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

Ladies and gentlemen, thank you for standing by, and welcome. [Operator Instructions] Please be advised that today's conference call may be recorded. I would now like to hand the conference over to your speaker today, Mr. Ben Church, Head of Investor Relations and Corporate Communications at Esperion. Please go ahead, sir.

Thank you, Rain. I want to remind callers that the information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. I caution listeners that management will be making forward-looking statements. Actual results could differ materially from those stated or implied by our forward-looking statements due to the risks and uncertainties associated with the business. These forward-looking statements are qualified in their entirety by the cautionary statements contained in today's press release and SEC filings. The content of the conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, October 18, 2021. We undertake no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call and webcast. As a reminder, this conference call and webcast are being recorded and archived. We issued a press release this morning detailing the content of today's call. A copy can be found at www.esperion.com within the Investor and Media section. We will begin with prepared comments and then open the call for your questions. Following today's call, the team will be available for follow-up questions. Please e-mail [email protected] to schedule a time to speak with our team. With us today are Sheldon Koenig, President and CEO of Esperion; Rick Bartram, our CFO; Joanne Foody, our Chief Medical Officer; and Eric Warren, our Head of Sales and Marketing. I'll turn -- now turn the call over to Sheldon for some prepared remarks. Sheldon?

Thanks, Ben, and thank you, everyone, for joining. Today, we announced the new plan to fundamentally improve our business now and for the future. We will strengthen the organizational structure and processes of the company to facilitate better alignment with the current health care environment and the constraints being driven by the ongoing COVID-19 pandemic. We believe today's announcement helps allow us to preserve our ability to deliver consistent growth in the near term with the flexibility to strategically scale up in the future. We anticipate consistent moderate growth leading up to the top-line readout of the CLEAR Outcomes study in the first quarter of 2023, which we believe will create an inflection in demand. As part of this plan, we are dramatically reducing our expense base, and Rick will walk you through those details shortly. Over these last 5 months as the new CEO of Esperion, I have invested much of my time working across the organization to develop a plan for restorative change to maximize both the near- and long-term opportunities of the company and generate significant value for our shareholders and stakeholders. While decisions that impact our people are never easy, they are necessary for the long-term health of the business. Driven by our systematic review of the organization and ROI of each program, management has optimized the organization structure and processes to foster growth in this new environment, where the traditional selling model has been challenged. Simultaneously, we are preserving resources and flexibility for scale in the future. We believe this is particularly important to ensuring the successful completion of our CLEAR Outcomes study and our ability to capitalize on the ensuing inflection in product awareness and adoption. Given the concentrated nature of our customers, we expect to retain the vast majority of our current prescription volume with this new model focused on the core sales team of 80 effective and efficient territory managers supported by increased utilization of nonpersonal promotion. With these additive tools, we will look to: one, target integrated delivery networks that partner with key opinion leaders at the top institutions recognized for their comprehensive cardiac care centers; two, drive interactions with the top 10,000 accessible providers most likely to prescribe our medicine; and three, support peer-to-peer education and scientific exchange through proven virtual forums and medical meetings. As we execute these 3 strategies in 2022, we believe that the company will be well-positioned to deliver consistent growth in the near term and rapidly scale up its promotional efforts after the readout of the CLEAR Outcomes trial when we anticipate a supplemental marketing application to the FDA for a risk reduction label expansion. We believe the potential for an expanded indication may support inclusion of our marketed products into treatment guidelines and broader appreciation and awareness of the benefits of NEXLETOL and NEXLIZET in appropriate patients. The focus on driving operational excellence and efficiencies goes beyond just the commercial function of the business. We've also incorporated a streamlined approach of our activities across all company functions. The outline improvements to our organizational structure have resulted in favorable reductions to our forecasted cash burn within both our R&D and SG&A lines. I'll now ask Rick to speak more on this topic.

