scPharmaceuticals Inc. (SCPH) Earnings Call Transcript & Summary

Greetings, and welcome to the scPharmaceuticals Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, PJ Kelleher from LifeSci Advisors. Thank you. Please go ahead, sir.

Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements on this conference call, other than historical facts, are forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding SC Pharmaceuticals' expected future financial results and management's expectations and plans for the business in FUROSCIX. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other important factors that may affect scPharmaceuticals' business, financial condition, and other operating results. These include but are not limited to, the risk factors and other qualifications contained in SE Pharmaceutical's annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed by the company with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and scPharmaceuticals expressly disclaims any intent or obligation to update these forward-looking statements, except as required by law. It is now my pleasure to turn the call over to Mr. John Tucker, Chief Executive Officer of SC Pharmaceuticals. John?

Thank you, P.J., and thanks to everyone listening to this afternoon's call and webcast. This afternoon, I am pleased to provide an operational update before turning the call over to Steve Parsons, our Senior Vice President of Commercials for a more detailed update on the early stages of the Porosix launch; and then Rachael Nokes, our Chief Financial Officer, for a review of our financials. We will then open the call up for your questions. Just 2.5 months into the FUROSCIX launch on February 20, we are pleased with our progress to date, and early feedback suggests that FUROSCIX is being well received in the market. Notably, our commercial team continues to execute on an important leading indicator in services with health care providers and have completed 518 through March 31 and have completed 743 total in services as of April 28. These initial in-service contracts can last at 2 hours as treating physicians often want the entire office to be educated and trained on the use of FUROSCIX. As Steve will detail momentarily, these early efforts are working as intended, as both unique prescribers and total prescriptions written are growing nicely. This supports our strong belief that FUROSCIX will quickly become a core part of the heart failure treatment paradigm, either pre-hospital mission or post-discharge as it allows patients for the very first time to receive IV equivalent furosemide based on similar systemic exposure in diuresis in the comfort of their own homes. Not only is this beneficial to patients who would much rather be treated his home than in a hospital setting, but by avoiding hospital admissions and readmissions, significant cost savings can accrue to commercial, Medicare Part D, and Medicaid payers as well as hospitals who face significant and worsening reimbursement pressure for their heart failure patients. As a reminder, FUROSCIX is indicated for the treatment of congestion due to fluid overload in adult patients with New York Heart Association Class II and Class III chronic heart failure. FUROSCIX is not indicated for use in emergency situations or in patients with acute pulmonary edema. The on-body infuser will deliver only an 80-milligram dose of FUROSCIX. Last quarter, we detailed 2 studies that we conducted that clearly demonstrate the potential financial benefits of FUROSCIX. One prospective study, FREEDOM-HF, focused on select patients who presented to the emergency room with a worsening heart failure event and were treated with FUROSCIX at home as opposed to being admitted to the hospital. The result of the study was that patients treated with FUROSCIX had heart failure-related costs that were lower by an average of $16,995 versus historically matched comparators. And this result was achieved with a very high rate of statistical significance with a p-value less than 0.0001. While this analysis excludes the cost of FUROSCIX since pricing had not been established at the time of the study, the conclusion remains unchanged. In the second study, the Phase II pilot study at HOME-HF compared FUROSCIX with a treatment usual approach in chronic heart failure patients presenting to a heart failure clinic that worsening congestion requiring augmented diuresis. Among the key findings, subjects randomized to FUROSCIX had a 37% reduction in the risk of a heart failure hospitalization at day 30 relative to patients randomized to treatment as usual. The outcome of both studies provides a compelling picture of the benefits of FUROSCIX and further supports the efforts of our commercial team as they work to educate treating physicians and their staff. They also provide critical validation as we engage with payer, pharmacy, and therapeutic committees regarding reimbursement dynamics. On the topic of the payers, we continue to have productive discussions with commercial, Medicare Part D, and Medicaid payers and a continuing effort to make FUROSCIX broadly available to patients at the most favorable terms possible. This involves not only securing initial coverage of FUROSCIX but also working to have it placed on a formulary tier that would be affordable to most patients. We previously indicated that approximately 60% of all heart failure patients can access FUROSCIX and a fixed tier co-pays of $100 or less. And we believe that over time, we can increase this to 75% or more. Reflecting our continued progress, we were recently notified by a top 5 national health plan that FUROSCIX will be placed in a preferred formulary status across all of its commercial plans effective June 1. We regard this as a significant positive reimbursement development, and we remain in discussions with this payer regarding its Part D plans with the goal of securing similarly favorable formula replacement for its Medicare beneficiaries. As mentioned, we are engaged with many other health plans, and we hope to have several more announcements like this in the months to come. In addition, we are also recently informed that we'll obtain national Medicaid coverage of FUROSCIX effective July 1, 2023. The market opportunity for FUROSCIX is significant. We believe it is worth reiterating. In the U.S. alone, they're estimated to be 6.7 million adults suffering from heart failure, resulting in 4 million heart failure events annually. Of those, we believe 2.1 million episodes can be effectively addressed by FUROSCIX. If we assume $3,300 per episode, which is 4 doses of FUROSCIX, we have the potential to access a market opportunity that is nearly $7 billion. And again, this is in the U.S. alone. There were a total of 15.8 million adults suffering from heart failure if we include the other G7 countries. At this early stage, we are seeing a wide range of doses of FUROSCIX per prescription from 2 to 12 as this is at the discretion of the treating physician, and some patients require more aggressive pension than others. Finally, we are well funded with more than $116 million of cash, cash equivalents, and short-term investments as of March 31, providing us with ample resources to continue to execute on our commercial plan. At this point, I'll turn the call over to our Senior Vice President of Commercial, Steve Parsons, for a deeper dive into our early launch metrics. Steve?

