Good morning, and welcome to the VYNE Therapeutics conference call to discuss the Q1 2021 financial results and updates. At this time, all participants are in listen only mode. Following the company's formal remarks, we will open the call for your questions. Please be advised that this call is being recorded at the company's request. I will now turn the call over to Michael Wood at LifeSci Advisors. Please go ahead.
Good morning, everyone, and thank you for joining us. Before we begin formal remarks, let me remind you that some of the information in the press release issued this morning and on this conference call contain forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict, including statements, forecasts, and observations regarding future financial operating performance, impacts of the COVID-19 pandemic on VYNE, and observations regarding ongoing operating expenses and net revenue.
These statements include observations associated with the commercialization of AMZEEQ and ZILXI in the United States. They will also include plans and expectations regarding the success, timing, and cost of clinical trials. Words that expect to reflect optimism, satisfaction with current progress, prospects or projections, as well as words such as believe, intend, expect, plan, anticipate, and similar variations identify forward-looking statements, but their absence does not mean that a statement is not forward-looking.
Such forward-looking statements are not a guarantee of performance, and the company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in VYNE Therapeutics' filings with the SEC. These forward-looking statements speak only as of the date of today's press release and conference call, and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this call.
In addition, the financial portion of the call will include certain non-GAAP financial information. For additional disclosures related to these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures, please see today's press release, which is posted on the investor relations section of the company's website.
Participating in this morning's call are David Domzalski, VYNE's President and Chief Executive Officer, Andrew Saik, VYNE's Chief Financial Officer, Matt Wiley, VYNE's Chief Commercial Officer. In addition, Dr. Iain Stuart, the company's Chief Scientific Officer, is also on the line and will be available during the Q&A session. At this time, I'd like to turn the call over to David Domzalski. Dave, please go ahead.
Thank you, Michael, and good morning to everyone. I'd like to talk about our recent progress and plans for 2021. As we continue to build the business, we are focused on three key areas. The first is commercial execution, where our top priority is to expand initial trial of AMZEEQ and ZILXI and grow continued utilization of our products. Matt Wiley, our Chief Commercial Officer, will provide an update on our two lead assets.
The second is maximizing operational leverage. We are in a position to take advantage of the significant overlap that exists between acne and rosacea prescribers as we deploy our sales organization efficiently. There will be opportunities to leverage this even further as we continue to add additional products over time. In parallel, we will prioritize our resources prudently and keep a tight control of expenses. Andrew Saik, our CFO, will provide a financial update.
The third is building a diversified portfolio and pipeline. During Q1, we unveiled our newest therapeutic candidate, FMX114, which is a fixed combination of tofacitinib, a pan-JAK inhibitor, and fingolimod, a sphingosine-1-phosphate receptor modulator, in a topical gel that is being developed for the treatment of mild to moderate atopic dermatitis.
Preparation activities for our upcoming Phase IIa study are ongoing. We plan to initiate this study in the Q3 and anticipate top-line results before the end of this year. FCD105, which is our minocycline and adapalene combination product candidate for the treatment of moderate to severe acne, is now Phase III-ready. We continue to be prudent as to when we would commence a Phase III program for FCD105.
This will largely hinge on our results of operations and market conditions, which depend on numerous factors, including the impact of the COVID-19 pandemic, recent payer formulary decisions, and our ability to successfully enroll patients in Phase III studies.
With our focused efforts on the introduction of AMZEEQ for the treatment of acne, as well as our recent launch of ZILXI for rosacea, our prioritization of resources should remain on these two assets within our acne and rosacea franchise. We believe the environment is optimal to progress the Phase III studies for our next product in acne, FCD105.
As we broaden our pipeline beyond acne and rosacea, advancing FMX114 into the clinic next quarter is both an important strategic step for our company and also a judicious deployment of our R&D resources. Let me review the highlights for the quarter.
