scPharmaceuticals Inc. (SCPH) Earnings Call Transcript & Summary

Hey, everyone. Welcome back to Cowen's 41st Health Care Conference. It is a great pleasure for me to introduce John Tucker, the CEO of scPharmaceuticals, who's going to provide a brief overview of this company.

Thanks, Georgi. Appreciate the opportunity. Typical forward-looking statement. Really, in a nutshell, scPharmaceuticals, the name kind of says it all. We're using subcutaneous technology to deliver drugs that have already been proven safe and effective, but are delivered in the highest-cost setting of care, the hospital. And by redeveloping the drugs and finding innovative delivery solutions, we're able to take that care from this highest-cost setting of care with all the complications associated with it and deliver that same level of safety and efficacy in the lowest-cost setting of care, where are the best outcomes, and that's in the home. We have 2 late-stage programs. We'll spend a majority of our time today on FUROSCIX for Heart Failure, about a $6 billion market opportunity. We also have a second candidate, subcutaneous scCeftriaxone, which is a broad-spectrum antibiotic, which is another $4.5 billion opportunity. Focusing a bit on FUROSCIX. It's as clear value proposition, as you're going to see, in pharmaceuticals, and I'll walk you through what that value proposition is. It's in expedited path to approval. Our development plan really leverages the 505(b)(2) pathway. We have real strong IP on our drug product up through '35, 2035; on the device component to 2035, plus there's an inherent barriers of entry to keep any generic from coming in. And we're in a good strong cash position, cash through anticipated resubmission approval and launch for FUROSCIX. Our Board, Bill Abraham just joined. He's probably the leading heart failure expert in the country. Jack Khattar is our CEO. I mean, excuse me, our Chairman. He is the CEO of Supernus. I might point out Len Schaeffer, who's the founding Chairman of WellPoint and who is also Head of CMS. He's on one public company Board. He's all about reducing the cost of health care, and that's really what we're going to be able to do. Our lead investors are OrbiMed, RA Capital, 5AM and Lundbeck. So to talk about heart failure. It's a big market. It's about 6.5 million patients in the U.S. that suffer from heart failure. A lot of them are fine on their oral LASIX. They take it every day, and they're fine. But about 3.8 million times a year oral LASIX isn't enough. These patients actually start taking on fluid and the oral just can't catch up. So this is what we're really focused on is a 3.8 million events each year, which equates to about a $5.9 billion accessible market opportunity in the U.S. So it's a big market, a big opportunity, but it's a big problem. Heart failure patients represent about 1/3 of all the Medicare Part A and Part B spending, about 1/3 of these patients. And how are we going to save the system money? How are we going to improve care? Really by reducing patients' admissions into the hospital for heart failure and readmissions into the hospital for heart failure. Here's a snapshot of the problem. Heart failure patients represent about 11% of the Medicare population. They account for 41% of all admissions and 53% of all readmissions. And this is because volume overload, congestion, their oral diuretic isn't working. So again, about 1/10 of the population of Medicare accounts for about 1/2 of all the rehospitalizations. What does that hospitalization cost? Why is that important? It's about $12,000 to hospitalize or rehospitalize a patient for heart failure. That's what it costs Medicare, $12,000. A course of FUROSCIX should cost around $2,800. So that's really the value prop. The difference between $2,800 for a course of therapy with FUROSCIX and $12,000 for an admission or for 25% of the patients, a readmission into the hospital. Here's a bid on the patient journey. Again, these 6.5 million patients, they're all on an oral diuretic. They are heart failure patients, they are on oral LASIX. But they start, maybe it's the progression of disease, but they start taking on fluid. They start having fluid retention. They get worse. What happens is the bioavailability of the oral when a patient is having gut edema, actually decreases to about 10%. So the doctor's prescribing 80 milligrams of LASIX to the patient. The patient is only able to access about 8 milligrams of that. So the cycle continues. They continue to build up fluid in the lungs and in the heart. And what you see is patients will -- they'll start swelling their fingers, their extremities, their belly will start swelling, and they know they're taking on fluid. But what's a doctor to do? Oral has stopped working. He has to give them 100% bioavailable Furosemide. He has to have something that the patient can access the full strength of the medication. So that's IV LASIX. Where do you have that administered in the United States? It's in the hospital. So these patients are having fluid overload, the oral stopped working, they go into the hospital, they stay in the hospital for 5.2 days, and then they come out of the hospital when they're fully decongested, or so we think. But we know half of these patients actually leave the hospital, and they're still congested. So how are we going to intervene? What's FUROSCIX going to do? We look at 2 opportunities. One we call a prevention window. These are where these patients are on their oral LASIX, start