Evoke Pharma, Inc. (EVOK) Earnings Call Transcript & Summary

Good afternoon, and welcome to Evoke Pharma's Fourth Quarter and Full Year 2020 Earnings Conference Call and Audio Webcast. With me today are Dave Gonyer, Evoke's Chief Executive Officer; and Matt D'Onofrio, Chief Business Officer; as well as Chris Quesenberry from Eversana as GIMOTI Chief Commercial Officer. Earlier today, Evoke issued a press release announcing financial results for the fourth quarter and year-end December 31, 2020. We encourage everyone to read today's press release as well as Evoke's annual report on Form 10-K, which is filed with the SEC. The company's 10-K report and press release are also available on Evoke's website at www.evokepharma.com. In addition, this conference call is being webcast through the company's website and will be archived there for future reference. Please note that certain of the information discussed on the call today is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. We caution listeners that during this call, Evoke's management will be making forward-looking statements. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in Evoke's press releases and SEC filings, including its annual report on Form 10-K and subsequent filings. This conference call contains time-sensitive information that is accurate only as of the date of the live broadcast. Evoke undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. With that, I would now like to turn the call over to Dave Gonyer.

Thank you, Christine, and thank you all for joining us this afternoon for Evoke Pharma's Fourth Quarter and Full Year 2020 Earnings Conference Call. Before we begin, I'd like to first recognize and thank all the critical workers who have helped to ensure the public safety and health during these unprecedented times caused by the COVID-19 pandemic. Despite the challenges we have all experienced since about the same time last year brought on by the pandemic, we are pleased to be with you today to share details on what was a transformative year for Evoke Pharma. It was a year of execution for Evoke despite the headwinds from the pandemic. We secured FDA approval for GIMOTI in June, gained Orange Book listing for 2 patents and then filed for several more, maintained appropriate finances and commercially launched GIMOTI in the U.S. While we reported our fourth quarter effective revenues today, we are pleased with the meaningful growth that we're seeing in 2021. We're excited with the positive response and receptivity from our targeted healthcare providers to GIMOTI's launch and the benefit it provides to patients. And as Chris will discuss in further detail, we are hearing encouraging feedback by existing and new prescribing physicians and patients. We are proud to have successfully executed on our business strategy,and in achieving our most critical milestones of 2020. FDA approval of GIMOTI and the subsequent commercial launch in the U.S. through our partnership with Eversana. With the launch of GIMOTI, we are now a commercial pharma company and are providing an important new treatment option for patients living with diabetic gastroparesis. Patients in this underserved market are seeking options to improve their quality of life and as a result of many hours of dedication and hard work by our team, consultants and the clinical investigators supporting us along the way, patients now have GIMOTI as a new treatment option. As many of you may know, in January 2020, we began our collaboration with Eversana for the commercialization and distribution of GIMOTI in the United States. This 5-year agreement from the October launch date has enabled us to leverage their integrated suite of capabilities and their highly experienced sales and marketing team. This also allowed us to avoid significant capital investment by utilizing their infrastructure, expertise and financial resources, which were crucial ahead of our product launch and now even more important upon commercialization. GIMOTI is the first novel pharmaceutical treatment for gastroparesis to hit the market in 4 decades and represents a significant market opportunity with an estimated 12 million to 16 million patients who have symptoms associated with gastroparesis, of which 80% women and diabetes being the most common cause. It's estimated that only approximately 2 million to 3 million patients are currently being treated, and we believe this may be due to the limited therapeutic options. Regardless, there are still approximately 3 million prescriptions of oral metoclopramide written each year in the United States, with the majority of them prescribed specifically to treat gastroparesis. Our goal is to describe to healthcare providers currently writing these prescriptions the benefits of GIMOTI in its non-oral delivery for those patients currently not receiving maximum benefits from oral treatment. We believe physicians and patients are in critical need of GIMOTI, and our intent is to [ stack ] GIMOTI as the drug of choice for diabetic gastroparesis. Our sales force of dedicated Evoke gastroenterology care specialists is currently calling on targeted gastroenterologists and select healthcare providers that are familiar with oral metoclopramide and treat patients with diabetic gastroparesis. Our strategic message outlining the benefit of bypassing the GI track of patients that have delayed gastric emptying is straightforward and meaningful, and to date, well received by providers. Our sales team is only at the beginning stage of this focused message, and we have had a positive response seen through our current market research. This encouraging response has been followed with daily messages of physicians seeing the benefits for their patients and is showing up in patient enrollments through our EvokeAssist program, with our best week to date ending just last Friday. As I, myself, have led specialty sales teams and the revenue line for prior companies, I remain very enthusiastic about the prospects for GIMOTI based upon these daily discussions and feedback from those on the front lines of our pursuit. GIMOTI's commercial launch in late October 2020 was successful despite the challenges of the COVID pandemic. This success was made possible by the reputation and quality of our strong partners, especially Eversana, and our manufacturing partner Patheon, which is a division of Thermo Fisher Scientific. And as we look back on the fourth quarter, including our accomplishments over the past year, we aim to continue our innovative development and expand our pipeline of novel product candidates in GI disorders that may not be satisfactorily treated with current therapies. The commercial launch of our novel treatment for patients suffering from diabetic gastroparesis is an important milestone reflecting years of clinical and product development. GIMOTI fills a major treatment gap by providing the current standard-of-care treatment through a non-oral delivery. With the support of an integrated commercial team from Eversana, we're confident in our ability to address the large and growing market opportunity. We're eager to provide patients and their physicians with a new, novel and important treatment option. With that, I'll turn the call over to Chris for further details on the GIMOTI launch progression. Chris?

