G1 Therapeutics, Inc. (NASDAQ:GTHX) Q2 2023 Earnings Call Transcript

G1 Therapeutics, Inc. (NASDAQ:GTHX) Q2 2023 Earnings Call Transcript August 2, 2023

G1 Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-0.92 EPS, expectations were $0.17.

Operator: Good day, and thank you for standing by. Welcome to the G1 Second Quarter Financial Results Conference Call. [Operator Instructions]. I would now like to hand the conference over to the speaker today, Will Roberts. Please go ahead.

William Roberts: Thank you, Jade. Good morning, everyone, and welcome to the G1 conference call to discuss our second quarter 2023 financial results and business update. The press release on these financial results was issued this morning and can be found in the News section of our corporate website, G1therapeutics.com. On this mornings’ call, the team will provide a business overview of the second quarter of 2023, including an update on our clinical programs and our commercial progress in that period with COSELA, which is approved and commercially available to decrease the incidence of chemotherapy-induced myelosuppression in adult patients with administered prior to a platinum/etoposide-containing regimen or topotecan-containing regimen for extensive-stage small cell lung cancer or ES-SCLC.

A question-and-answer session will follow the prepared remarks. Before we begin, I want to remind you that today’s webcast contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements represent management’s judgment as of today and may involve risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. For more information on such risks and uncertainties, please refer to our filings with the Securities and Exchange Commission, which are available from the SEC or on our corporate website. Any forward-looking statements represent our views as of today, August 2, 2023. Joining us on the call today are Jack Bailey, our Chief Executive Officer; Andrew Perry, our Chief Commercial Officer; Raj Malik, our Chief Medical Officer; and John Umstead, our Chief Financial Officer.

With that, I’ll turn the call over to Jack Bailey.

John Bailey: Thanks, Will. Good morning, everyone, and thank you for joining us on the call today. As of midyear, our goals for 2023 remain unchanged. First, to drive depth of COSELA usage and adoption, especially amongst the top 100 organizations who treat half of all extensive stage small cell lung cancer patients in the country. Second, to prepare for important clinical readouts early next year; and finally, to efficiently manage our cash runway. Regarding the first goal, our objective was to continue to drive quarter-over-quarter COSELA volume growth by broadening the number of deeply adopting customer organizations and drive in depth, particularly amongst our top 100. As you’ll hear from Andrew, we did this successfully in the most recent quarter while seeking to navigate a national platinum-based chemotherapy shortage.

Despite that headwind, net sales grew 6% quarter-over-quarter to $11.1 million, enabling us to reiterate our guidance of $50 million to $60 million in COSELA net sales in 2023. Though as a result of the platinum shortage, we will potentially be toward the lower end of that range. It’s worth reminding our investors that assuming we continue to hit our internal forecast, we expect COSELA to drive us to cash flow positivity and profitability in the next few years. Regarding the second goal, this is a particularly exciting time for G1. We presented important new data throughout the quarter from our Phase II trials, including that trilaciclib can improve the tolerability of an ADC. Importantly, we expect the survival results from our pivotal Phase III triple-negative breast cancer trial as well as from two Phase II trials in the first quarter of 2024.

If the interim Phase III TNBC results are positive, we expect to meet with the FDA to discuss filing a potential supplemental NDA shortly after that. Finally, we made good progress during the quarter in strategically managing our finances. First, by obtaining payment from Simcere for relief of future royalty payments on the sales of COSELA in Mainland China and then by amending our debt agreement with Hercules and paying down a portion of our debt to provide additional financial flexibility. Now we will discuss each of these topics in order. Andrew will cover our recent commercial efforts and results. Raj will then provide an update on our clinical pipeline, and John will provide financial results for the quarter. Finally, I’ll be back for some concluding comments.

With that, I’ll now turn the call over to Andrew.

Andrew Perry: Thank you, Jack. I’m glad to be with you today to provide an update on our second quarter 2023 sales performance, and the progress we’ve made in our commercial execution over recent months despite facing some external challenges. Our goal in the second quarter was to extend our quarter-over-quarter growth by continuing to build a broader platform of more deeply adopting customer organizations. We delivered on this goal in Q1, and we’ve continued to deliver in Q2, despite some marketplace challenges, and I’ll discuss some of the factors underlying our performance today. Beginning with sales results. As Jack mentioned, we ended the quarter with $11.1 million in net sales of COSELA, representing 4% vial volume growth and 6% sales growth compared with Q1.

