Earnings Call: Q3 2020

Nov 5, 2020

day, and welcome to the Vyme Therapeutics Third Quarter 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Michael Wood, LifeSci Advisors. Please go ahead, sir. Thank you. Good morning, everyone, and thank you for joining us this morning. Before we begin the formal remarks, let me remind you that some of the information in the press release that was issued by the company this morning and on this conference call contain forward looking statements that involve risks, uncertainties and assumptions that are difficult to predict. Words that express and 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 the company's 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 to the financial portion of the call will include certain non GAAP financial information. The company has provided a reconciliation for such numbers in the earnings release. Participating in this morning's call are Dave Lemoszalski, Chief Executive Officer of Ryan Therapeutics Andrew Saig, Chief Financial Officer and Matt Wiley, Chief Commercial Officer. So at this time, I'd like to turn the call over to Dave Domzalski. Dave, please go ahead. Thank you, Michael, and good morning to everyone. This is our first quarterly call since we announced our rebranding to Vine Therapeutics in September with the corresponding update of our ticker symbol to Vine. Having achieved FDA approval for our 2 commercial products, ANZYK and ZILSI, we thought that this was a good opportunity to take a look at our corporate branding and make sure this was aligned with our vision and a positive image we wanted to project to our customers and various stakeholders. The symbolic meaning behind our new name reflects our core values: strength, growth, endurance and resilience, and is a testament also to the value of our proprietary technology. We are excited to have launched ZILTI on October 1, which is our 1.5% minocycline topical foam for the treatment of inflammatory lesions of rosacea in adults. We received FDA approval for ZILSI in May. And this is, in fact, the 1st minocycline product in any form to be approved for use in rosacea. Our immediate priorities for ZILTI are to leverage physician experience with ANZYK as well as our MST technology in order to drive rapid trial and experience with ZILTI and gain broad payer acceptance and reimbursement. We already make progress right out of the gate on the payer front with the signing of a contract with Express Scripts just after launch. Matt Wiley will expand on this. Organization market remains an area of significant unmet medical need and we believe that ZILSI should receive broad market acceptance. Within just a few weeks of launch, we are already seeing excitement from care providers relating to the availability of ZILTI as a new treatment option for patients. Turning now to Amzek. The overall branded acne market continues to recover and prescription counts for Amzik continues to grow. I'm pleased to report that both weekly and monthly prescriptions have now eclipsed pre COVID levels for the first time since the shutdown in March and then we are gaining market share. We continue to see both interest and enthusiasm among healthcare providers as trial and utilization of Amzik continues to increase. Also on October 1, we hosted a physician symposium for investors featuring 3 dermatologists, which highlighted the way in which these doctors are currently using Amziq and how they plan to use ZILSI in their practices. They shared that they were pleased with the performance of Amziq in their patients and continued broad utilization of Amzhek in acne. We were also delighted to hear that these doctors believe that ZILTI could become their first line therapy organization. If you missed the event, a replay can be found on our website at vyantherapeutics.com under the Investors section. Simply go to the Events and Presentations section, click on the Investor Event Physician Symposium dated October 1, 2020, 5, which is our investigational combination minocycline and adapalene foam for moderate to severe acne, we will have our end of Phase 2 meeting with the FDA this quarter and intend to share our Phase II data along with our plans for our Phase III development program. Recall that in June, we announced positive results in the 4 47 patient Phase 2 trial, showing potentially best in class improvements above IgA treatment success score and inflammatory lesion counts. Finally, in September, we announced the appointment of Patrick Lepore to our Board of Directors. Pat has an extensive record of creating shareholder value both organically and through strategic M and A as a Board member and a former CEO of several life science companies. We're thrilled to have Pat on our Board. His experience will be enormously helpful as we continue to execute on the launch of our commercial products and grow our business. With that, let me now turn the call over to Matt Wiley, our Chief Commercial Officer, who will provide an update on our commercial activities. Thanks, Dave. We are pleased with the commercial execution for both Amzik and the recent launch of Bilsea into the rosacea market. Although the pandemic has had impact on both the acne market and physician access for our sales team, I'm encouraged by the resilience and fortitude of our team to continue to sell through these obstacles. Amzinc prescription volume in the 3rd quarter came in at 26,900 NRxs and 32,700 TRxs representing 49% 52% growth over Q2, respectively. Additionally, in