taking on fluid. This doesn't happen in hours or minutes. It happens in days or weeks. That patient sees that their weight's up a few pounds, that they can't get their wedding ring off, that their ankles are swollen. They call the doctor and say, "Hey, hey, doc, it's happening again. I'm taking on fluid." Right there, the doctors should prescribe FUROSCIX. "let's get that fluid off without you having to go to the hospital." We do know, though, that some patients are just going to end up in the hospital. When they get discharged, there's a period there where there's an opportunity for intervention. We talked about readmissions. Readmissions are a big deal in heart failure. Medicare has labeled heart failure one of the diseases for their readmission reduction program. So if hospitals have higher readmission rates for heart failure than the national average, they actually could penalize financially on all of their Medicare billings, including those profitable hips and knees. So these hospitals are really motivated to keep these patients from being readmitted within 30 days to the hospital. So now we have a patient who's been in the hospital 5 days, who's been discharged from the hospital, comes back for their post-discharge visit and still has residual congestion. What's that doctor going to do now? This patient just came out of the hospital. They just paid $12,000. The patient just was in a hospital for 5 days, exposed to nosocomial infections, COVID, whatever. Right there is a chance. "I'm going to give you -- I'm going to prescribe you FUROSCIX. I'm going to give you 100% bioavailable Furosemide, and you're going to do this at home, and you are not going to be readmitted to the hospital." Those are our 2 opportunities to intervene. So I've talked about FUROSCIX. What is FUROSCIX? FUROSCIX is a drug-device combination that includes our proprietary formulation of Furosemide. IV Furosemide has a pH over 9. It'd be like if you try to use that subcutaneously, it'd be like putting Tide detergent under your skin, impossible to deliver. So we've spent a few years and millions of dollars developing a formulation of Furosemide that's stable, and that's pH neutral, so it can be delivered under the skin. So that's what the company was based on its FUROSCIX, its proprietary formulation of 100% bioavailable Furosemide. We have IP on this until 2034. We had to find a way to deliver it? You can't do an [ auto-injection ] of 10 mls of Furosemide. We needed to deliver it over time. I talked about the 505(b)(2). You have to match the PK of the reference drug, which is IV Furosemide. We are a replacement for IV Furosemide given in the high-cost setting of the hospital. So we had to match the PK of that. So we've developed with West Pharmaceuticals on infusor that actually infuses our Furosemide over a 5-hour period of time. We give an initial bolus dose over the first hour of 30 milligrams and then 12.5 milligrams an hour for the next 4 hours. And this matches the PK of the IV. So this is a smart device. This is the same device West developed for Amgen. Albeit the Amgen is 3.5 milligram -- mls, ours is 10 mls, but it's the same backbone of the device. It's a prefilled cartridge. It's incredibly simple for the patient to use. They just drop that cartridge in the infusor, they shut the door, they peel off the 3M tape on the back, they put it on their stomach, and press the button. It's a biphasic delivery, as I mentioned. It's 30 milligrams in the first hour. 12.5 milligrams an hour for the next 4 hours. And that delivers the Furosemide with the same PK profile as the IV. And again, that's the goal. If you look back at that device, that device, which is about the size of an iPhone, replaces a day in the hospital. That's a day in the hospital. That iPhone-like device that the patient puts on their stomach, presses the button, receives their IV-strength Furosemide and does not have to be admitted into the hospital. We've done our activities of daily living. It doesn't interfere with any of their activities of daily living. These are heart failure patients. They're not playing basketball. But at the same time, they want to do the things they want to do. They want to go get the mail. They want to walk the dog. And our -- when we looked at the ADLs, no interference with their ADLs with FUROSCIX. So this is our pivotal trial. Again, this looks at our 5-hour biphasic delivery against the delivery of the IV. And as you can see, we're equivalent to the PK of the IV, we looked at diuresis, and it was equivalent as well. So this is our pivotal study. The FDA has agreed that this matches the equivalence they need against the PK. So we rely on this study. So where are we with the FDA? Fortunately, we received a Complete Response Letter back on December 3 of last year. I think it's important to note they didn't ask us for any additional clinical, no efficacy, no PK, no more safety data, no device modifications, no human factors. They were focused on 2 things, and 1 was the big thing, which is the inability to do pre-approval inspections. These are at our West Pharmaceuticals. Again, I mentioned that West is our partner on the infusor. This is the same site where Repatha is manufactured, but the FDA let us know back in October with a General Advice Letter that they needed to go into West. So we feel, once we resubmit the NDA, they'll be able to go in West Pharmaceuticals. Important to note, there's no outstanding 483s, was inspected in 2019, clean bill of