Thanks, Sheldon. As Sheldon mentioned, we're fundamentally shifting our business to become more efficient and effective, which is resulting in significant cash savings from our prior expense estimates. First, we're revising our full year 2021 expense guidance down by approximately $20 million when compared to the midpoint of the prior expense guidance range. We now expect our full year 2021 R&D expenses to be between $110 million to $115 million and SG&A expenses to be between $195 million to $200 million. This reflects the optimization activities we've already implemented this year that we expect to be realized as savings in the third and fourth quarter. Looking ahead to next year, we expect that the optimization activities we have already initiated and those we are communicating today will also reduce our full year 2022 expenses by approximately $80 million when compared to the midpoint of this year's revised expense guidance. This amounts to at least $20 million of additional savings per quarter and is principally attributed to a reduction in our overall workforce and reshaping our commercial business to adapt to the -- to further adapt to the headwinds of COVID-19 while still preserving the cash resources necessary to support the successful completion of our CLEAR Outcomes trial as it reads out in the near future. In summary, we expect 2022 R&D expenses to be between $100 million to $110 million and SG&A expenses to be between $120 million to $130 million. These estimates are inclusive of approximately $25 million of non-cash stock-based compensation expense expected to be incurred next year. Lastly, as part of today's announcement, we are providing preliminary unaudited Q3 U.S. net product revenue range of $10.5 million to $11 million. During the third quarter, prescriptions for our medicines increased by approximately 10% compared to the second quarter and we saw a continued increase in prescriptions associated with commercial and Medicare-covered plans while we retired the last remaining full co-pay buy-down program that was established at launch. As a result of our business, the mix shifted to profitable prescriptions covered by managed care providers, including increases in Medicare-covered prescriptions, which, as you know, has an associated seasonal coverage gap impacts. The net price for our medicine remained in line with the second quarter. We look to provide additional context on our quarterly results call on November 2. Sheldon, any closing remarks?

Thanks, Rick. Yes. If there are 2 things you should remember, they are this. Cardiovascular disease, largely driven by elevated LDL-cholesterol, remains the #1 cause of death in the United States and around the world. We know there are 18 million patients not at LDL cholesterol goal in the U.S. alone who require additional lowering of LDL-C. We have 2 affordable oral products, NEXLETOL and NEXLIZET, that are approved in certain adults as an adjunct to diet to lower LDL-cholesterol today and have the potential to reduce cardiovascular events and save lives in the future based on the readout of our CLEAR Outcomes study. Overall, we believe our new organizational model optimizes and transforms the business for the current and future environment. And we remain committed to bringing additional funding into the organization to support this revised structure through the anticipated top-line results of CLEAR Outcomes, allowing Esperion to effectively compete in the attractive cardiovascular market and position itself as a long-term leader in cardiovascular disease prevention. With that, we'll be happy to answer any questions. Operator?

[Operator Instructions] Your first question comes from Michael Yee from Jefferies.

Two questions. One is regarding the overall thinking around the balance sheet in the sense that you have definitely cut expenses today, which is good for the long term. But overall, if one just does out the run rate for cash, there still seems to be very limited visibility throughout the next 4 to 5 quarters based on some simple math. So can you just make a comment about that? And I presume you're looking at all sources and options. So you may comment on that. And then second question is, I think I caught that, that you said the outcomes is now Q1 '23. I mean just formally, that seems to be a slight push-out. Is there a logistical thing there? Is it event rates lower? Maybe just make a comment about that, please.

So thanks, Mike. Thanks for your question. First, I'll have Rick address your question as it relates to run rate, capital, et cetera. And then Joanne will speak to the CLEAR Outcomes study. I do want to say, though, that the date that we mentioned for the CLEAR Outcomes study has not changed. It's been consistent. Joanne can speak to more detail as it relates to that. Rick?

Yes. Thanks, Sheldon. Thanks, Mike. Yes, so the optimization efforts that we announced today will provide additional runway for the company, as you mentioned, but we acknowledge the need for additional capital. And like you said, we're evaluating all options to bring capital into the business, and we're committed to ensuring that we have the capital on the balance sheet to drive success and move further ahead to this top-line results of CLEAR Outcomes, which we're very excited about.