Beginning with FMX114, we created this investigational combination product to address the multifactorial nature of atopic dermatitis and to target both the source and cause of inflammation. tofacitinib reduces inflammation by inhibiting cytokine release from inflammatory cells, and fingolimod inhibits the migration of inflammatory cells, as well as potentially supporting skin barrier recovery, an important factor for patients afflicted with this inflammatory skin disorder.
On our year-end 2020 call in March, Dr. Iain Stuart presented compelling preclinical Proof-of-Concept data for FMX114. We now plan to initiate a Phase IIa Proof-of-Concept study in this Q3 coming up and anticipate top-line results prior to the end of this year. atopic dermatitis represents a large market opportunity with an estimated 30 million patients diagnosed in the U.S. Of these, 22 million are classified as mild to moderate and are on treatment.
Topical steroids account for eight out of 10 of the most prescribed products, but are associated with negative effects on the endocrine system and skin structure when used for a prolonged period of time. There clearly is a need for an alternative that can address the underlying disease pathogenesis, and most importantly, is safe enough for patients to apply chronically.
We look forward to providing further updates on FMX114 this year as the product advances. Regarding our commercial business, we generated revenue of $4.1 million in the Q1 of 2021 compared to $1.8 million in the Q1 of 2020. We now have further clarity on market access and now anticipate AMZEEQ and ZILXI market access to be in the range of 70%-75% of commercial lives for the balance of this year, as Matt Wiley will discuss further. We also ended the quarter with $120.4 million in cash. I will now turn the call over to Matt Wiley, who will talk about our progress on the commercial front. Matt?
Thanks, Dave. Our sales team continues to perform well despite the pandemic-related obstacles that exist in the marketplace. The team began the year with roughly 35%-40% access to target physicians live, which has advanced to 60% today and continues to improve. AMZEEQ prescription volume in the Q1 came in over 34,000 new prescriptions and over 44,000 total prescriptions.
While this represents modest growth over Q4, we're very encouraged when comparing this to key market competitors, which declined more than 10% quarter-over-quarter. We continue to expand our reach and trial of AMZEEQ, with the number of prescribers of AMZEEQ reaching nearly 5,200 in the Q1, representing a 6.4% increase over Q4. To date, nearly 8,000 healthcare prescribers have prescribed AMZEEQ.
Additionaly we have penetrated 63% of our target universe, resulting in a prescription being dispensed, and their productivity has risen to 21 prescriptions per physician launch to date. We are pleased with the progress we have made over the course of the year and expect to see continued increase in productivity due to the high volume of patients and prescriptions in these important offices.
We continue to be encouraged by our non-personal promotions, specifically in our ability to educate healthcare providers through peer-to-peer speaker engagements. This platform is allowing us to quickly and efficiently communicate the recent label change for AMZEEQ, which states the low potential for antibiotic resistance. Our online consumer activation efforts have also been fully deployed for AMZEEQ since early January.
Turning to ZILXI, we've seen the impact of COVID-19 pandemic on the launch. Recall, we launched ZILXI in October 2020 during the second widespread state shutdowns. The state level and physician office COVID-related protocols have significantly impaired face-to-face interactions between our sales team and doctors over the last few months for both of our brands.
The impact of these constraints is more pronounced in a space like rosacea, where there hasn't been a meaningful new entry in over five years, and changing these habits requires consistent field efforts and additional education.
Despite these headwinds, we've generated over 11,000 total prescriptions for ZILXI since its introduction last October, with 7,200 prescriptions in Q1 versus 4,200 in Q4 2020. Prescriptions are gaining momentum month-over-month. Nearly 2,300 healthcare providers have prescribed ZILXI since launch, with approximately 50 to 70 new writers per week. Furthermore, we have penetrated our target universe by 33%. Peer-to-peer education is a key component of our commercial strategy.
As with AMZEEQ, healthcare providers have demonstrated keen interest in the ZILXI peer-to-peer efforts, and we continue to execute these programs both live and virtually in 2021. Since the beginning of the year, we have educated nearly 1,100 healthcare providers in our ZILXI and AMZEEQ speaker events and plan to accelerate the pace as we go back to face-to-face dialogue.
