that out of the gate is obviously at the eye care professional level. So that will be an area that I think as we head through the end of this year and into 2020 that you'll see a continued emphasis and focus in terms of us out there, not just at Eye Care conferences but the internal work streams as well. On the commercial side, when we look at this market and all of the interactions we've had thus far, there's a lot of enthusiasm as you might imagine across eye care specialties. So whether we're talking to oculoplastic, comprehensive or general surgical ophthalmologists, optometrists with a range of specialties, all of them have a unique interest in what ultimately will be a first-in-class treatment if approved. And so I think with that the work now is understanding, okay, who are the drivers of utilization upfront? And what type of effort do we need to get there from a field-force perspective? I think we're very comfortable with the footprint that we have in place today serving as the foundation for that launch. I don't think any meaningful build beyond that footprint is going to be required and any growth of the field would just be a function of the ultimate trajectory and growth of RVL once commercialized.

Right. And we restructured the sales team at the very beginning of the fourth quarter of this year or third quarter and the third quarter last -- this year. And that footprint now is designed to match up perfectly with the high prescribers and ophthalmology optometry. We're now going to begin to expand our digital marketing prep and presence, which we know can have a major influence in this market. And again, Ashley, the U.S. population, we know had -- at least half of them always go for an annual eye exam and given the high prevalence of ptosis, we're not really too concerned about patients initially coming into the office. So our direct-to-consumer preparation will be staged based upon the uptake we see with the core physician audience and the other component that we want to test and digital will help us a lot with this is patient self-referral because when we had an opportunity to talk to patients that have been in our clinical trials, they unanimously said that they would refer this to other members of their household or friends and family that might have need of this product for a similar, albeit, maybe more mild condition. So the DTC will be staged and will probably occur after we monitor uptake with the core physician group.

Got it. And just one more. Can you talk a little bit more on the arbaclofen amendment that you're submitting in the first half? What kind of further work does that entail?

None of the work is really in the clinic. We recently did receive very good and thoughtful advice from the agency. We're going to be putting that altogether, the one outstanding trial that is yet to finish is our term safety for the 80 milligrams strength. The last patient should be coming in this month and then as soon as that is completed and cleaned and that data processed, we'll be looking to make what we would consider a rather robust amendment to our already existing NDA. So we're quite enthused about the program, we believe the totality of the evidence is persuasive, and we are on track to submit in the first half of next year. We're very excited about the program.

(Operator Instructions) And our next question comes from Jacob Hughes of Wells Fargo Securities.

Could you provide some additional color on the outlook for methylphenidate? I mean do you think it has started to trough out here?

Well, being that the markets are very strong and attractive, I'm not sure troughing is the right way to look at it. I think JD could give you more color.

Yes. Sure. So I think -- and in our earlier prepared comments I alluded to this, I think we're well positioned in both of those markets in terms of the customer base. The competition has obviously increased, I think that's something that we expected and were prepared for. But like any generic market knows particularly that they are of value. I think we continue to expect that competition to persist in those key markets. But we're also, again, I think strategically in a good place given the importance of supply in large markets like meth ER and venlafaxine, and are comfortable with the existing customer base where if we see some additional price erosion, we believe that the volume is going to be able to sustain us through whatever the competitive set looks like.

Okay. And then on the -- Brian, is there anything you can see on the level of interest for a partnership outside the U.S.? And geographically, where would that be?

Yes. In fact, the reason our call is this morning is JD and Nick and I just -- literally just got back from Japan where we see robust interest. We've had a lot of companies reaching out to us now and particularly around the exposure we generated at the medical conferences. So we're going to try to -- our best to pick the right partners for those geographies. We're not suffering now from lack of outreach, our biggest problem is actually trying to consolidate it through a process that we have and make sure that we pick the right partner. But we know having a partner in those territories will not be a problem for us. It's more a matter of taking our time and making sure we have the right partner that can optimize value for the franchise. But the reception has been, thus far, very encouraging.

And ladies and gentlemen, this does conclude our question-and-answer session. I would now like to turn the call back over to Brian Markison for any closing remarks.

Thanks, operator, and thanks everybody for participating and listening in on the call. We're excited about RVL. I think that comes through clearly in our call and also the core that we've built with our base business, and with our baclofen, we look forward to updating all of you on our progress as we make our submission plans more final. Thank you. Bye.

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