Thank you, John. As John indicated, well, it's only been about 2.5 months since we announced the launch and commercial availability of FUROSCIX on February 20. We are pleased with our initial progress. I'll start with an update on our commercial team. We currently have 41 field territory sales representatives, with 3 additional reps expected to join by the end of May for a total of 44. They are conducting face-to-face in services at hospitals, doctors' offices, and heart failure clinics. We stand ready to add more as demand patterns for FUROSCIX continue to emerge, targeting approximately 150 to 200 healthcare providers and 12 hospitals per territory in services that provide healthcare providers with training and prescribing instructions for FUROSCIX designed to ensure office readiness. Demotic train patients are provided at the completion of each in-service. The focus on the in-service is crucial to ensuring effective use and training on FUROSCIX. As John mentioned, our sales force conducted 518 in-services as of March 31 and completed 743 total in-services as of April 28. Many of these in-services are lasting 1 to 2 hours as physicians desire to have training done throughout the entire office or clinic. This reflects the interest in FUROSCIX by healthcare providers. This sales team is a specialized force that can target top clinics and doctors' offices efficiently and effectively. They are focused on building strong relationships with the key constituencies at these clinics through an educational and consultative approach. And while it's still early, we will be ready to add more reps in the field as needed to maximize the clinic and patient access to FUROSCIX. The early results are encouraging. Through March 31, we had 194 total prescribers, with a total of 381 prescriptions written and 161 prescriptions filled by the last day of the quarter. As of March 31, we had 152 prescriptions still pending. The vast majority of the balance of prescriptions pending are either due to prescriptions doctors have written that are acute and ready for patients or prescriptions still in progress with payers. We continue to move pending prescriptions into the film bucket with each day. We have a small number of prescriptions abandoned, and the reason for these cancellations are varied, ranging from patients being unreachable, hospitalized or deceased. There have also been a small number where the patient's co-pay was a little too high. As we've already seen so far in April, we would anticipate that the difference between prescriptions written and fill will narrow as FUROSCIX is placed on more health plan formularies, expanding access for patients and lowering patients out of pocket expenses. At the moment, the average number of doses per prescription is slightly higher than 4, but we continue to believe 4 doses per prescription to be the right number long term. In terms of distribution, as we indicated last quarter, we are pleased with the functioning of our distribution process thus far through our strategic partnership with Cardinal Health as our third-party logistics provider. Cardinal is working well with our 3 specialty pharmacy partners, including our main specialty pharmacy and biometric. Cardinal has shipped initial inventory to the specialty pharmacies, which is reflected in our first quarter revenue. As a reminder, we recognize revenue by FUROSCIX moves from Cardinal to the specialty pharmacies. FUROSCIXDirect, our reimbursement support hub provides benefits investigations for physicians to determine insurance coverage and patient out-of-pocket costs. Our specialty pharmacy partners provide device training to patients and are available 24 hours a day to answer questions about the use of FUROSCIX. From a marketing perspective, we are engaged in a broad omnichannel market awareness campaign to drive brand awareness, adoption, and commitment. This program encompasses many different activities, but some of the key ongoing activities include KOL engagement and development, conference appearances, print and electronic collateral, and the development of both provider and patient websites among other critical tasks. Overall, although we still have a lot of work to do, we are pleased with our early progress and the trajectory that we are on. That concludes my update. I would now like to turn the call over to our CFO, Rachael Nokes, for a financial update. Rachael?