our most recent weekly data ending the week of October 23, we equipped 3,500 TRxs for the first time. We continue to expand our reach in trial of Amzik with a number of unique prescribers exceeding 5,500 through Q3, representing a 31% increase over the previous quarter. Additionally, since launch, we've educated approximately 1300 healthcare providers on the features and benefits of Amzik through virtual and live speaker programs with the ambition of educating over 2,000 healthcare practitioners total in 2020. With respect to market access, our coverage for Amgeniq has increased to 67% of total commercial covered lives with 1 major PBM negotiation in process. Our goal is to complete negotiations before the end of the year, which would take our covered commercial lives to over 80%, which has been our target. Turning to ZILTI, the rosacea branded prescription market appears to have largely recovered from COVID-nineteen impact. Zolpi was launched on October 1 with over 7,500 calls made to date. We've already reached 55% of our ZOPP target universe and educated over 500 healthcare providers through peer to peer programs in the month of October. Conversations with payers on VIVILTI continue to be encouraging with payers expressing strong interest in the brand and acknowledging a significant unmet need in the rosacea population. Express Scripts, one of the nation's leading PBMs, made the decision to cover Xylphy effective October 2, 2020, on its national preferred, Flex and basic commercial formularies. This is an important step towards broad payer coverage as it represents millions of additional covered lives in the U. S. That follow these formularies. With this success with this successful contract execution, we now have just over 50% of commercial lives covered across the country. We expect additional PBM contracts to execute over the next few months. I will now turn the call over to Andrew, who will provide the financial update. Thank you, Brett. In my review of the Q3 financials, I will talk about revenues, costs during the quarter and the 9 month period ended September 30 and our cash position and our market access program. Revenues totaled $3,300,000 for the quarter. Our revenues consisted of $2,900,000 of product sales, primarily associated with Amzik and 0 point $4,000,000 of royalty revenue from Finacea Foam, our product out licensed to LEO Pharma. There were no revenues for the 3 months ended September 30, 2019. Switching to market access, our strategy has been predicated on leveraging a synthetic access program that allows a patient without commercial insurance coverage to acquire AMD for $75 while we pursue broad payer coverage. This was done to ensure patient access during the launch phase of our product and we always anticipated eliminating this temporary and unprofitable program. Given that we are in the final stages of contract negotiation with the one remaining large PBM, we expect that we will be able to end this program in the first half of 2021. With the anticipated attainment of having over 80% of commercial lives covered and the elimination of the $75 cash pay option, we feel comfortable tightening our expected net value per prescription range from $200 to $400 per prescription to $200 to $2.50 per prescription. We believe that this should be realized sometime in the first half of twenty twenty one. Our cash, cash equivalents and investments totaled $77,000,000 as of September 30, 2020. We believe that the $77,000,000 and our projected cash flows from revenues provide cash runway through the end of 2021. Beginning this quarter, we are going to begin showing our earnings on both GAAP and non GAAP adjusted basis. We believe this will provide investors with better transparency into our earnings and make it easier for investors to compare our results to analyst estimates. We have provided a reconciliation for GAAP and non GAAP adjusted numbers in our earnings release. Our Q3 2020 GAAP net loss was $24,700,000 or $0.15 per share. This compares to $23,200,000 or 0.2 $3 per share for the comparable period in 2019. When excluding $2,600,000 of stock based compensation expense, our Q3 2020 adjusted net loss was $22,100,000 or $0.13 per share. For the Q3 2020, adjusted operating expenses were $24,100,000 When excluding cost of goods sold, adjusted operating expenses were $23,800,000 for the quarter, including SG and A expenses of 17.5 and adjusted R and D of 6.3. Dollars This compares to $21,900,000 of adjusted operating expenses for the Q3 2019, which included adjusted SG and A expenses of $9,900,000 and adjusted R and D expenses of $12,100,000 For both periods, adjustments considered consists entirely of non stock compensation expense. Regarding the restructuring we underwent related to the combination of Foamix and Menlo, The restructuring is now complete and our Q3 cost structure should be more indicative of our expenses and costs going forward. We believe that operating costs of approximately $25,000,000 per quarter are sustainable into the future, but do not include incremental costs that would be required for the anticipated Phase III trials for FCD105. Moving to the 9 month period ended September 30, our 2020 GAAP net loss for the period was 230 $2,400,000 or $1.99 a share. Included in the net loss were $154,000,000 of non cash expenses consisting of $85,000,000 related to contingent value rights, which converted in Q2, $54,000,000 related to Q2 impairment of goodwill in IPR and D related to the Menlo