Thank you, Dave. I'd like to begin by echoing the value that GIMOTI represents to healthcare providers and their patients struggling with the symptoms of acute and recurrent diabetic gastroparesis. This disease does not take a holiday, it does not go away and there is no cure. Importantly, these patients do not have enough options to control their symptoms and many must alter their daily life to cope with its impact. It is specifically for these patients and what they endure so bravely that we are working hard to bring GIMOTI to them. I'm proud of the partnership forged between Evoke and Eversana. Together, we have laid out a disciplined commercial plan to realize the potential for GIMOTI, and we are executing that plan in a deliberate and stepwise manner. The foundation of our commercial efforts is built on our vision for GIMOTI to be the preferred treatment to improve the health and daily life of patients struggling with diabetic gastroparesis. We have built a strong value proposition and clear messaging for our target audiences and developed a compelling promotional campaign to communicate to providers and patients alike. To support patients and overcome access hurdles that are typical for any new launch brand, we developed a patient support hub and co-pay program where patients and the providers can enroll in the program called EvokeAssist and obtain GIMOTI via our exclusive pharmacy distribution program. At the beginning of October, we trained our newly hired sales team and conducted a virtual launch meeting. These 27 highly motivated gastroenterology care specialists began promoting directly to HCPs soon thereafter. We have supplemented their capacity with an internal sales specialist team that is making outbound calls to a targeted physician list that practice outside of the territories of our 27 field representatives. Coinciding with our initial in-person promotion, we launched websites for providers and patients and implemented online targeting, search and banner advertising for both audiences. The initial reception we have received from customers has been positive. They reinforce that a nasal route of administration makes sense for this patient population that can experience vomiting or delayed oral absorption and have indicated a need for new options for patients with diabetic gastroparesis. Our sales team was able to contact many of the targeted offices, but not all, due to the ongoing pandemic and despite promoting during the fourth quarter, which contains several major holidays and is traditionally a more difficult promotional quarter from an access perspective. Additionally, the ongoing COVID pandemic has impacted our launch in similar ways to others in the industry. Specifically, it has impacted our team's ability to travel and meet customers face to face. While access to offices has been better than expected, access to healthcare providers has been lower than we'd like. While a specific benchmark or numeric assessment on how the pandemic is impacting our launch efforts is not available, the data from various sources, like IQVIA and Johns Hopkins, indicate that 41% of chronic patients, especially those with comorbidities who are most prone to COVID-19 are avoiding care. These numbers were as of July. And it's possible that this only intensified with a COVID surge in the fourth quarter. Additionally, IQVIA's COVID tracking further indicated that there were 920 million missed patient diagnoses and among specialty, gastroenterology had the second-highest diagnosis backlog. Those data inform us that there are fewer patients coming into the office. That is further compounded by data showing a 56% decrease in face-to-face [ retail ] and a significant loss of prescription volume. That said, our representatives have reached about 70% of their target offices and have established strong initial relationships with offices that have identified key personnel who are important for GIMOTI for prior authorizations and refills. As we look to the data regarding those patients who have tried GIMOTI, there are several insights that I'd like to share: First, our typical prescriber has been a gastroenterologist, and to a lesser degree, primary care physicians who are affiliated with a gastroenterology practice. A good proportion of prescribers have written multiple prescriptions for GIMOTI. The typical patient who has received GIMOTI is a female between 50 and 64, who has commercial insurance, matching our ideal patient profile. Like