Esperion Therapeutics, Inc. (ESPR) Earnings Call Transcript & Summary

Hi, everyone. Good morning, good afternoon, depending on where you are in the world. I'm Michael Yee, and I'm excited to host Esperion with us here on this fireside chat at the Jefferies Virtual Lending Global Conference. With us today, of course, we have the President and CEO of Esperion, Tim Mayleben. We also have the CFO Rick Bartram on with us.

I would love to just start off, Tim, maybe just from a high level, and say congrats on approval and launch, particularly during a COVID environment. I think that deserves recognition, and it's certainly a testament to your guys' ability to execute. With all that said, of course, that has come with challenges with other companies as well that we have talked to during COVID. So maybe you could just make some opening comments about the state of the launch this year, the pluses and the minuses during the COVID environment and how you feel particularly about the progress of it as we go into the end of the year and into 2021?

Great. Hey, thanks, Mike, and I want to thank you and the entire Jefferies team for hosting us today, virtually. Blue skies in London, that's a rarity. And so definitely nice to see this time of the year.

Definitely a photoshoped view there because it's never this sunny there.

No, like it, like it. It's optimistic, though. And certainly, suitable with the vaccine news that has been coming out each of the last couple of weeks, which I think has given us all a bit of optimism. But so just turning to your questions. As you noted, we got our medicines approved NEXLETOL and NEXLIZET in February of this year. We also got them approved in the EU in March of this year. So we got 4 approvals in the course of about 30 days or so. That was also the time, February, March was also the time, of course, when COVID hit initially in the U.S. And so we found ourselves with a very challenging decision, whether to continue to move forward with the launch or not knew that it was going to present a whole set of new challenges. But ominously, I think like many of us just didn't know the degree or what the overall impact would be. Of course, as we look into Q2 -- we looked into Q2, physicians were telling us, yes, please make these medicines available. Some of the injectable non-statin therapies that were available were much harder to initiate therapy because of COVID. And again, remember, in Q2, there were state shutdowns across the U.S., which limited activity. And that was really the headwind that we were facing in Q2. And quite frankly, anybody that was trying to promote new medicines. I think -- we've gotten very good, I'd say, at analyzing the past as opposed to predicting the future. So I'm going to spend a little bit of time on just what have we learned from the first 7 months of our launch. And I think the best context that I can provide is that when you look at LDL cholesterol lowering prescriptions, when you look at the prescription volumes this year compared to last year, when you look at them from sort of April compared to January, February, March, what stands out is that for the first time in history, new prescriptions for LDL cholesterol lowering drugs were down 30%, whether you compare that to pre-COVID this year or whether you compare it to this same time last year, it was almost...

On this note, they're not prescribing that right now. And there's delays due to what's going on in COVID, why?

Exactly. So again, you see it in the volume of new prescriptions for LDL cholesterol lowering drugs. There was also a paper that we've been referencing recently in JAMA that look at claims data for Q2 and early Q3. And what the author's reported was that, as we all heard about and read about, there was certainly an increase in telemedicine visits. And I think there was a great expectation in April and even May, that telemedicine could serve as a good substitute for in-person visits. This was the time for telemedicine. And indeed, for some therapeutic areas, it proved to be really effective. Heard about mental health and some other therapeutic areas where it really lent itself to a physician and a patient engaging via video. But what we learned and what the author's reported on is, yes, there was this really significant increase in the use of telemedicine during Q2 and early Q3. But if you look at the claims data, and this is -- I'm paraphrasing what the auditor's said, blood pressure and cholesterol checks fell through the cracks. So what we learned is while there was this increase in telemedicine, and that there was certainly a lot of hope that, that would provide a substitute for in-person visits, physicians really didn't feel like they could check a patient's blood pressure. They didn't feel like they could check their cholesterol via telemedicine, even if you think about sending them to a Quest lab or an outside lab, that was -- it was just not done. So we see it in the overall prescription volumes for LDL cholesterol lowering drugs, we see it in some of the reports from telemedicine just not be an effective substitute for prescribing or checking cholesterol.

This is an important point, Tim, in the first few minutes here. Do you believe that Wall Street and investors, the financial community, it's not just Wall Street, is under appreciating the true opportunity and trajectory? Because the first 3 to 6 months are not good reflections of the demand because new prescriptions are slowing. People can't go to the office, they can't see their doctor out, I would have presumed you could get a script over telemedicine, maybe you can make a clarification about that. But the bottom line is, all of that is basically put on some pause during COVID. So when people go and they stay, they look at the scripts, by the way, they're up from 600 to 1,000 and 2,000 to last week 2,500, so congrats on that. That's not a good indication, and people are saying, oh, see the launch is slow. That's just not the case. You think that, that will pick up remarkably as we start to climb out of COVID. Is that the conclusion?