Thank you, Steve. We generated net product revenue of $2.1 million during the first quarter of 2023, and the cost of revenue was $0.6 million, yielding a gross profit of $1.5 million. One quick note for Q1, the cost of revenue excludes inventory that was expensed prior to FDA approval in October of 2022. Research and development expenses were $2.1 million for the first quarter of 2023 compared to $4.3 million for the comparable period in 2022. The decrease was primarily due to a decrease in clinical study and medical affairs costs, employee-related costs, device and pharmaceutical development costs and quality and regulatory costs. Selling, general and administrative expenses were $10.9 million for the first quarter of 2023 compared to $2.9 million for the first quarter of 2022. The increase in selling, general and administrative expenses for the quarter ending March 31, 2023, was primarily due to an increase in employee-related costs, commercial costs, and legal and professional service costs. We reported a net loss of $11.2 million for the first quarter of 2023 compared to a net loss of $7.7 million for the comparable period in 2022. As of March 31, 2023, we held $116.1 million in cash, cash equivalents, and short-term investments compared to $118.4 million as of December 31, 2022. As of March 31, 2023, scPharmaceuticals' total shares outstanding was 35,769,073 shares. That concludes the financial update. John?

Thanks, Rachael. This concludes our prepared remarks. At this point, we will open the call for questions.

[Operator Instructions] The first question we have is from Glen Santangelo from Jefferies.

Glad to see the launch is off to a great start. So congrats on that. John, I don't know if there's questions for you or for Steve, but I did want to follow up on some of the KPIs you gave, particularly around the 381 scripts that were written versus the 161 that were filled. I think, Steve, I heard you say that that's due to a combination of things like the patient being unreachable or hospitalized or unfortunately deceased, but some of them, I think you suggested might have been reimbursement related around co-pay. So I was wondering if you could just flesh that out a little bit more. And I think you said you expected to sort of narrow. Any sort of color around that you can give us would be helpful.

Glenn, this is John. Thanks for the question. I'll let Steve answer that. Steve?

Yes. There's multiple factors that contribute to the fail percentage and the timing at which that happens. As I alluded, it depends on the prescriber, some on the payer, and the patient. It's early. We got to get the HCPs, the health care providers in the habit of providing everything that the payer needs upfront so that they can process the prescription quickly as they have everything that the payer needs. And they forget to include something, it might slow down the process until they can reach them. Some are sending in prescriptions for what we call preapproval. They don't need it immediately. The patient doesn't need it immediately. It's in case they need FUROSCIX in the future. So there's some of that that's in depending, as I said. And in that case, it's less urgent for adjudication. There's some patients who resolve. They order FUROSCIX just in case, and then using the standard of care, the patient results, which is a good thing for the patient. We do still have some plans where the co-pays are too high, and we're actively working to address that. We think the addition of this one top 5 health plan coming online June 1 could really help us there.