health. The same with our packager, Sharp. The FDA has told us they want to go in there. They couldn't go in there because of restrictions due to COVID. No outstanding 483s, Sharp's been inspected a number of times. There's hundreds of pharmaceuticals that go through Sharp. But -- and I do feel they'll probably be inspected prior to our resubmission. And the third manufacturer, we do have a little alcohol swab that patients clean the site before they attach the infusor. They did have an outstanding 483 that the agency noted. They've since taken corrective action. CDRH has signed off on that. We're waiting for CEDR, but we anticipate that being cleared up prior to resubmission. So what we -- the other thing we need to do is some modified bench tests. These are not clinical trials. These are not put on patients. These are straightforward bench tests on our commercial units. And then when we finish that, we'll be ready to resubmit. We anticipate that being somewhere in Q3. We're making the device. We start making the devices this month. We'll age them, and then and we'll do those tests and then be able to resubmit in Q3 of this year. So let's talk a bit about the market. Commercial overview. Again, I talked about the 6.5 million patients. It's about 2.1 million addressable events for us, there's 3.8 million total. We think 2.1 million are appropriate for FUROSCIX. We're looking to charge about $700 a unit, 4 units as the average length of therapy. It's about 2.8 -- $2,800 for a course of therapy, resulting in about a $6 billion market opportunity. And it's really simple. We're focusing on 2 things: prevent that admission in that prevention window and prevent that readmission on the post discharge. So when we look at stakeholders. This is one of the rare things where your stakeholders are really aligned. Obviously, the patient doesn't want to be in the hospital for heart failure. They don't want to be in the hospital. Again, I said they're heart failure patients, but they don't want to be in the hospital, especially now being exposed to COVID. Even before that, these are the most vulnerable patients for a bad outcome on nosocomial infection. So you have a patient that doesn't want to go in the hospital. You have a payer that doesn't want them to go in the hospital. Because it's costing about $12,000 per admission. And we talked about that 25% of patients who are readmitted. So that's the reason the payers are really aligned with us that we need to find a way to better treat these patients. They're incredibly expensive, about 1/3 of Medicare. I mentioned that heart failure is a top condition targeted by the CMS hospital readmission reduction program. CMS recognized who weren't doing a good job, went to the hospitals and physicians and said, "We're going to start penalizing you for these readmissions." And don't forget, these Medicare Advantage Plans bear both the medical and pharmacy costs. Let's talk about the hospital. Everyone says, "Doesn't the hospital want full beds?" Of course, they do. They just don't want full beds of heart failure patients. They get paid a DRG for hospital patients -- for heart failure patients of 3.9 days. They overstay that DRG on average about 1.5 days. So the hospital is already -- the patients are already overstaying the DRG. But then the real issue when you talk to hospitals is this readmission penalties. Over $560 million last year were taken away from Medicare hospitals because they had heart failure readmission rates higher than the national average. And how about physicians? Well, it's really a failure of treatment of diuretic management if a patient is hospitalized. Something failed. So these physicians know that patients have worse outcomes if they have to go to a hospital and then once they come out of the hospital. So physicians are aligned with us on let's try to treat them a little earlier and let's try to [indiscernible] fully when -- so they don't get admitted. And then when they're discharged, if they're still at risk and they still have residual congestion, let's aggressively treat them so they don't bounce back into the hospital. So you have an alignment of payer, physician, hospital and patient. So how are we positioning this? Really, it's giving physicians and patients the ability to have IV-strength, 100% bioavailable Furosemide, where they want to receive it, which is home. And kind of when. So it gives patients and physicians flexibility and giving them the therapy they need, that IV-level strength they need, but giving it to them at home. So we did market research, obviously. We talked to physicians. We talked to heart failure specialists. We talked to cardiologists. We talked to a really key component here, who's the nurse practitioners that are in heart failure. And said, "Here is our target product profile. Here's what we're doing. Will you prescribe this?" Well, it's not surprising. The heart failure specialists, 93% of them said they would; cardiologists, 96%; and then even the nurse practitioners, at 94%. It's not that surprising. They've been using LASIX, either oral or IV, since they came out of med school. We're giving them IV-strength Furosemide, something they're familiar with. Again, we're just delivering it differently and allowing us to deliver at home. We then said, "How long until you adopt this?" And we all know of launching drugs, and doctors will do onesies and twosies until they're comfortable. Here, they're ready to adopt it quickly. 