scPharmaceuticals Inc. (NASDAQ:SCPH) Q4 2022 Earnings Call Transcript

scPharmaceuticals Inc. (NASDAQ:SCPH) Q4 2022 Earnings Call Transcript March 22, 2023

PJ Kelleher: Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements on this conference call, other than historical facts, are forward-looking statements within the meaning of the federal securities laws including, but not limited to statements regarding scPharmaceuticals’ expected future financial results; and management’s expectations and plans for the business and FUROSCIX. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project and other similar expressions are typically used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain resins and uncertainties and other important factors that may affect business, financial condition and other operating results.

These include, but are not limited to, the risk factors and other qualifications contained in scPharmaceuticals’ annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by the company with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and scPharmaceuticals expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law. It is now my pleasure to turn the call over to Mr. John Tucker, Chief Executive Officer of scPharmaceuticals.

John?

John Tucker: Thank you, PJ, and thank you to everyone listening to this afternoon’s call and webcast. This afternoon, I am pleased to provide an operational update on the initial stages of the FUROSCIX commercial launch before I turn the call over to Rachael Nokes, our newly appointed Chief Financial Officer for a review of our financials. While it has only been a few weeks since we announced the launch and commercial availability of FUROSCIX on February 20, initial interest among patients, providers and payers is very high, reflecting the important role that FUROSCIX can play in the heart failure treatment paradigm, either pre-hospital admission or post discharge. As we have said before, we believe FUROSCIX is a true game changer as it allows patients for the first time to access IV-equivalent furosemide based on similar systemic exposure in diuresis in the comfort of their own homes.

Our own proprietary research suggests that among heart failure specialists, cardiologists and nurse practitioners’ intent to prescribe FUROSCIX ranges between 93% and 96%, and intent to prescribe within six months ranges between 86% and 89%. This research underscores the openness to a different approach to the treatment of heart failure. We believe we are well financed and have assembled a highly experienced commercial team that hit the ground running, making contact with top-tier hospitals, clinics and physicians in their respective territories. I’m confident that we will see a strong uptake and quickly get FUROSCIX to the many heart failure patients who stand to benefit from it. Taking a step back, or for the benefit of those may be new to the story, in October of 2022 we received FDA approval for FUROSCIX, a proprietary formulation of furosemide delivered by an on-body infuser, the outpatient treatment ingestion to the fluid overload in adult patients with the New York Heart Association Class II and Class III chronic heart failure.

FUROSCIX is not indicated for use in emergency situations or in patients with acute pulmonary edema. The FUROSCIX Infusor will deliver only an 80-milligram dose. We believe this represents a significant advancement in the management of heart failure with the potential for improved outcomes for patients and material cost savings to health care payers, most notably the Centers for Medicare and Medicaid Services who represent Medicare, the single largest payer for heart failure-related medical services. Furosemide is the most widely used oral and parenteral diuretics available for patients with congestive heart failure. But the bioavailability of oral furosemide decreases and becomes highly variable during episodes of worsening symptoms. As symptoms worsen, patients are often hospitalized to be treated with IV Furosemide.

By contrast, FUROSCIX allows patients to access IV-equivalent furosemide based on similar systemic exposure in diuresis in the comfort of their own homes. FUROSCIX is administered subcutaneously with the West Pharmaceutical Services smart dose on-body drug delivery system technology, delivering an 80-milligram dose over a period of five hours. Heart failure is a significant financial pain point for both health care payers and hospitals, with the estimated that up to 90% of patients presenting to the emergency department with symptoms and worsening heart failure are admitted to the hospital, and 50% of these admissions may be potentially avoided. The average cost of a heart failure-related hospital admission for Medicare patient is nearly $19,000.

It is no surprise that the centers for Medicare and Medicaid services has put significant resources in place to look for solutions to this problem. Treatment of heart failure is estimated to be 33% of annual Medicare Part A and Part B spending, a staggering $123 billion. Further, hospitals face significant reimbursement pressure under the current heart failure payment structure. The average length of stay for heart failure patients is 5.2 days, while CMS reimburses just 3.9 days under the current DRG. Hospitals also face exposure to financial penalties resulting from readmissions under the hospital readmission reduction program, which includes heart failures as one of its focused conditions. Our clinical development program is focused on the safety and efficacy of FUROSCIX as well as the pharmacoeconomic benefits to the system.