We’ve previously stated that our growth in the extensive stage small cell lung cancer market can fluctuate due to the 2- to 3-month duration of therapy for first-line patients. However, in this quarter, we also faced the challenge of well-publicized national shortages of both carboplatin and cisplatin, which are the backbone of platinum-based chemotherapy in small cell lung cancer. This caused considerable disruption with customers as patients incurred those interruptions and discontinuations or switches and regimens. Although the situation remains in flux, we anticipate an improved outlook in the second half of the year. In terms of the effect on our COSELA business, we estimate that this impacted our May and June performance and particularly in community clinics and hospitals, which may have had less capacity to maintain stock of carboplatin and cisplatin.

For example, COSELA volume in top 100 customers, which see around half of extensive stage small cell lung cancer nationally, grew 20% in the quarter while non-top 100 customers declined 11%, and this may have been due to being more affected by platinum shortages than larger customers. We saw similar dichotomy when looking at all academic institution customers who grew 25% in the quarter, compared with minus 2% for all community customers. And again, this may be due to their purchasing power in the market and ability to maintain stock. Taking into account some of these underlying performance trends, we anticipate that without the platinum shortage, our volume growth in Q2 may have been closer to our Q1 growth rate of 20% than the actual growth of 4% we are reporting today.

Despite the challenges, we saw a number of indicators that our COSELA business continued to build a stronger base of deep adoption during the quarter. Not only did we see the growth in top 100 customers and in academic institutions are referenced earlier, but we also saw an increased number of deep adopting customers. Last quarter, I highlighted an increase in customers purchasing more than 100 vials per quarter from 17 in Q4 2022 to 19 customers in Q1 2023 and in Q2, 25 customer organizations purchased more than 100 vials. In the second quarter, we brought on board 58 new accounts, including 1 new top 100 organization, meaning 73 of the top 100 have ordered COSELA launched to date. We saw orders from 56 of the top 100 organizations, which was up from last quarter.

Despite the challenges in the community , we continue to support community oncology through education around optimal EMR placements and through volume-based contract agreements. In Q2 2023, customers who elected to place COSELA on a default position as their standard of care demonstrated 3x the debt of utilization compared with customers who simply left COSELA as an option. We added 2 new community contract customers in Q2, and we estimate roughly 30% of our business is with customers who have a volume agreement. Our estimate of COSELA patient share continues to grow. And although claims data for Q2 are not fully available, we estimate patient share in the 10% range in the first-line market, which represents the majority of our use. We saw 74% of volume in the quarter come through community clinics and hospitals, and 26% of volume from academic centers, 98% of our volume in the quarter was in commercial supply with 2% provided through our patient assistance program.

Moving on to Q3. We have been encouraged to see community customers most affected by the platinum shortages begin to reorder at more normal rates and we’ve shown that there remains growth potential in the academic segment. We continue to see the benefits of the strategic shifts we’ve made over the last several quarters despite marketplace challenges. As always, we’ll continue to evolve our commercial model as necessary to achieve our ambitions for COSELA. I’ll now turn the call over to Raj for a pipeline update.

Rajesh Malik: Thanks, Andrew, and good morning, everyone. I will review progress with our clinical pipeline, including recent results, the expected time lines for overall survival results from the ongoing trials and provide an update on our work to understand the Phase III colorectal cancer results. First and foremost, based on data generated to date and to optimize the opportunity ahead, we plan to focus primarily on 2 core development paths for trilaciclib. The first in metastatic TNBC settings, where we have already shown a survival advantage in the trilaciclib arms in a Phase II trial, and secondly, in ADC combinations, including in additional tumor types. We let the bladder cancer survival data to determine next steps in this setting, if any.

I will now review the clinical results we presented during the second quarter. I’ll start with our May ESMO breast presentation of trilaciclib in combination with Gilead’s ADC, sacituzumab govitecan. ADCs have changed the treatment landscape. And thus far, we have convincing data showing that trilaciclib can improve tolerability of sacituzumab. Trilaciclib administered prior to the ADC was associated with clinically meaningful reductions of over 50% in the rates of multiple adverse events compared to the single-agent safety profile of sacituzumab including neutropenia, anemia and diarrhea. We believe that having a healthier bone marrow and immune system function with trilaciclib treatment may help patients live longer. And we’re looking forward to the overall survival results, which are expected in the first quarter of 2024.