Absolutely. Because keep in mind, one of the statistics that we and others and the community have always talked about is that for every 10 patients on a statin, 2 of them, 1.5 to 2 of them are going to be a statin intolerant patient. They -- statins are great medicines. They have been great medicines for so many people, 80% to 85% of people who take a statin do extraordinarily well on them. But 1.5 to 2 patients who get on a statin can't tolerate it. And so if you're thinking about 30% down in terms of new prescription volume for statins, for LDL cholesterol lowering drugs overall, that puts a really significant damper on the launch of a new medicine like ours, which is a non-statin alternative to the drug.

Yes. Now I have seen that with some oral cancer drugs, Tim, even with some oral cancer drugs, they have cancer, too, we're even seeing this, too. But the takeaway then, point one here, the progress that you've made to date, are -- you think is hugely impacted by the dynamics of what's going on at the office and with COVID. I don't think that needs to be emphasized, beating a dead horse here, but therefore, the numbers that you're putting up are well under reflecting what you think could happen as we get into 2021. And therefore, with the stock where it's at, significantly again, under reflects what you think could happen. And therefore, if that's true, because people are -- you know how it is on Wall Street, they took it in early quarters, they go up, that's it. That's it.

No, right. I think, and again, we've been saying, you've been saying, there is no analog, right? There is no comparison that we can look back and say, oh, this launch is like fill in the blank because no one has ever launched in a pandemic before, right? So we have what a half a dozen cases of companies that have launched in the pandemic. We've heard of this big retrenchment, if you will, among sales forces in the industry that almost every company pulled back their sales force during Q2, started getting them out in Q3 again. But we've been on the leading edge of having our sales force in the field because I think one of the other things coming back to what have we learned over the last 6 or 7 months, one of the things that we learned is video detailing, digital detailing is not the same as promotion -- in-person promotion between a sales representative and a physician. It's just not as effective.

Okay. Tim, look at this, I have the scripts in front of me. According to the scripts, you are in week 20 something right now.

That sounds right, yes.

Something like that. You have more total scripts last week than PCSK9 did in week 25.

That's right. No. And we launched during the pandemic. The other thing to keep in mind is that speaking of PCSK9s is that PCSK9 scripts are down 40% -- new scripts, sorry, new scripts, are down 40% as compared to pre-COVID. And again, that is also relatively underappreciated. So it's -- the overall cholesterol-lowering market, but then even the PCSK9s that have been around.

They have a stable base because you just get a refill. That's not hard.

That's right.

And you are based on new scripts, that's what you got to get, new scripts.

That's right.

They are a flat base and trying to add new scripts, but they have a flat base. So let me ask you this, what do you think the trajectory looks like in the fourth quarter and the first quarter and the second quarter as we get to 2021? I think there'll still be COVID-19. So is it fair to say that it modestly increases every quarter, but you should continue to see improvements? If not, I don't want -- I'm not putting words in your mouth, acceleration but a slope should pick up both with release of COVID and people starting to return to their doctor's offices in January, but also because you've had a year to market the drug. So the combination of those 2 things should get you to really pick up the pace in millions of dollars every quarter. Do you think that's right?

So I'll ask Rick to comment, but I think one of the most interesting things about a medicine like ours is whenever a new prescription is written by a physician, that is, in essence, a mini annuity, right? I mean, in financial terms, it's a mini annuity. Not -- of course, not every patient refills, not every patient refills every month. I think on average, it's like 10 or 11, for a monthly prescription, it's like 10 or 11 a year because patients forget to refill their prescriptions. But on average, it's a mini annuity. And so we are building a foundation for, not only next year, but the years in the future as every new prescription becomes a mini annuity through this -- the magic of refills and the magic of -- the not so magic of compounding. So I think it's...

Once you got him on, he's a believer -- I believe it or at least write some scripts, he should be able to write 4, 5, 6, 7, 8 once you got him on, once you got him onboard.

That's right. And keep in mind that COVID, as you said, we fully expect is going to continue to be with us for some time, right? It is here. Great news on the vaccine front, we can now at least see the sun coming up over the horizon mid next year, maybe earlier, but certainly mid next year with broad vaccine distribution. And of course, with that happening, we do see patients returning to their physicians' offices. So medical distancing will start to dissipate patients. Again I don't know if you're old enough for this, but...