A prospective clinical trial, FREEDOM-HF with our positive results in July of 2021. The study design focused on select patients who presented to the emergency room with a worsening heart failure event and were treated with FUROSCIX at home as opposed to being admitted to the hospital. The results of the study with patients treated with FUROSCIX had heart failure related costs that were lower by an average of $16,995 versus historically matched comparators. And this result achieved at a very high rate of statistical significance with a p value less than 0001. All this analysis excludes the cost of FUROSCIX since pricing has not been established at the time of the study readout, the conclusion remains unchanged. More recently, we announced positive results from a Phase 2 pilot study at HOME-HF that compared FUROSCIX with a treatment-as-usual approach in chronic heart failure patients presenting to a heart failure clinic with worsening congestion requiring augmented diuresis.

Among the key findings, subjects randomized to FUROSCIX had a 37% reduction in the risk of a heart failure hospitalization of day 30 relative to patients randomized to treatment as usual. We are pleased with the results of these two studies, which added significantly to the growing body of clinical and pharmacoeconomic evidence favoring FUROSCIX versus the current standard treatment protocol. The market opportunity for FUROSCIX is significant. In the U.S. alone, there are estimated to be 6.7 million adults suffering from heart failure, resulting in 4 million heart failure events annually. Of those, we believe 2.1 million episodes can be effectively addressed by FUROSCIX. If we assume $3,300 per episode, which is four doses of FUROSCIX, we have the potential to access a market opportunity that is nearly $7 billion.

And again, this is in the U.S. alone, there are a total of 15.8 million adults suffering from heart failure if we include the other G7 countries. Turning now to the launch. We put a strong commercial team in place that is led by Steve Parsons, our Senior Vice President of Commercial. We have 40 field territory sales representatives fully trained and conducting face-to-face in services at hospitals, doctor’s offices and heart failure clinics, targeting the approximately 150 to 200 HCPs in 10 hospitals per territory, in surfaces provide HCPs with training and prescribing instructions for FUROSCIX designed to ensure office readiness. Demo kits trained patients have provided the completion of each in service. The focus on the in surface is crucial to ensuring effective use in training on FUROSCIX.

Our sales force has conducted approximately 307 in-services to date, with many of these in services lasting one to two as physicians desire to have training done throughout the entire office or clinic. This reflects the interest in FUROSCIX by health care providers. The sales team is a specialized force that can target top hospitals and clinics efficiently and effectively. They are focused on building strong relationships with the key constituencies at these clinics through an educational and consultive approach. Depending on the launch trajectory, we stand ready to add more reps in the field as needed to maximize clinic and patient access to FUROSCIX. In terms of distribution, we are pleased with the seamless functioning of our distribution process thus far through our strategic partnership with Cardinal Health as our third-party logistics provider.

Cardinal is working well with our three specialty pharmacy partners, including our main specialty pharmacy, BioMatrix. Cardinal has shipped initial inventory to the specialty pharmacies, which will be recognized as revenue in the first quarter. As a reminder, we recognize revenue when FUROSCIX moves from Cardinal to the specialty pharmacies. So Q1 revenue will reflect initial stocking at the specialty pharmacies. We have already seen initial patient prescriptions being filled and shipped to patients next day. FUROSCIX Direct, our reimbursement support hub, provides benefits, investigations for physicians to determine insurance coverage and patient out-of-pocket costs. Our specialty pharmacy partners provide device training with patients and are available 24 hours to answer questions about the use of FUROSCIX.

From a marketing perspective, we have engaged in a broad multichannel market awareness campaign to drive brand awareness, adoption and commitment. This program encompasses many different activities, but some of the key ongoing activities include KOL engagement and development, conference inferences, print and electronic collateral and the development of both provider and patient websites among other critical tasks. In terms of reimbursement, we are pleased that all Medicare Part D and Medicaid beneficiaries will have reimbursed access to FUROSCIX since day 1 of the launch. We estimate that approximately 60% of all heart failure patients will have fixed tier co-pays of $100 or less. We continue to meet with many large national and regional Medicare Part D and commercial health plans and those discussions have been productive.

Our goal remains to achieve 75% of patients with access to FUROSCIX under fixed tier co-pays by the end of this year. Turning to our balance sheet. In November, we were able to add $50 million of gross proceeds through a public offering of common stock. This followed a $100 million secured debt facility that we announced with Oaktree Capital Management in October, $50 million of which was made available upon the signing of the agreement. The remaining $50 million will be made available in two additional $25 million tranches based on the achievement of prespecified commercial milestone. With these financings, we believe we are well funded to execute a very successful launch. Finally, in December, we announced the promotion of Rachael Nokes the position of Chief Financial Officer.

Rachael brings tremendous experience and leadership to the CFO role, and her promotion maintains organizational consistency and an important time for the company. We are excited to celebrate this well-deserved recognition of our expertise and contributions. I will now turn it over for her comments. Rachael?