Then at ASCO in June, we presented new results from our Phase II mechanism of action trial showing the ability of trilaciclib to enhance long-term immune surveillance by increasing T cell function and generation of certain memory T cells and gene expression profiles that may be associated with improved clinical outcome. This will be expected to produce a greater effect on overall survival compared to earlier efficacy measures such as overall response rate and PFS, consistent with other immunotherapies. Next, regarding our pivotal first-line TNBC Phase III trial, we continue to expect that the interim overall survival analysis will occur in the first quarter of 2024. This trial largely replicates the design of the Phase II trial that showed a statistically significant overall survival advantage in both arms for participants receiving trilaciclib prior to standard of care, compared to standard of care alone.

As a reminder, if the trial meets the interim analysis stopping rule, it will be unblinded and G1 will report the top line results. In addition, we will meet with FDA to discuss filing a potential supplemental NDA as quickly as possible in 2024. If the trial does not meet the interim analysis stopping rule, it will continue to the final analysis. Turning to our Phase II bladder cancer study. We expect that the overall survival results anticipated early next year would be the most meaningful to evaluate trilaciclib in this setting. In our January press release, we announced that early response rate data in the bladder cancer trial, numerically favored patients who received gemcitabine/platinum and avelumab over patients who received trilaciclib prior to the combination.

Despite the differences in response rate as of the most recent data come. The PFS is similar between the 2 arms with a median of 6 months in the trilaciclib arm and 6.1 months in the control with a hazard ratio of 1.07. Further, median PFS was similar across arms in both tumor PD-L1 subsets. Median duration of response favored the trilaciclib arm overall with 7 months versus 6 months and in both tumor PD-L1 subsets. We expect to reach the final OS endpoint for this trial in the first quarter of 2024, which will determine whether additional late-stage studies in this tumor type are warranted. Next, I want to provide an update on our work to understand the confounding Phase III colorectal cancer trial results. We explored a number of hypotheses, including potential inhibition of transporters involved in 5-FU uptake into the tumor, an effect of CDK4/6 dependency of the tumor.

Following comprehensive analyses, our efforts did not identify any specific cause or factors explaining the unexpected results. Considering data from all of our clinical trials, we believe that the CRC results are likely attributable to this specific regimen and this specific tumor type. We have not seen any similar adverse antitumor efficacy outcomes in our studies in extensive stage small cell lung cancer or triple-negative breast cancer. In fact, we saw improved survival in TNBC. As I said earlier, protecting the bone marrow and making the immune system function better could improve long-term tumor efficacy outcomes such as overall survival. In that regard, based on the occurrence of events, we look forward to meaningful OS data readouts across our trials in the first quarter of 2024.

I’ll turn the call over to John for the financial results. John?

John Umstead: Thanks, Raj, and good morning, everyone. As Will mentioned, full financial results for the second quarter 2023 are available in this morning’s press release and will be in the 10-Q, which we expect to file today after market close. Our total revenue for the second quarter of 2023 was $42.4 million, comprised of net COSELA revenue of $11.1 million and license revenue of $31.3 million. For the same period in 2022, total revenue was $10.6 million, including $8.7 million of net product revenue. The license revenue from the current quarter is primarily related to Simcere for the relief of future royalty payments for sales in extensive stage small cell lung cancer in Mainland China. The remaining license revenue related to supply and manufacturing services with Simcere and clinical trial reimbursements from Simcere and EQRx. On the topic of EQRx, yesterday, we received formal notice of their intent to terminate the lerociclib license agreement and revert the product rights back to us as part of their proposed acquisition by Revolution Medicines.

We are currently assessing next steps and would not expect to receive any additional milestone payments from them. Cost of goods sold for the 3 months ended June 30, 2023, was $1.4 million compared to $1 million for the same period in 2022. We mentioned on the last call that we expected our 2023 operating expenses to be 20% to 30% lower than that of 2022. As an update, we now expect our 2023 operating expenses to be closer to 30% lower than that of 2022. Our research and development expenses for the second quarter of 2023 were $12 million compared to $20.8 million for the second quarter of 2022. Our Selling, General and Administrative expenses for the second quarter of 2023 were $17.4 million compared to $25.7 million for the second quarter of 2022.

This reduction is primarily related to decreases in expenses associated with commercialization activities, personnel costs and professional fees. Regarding our cash position, we ended the second quarter with cash, cash equivalents and liquid securities of $104.2 million compared to $145.1 million as of December 31, 2022. While on the topic of our cash position, as Jack mentioned, we strengthened our balance sheet even further and added financial flexibility during the quarter. First, we received net proceeds of $27 million after Chinese withholdings for relief of future royalty payments from Simcere for the extensive stage small cell lung cancer indication. G1 has the potential to receive an additional $18 million, pending positive data from our ongoing pivotal TNBC Phase III trial, of which we would receive $5 million on some filing of an NDA in Mainland China and $13 million on their approval.