With respect to market access for both products, as a result of CVS Caremark's decision not to cover these products and other new branded comparator drugs on its national formulary for 2021, we now anticipate having 70%-75% of commercial lives covered in the near term and are continuing to focus on pull-through efforts with underlying custom plans.
Looking ahead, the commercial organization is focused on driving patient demand, accelerating volume as the market conditions improve, and continuing to focus on targeted physician penetration and adoption. We believe all of these efforts will have both near-term and long-term positive impact on our business as we emerge from the pandemic conditions. Now I'll turn the call over to Andrew Saik.
Thanks, Matt. Beginning with our balance sheet, our cash position as of 31 March was $120.4 million, which we believe provides cash runway for at least the next 12 months. We continue to remain focused on cost control and resource prioritization. To that end, cash used in operating activities during Q1 was $12.6 million. Turning to the income statement, revenues were $4.1 million for Q1, consisting of $3.9 million of product sales for AMZEEQ and ZILXI, and $0.2 million of royalty revenue.
Our Q1 2021 GAAP net loss was $20.6 million or $0.42 per share. This compares to $40.2 million or $3.79 per share for the comparable period in 2020. Included in the Q1 2021 GAAP net loss were $2.4 million of non-cash stock-based compensation expense. When we exclude this non-cash expense, our Q1 2021 adjusted net loss was $18.01 million or $0.37 per share.
Adjusted operating expenses in Q1 were $20.5 million, including adjusted SG&A expenses of $14.6 million and adjusted R&D expenses of $5.9 million. As we continue to focus on cost control, we believe that operating costs at the level of $20 million-$25 million per quarter, which is what we saw in Q4 2020 and Q1 2021, are sustainable into the future. These include expenses required to get to the FMX114 Phase IIa readout anticipated later this year.
They do not, however, include incremental costs that would be required for a Phase III trials for FCD105. Finally, our share count as of 31 March was approximately $51.4 million shares. For further details on our financials, please refer to our Form 10-Q for the quarter ended 31 March 2021, filed with the SEC. Let me turn the call back over to David Domzalski for closing comments.
Thanks, Andrew Saik. We continue to remain laser-focused on our key objectives of driving sales for our two launch brands, AMZEEQ and ZILXI, and executing against our commercial strategy, prudently managing our resources and maximizing our operational leverage, and building a more diverse pipeline to address unmet needs for patients and providers. We are encouraged by the progress made across these fronts as we build our business and create long-term value for our shareholders. I will now turn the call over to the operator and open the call for questions. Thanks.
Thank you. If you'd like to register a question, kindly press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Again, if you would like to register a question, please press the one followed by the four on your telephone keypad. Just a moment for the first question. Our first question comes from the line of David Amsellem with Piper Sandler. Please proceed with your question.
Hey, can you guys hear me?
Yeah, we can, David. Yep.
Okay. Sorry, the operator was cutting out. Okay. Just real quick, just about how you're thinking about gross to net over time, number one, and particularly in the context of your commentary on the payer landscape. I'm more interested in how you're thinking about steady state gross to net for both AMZEEQ and ZILXI. Then I have a follow-up. Thanks.
Yeah, sure, David t his is Andrew i 'll take it. Look, not a ton has changed since last quarter. We still believe that commercially covered lives are going to be in that net $200-$250 per script range. What's changed is with Caremark not giving us their national formulary or access to it, we're going to keep some synthetic access available to patients.
As a result, the overall net is going to be lower than that, right? Obviously, because we're going to have some prescriptions coming in with a cash pay option. We don't know exactly what the percentage is going to be, we're not going to sort of reissue guidance on that but w hat we can say is this is hopefully a moderate change, right? We had been expecting between 80%-85% coverage. We're kind of in that 70%-75% of commercial lives.
We just don't know what the utilization is going to be going forward because we are going to change the synthetic access program. Right now it's $75 t hat's going to change. Without knowing exactly what the utilization is going to be, we're going to wait and give guidance in the future when we have more certainty. I don't know, David, if you want to add anything to that.