Joanne, do you want to speak to the timing?

Yes. So Mike, thank you so much for your question. And just for a point of clarification, Sheldon did mention that the top-line results for CLEAR Outcomes are anticipated Q1 of 2023. That's actually exactly on target. And if anything, our previous communications were that we would have results in the first half of 2023. Our events are actually accumulating right on track. If anything, they're accumulating ahead of schedule in 2022. So again, no fundamental change, if anything, slightly earlier commitment on reporting top-line results in the first quarter of 2023. So again, very confident with that study. And again, we're prioritizing everything we do in this organization to ensure the successful outcome of that study and successful execution of the study.

Your next question comes from Tom Shrader from BTIG.

You made the comment that net price is going to be in line this quarter when it looked like it was getting a little better. Can you give us any color on what we're waiting for? And what are the key levers for net price to get better?

Rick?

Yes. Sure. Thanks, Tom. This is Rick. So I think there's a couple of factors. We're pleased with the progress that we've made with net price compared to where we were with the first quarter. One of the key pieces was retiring this last full co-pay card program that was established at launch that was retired in the third quarter. We saw the mix shift to those profitable prescriptions. And again, as we said, there's going to be some seasonal variability with net price. Now we're getting into the time of seasonal coverage gap impacts for Medicare patients, but those have been accounted for in our net price for this quarter. And as we progress ahead, we finalize our contracting plans with the Medicare providers, the volume scales up. We're going to see normalization and continuing improvement in net price, but we're pleased with the progress that we've made so far.

And then a quick follow-up. I hope the answer isn't too long. But can you give us any color on what you're stopping? What have you decided isn't worth? You're cutting 40% of your operation. Any color on what you're not going to do any more?

Yes. So thanks, Tom. Thanks for the question. So again, I think what we've seen in this environment as it relates to how the marketplace has changed, somewhat the result of COVID. And me being the CEO for the past 5 months, we really took a serious look across the organization, did a very deep review of where we think we could have savings, where we could think we could be more effective. And I'd like Eric to discuss, especially in the sales and marketing area, where we'll be making some changes, but still essentially keeping our business and potentially growing our business moderately as time goes on. Eric?

Yes. Thanks, Sheldon, and thanks for your question, Tom. So as you're aware, before COVID, access to HCPs was challenging. COVID didn't help that, made it even more difficult. So we did a really thorough review of our business. We found that about 80 territories generate 90-plus percent of our prescriptions. So in short, what we're stopping is inefficient use of our direct selling resource. It's an expensive resource. We can be much more concentrated and efficient. That will allow us to have more dollars to leverage towards the other 2 arms of our strategy, and that is the integrated health network or system strategy as well as an increased focus on those digital activities that generate favorable ROIs.

Your next question comes from Judah Frommer from Credit Suisse.

Maybe just following up on the cost-cutting question. Sheldon, as you went through your kind of deep dive as you got in there, can you comment on how much of the ramp in bempedoic acid, and maybe it being lower than expectations, is maybe tied to COVID versus tied to internal planning issues? And do you think that you can get somewhere near the ramp that you would have liked to get in a non-COVID environment with these changes?

Thank you, Judah, for the question. So I think let me just talk about how we view the growth of the NEXLETOL franchise, NEXLETOL and NEXLIZET. We still believe that we can still generate consistent and moderate growth pre CVOT. I do think COVID has a lot to do with the launch but I think also a part of it was just a strategy that was not clear for physicians of where to actually use this product. I think we also had some inefficiencies when the product was launched as it related to really developing the unmet need. And I think that's something we've really been working on. We are missing areas such as continuing medical education, which we actually will be having that now at the American Heart Association. We actually have 2 programs. That meeting is now a virtual meeting. So there were a lot of things that, from a basic blocking and tackling, were missing that we've instituted. I'll have Eric maybe comment on the new positioning that we launched in April and some other areas that he has instilled since he has joined. Eric?