Then on June 6, 2023, we amended our loan agreement with Hercules Capital. The amendment modified certain tranche advances and lowered the required minimum cash covenant. In addition, the amendment removed the existing minimum revenue covenant and now provides for a conditional borrowing base limit. Upon closing of the amendment, G1 paid down the loan $25 million, resulting in a total loan amount outstanding of $50 million as of June 30, 2023. Our cash position as of the end of June is reflective of those strategic transactions. And as a result, we believe we have additional financial flexibility and takes our cash runway well into 2024 beyond the readouts of our clinical trials that Raj discussed. Finally, regarding revenue and cash runway guidance for 2023 and we reiterated our net product revenue guidance for 2023 of a range between $50 million and $60 million, though because of the platinum-based chemotherapy shortage, we may be on the lower end of that range.

There is no change to our 2023 gross to net expense percentage estimates. And based on the foregoing, we anticipate a year-end cash, cash equivalents and marketable securities balance of approximately $70 million to $80 million. With that, I’ll turn the call back over to Jack for some closing comments. Jack?

John Bailey: Thank you, John, Raj, Andrew, and Will. And as always, I want to thank the people living with cancer for your continued inspiration. We know the difference our drug makes to people living with this disease. In small cell lung cancer, our first indication, the patient benefit is clear due to its ability to protect the bone marrow from the harmful effects of chemotherapy. And as you just heard from Andrew, we remain confident in the potential of COSELA in small cell lung cancer and are making strides in expanding the depth and rate of adoption. Importantly, we accomplished this in the phase of a platinum-based chemotherapy shortage that impacted our business in the second quarter. Beyond the sales line, we are convinced that trilaciclib has potential to meaningfully improve efficacy by protecting the bone marrow and making the immune system function better.

We have a lot to look forward to in the first quarter of next year in that regard as we await survival data from our pivotal Phase III trial in TNBC and from II — Phase II trials. If successful there, our next step is to prepare for a supplemental NDA filing as soon as possible. I’ll finish with a reminder that we are one of the very few companies in our sector in market cap that have an approved drug that provides clear benefit and is expected to drive profitability in the next few years, along with pivotal data expected in the first quarter of 2024 and the cash position to get us through those and other results. Thank you for your time this morning. We will speak again in this format on the third quarter 2023 call in November, and we’ll see many of you at the fall investor conferences.

With that, I’ll close the call and turn it over to Q&A. Operator, would you please remind our listeners how to ask your questions.

Q&A Session

Operator: [Operator Instructions]. Our first question comes from Gil Blum of Needham & Company.

Gil Blum: So just maybe a good place to start is with which platinum shortage. Given the relatively short duration of therapy in small cell lung cancer, should we expect much of a bolus of patients in the second half of ’23 due to this shortage?

Andrew Perry: I would not anticipate a bolus of patients. So as you know, this is a very rapid aggressive disease. In many cases, I believe those patients were being dealt with by dose rendering down or extending doses out, so creating more space between the cycles. But in some cases, patients were discontinued or were not able to be offered a platinum-based chemotherapy and we’re given some other choice instead. So I don’t think we’ll see a situation where those patients are waiting in the wings.

Gil Blum: And maybe a broader question on the effects of trilaciclib in cancer even more broadly. I know you guys took a closer on the colorectal cancer population and really didn’t come back with anything specific, but given the kind of immunological landscape here, I mean, it looks like a lot of these data are trending towards a survival benefit, which is pretty typical for IO agents. I’m just curious if this is — if you say if this is a class effect and whether you should spend more time on immunological numbers.

Rajesh Malik: Gil, this is Raj. Yes, we completely agree with you. And hence, our focus going forward on TNBC, where we saw a very strong Phase II data and in the ADC landscape. And also on the data where we saw greater at least suggestions of greater efficacy in the PD-L1 positive subset. So yes, we completely agree with you that as we learn more about trial and where it could help patients that’s really where we’re going to be focusing going forward.

Operator: Our next question comes from Kaveri Pohlman of BTIG.

Kaveri Pohlman: So for the ADC study, I was just wondering if you can provide any insight on any comments from the physicians how they are seeing whether TRODELVY use or the duration of administration is more biased in this trial. The approval trial for TRODELVY showed a median duration of administration of 4.4 months. And I was hoping to kind of like get some insight there because TNBC, the previous trial also showed higher chemo administration. So I just want to get some insight there.