Maybe I can just follow up on one more here. I wanted to ask about the in-services completed to date. I think you said 743 as of April 28. And John, I thought I might have heard you quoted at a conference somewhere saying that you would expect to have the bulk of the in-services done by the middle of the second quarter. I may be mistaken, but I don't know if that's still your goal. And I'm just trying to reconcile that versus now you have 44 sales reps. Like when do you think you'll be through the bulk of the in-services with sort of your target audience, and we can think about maybe what that's going to mean from an expense trajectory perspective and maybe how scripts will ramp over the balance of the year once that's completed?

So with the 743 complete, we still have a number booked moving forward, both in new territories and some existing territories. It's important to note that in some places, one in-service isn't enough. They might have all kinds of satellite locations. They might want us to come back to see a different part of their staff. So I think we'll have the bulk of them done here in the next month or so. But we want to be doing in services. Now we don't want to be doing just in-services forever because it slows down your call average a little bit. But we think we'll still be doing them at least through the end of this quarter, probably in the third. But I think the bulk of them will be done -- big book can be done by the end of this quarter.

The next question we have is from Roanna Ruiz from SVB Securities.

Congrats on the progress so far. A few from me. I wanted to ask about the range of doses seen for FUROSCIX. I think you mentioned 2 to 12. So I was curious what's driving the high end of that range where physicians -- what are physicians saying basically to justify those more doses for which patients basically?

Yes. We'll see you'll hear this a lot. It's really early on drawing any conclusions on what those doses will moderate to. We still think our guidance of around 4 will be where we end up. It's a little higher than that right now. We admit the 12 versus the 2. The 2 is really someone just putting their toe in the pool. They're not quite sure how it's going to work yet. And so they just want to see, they want to try it, and then they'll order a couple more. The 12% is more severe patients, people who have an awful lot of fluid, they want to really -- sometimes they'll use 2 a day to try to address that fluid. These are people who are pretty close to going to the ER, or the hospital, they don't need to, but they're closed if they don't get an intervention. So those are the extremes. I think we just wanted to give you color on how big or small they get, but we think it will moderate around 4.

Okay. Great. And thinking about the total FUROSCIX prescriptions written, I was curious if you could give us some detail around if any of them are preadmission versus post-discharge. And just trying to understand the dynamics there. I know it's pretty early, but if you're seeing any themes that would be super interesting.

Yes. We don't capture that information in our Rx start forms or anywhere in our hub data. Anecdotally, we feel like more Rxs are happening preadmission than post-discharge at this early stage. There's a lot more patients who are in the preadmission setting with fluid issues than there are post-discharge, which is really just a 30-day period. So that makes sense. And again, it's early in the launch. We don't know the split, but I would say anecdotally, it's more on the front end before they get hospitalized.

And by the way, thanks for joining the call. I also think that, anecdotally, what we're hearing on these preadmissions, might be part of the reason why we're seeing a little higher average number of units per script because I think if you think about it, a patient that was discharged and is coming back in 5 days after the discharge has been diarized actively, i.e., diarrheas for 4 or 5 days. So you would think they would need less. So I think the higher script count or the higher doses per script, Mike also kind of follow what we're hearing anecdotally that it's more preadmission right now.

Super helpful. And the last one for me. I was curious, what are you seeing in the regional trends? Any sort of fast-growing areas that you're noticing so far?

I don't think it's regional. I couldn't say it's that we have territories that are doing better, the rep, it's really rep-driven where people are ahead of others ahead of the average, ahead of the norm, but it's not regional, and we have territories in every region of the country. Even with just 40 reps, we cover the nation except for the big centers. So I don't have regional observations, just individual rep performance.

It's a little early, John. I think you had one observation, though. I think, Roanna, you asked about the number of doses. And I think that it's -- we had doctors that participated in both the Freedom and the At-Home study as well that have had of experience. And so they have been with a little bit more experience, have a little bit more comfort, and are the ones that are probably using some of the higher doses. So that has had an impact on that as well. And I think the other thing we've seen, which I think is encouraging, is that the doctors that did participate in Freedom and at home have been early writers of the product, which, hopefully, they've had experience and they did well on the study and can embrace it as it gets into the market. But it's really early, but we have seen some of those doctors writing early.