Sure. Yes. Thanks, Sheldon, and thanks, Judah, for your question. So we've increased our focus on NEXLIZET. NEXLIZET has impressive efficacy, 38% reduction in LDL-C. And it really is the area that we've decided to put our emphasis. I just want to comment on prior authorization. So Sheldon mentioned the COVID environment and access to HCPs has impaired or kind of weighed us down. Prior authorizations do require some effort by our HCPs or their staff. And as Rick mentioned, we did have at launch a full buy-down card that, although good for patients, made it a little bit more challenging to us as a company because it didn't require the HCPs to actually complete the prior authorizations for patients that were receiving those full buy-down cards. So effective August 1, we eliminated that full buy-down program and we put forward the prescription support program. I'm happy to announce that just since August 1, we've had about 2,000 patients enroll in the system. And just as a quick refresher, what this -- what the program is, is it frees the HCP from the burden associated with the prior authorization. So it allows the office to electronically transmit a prescription to a centralized pharmacy. That pharmacy does the heavy lifting, if you will, gathering the paperwork required for the prior authorization and then ultimately sees that to completion. So we feel really good about this prior authorization support program and the impact that, that will have in the immediate and more distant future.

Your next question comes from Jeff Hung from Morgan Stanley.

You talked about stopping inefficient direct selling resources. So assuming the CVOT data read out positively, can you talk about your intentions for rebuilding the sales force either before or after the CVOT data and what that might look like? Just appreciate any color you can provide on the factors that will go into that decision process.

Eric, do you want to take that?

Yes. Thanks, Jeff. So the new model that we have going forward gives us flexibility, which is really important. So we'll maintain that direct selling focus, but we'll also increase our emphasis, again, on system approach for that integrated delivery network approach as well as nonpersonal digital activities, including those that empower peers to activate other peers. Now as we start to progress and get closer to CVOT, obviously, we'll keep an eye on all of those as well as the environment around us. And if there is an opportunity to expand our personal promotion, if we think it will generate favorable returns, we'll do so. I should say that we've also leveraged -- or we will be leveraging a contract sales organization to provide some support of white space now. As I mentioned that 80 territories provide 90% -- coverage of 90% plus of the scripts, but that CSO will provide us with that support for a good chunk of those remaining. So that's also another mechanism by which we could potentially flex. But right now, we preserve flexibility, which is really important for us going forward.

Your next question comes from Olivia Brayer from Bank of America.

Sheldon, as you think about the launch over the next 18-or-so months before the outcomes data gets added to the label, are there some opportunities or maybe patient groups that you could target to deliver more commercial growth ahead of that bigger 2023 inflection? And then just a follow-up on CLEAR, can you give us an update on where we're at now for these events? I think it was 75% last quarter.

Yes. Thank you, Olivia. Let me start, and then I'll also turn it over to Joanne for her comments not only as it relates to different patients but as it relates to the CLEAR Outcomes study. So yes, we do think there's an ability to, first of all, partner with society, some of which we have already been partnering with, to address specific patient groups. One other area, as I mentioned in our prepared remarks, we've talked about integrated delivery networks. One of those -- a large one is the VA, the Veterans Administration, where we started initial conversations with them as well as the Department of Defense. This is an area where the population that is treated is very much candidates for our products. We've also partnered with groups such as the FH Association. We're always looking to partner with groups such as AHA and ACC as well to identify unique patients. And also, I think one of the things that we've struggled with is just overall awareness. And this will really help accelerate the awareness and the availability of these products. Joanne, can you speak to CLEAR and maybe also if you have any additive comments for patient groups?