any new brand coming to market, most payers have not evaluated GIMOTI and determined formulary coverage. However, in the days since launch, 65% of dispenses are commercial, either covered by a commercial payer or our [ propay ] program and 27% were covered by a Medicare plan. The remainder were covered under TRICARE and a nominal number through our patient assistance program. Of the patients who have tried GIMOTI, nearly 40% had at least 1 refill. That's a bit of an underreporting because not all patients have come up for the first renewal. In the month of December 2020, after our initial launch, Eversana conducted market research, utilizing an ATU study. The study is a quantitative survey with 104 physicians and measures awareness, trial and usage for GIMOTI. We were very pleased to receive positive feedback in key areas of interest, including initial state of prescribing and future intent to prescribe trends and how healthcare providers view the suitability of GIMOTI in certain patient populations. 21 of the 104 respondents reported that they had already prescribed GIMOTI. Healthcare providers indicated that the primary driver of prescribing and switching to GIMOTI was due to the lack of effectiveness with the current standard of care. 80% of gastroenterologists and 50% of PCPs indicated they intended to prescribe GIMOTI. 94% of gastroenterologists indicated GIMOTI would be appropriate to use in moderate to severe patients. And despite being early in launch, a significant number of gastroenterologists indicated nasal as the most appropriate route of administration for gastroparesis. So we're feeling quite positive about the current reaction GIMOTI is receiving from the healthcare community. We know GIMOTI is an effective treatment option, and with further education, there should be continued adoption with healthcare providers, especially gastroenterologists who might favor prescribing GIMOTI as a new approach to treat gastroparesis. As awareness and trial of GIMOTI expands, we are continuing to build upon our launch plans and to accelerate awareness, encourage trial and ensure access to GIMOTI. Some key areas that we are addressing include: We are excited to expand the patient engagement to include a social and digital campaign. Our patients are online in seeking support and alternatives to current therapy. As HCP awareness is growing, we will now message directly to patients and provide them support that has been absent and help them learn and get access to GIMOTI. We launched an e-prescribing pilot and are expanding our e-prescribing initiative with a partner to integrate GIMOTI and our specialty pharmacy into ambulatory EMR platforms. Our goal is to integrate with the usual workflow of our targeted audiences so that we ease the prescribing of GIMOTI and facilitate the connection to our reimbursement specialists and EvokeAssist. Lastly, we are registered with Center for Medicare & Medicaid Services, or CMS, to participate in both Medicare Part D and Medicaid programs as many patients with diabetic gastroparesis are covered through those channels. The registrations were complete in December and January, respectively. And for Medicaid, in particular, notices were sent to individual states at the end of January, letting them know that GIMOTI was available. Of course, each state will make its own determination about GIMOTI on their PDL, or preferred drug list, and we expect some may request additional information prior to full coverage. For both programs, this registration represents access for now but importantly allows for reimbursement should they decide to cover. As a subset of our broader stepwise plan, we are excited about all of these initiatives, targeted and disciplined HCP and patient marketing, electronic prescribing and expanding access. These will be the key to our success in bringing GIMOTI to market. I'd like to end my comments with where we started, patients. We've heard from patients describing their fight as they post pictures online of oral tablets they have just vomited up or those that are wondering why they don't seem to get relief after taking oral medications at all and are thinking about any other mode of delivery like depositories and injectables for a wide collection of the multiple types of medications they are utilizing. We hear your calls for help and are empowering our sales organization to get the word out about the benefits of GIMOTI. I would now like to hand the call back over to Dave.