No, I think you captured it perfectly, Andrew i think the key thing too, David, is this is a relatively recent situation with CVS Caremark's national formulary a s we said before, our patients have access to our products under their custom plans.
We're just coming out of the pandemic M att talked about it. If you think through the end of last year and the early parts of the beginning of this year, access in the field for representatives to get to physicians was 30%-40%, i t's now about 60%. We're not at 100% yet. Despite that, we continue to see improvement in our business and growth in our prescriptions.
We want to be smart about managing, obviously, the gross to net and the net price per prescription, but also be mindful of access for patients to our products. As Andrew outlined, we'll keep some form of this co-pay card in place, at least for the time being, until we get a chance to see exactly the impact from Caremark's national formulary decision.
Okay, that's helpful i s there a point, I guess with any of these plans down the road, where you just look at your rebates and the gross to net and you just say it's just not worth it in terms of being in a contracted position? Because you're certainly not the only one with these high gross to nets, and we're seeing it in a lot of areas, in a lot of products, I should say. Yeah, how do you think about that philosophically?
Yeah. Look, we believe obviously, it's important to have partnership relationships with payers. I think you said it well, it's a balance between access and the right net price for prescription gross to net decisions to be made a gain, this is all early.
Our plan when we were preparing to launch these products has always been to partner with the payers, make sure the patients have access, the physicians have access n ow, all that being said, we're constantly looking at other ways from a distribution perspective to drive sales. We don't just operate in a vacuum. We think through all of these optionalities, and they're clearly scenarios that we're considering.
For the time being, again, we want to stay focused on doing everything we can to get access to physicians, continue to drive awareness, utilization for our products a gain, we're only a couple of months into the launch of ZILXI. We've yet to have complete open access for the launch of AMZEEQ, sans the first three months of the launch last year. We want to continue to do that while we're talking and negotiating with the payers.
Okay. Thanks, Dave.
Got it.
Our next question comes from the line of Louise Chen with Cantor Fitzgerald. Please proceed with your question.
Hi, good morning, everyone t his is Carvey and then Louise Chen. Just a couple of questions from us. Given roughly one third of U.S. population has already been vaccinated, how should we think about any seasonality in sales for the rest of 2021? There's been a lot of innovations in the acne space, including technologies like bacteriophage, lasers, other topical treatments in the pipeline. How should we think about the outlook of the acne space? and how will your acne franchise position itself in the future environment? Thank you so much.
Carvey, could you repeat the first one again? Sorry.
Given roughly 1/3 of U.S. population has been vaccinated, how should we think about any seasonalities in sales for the rest of 2021?
Yeah. No, great. I got it now. Where we see an opportunity clearly is as, assuming that offices continue to open, we continue to see improvements in access, which we're anticipating that to be the case. We anticipate a bolus of patients coming back, call it end of summer, beginning of the fall.
We did not see that last year because of the shutdown. We're encouraged by what we're seeing, more and more people getting vaccinated. Warmer months are happening here e ven if you take a look at our prescription trends last year, despite much more onerous shutdowns, when you look at the months of June, July, August, and into September, we saw steady growth, 20% compounded growth month-over-month.
We anticipate seeing this type of opening as we again, move out of the Q1 and firmly into the Q2 and Q3 w e anticipate seeing that similar type of openness. Hopefully, we will see the type of influx of patients into the dermatology offices in the months of August and September as kids are getting ready to go back to school.
I think for the rosacea marketplace, you see some of the seasonality right around now i t starts right around now through the next quarter. We believe that the work we're doing, the efforts of our sales force, it puts us in a good position to take advantage of that. You want to take the second question?
Sure. This is Matt. Regarding the acne space evolution, there are two new players that will presumably come into the market this year, Winlevi from Cassiopea and TWYNEO from Sol-Gel. They're interesting products, one of the things that we count on here, first of all, we have a once-a-day product s econd of all-
Antibiotics have been a mainstay in the acne space for a long time, tetracyclines clearly are effective. AMZEEQ solves a lot of the safety issues with those legacy products. We feel pretty good about where we're positioned in the market. We have a very strong position in the market and we believe that even as these new entrants come into the acne space, we're well positioned to continue to grow in share.