[Operator Instructions] The next question we have is from Stacy Ku from TD Cowen.

And congratulations on the progress. So first, as we think about the different centers and where you're seeing patients, it seems to be a lot of preadmissions, so are you able to get a sense of which heart failure centers might not have easy access to IV theoretics so maybe some more low-hanging fruit, are you getting any feedback for either you're kind of onboarding. So that's the first question. And then the second is just about the clinicians. Would they need to be more comfortable kind of using it post-admission? What do they want to see to be able to use for FUROSCIX to shorten hospital stays? What practices would need to be adjusted from their end? Any feedback that they're providing would also be really helpful. And then last, can you just clarify, is this a single co-pay for this range of doses?

So I think the first one is around any differentiation between places that have access to IV diuretics versus places that don't. And does that affect the adoption rate? I think it does. I think it does. Did I get that question right?

Yes. Absolutely. Yes. Are you seeing any kind of centers that don't have to be IV diuretics and maybe that's why you're seeing kind of this really high branded business.

Yes. Well, they're certainly quicker adopters. If they don't have IV access for sure. There's a much greater unmet need for them than some other places. And I think it's probably true if they do have access to IV, they might treat them with diuretics in the office and then finish the job with FUROSCIX at home and maybe they don't need as many doses if they've done a day in the office, they normally 4 days or 5 days, and it would be on less, right? So I think that's rational. You asked about comfort in the discharge setting. I don't think that's an issue. I think people are comfortable using it there. We don't want to say that there's none happening there. I think people ask me to characterize what the mix is, and it is a little higher in the preadmission. It's just not as many patients who are fluid-overloaded after they've been discharged from the hospital. There's about 20% to 25% who get in trouble in the next 30 days. And so I think those will be our patients, but if you just look at the raw numbers is more patients who are "preadmission".

Stacy, it's John. And I think we think about the different use cases, preadmission, post-discharge, even reduction of length of stay. It's the same patient. It's the same treating dock. It's kind of where they are in the journey. But we do think once physicians get more and more comfortable using it. And I think one thing we're hearing anecdotally is that patients are doing well on FUROSCIX working as advertised, which kind of is a key thing here, once doctors are more and more comfortable using it, even if they start with just their pre-admission patients, we think then they'd expand that usage, if appropriate, for potential early discharge and then for that to keep that patient from bouncing back in the hospital.

We think that's why the end services are important. That's why positive use is important. I think the other question -- I think, John, did you have something to add?

On the IV clinics, I think it's important just to point out that there's only lit makes sense that these things should be very, very common because they make sense to have the ability to give IV diuretics. It's just not commonly used, and we've got sort of estimated that about of institutions have the availability to administer IV diuretics in the outpatient setting because it's logistically challenging to be able to do that. On the flip side, those that do it have demonstrated comfort with the ability to give IV diuretics in that setting and it kind of makes sense for them to be some of the early adopters on the FUROSCIX. And your third question, Stacy, on the co-pays, what we've seen is that it doesn't matter if the dose is 2 or 12, it's a single co-pay for the patient.

The next question we have is from Douglas Tsao from H.C. Wainwright.

Maybe to start, John, in terms of how quick is it taking from a position to participating in-service to actually starting to write? Or are they needing sort of a follow-up call from a sales rep? And then just in terms of the physicians that participated in the FREEDOM and at-home studies, are they using the product in a different way than other people who are writing for FUROSCIX?