Thanks, Chris. We're still very early in on our launch of GIMOTI. However, physicians' feedback has been very positive. [indiscernible] neurologist offices will need to fully open and more patients to feel comfortable going back to doctors' offices to help physicians give them an opportunity to try something new. Drug launches have gone slower during the pandemic, and continued progress, getting COVID under control is needed. Now let me turn to Matt D'Onofrio to review the agreement we have with Eversana and the fourth quarter and year-end 2020 financials. Matt?

Thanks, Dave. Once again, thank you all for joining this afternoon. Let me tell you the basics of the Eversana agreement. Eversana will receive reimbursement of its commercialization costs, pursuant to an agreed-upon budget, and are only paid back to a portion of the revenue that is recognized and received. Once those costs are covered, Eversana will receive a percentage of product profits in the mid- to high teens and Evoke retains over 80%, net product profits or net sales of GIMOTI, less reimbursed commercialization costs, Evoke manufacturing and Evoke administrative costs set as a fixed percentage of net sales and third-party royalty. During the term of our agreement with Eversana, they have agreed not to market, promote or sell a competing product in the United States. Before I review the financials for the fourth quarter and the year-end 2020, I'd like to highlight that Evoke has historically been a lean organization of 5 core people. We believe that we have always been positioned from our cash flow and annual spend. That said, this past January, we completed an offering of 5.75 million shares of common stock, including underwriting [indiscernible] option to purchase additional shares. Our gross proceeds from the offering were approximately $14.4 million before underwriting discounts and commissions and estimated operating costs. We believe this financing will extend our runway into the first quarter of 2022 without consideration of potential GIMOTI revenue. Now let me review our financials for the fourth quarter and full year-end 2020 results. For the fourth quarter of 2020, net sales was approximately $23,000, and the net loss was approximately $2.3 million or $0.09 per share compared to a net loss of approximately $1.4 million or $0.06 per share for the fourth quarter of 2019. For the year ended December 31, 2020, net loss was approximately $13.2 million or $0.52 per share. This compares to a net loss of approximately $7.1 million or $0.32 per share for the full year of 2019. This increase was primarily due to the reporting of a $5 million expense in June 2020, upon achieving a technology acquisition milestone related to the FDA's approval of GIMOTI, along with costs associated with the commercial launch of GIMOTI. Research and development expenses totaled $0.1 million for the fourth quarter of 2020 compared to approximately $0.6 million for the fourth quarter of 2019. For the full year of 2020, research and development expenses were approximately $6.6 million compared to approximately $3.4 million in the year prior. This increase in 2020 was primarily due to reporting a $5 million expense in June of 2020, upon achieving a technology acquisition milestone related to the FDA's approval of GIMOTI. The milestone will be paid in June of 2021. For the fourth quarter 2020, selling, general and administrative expenses were approximately $2 million compared to approximately $0.8 million for the fourth quarter of 2019. For the year ended December 31, 2020, selling, general and administrative expenses were approximately $6.4 million versus approximately $3.7 million for the full year 2019. Of the total selling, general and administrative expenses incurred during the year ended December 31, 2020, approximately $2 million was related to pre-commercialization and commercialization activities for GIMOTI. We expect that selling, general and administrative expenses will increase in the future as we continue to progress with the commercialization of GIMOTI, and we reimburse Eversana from the net profits attained from the sales of GIMOTI. Total operating expenses for the fourth quarter of 2020 were approximately $2.1 million compared to total operating expenses of approximately $1.4 million for the same period of 2019. For the year ended December 31, 2020, total operating expenses were approximately $13.1 million compared to approximately $7.2 million for the full year 2019. As of December 31, 2020, the company's cash and cash equivalents were approximately $8.1 million, which excludes approximately $13.1 million in net proceeds raised from our recent common stock offering in January of 2021. We expect sufficient runway to fund our operations into the first quarter of 2022. Let me turn the call back over to Dave for closing remarks.