Got it. Great. Thank you so much, everyone.
Our next question comes from the line of Oren Livnat with H.C. Wainwright. Please proceed with your question.
Thanks. I have a couple w e could just return to the patient access programs i t sounds like you're still modeling this out and trying to figure out what levers you can push and pull. Can you just talk a little bit about what that process is like? How long do you need to trial different options before we might have, I guess, an optimal solution going forward? and to what extent, already are you pushing through prior auths where you guys aren't covered, either from the doctor or with help of the specialty pharmacy channel, such that you're incentivizing payers to return to the table?
Sure. This is Matt again. Let me talk about the synthetic access program first. This is one that we have to balance the out-of-pocket cost and abandonment rates. That's something that we're analyzing very carefully. As we make the changes, like an equalizer, we will balance these things up very carefully to make sure that we don't offset volume with the out-of-pocket evolution. Oren Livnat, can you just repeat the second part of the question?
Yeah.
I apologize.
Second part of my first question is, prior auth, actually.
Yeah.
Obviously, that's an important variable in bringing managed care to the table for you and everybody else. I'm just wondering to what extent you've got doctors or the specialty pharmacy helping to successfully push through prior auths already.
Yeah w e've seen pretty good prior authorization adjudication. Roughly half of our covered lives have some form of utilization management s ome of that is electronically adjudicated step therapy. There is going to be that electronic look back through EMR.
The rest is going to be through prior authorization t he good news is that by partnering with our specialty pharmacy network, where roughly 50% of our trade goes through, they are really skilled at helping physicians navigate prior authorizations so w e have really good adjudication where the criteria is met. Now, where the criteria is not met, obviously, the prior authorizations would not go through w e've seen really good success with our prior authorizations thus far.
Yeah. Oren, I would say what shouldn't be lost in any of these discussions is that when we take a look at both the acne and rosacea category, again, sans oral isotretinoin, there's really only two franchises that have been growing business, which is ours and in the acne space, one other product, AKLIEF, and then in the rosacea space, you have modest movement from ROVI.
We're out there getting access to customers and continuing to improve that. The initiatives that we have out there, including the peer-to-peer selling efforts that Matt had talked about, are paying off for us. We're certainly anticipating improved access, and it continue to drive prescriptions for both these products as we move to the following quarters.
If I may, just how material is this label change for antibiotic resistance? It came late in the game. Is that something that you expect to be able to leverage both? or either or in the field ? or even more importantly, for managed care that might have been resistant to cover you now should be less resistant? No pun intended.
Yeah, we think it's very important. Part of the reason we developed a product like AMZEEQ is to address the concerns from healthcare providers and in the broader clinical environments around better antibiotic stewardship. We've got data to support that there is a very low propensity for the growth of resistant strains with a product like ours for topical minocycline.
That was just recent news we got just a few months ago. Our field force obviously has this information, and they've been out there working with it over the course of the last several weeks. To your point, we believe it is, from a clinical perspective, we believe it's compelling as we speak with payers. That information also that came to us was after the decision from CVS Caremark. All this, we anticipate to use and leverage as we continue to talk with payers, not just on the national level with the PBMs, but also with all these custom plans as we continue to pull through business there.
All right. Thanks. Appreciate it.
Yeah. Of course.
As a reminder, if you wish to ask a question, kindly press the one followed by the four on your telephone. Our next question comes from the line from Patrick Dolezal with LifeSci Capital. Please proceed with your question.
Hi, thanks for taking the questions. Could you just give an update on the phasing out of the co-pay card assistance for AMZEEQ and whether the CVS decision had an impact there and the timing of impact on revenue per script? The second part is really just the same question on ZILXI o bviously, it was a bit further behind AMZEEQ in terms of bringing some of these payers on board and sorting out the details of the underlying plans. Any guidance on the timing of impact of phasing out those co-pay assistance programs for both those programs would be super helpful. Thanks.