Doug, it's John. Thanks for the question. So I'll probably have Steve and John chime in. I think it depends on the in-service. I think we did see early on, I think we talked about on the last call, kind of a queue of patients that some doctors did have, not all doctors clearly, but some. And they were -- already had a patient in their mind or and so we in-service them, they ask for the in-service they outreached to us either at a conference or over the phone. And so they were very quick to activate after and in service. Other physicians, it does take the in-service and then a call, and then maybe another call. It's the same thing. It's the difference between getting the 1 script, which is maybe right after an in-service. What you want to do is change long-term behavior, and that's going to take a number of calls. But it just depends on it. Again, the docs that had a patient in the queue as soon as we activated them, they were right in scripts. And some of them, it's taken a little bit longer to get a patient. And the other question, John. Are the individuals that participate in the study using FUROSCIX different than other clinicians? And I don't think that that's true. I think that the criteria used for the study on inclusion criteria and execution criteria, we're very, very clinically oriented. It's the way that they are evaluated in the clinic today. And I would say it was that they were very -- when they were controlled, they were very pragmatic and real world. So I would say that they're probably using it the same way and others. I think the comment was is that even in some of those studies, they were using a little bit more doses because of the types of patients that they were enrolling in the study. And it was just the total number of doses that I think would be different. But the way in which they're using it, I'd say it's very, very similar.

Yes. That confidence. Some of them are speakers for us, right? So we're doing peer-to-peer speaker programs, and it's very helpful for them to talk to their peer physicians, their peer practitioners, and PAs because they have questions about, well, what about higher BMI patients? What about lower BMI patients? What about elderly patients, 80-year-olds, and they're able to speak to, I've used it in all of these patients, and there's no restrictions in my mind on who you can use it with. So that takes a potential reservation that reluctance is it's unknown to the new prescriber off the table when they hear about the broad use. So we'll continue to do speaker programs, peer-to-peer virtual and we're starting to ramp up face-to-face.

[Operator Instructions] The next question we have is from Nazibur Rahman from Maxim Group.

And congrats on the launch metrics. Just a few. The first question I have is in regards to prior lots, could you provide us some color on, I guess, the rate of prior drugs that are approved like on the first pass? My second question is on the formal decision by the top 5 national health plans. Could you give us some color on how many covered lives that adds? And my third question is, I guess, based on the initial feedback and perception that hospitals and physician groups and practices have gone from FUROSCIX. Have you seen any request to potentially purchase bulk orders of FUROSCIX by set practices?

So let me try to take the last 2 and then maybe turn it over to Steve for the first one. So the ballot purchases by offices probably doesn't make sense. It's not a Part B. It's not buy and bill. But I would think in the future that there will be direct purchases from systems that have -- they might have infusion clinics. They might have pharmacies or they might have an outpatient pharmacy in the hospital just to make sure patients have pretty quick access. So I think that's what we see. What was the second question?

How many lives are in this top 5?

The problem is we'd love to tell you who it is. First, we can tell you you'll know the name well. Maybe I leave it there, but we're really happy and it's the commercial plan. We've had negotiations now, negotiations on their Part D with them now as well. So but we're really not allowed to use their name. It's over 24 million, 25 million lives covered on the commercial side of the business. So it's one of the big guys.

And then the last one, I think, was the PA timing, how long that takes. What's required on the PA? What percentage of those PAs go through it the first pass?

Good question. I actually don't know that data precisely. It's more than not. First pass. Yes. I mean if the doc sends in the information that's required and they're getting better at that, it should be around 80%. 75%, 80%.

Now keep in mind, though, just that 75%, 80%, they still could -- the prior auto be approved, they still could have a very high co-pay. So a PA getting approved, obviously, is huge. But if the patient still has a 1% go insurance, then that's an obstacle.

Well, I think we've said the patient has to be Class I or Class III. So there's some Class IVs that have come through that not indicated for at the moment. So there's a little bit of that factor in. So if they provide the right information, they go through. And Medicare has got rules about how quickly they have to be done.

There are no further questions at this time. I would like to turn the floor back over to John Tucker for closing comments. Please go ahead, sir.

Okay. That concludes our call this afternoon. We hope you take away from this call that we are pleased with our progress to date. And as we continue to execute on our commercial plan, we anticipate continued growth in the percentage of heart failure patients with affordable access to FUROSCIX, which we believe will translate into a nice trajectory for both prescriptions and revenue. We look forward to providing more information during our second-quarter update in August. Thank you again, and have a good evening.

Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.