Rajesh Malik: Yes, Kaveri, this is Raj. As we reported, the combining trial with TRODELVY improves the tolerability. Our previous data that we reported was still a relatively short median follow-up of around 5.5 months. The patients were still ongoing on therapy. So clearly, this is something that we’re following and we’ll report more as we report the OS data early next year.

Kaveri Pohlman: All right. That’s fair. And then for bladder cancer, are you thinking about TRODELVY combination since it’s approved? And given that PADCEV has now moved to front line, TRODELVY could get higher market share. Just your thoughts.

Rajesh Malik: Yes. Absolutely, that’s a possibility. The landscape in that first-line setting is going to change a lot next year with readouts of PADCEV and other trials as well. So we’ll have to really evaluate the data at the end of the day and the OS data from in TNBC, but that certainly could be a potential path as well because we’ll be interested in looking at developing ADCs more broadly than just TNBC.

Kaveri Pohlman: Got it. And maybe a last one, again, on the bladder cancer study, the results that you reported today. Can you tell us how the R&D from the control arm compared to the historical results? And then for the OS readout, what do you expect from the control arm? And how much difference between the arms would be meaningful?

Rajesh Malik: Yes. The — as you know, this trial, actually, there isn’t a good comparator because in the JAVELIN 100 regimen, the all of the data is from the avelumab maintenance. And so patients who did not make it into maintenance were obviously not part of that data set. So this is really new data, if you will. I mean some of the trials that we’ll be reading out next year, such as the EV-302 and others, where you have treatment right from the beginning, could also help. But — so this is why we run controlled trials, right, because patients are randomized and there’s really no difference in PFS. So — and I think the same applies for OS really. We’ll have to — we’ll really be generating control our data for this particular combination because that doesn’t really exist.

Right now, and again, it’s a controlled trial. So we’ll be looking to see whether the additional trial improved survival relative to the control arm. And generally, across trials, if you see at least about a 2-month improvement in OS generally, that’s considered clinically meaningful, but we’ll have to look at what the data shows.

Operator: One moment for our next question. Our next question comes from Anupam Rama from JPM.

Anupam Rama: I had a quick clarification question. On the operating expenses being down closer to 30% versus 20% year-over-year. Sorry if I missed this, but what is driving that more specifically?

Rajesh Malik: Thanks, Anupam. Really what’s driving that, if you recall at the beginning of the year, we did a cost restructuring following the CRC readout where we said we’d recognize or realize a lot more of those cost savings on the back half of the year. That in addition to a lot of these Phase II trials winding down as well as the colorectal, we expect any by the end of the year being wound down. That’s what’s driving it.

Operator: Our next question comes from Troy Langford of TD Cowen.

Troy Langford: Just on the TRODELVY combination data, just given that data that you all saw and then with consideration for the patient population enrolled in that study. I guess what OS number in the first quarter of next year would really excite you all? And then just as a follow-up to that, would you still take the COSELA combination with TRODELVY forward if you saw kind of similar OS measures in that readout next year, but significantly improved safety.

Rajesh Malik: Yes, Troy, Raj here. No, those are great questions. I mean, as you pointed out and we — as we also mentioned in our ESMO breast poster, the population is different, a more heavily pretreated patient population with more prior PD-L1 exposure. And if you look at the TRODELVY data, the — both the response rate as well as the efficacy is a little bit lower. So we would really want to be looking more closely at how our data compares to sort of maybe more of the heavily pretreated ASCENT patient population. If you look at the overall ASCENT population, it’s around — a little under a year or so. So again, we would want to see some meaningful improvement over that. It’s not a controlled trial, and we’re thinking about other ways to look at the data in some controlled fashion, but certainly greater than 12 months and the better, the longer the better, I would say.

Your second question about wood tolerability alone be sufficient to take the drug forward. I think this could certainly be probably more important in earlier stage settings where patients may be less able to or willing to tolerate greater toxicity. So I think those are probably some settings where better tolerability and OS that seems in the same ballpark could be areas to explore. Not to say that we wouldn’t also consider exploring in the metastatic setting. But that’s sort of how we’re thinking right now.

Operator: [Operator Instructions]. If will be no further questions. I would now like to turn it back to Jack Bailey for closing remarks.

John Bailey: Thank you, operator. As always, we look forward to keeping you updated on our progress and certainly thank you for joining us today. We look forward to being in touch later this year. Thank you.

Operator: This conference is now over. You may now disconnect. Thank you.