Rachael Nokes: Thank you, John. As of December 31, 2022, we held $118.4 million in cash, cash equivalents, restricted cash and investments. Our year-end cash includes net proceeds from the successful $50 million equity offering that we completed in November, plus the first $50 million tranche under our debt financing agreement with Oaktree. We did use some of the proceeds from the Oaktree transaction to prepay all amounts due under the credit facility that was outstanding at the time. Now I will cover a few income statement items. We reported a net loss of $9.2 million for the fourth quarter of 2022 compared to a net loss of $7.3 million for the comparable period in 2021. For the full year 2022, we reported a net loss of $36.8 million compared to a net loss of $28 million for the full year 2021.

The reported full year net loss was favorable to our guidance range of a full year net loss of $38 million to $41 million. Research and development expenses were $2.3 million for the fourth quarter of 2022 compared to $4.5 million for the comparable period in 2021. The decrease was primarily due to a decrease in clinical study activities, device development costs and regulatory consulting. For the full year 2022, we reported research and development expenses of $15.5 million compared to $16 million for the full year 2021. General and administrative expenses were $7.2 million for the fourth quarter of 2022 compared to $2.2 million for the comparable period in 2021. The increase was primarily due to an increase in employee-related costs, commercial preparations and legal costs.

For the full year 2022, we reported general and administrative expenses of $20.6 million compared to $9.8 million for the full year 2021. The increase was primarily due to an increase in employee-related costs and commercial preparation costs. Based on our current operating plan, we expect our operating costs to increase in 2023 as we support the launch of FUROSCIX, including investments in marketing and a field sales force. As of December 31, 2022, and we had 34,257,916 total shares outstanding. That concludes the financial update. John?

John Tucker: Thanks, Rachael. This concludes our prepared remarks. At this point, we will open the call for questions.

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Q&A Session

Operator: Thank you. Our first question is from Glen Santangelo with Jefferies. Please proceed with your question.

Glen Santangelo: Hi, thanks for taking my question. Hi John, I just want to follow up on some of the comments that you made in your prepared remarks. I think you were sort of talking about your interactions you’re having with the various Part D plans. And I — and if I heard you correctly, I thought you said that you hope by the end of this year, you hope to have maybe 75% of the patients under contract with a co-pay of less than $100 per. And I’m not sure if I heard all that correctly. I was wondering if you could just sort of walk us through again in a little bit more detail where you stand right now with all your Part D negotiations, just so I can sort of put it all in perspective? Thanks.

John Tucker: Glen, thanks for the question. This is John. I can ask Steve to fill in a little bit. Yes, so we’ve kind of stated a number of times that our goal for the end of the year — and it’s not just for Medicare Part D, it’s for all of our patients. And so again, we have a MIPS of Medicare Part D, which is the predominant payer, commercial. And then we also have Medicaid. So our goal is greater than 75% of all of the patients to have fixed tier copays under $100 by the end of the year. We do know now we’ve been very successful. We think there’s one very small plant that might have put us in the specialty tier. But our team has been really successful in keeping FUROSCIX out of the specialty tier in both commercial and Medicare Part D plans.

As you know, specialty tier incorporates coinsurance, which is what we want to stay away from. So we’ve been successful. we’ve been keeping it out, especially tier. We’ve also gone through the P&C at all, but one of the major plans and have had successful P&T meetings at all — and we’re still awaiting one plant to have that P&T. We’re still in active negotiations around rebates. The good thing is with the advantage — with advantaged Medicare Advantage, the patients will have fixed tier co-pays of under $100. So we’re still negotiating on moving those co-pays down. Our goal is to significantly a lower co-pay than $100. And we’ll rebate to get there, Glen. We’re not going to — we know the most important thing is patient affordability. So we’ll be rebating to — with the plans, and we’re negotiating with them now, to lower the co-pay and to add to that 60% that has co-pay that’s under 100 and try to actually get that up even higher than 75%.

That includes the commercial plans as well. And we can’t say a name, but we’ve had a recent big win there. We’re a preferred formulary status, which have been co-pays well under that $100 on one of the two or three largest plans on the commercial side. So I don’t know, Steve, if you wanted to add anything to that, that was a long answer.

SteveParsons: No, I think it’s accurate. We use $100 as the high watermark for the patients we’re talking about. 60% of the patients should be at 100 or less, many of them much less. Remember, of course, that in Medicare Part D, there’s a group of low-income subsidy patients. Those are dual eligibles. They’re lower-income Medicare patients, and they’ll have a co-pay of about $10 whether they get three doses, four doses, five doses, six doses. It’s the same co-pay. So we use $100 to be as the high water on about 60% of the patients. There’s still some others that we are pursuing in improved co-pay situation, but it’s a really good place to start.

John Tucker: And we’ve seen scripts come in for commercial, Medicaid and for and for Medicare Part D, and we fulfilled all of those. We filled those scripts for all three of those major, major payers in the market.