merger and $15,000,000 of stock based compensation expense. When excluding these non cash items, our adjusted operating expenses and adjusted net loss were $93,000,000 $78,000,000 respectively. Our current share count is unchanged at approximately 168,000,000 shares. For full details on our financial results, please refer to our Form 10 Q filed today with Kathy Stevens. All right. Thanks, Matt and Andrew, for your detailed updates. That concludes our prepared remarks. So operator, we're happy to open the call now for any questions. Thank We'll take our first question from Louise Chen with Cantor. Hi, good morning. This is Carly in for Louise. Just a few questions here. First of all, after completing the negotiation with the last remaining major PBM, what is your plan on further increasing your coverage level? Secondly, what are some possible scenarios coming out from the end of Phase 2 meeting with the FDA for FCD105 in Q4, how much will each scenario impact your timeline and R and D costs? And lastly, are there any plans to progress the development of Sulapitan from the diverse merger with Lenovo? Thank you. Hi, it's Karvi. I'll provide some thoughts on your last two questions. First of all, regarding sirlapenib, as we stated in the past and last few quarters, right now, we're not putting any direct investments behind srolapinib. So our focus is on the execution of AmSeq and Bilsea launches as well as progressing FCD105. That being said, we obviously have an asset. We believe there is value to it. We're certainly open and have had discussions in the past with potential partners, nothing at all to that's imminent to provide any updates on. But our focus obviously at this stage is on our commercial side and again the events of FCD105. Regarding FCD105, as I shared, we'll have the Phase II meeting this quarter. We said that depending on the outcome or assuming a positive outcome, which we would assume such, that would put us on track to initiate a Phase 3 program sometime in the first half or so of next year. There are a lot of variables that go into that. We one is just what the environment is going to be in light of the current pandemic. We believe, as we've said in the past, the data from the Phase 2 studies for SDP-one hundred and five were quite encouraging. We're very pleased with the outcome of those Phase II results. We do believe that that can be replicated in the Phase II program. It has the potential to be a best in class product for the treatment of monospecear acne. Normally, the guidance is quite clear on Phase II programs for acne. And a standard program will require 2 double blind, the open control studies plus an open label safety extension and then you have the requisite Phase 1 dermal safety studies. But as I've said in the past, there's quite a significant body of work around minocycline, obviously, through Amzq and Bilqsi. And the dose in FCD105 is bracketed between the dose of Amzq and the dose the concentration of and the concentration of Bilqsi. It's a 3% dose of minocycline and FCD105. Amzinc, as you know, is a 4% dose of minocycline and ZILXVI is a 1.5% dose of minocycline. So there's a significant volume of data out there for minocycline. And the dose that's in the Fc105 product for adapalene is 0.3%, which is the marketed which is the best of the marketed product, have to do what have to do with Forte. So the team internally here in VIBE has done a fantastic job of putting together a comprehensive package for the FDA. We'll have that meeting again later this quarter, And we'll see how it goes in terms of what the ultimate design of the Phase 2 program should be. We're obviously going to put our best foot forward to have as an efficient design as possible. And we'll just take it from there. We'll know later this quarter. But a review of that, if we do a full comprehensive program, 2 double blind vehicle control studies plus the open label safety expansion, that's roughly from the time first patient is initiated. It's roughly 20 to 24 month timeline from beginning to end. And then, obviously, factor in roughly 10 months or so for an NDA review. So we can kind of sort out how long the program would go. And the cost of those are, if it's a full program as I've outlined is $30,000,000 to $40,000,000 spread out over a 2 plus year time period. But we'll see ultimately what a Phase 2 program will look like after we've concluded our meeting with the FDA later this quarter. I think regarding coverage, I'll turn it over to Matt or for ANSI. Good morning, Karvi. So the question is about what we do after we get the remaining PBM under contract and really comes down to pull through from that point forward. So certainly working with the custom plans underneath the major PBMs to make sure that they are aware of the formulary options that they have and that they may be. I think that's one of the things that you've probably seen between the last time we reported and today is we had about 63% coverage back when we did the symposium in October. We now have 67%. And that's a nod to being able to pull through some of those custom plans from the Blues plans underneath the payers that we already have under contract. And that's what we'll continue to do after we get the last CVM under contract as well. Got it. Thank you so much. And next we'll move to David Amsellem with Piper Sandler. David, your line is open. Please go ahead. And would you like to move on? He's not responding. Sorry about that. Just wanted to get some thoughts