Thank you, Matt. I'd just like to close by thanking our shareholders and partners and employees for getting us over the finish line this past year. In 2021, our team will continue to build on the commercial launch of GIMOTI and to increase awareness to ensure patients and the providers have access to this important product. That concludes our prepared remarks. We'd now like to open the call to questions. Operator?

[Operator Instructions] The first question comes from the line of Ram Selvaraju.

This is [indiscernible] speaking on behalf of Ram. Congrats on the quarter. So I'll ask a few questions and then jump back on the queue. I was wondering if you had any indication how many physicians prescribed GIMOTI to date and what percentage of these were repeat prescribers.

Thanks, [indiscernible]. This is Dave. I'm going to turn that question over to Chris.

Thank you for the question. So to date, we have 108 unique prescribers, and that number is growing daily. And of those, about a 30% to 40% of them are repeat prescribers.

That's fantastic. And any indication what percentage are gastroenterologists on this?

Yes. The vast majority of the prescribers are gastroenterologists, which is our targeted customer. There are some primary care physicians that have prescribed, but in those cases, they're affiliated with gastroenterology practices, so nurse practitioners and PAs as well as other internal medicine physicians.

Okay. And the next question kind of centers around the promotional performance provided by Eversana. Do you have any metrics or indication of how well the promotion is going?

Well, we're working on that now. We've had just the fourth quarter to look at that. We're looking at the ATU in different ways that we'll be able to analyze how the promotion and the reps' effectiveness is in the physicians that we're calling on. So that's being done now.

Understood. And just one more before I jump back in the queue. We were wondering what the gross net discount levels look like at this point and where they might be trending.

This is Matt D'Onofrio. Great question. So in regards to the Q4, given the modest amount of sales, it's kind of early to give a specific number around that. However, as we've stated in the past, we haven't been contracting with parties out there. So you can understand that, that has not had a negative effect on us thus far. We continue to take that same approach. While in the future, we may eventually engage more in the contracting aspect, and that may change, but today it hasn't been a significant part of the overall prescriptions.

The next question comes from the line of Yale Jen.

Dave, that -- you have mentioned at the beginning that you've seen a very positive trend this year so far. Would you elaborate a little bit more?

Sure. Thanks, Yale. Yes, we've been encouraged. Remember, we launched this product in October, near the end of the month, when the drug was available. And then we were into at least 3 major holidays and the pandemic. So -- and we have plenty of new representatives and new territories, talking about a new product for a disease that hasn't been discussed in at least 20 years. So starting out a little bit slow at that point, we gained significant traction after the first of the year with being able to find different ways to access physicians. And with more access, obviously, and more discussions with physicians, we've seen better trends in terms of prescriptions.

Okay. Great. That's helpful. My next question is that it seems that the physician buy based on your market research was quite good, but the gating factor seems to be that the patients not visiting the clinics to get treated. So how would you -- I mean, what's the current sense of what this trend might be -- the patients' trend might be in terms of visiting the clinic? And what other things you guys can think about to enhance that or improve that?