Olivia, thank you so much for the question. I think as we move forward, we continue to help clinicians understand who the appropriate patients are for our therapies based on our existing label. We believe we have significant opportunity in the large proportion of patients who are not optimized on their statin or who cannot take a statin. Particular groups of interest are the elderly, as you might imagine, given some of the challenge in the multiple therapies they take. Our combination therapy is particularly relevant there in reducing pill burden. As Sheldon mentioned, we're working in initial conversations with veterans who represent a very high-risk cardiovascular group of individuals who are not currently optimized on their current oral therapies for hyperlipidemia. And finally, given our particular cardiometabolic benefits, the fact that we have a favorable glucose profile versus statins that do actually increase glucose, we have particular targeting around our diabetic patients given that beneficial cardiometabolic profile. To the second point around the CLEAR Outcomes study, we are really very confident in the successful conclusion of the study. As we've reported before, we have achieved 100% of our MACE 3 events and 75% of our MACE 4 events. In fact, we are accumulating our MACE 4 events slightly ahead of schedule, as has been predicted, and do anticipate the second half of 2020 to the 100% accumulation of our MACE 4 event. So again, everything is on track. In fact, the study is tracking, if not better than pre-COVID studies of similar size. And again, very happy and confident that we'll have those results as we've reported.

Your next question comes from Troy Langford from Cowen.

This is Troy Langford on for Joe Thome. Just a quick question on the cash position from my call. What other levers can you pull to further improve the company's cash position? Could you also pull forward any of the cash from the future milestone payments related to Daiichi Sankyo partnership?

Yes. Thanks, Troy. This is Rick. So in the past, we've been focused on non-dilutive means. But as we look at capital and options ahead of us, we're considering all means. To your point, on milestones, it's something of consideration, and we're constantly working on additional ways to bring in capital, so evaluating all options that are out there.

Your next question comes from Jessica Fye from JPMorgan.

I've got 3. First one, apologies if I missed this, but do you expect this cost cutting to enable your cash to take you out to the CLEAR Outcomes data?

Rick, do you want to?

Yes. So Jess, this is Rick. So we do expect that this going to extend the runway beyond prior estimates. But additional capital to achieve top-line results of CLEAR Outcomes is something that's on the forefront for us.

Okay. Great. And then 2 others. Can you explain the comments in the press release about $50 million of your cash becoming restricted cash and just talk about this $15 million threshold with Oberland? I wasn't familiar with that. And last one is just a clarification on the 3Q number. Was it a one-timey issue affecting gross to net this quarter as you closed out some of that patient assistance? Or was this just the last quarter affected by that program that's just going to fall away? I guess, was it above and beyond what you would have otherwise had because the closeout cost is something? Or is it just over now and kind of falling away? I don't know if that makes sense.

Jess, let me answer your question as it relates to Oberland and what we have in the press release. So there was a covenant with Oberland that if we didn't achieve the $15 million in net sales that they would have a restriction of $50 million. So Oberland is a partner of ours, and we are working with Oberland to figure out if there's a way that -- a meaningful way to achieve a waiver on that, and we're having open discussions and dialogue with them. Again, we view Oberland as a very important and strategic partner to ours, and we can provide more update as we continue over the next few months. Rick, do you want to talk about the GTN?

Yes. Yes. So Jess, on the GTN, as Eric mentioned, that last full co-pay card buy-down program was concluded on August 1. So there is a little bit of cost associated with that for the third quarter. But additionally, during the third quarter, wholesalers did adjust their ordering patterns and inventory levels to align with demand. So we had a little bit of a decline on days on hand at the wholesalers, which we quantified to be between $0.5 million to $1 million of net revenue. But other than that, no additional items for price.

Okay. And if I could just work in one follow-up. Does the $50 million cash becoming restricted cash, is that a difference maker for whether you get the data with this kind of current plan or not, i.e. if you do negotiate out of it, would you use them to get the data?

So Jess, obviously, those discussions are ongoing with our partner at Oberland. That's definitely going to extend the runway, as you can see in the revised guidance, of approximately about $50 million per quarter of burn, so that will increase the runway for sure.

There is no further question at this time. You may continue.

Well, I just want to say thank you for everyone for joining the call. We appreciate the questions. We look forward to continuing to update you, and have a great rest of the day.

This concludes today's conference call. Thank you all for joining. You may now disconnect.