on where you think you're going to be pulling ZILSI patients from. Are these going to be patients who are on doxycycline, all doxycycline patients who are naive to tetracycline or patients who have been on other topicals. Just trying to get a sense of what you think the kind of patient mix will be. And maybe I'll ask the same question for Amzik, if you can go through the patient mix, where you think patients are coming from and particularly the extent to which you're getting treatment naive patients? Thanks. Sure. So let me start with the ZolpiMisty. So yes, you've got a pretty good beat on this one. We see from our demand study that primarily we're pulling from metronidazole and doxycycline and further down the list obviously we get to other displacement of products such as Cilantro and Fenacia. But yes, the 2 primary ones would be the metronidazole and Doxys of the world. As it relates to AMZ, we're seeing pretty broad disruption in the market. So we are taking from a bit of everything. It's tough to discern from our data whether we're being added to certain products or displacing certain products, but it has been a pretty disruptive market entry as we expected it to be. Yes, David, I would add too in terms of the where we anticipate the potential to pull business from Brazil to the as Matt outlined and he's outlined, the oral antibiotic arena, whether it's doxycycline or minocycline. And then metronidazole, they're the 2 biggest therapies that are utilized in treatment of rosacea. For metronomicile, there's over 1,000,000 prescriptions written a year for the treatment of rosacea. So we're certainly encouraged by the potential and what we've seen in the market research. Obviously, we're very, very early in the launch to see how things ultimately play out. We have seen consistently both in the research from Amzik and the research from Silky that these cutters have the potential to be disruptive. We obviously have a bit more traction on Amzik for 9 months into the launch. And as Matt outlined, we're seeing share gain pretty broadly. And we're eager to see how it's going to shake out for ZILTI as we continue to launch that drug. Okay. That's helpful. And if I may just sneak in a follow-up question. To the extent that 105 gets to market, what is your expectation regarding the extent to which you could expand your acne franchise footprint? Or do you expect a large bit of conversion and some cannibalization? Just trying to get a sense of the extent of expansion or if this is really more of a conversion to the combination product type paradigm? Thanks again. Yes, David. So I look at this as a welcome addition to the market. So obviously, there are going to be certain patients who are going to need a combination product versus those that are going to do just fine with anti monotherapy. And so giving the market, the choice for those products, I think is the right thing to the right way to think about it. FCD105 certainly is going to be a great addition. We think it's going to be a game changer in the market. So we do think that it's going to be equally disruptive as Ampeek was coming into the market. And we have some market research work to do ahead of us to understand the impact on the market overall, but we feel pretty optimistic about its chances given what we've seen with the market research for AmSeq and the disruption it's had in the current market. Great. Thanks. And David, were you done with your questions? Yes, I got it. Sorry, Deepa. Yes, thanks. Thank you. We'll move on to next we'll move on to Ken Cacciatore with Cowen and Company. Hey, thanks guys. Just a couple of questions. I got on a little bit late. I just wanted to hear if you gave an update on ZolpiMist Care timing that we could maybe match Amzeq. I know you're still outstanding on CVS, but it sounds like this quarter when it came on you were saying it looks like that could be finally done. So just wondering if you could lay out for us when do you think we'll have kind of matching coverage on ZILXI? And then is net pricing still going to be roughly the same, the $2,000,000 to $2.50 that you're capturing for Amzik for ZILXI when all things shake out? And then lastly, and don't get angry at me because I'm going to kind of ask you guys to do a little bit of math. But according to my math, you would need kind of at a normalized pricing once coverage is on board about 8,500 combined Amzq and Zolpi prescriptions per week to get to breakeven. Just wondering when do you think you guys will internally model that type of run rate? As I look at an axon and an epiduo inferior products to Amzeq, they're doing about 15,000 to 20,000 a week just individually. You have a combination franchise. So as investors try to stare at the balance sheet and the confluence of negotiations with managed care and kind of getting that net pricing on board and prescription growth. Are my numbers basically right? I know I just threw a lot of numbers at you. And then if we're on a good run rate, do you think the capital markets in terms of debt would be available to you, not necessarily just equity? So a lot to chew down, but wanted to see if you could help investors as they stare at the confluence of growth, managed care and your balance sheet? Thank you. Sure. So good morning, Ken. It's Matt. Regarding the PBM timing for ZILTI, so first of all, we've engaged with all of nature and most of the smaller PBMs across the country. We feel very good about the conversations that we've had to date. There