Sure. This is Matt. Hi, Patrick. Regarding the co-pay card for both AMZEEQ and ZILXI, we intend for those commercially covered patients, we're still going to have the buy-down to $35 out of pocket. Especially for those who are in a tier 3 or better co-pay scenario, we'll continue that as part of the program.
On the other side, where patients don't have coverage, where there's an NDC block, we are making some alterations to that program for AMZEEQ. For ZILXI, it's still $75 out of pocket as we're still in launch mode with ZILXI, and certainly, we'll make adjustments or we reserve the right to make adjustments to that program in the future but t hat will stay as is. We're going to continue these programs in light of the CVS Caremark decision, and we'll make adjustments as needed over time to balance out profitability and patient access.
Great, thanks. I guess one more, if I may. Could you just provide some qualitative feedback on the reception that providers are having with ZILXI? Just curious how doctors are implementing this product into their existing treatment paradigm for rosacea.
Yeah. So far, the feedback that we've gotten from physicians has been very positive. Physicians have either introduced the product in concert with other therapeutic regimens they're comfortable with. Others are implementing as monotherapy, and we're seeing good feedback early on from those physicians. It's still early. We have 11,000 prescriptions so far, but everything that we're hearing back is good and o ne of the positive things to keep in mind here is that the refill rate on ZILXI is good and growing, even though it's early. That is a testament to the fact that these patients are getting relief.
Operator, other questions?
As a reminder, if you wish to ask a question, kindly press the one followed by the four on your telephone keypad. Our next question is a follow-up question from the line of Oren Livnat with H.C. Wainwright. Please proceed with your question.
Sorry to make you stay here longer.
No problem, Oren. All good.
You mentioned that this is the season now typically for rosacea, so it's an important time for that product. I'm just wondering, what are you seeing with regards to, or hearing from physicians about patient visits as it relates to COVID, pre-COVID versus now, in terms of how live that market really is compared to typical levels? Just lastly, any chance you're going to break out AMZEEQ and ZILXI revenue going forward? Thanks.
I'll start with the market dynamics, Oren o ne of the ways to really examine the seasonality, there are a couple of ways that we've looked at it historically w e've looked at how search terms are viewed in March, April, May, versus the rest of the year in rosacea, and we see big spikes, especially around the April/May timeframe.
As we're looking at the NRx volume as of recent weeks and certainly since about the beginning of March, we've seen this step up from where it was around 10,000, 11,000 prescriptions in the branded space up to around 14,000 in most recent data weeks. We are seeing the throughput of patients increase.
This is really the time as the seasons change, where rosacea patients feel a lot of discomfort and seek treatment and w e're taking advantage of that through our digital marketing efforts and specifically as it relates to search. As we're getting out in the field or as we're out in the field seeing our physicians live, making sure that they have enough samples to accommodate these patients as they come in.
Oren, I'll answer the second part of your question. We do intend to break out the product revenues, but we'd like to get through the launch phase of ZILXI first, so it'll likely be later this year or maybe next fiscal year. We're not going to do that in the next quarter or Q2 i t's just we're too early in the launch phase.
Yeah O ren, just to follow up too, one of the things that we have is a large number of peer-to-peer educational events around ZILXI scheduled for the next couple of months to coincide with what we anticipate to be some of the increased patient volume seeking treatment for rosacea. We've got our efforts deployed, not just direct field efforts from representatives to offices as they continue to open, but we're trying to supplement that through a large number of peer-to-peer events, which again, will be ongoing for the next several months.
All right. Appreciate it.
Got it.
We're showing no further questions on the audio lines at this time. I'll turn the conference back over to you.
Thank you, operator, and thanks to everyone that joined on the call today and for the thoughtful questions. We look forward to continuing to provide you updates as we progress our business. I wish everybody a great rest of the week, and look forward to speaking with you soon. Take care, and thank you.
This does conclude today's conference call. We thank you for your participation and ask that you kindly disconnect your lines. Have a good day, everyone.