90% of the heart failure specialists said they intend to prescribe within 6 months. 86% of the nurse practitioners, which are usually a slower-adopting group, but 86% of nurse practitioners said they'd adopt this within 6 months. So a lot of docs going to try it, they're going to try it quick. But then the question is, "How much are they going to use?" So we actually did different types of research. We said to the heart failure specialists, the cardiologists and nurse practitioners, we said, "Let's take the last 2 patients, those pre-acute patients in the prevention window and those post-discharge patients," we call them clinic-based and hospital-based in this study. But on those preadmit patients, they said 2/3 of the time they would use FUROSCIX to prevent that hospitalization. Okay, the patients come out of the hospital. Physicians know about 1/2 of them are still suffering from some level of congestion. They're going to use it in almost all of those patients, all of that 50% coming out. So any way you look at this, that's a $5.9 billion market opportunity, physicians choosing it both to prevent hospitalizations and then to prevent readmissions. So how many reps do we need to do this? So we can target the top 4 deciles, about 435 hospitals. And this isn't a hospital-based product. It doesn't need to get on formulary. It won't be used in the hospital, but the hospitals are really the kind of the center of the care continuum.. So we'll target these top hospitals, about 435% (sic) [ 435 ] of them. But that's -- it's very highly concentrated. It's about 40% of all of the discharged, and the Furosemide volume sits in 435 hospitals. We can also target about 6,000 cardiologists, heart failure specialists and heart failure nurse practitioners, with a sales force of about 40 reps. And you think about that, 40 rep is about $10 million to be able to target about 40% to to 50% of the opportunity, to look at the spillover. For us to get to that 75%, 80% of the opportunity, we probably need to go to about 125 reps, but we'll launch with 40 of our own reps. Payers. This is Medicare, about 75% will be Medicare Part D. You have Part D, which are Advantage Plans; and Part D, which are PDP. Advantage is about 50% of it, and we think that trend will continue. We've talked to all of these payers. It's as a clear value proposition as you possibly can imagine. We're doing right now an HEOR study, we call FREEDOM. We've announced that we've started that study. We hope to have top line data sometime mid this year. We think that'll really show the value of keeping patients out of the hospital. But even as we sit here today, about 55% of these patients are going to have low fixed co-pays. So Medicare Part D, both Advantage and PDP and again, about 55% of the patients will have a fixed reduced co-pay. And this is before we announce the data from our HEOR study, which we're very excited about. So how are we going to support these patients? We'll have a patient support hub, where we'll give them training, live support, online video, we'll have home nursing support. We'll have specialty pharmacies, probably 1 or 2 we'll work with. And the hub coordinates with the specialty pharmacy. We will have electronic benefits verification, prior authorization. If we launch [indiscernible] prior auth, we think the prior auth would be failure in oral drug. Well, our job is to get patients back on oral as soon as they can without having to go to the hospital. So that PA is not going to really hurt us at all. And we'll guarantee that PA through the specialty pharmacies during the launch part of the life cycle. And then again, we'll have a patient assistance program as well. Where are we financially? We haven't announced the year-end from 2020 yet. We're doing that in the next couple of weeks. But we estimate about $105 million at end of 2020, which is more than enough to fund operations through approval and the launch into 2023. We haven't given guidance on what our burn will be for 2021. We have said it will be in the same range of what we burned this year, which we said was going to be $8 million to $10 million a quarter or in the $35 million range. We anticipate it being in that same range. So that gives us cash flow into 2023. We do have venture debt with SVB and Solar Capital, a $20 million note that goes through September '23, it starts amortizing later this year. And we have about 27 million shares outstanding. So in summary, it's a fairly simple story. We have a huge market opportunity, $5.9 billion market opportunity in heart failure. We have a patient base that's about 1/3 of all Medicare costs on these patients with alignment between patient, physician, hospital, payer on having to treat these patients better and actually using punitive -- financial punitive methods to try to improve treatment. Clearest value proposition you can have. Looking at that $12,000 hospitalization versus a $2,800 cost of therapy. Well-defined development plan, strong intellectual property and a cash runway through the resubmission, approval and the launch. So that's what I had, really thank Cowen for allowing us to tell the story. We're really excited. We're going to have data coming out here somewhere midyear, which we think will really demonstrate the value prop in a trial. So again, thank you.

Thank you so much, John. Thank you so much for accepting the invite to present at the conference, and we're really excited to continue looking at all the progress that is happening. Thank you.

Great. Thank you.