are certain PBMs, as you know, that require for their custom plans a new market block for 6 months. Major PBM that with AmSeq given the one major PBM that had a contract change during the course of the year. So we feel good about the timing and we believe that this should be a little quicker than ANSI has been. Yes, sure. And David, with regard to your math, your math isn't far off. Obviously, we've given the guidance of about $200 per prescription. To your question, we would expect, Ken, sorry, we would expect ZILTI to be relatively similar to Amzick. As you know, the WACC price on both products is the same. As we pursue coverage with the payers, we obviously have a precedent. We don't want them to be desperately priced because we don't want switching between the 2. We want them each to be on indication. So we're doing our best to keep them at price parity. So I think your math is correct. And I think your pricing assumption for Voelte is correct. As to the timing, as you know, we haven't given timing in our forecast. So I'll allow you to project that out. But I agree with you and I think Matt and Dave would agree. We believe our products are superior and we simply need to get the traction in the market, and we're doing that as quickly as we can. Thanks. Did I answer everything, Ken? You did. Thanks, Dave. Yes, thanks, Steve. Thanks, Next, we'll hear from Patrick Dolezal with LifeSci Capital. Hi, thanks for taking the questions. Just a COVID related question to start with. As some cases are beginning to rise in certain areas of the country, I'm just curious if there's particular territories that have been adversely affected by tightening restrictions at this point? Or is the recovery trends kind of continuing to predominate across the board? And then on a similar note, just in terms of general seasonality, what should we expect with the ethylene utilization market, I mean, even the winter and particularly with the New Year approaches? Thanks. Thanks, Patrick. Regarding COVID, I mean, this is obviously the big unknown. And as a follow-up to Ken's putting a line in the sand on when we'll hit certain marks for profitability and the like just because current environment. I think we're all obviously still living with this global macro arena where we've got spikes in cases in various geographic areas that we have to contend with. And Matt can provide a little more color. In large part, again, our field force is fully deployed, but remains similar as I've shared in past earnings calls that it varies by geographic region the assets, more open areas where we're not seeing spikes in cases, representatives have pretty open access getting in there. There's obviously the appropriate regulations and rules from the offices and everybody's taking the appropriate precautions. But there are certain areas around the country that are much more open than others. And so we continue to manage that Where there's more restrictions on office level, we pivot to more virtual initiatives. And again, despite all the headwinds, we're quite pleased with the efforts of our team. And I think that's reflected in the numbers that we presented at the top of this call, both in prescription growth as well as our continued increase in number of unique prescribers. So we're continuing to manage this like any other company out there. I think we've gotten pretty efficient and proficient pivoting to more virtual environments as needed. And I'll turn it over to Matt to provide some additional color. Sure. So regarding the markets themselves, let me start with the rosacea market, which has predominantly yield since the COVID-nineteen impact. We have seen the number of diagnosed patients and NRx volumes rebound significantly similar to if not ahead of where they were in early Q1. Regarding the acne space, if we look at the TRx volumes Q3 in 2020 versus Q3 in 2019, still down about 10%, but it has been coming back nicely. In fact, this last week we saw the NRx volume pop up over 70,000 for the first time since the COVID lockdown. So that's an encouraging sign and something that I think points to better days ahead. Regarding seasonality, so with the acne patients, it's typically driven by when kids go back to school. So we do see some spike volume typically in July August over the course of the year. With rosacea, it's a little different. There is a true seasonality component driven by the triggers that these patients have, specifically the change in seasons from cold weather to warmer weather. And we see this in the diagnosed patient volume in March, April May. And so that should actually be a slightly higher period of time where rosacea patients are seeking treatment. We also see that in search volume. So we see the same phenomenon not just with when patients are getting diagnosed, but what they're searching for and triggers that they're searching for related to rosacea. So there is a true seasonality component to that disease and something that is aligned with our strategic thinking. There are no further questions at this time. I would like to turn it back to management for any additional or closing remarks. Thanks, operator, and thank you to everybody for taking time out of their schedules to join us on this call. We look forward to continuing to provide an update on our progress. And we wish everyone to have a great rest of the week and stay safe and healthy out there. Speak soon. Thank you. And that will conclude today's call. We thank you for your participation.