Now, Tim, because even though there's a spike in COVID, so people are like unsure how to interpret that. Just because there's a spike per se in COVID cases, and I don't want to get in the nitty-gritty, but I'm sure the average age of those cases is younger in general. But the demographic of what we're looking at here, do you think that more patient volumes are up at the doctor's office, paid doctor visits are up in Q4 over Q3 over Q2, and that should -- that is getting better. It is improving.

So I think what we've seen, Mike, is that it has plateaued. So it did increase from Q2 to Q3. We saw some modest increase from Q3 into early Q4, but it's plateaued at roughly around 70% of pre-COVID patient volumes. And so -- and by the way, that's -- it's different for cardiologists than it is for primary care. So in both cases, the flow, the patient flow seems to be at around that 70% level. But for cardiologists, of course, it's cardiovascular health issues they're dealing with. It's the primary care doctors, which, again, you may remember us talking about for drugs like ours, oral, convenient once-daily medicines. Primary care doctors are going to be big prescribers of these medicines over time. And they represent about 70% of our HCP targets. And so they are still going to be dealing with COVID during the next couple of quarters.

If that's the thinking of the launch, Tim, is it the big cardiologists and thought leaders and those guys and the guys who are taking care of the guy who's had 2 heart attacks, all of that type of thing, aren't those, at least in the first year or 2 or 3, really sort of the early volumes?

So absolutely. But remember, there are primary care docs that write like cardiologists. They prescribe beta blockers, they prescribe Factor Xas, they prescribe, of course, LDL cholesterol lowering drugs. And those are the physicians that are also really high-prescribing physicians, but their practices have turned toward, obviously, treating patients who have COVID or COVID-related impacts. So the patient flow is there, but it's more diverse than cardiologists.

The dangerous thing is huge impact in the summers in Q2 and Q3 from COVID, it's improved a bit. It started to plateau a bit. Again, cases are going to that but you feel like as that gets towards the sun coming on the horizon, as you said, that, that should get better. And your point is in the first 10, 15 minutes of this conversation is that's a big impact, and you think it's under reflecting what you really should be doing, if it was not COVID. So what does that look like then, Rick, as we get into the fourth quarter and the first quarter and the second quarter, is it incremental? Just modest increases? You look at where consensus -- consensus came way down, which is probably good from an expectation standpoint, the numbers came way down. Do you think there's a point where people start going the other way on consensus, as we get into '21? Or how do we think about that trajectory? What walked to us say, you know what, we're doing better than people thought right now?

Yes. So Mike, I think a couple of ways to think about it. And while we're not providing revenue guidance next year, mainly around just the COVID uncertainty as we've all experienced. I think, generally, the way you mapped it out is a reasonable way to frame it out. When we look at our expectations and in our internal data and models, the next couple of months and quarters as we navigate through vaccine deployment, broad adoption, we'll have incremental steps. But I think the key piece to just focus on is we've got all the fundamentals in place for when the overall environment improves, and we get some of these roadblocks and headwinds that have been created by COVID to dissipate. We have the capital, we've got the infrastructure, we've got the fundamentals to strike and grow prescription growth pretty significantly.

Now one of the big things that the market was different from your guys, and this was talked about is that you have consistently said, the capital and the cash last well into profitability or I don't remember the exact words you used recently. But 2 things. One is, you felt that the revenue numbers continually have been above where you thought The Street was in 2021. The expenses may be another lever. But you also did show up the balance sheet. So maybe just talk about, again, your confidence that this should continue to ramp very nicely through 2021. Perhaps at least as good as where consensus is. You know the trajectory, you feel good about that, too, that are the expenses, as you go down the P&L with the expenses, you probably have some leverage there versus where people are at. I don't know where that may come in from. And three, you're adding more cash anyways, a lot more cash, yes.

Yes. So Mike, I think all that is spot on. As we sort of think about where we're at, especially with the capital, so I think just the fundamental piece, given where we're at, as I mentioned, we're not going to provide revenue guidance, but it's obviously a fundamental factor of cash runway. We talked about -- our view is optimistic, and it gives us really confidence in the long-term cash runway. And then when we factor in the proceeds from the offering last week, coupled with, as you mentioned, scrutinized cost management, we estimate that the current funds as well as the proceeds from the offering, extends our cash runway well beyond the subsequent approval of the CLEAR Outcomes trial as well as those significant payments that we have from our collaboration partners, which I'll remind everyone is up to $350 million upon the successful completion.

Let me repeat that's very important. So with the recent convertible, this was not equity dilutive, convertible, you believe that, that takes you well into or past the CLEAR Outcomes data, which remind me is second half '22?

Yes. The endpoint accumulation is second half of '22, subsequent approval, '23.