Shield Therapeutics plc (STX) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Shield Therapeutics plc investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Anders Lundstrom, CEO. Good afternoon, sir.

Thank you so much, and welcome, everybody, to Shield Therapeutics Quarter 1 2025 Trading Update. I'm Anders Lundstrom, the CEO; and together with me today is Santosh Shanbhag, who is our CFO. So this is our disclaimer, and I'll leave it up for a few seconds if you are reading it. Let's move on. So let me start with looking back at 2024. So 2024 reflected a significant step-up in revenue along with making substantial progress in expanding our global footprint together with our partners. So during the final quarter of 2024, we took a decisive step to strengthen our balance sheet by securing a $10 million equity funding from our largest shareholder, AOP. And that is really a game-changing moment for the company. So now we can look ahead in a very different manner from what we were able to do previously because we spent a lot of time trying to raise money just to make the day-to-day operations outlook be secured. Now we can start planning secure more strategically what the next steps for the company will be. Then reflecting on our 2024 performance, we're very proud of our team's effort in making significant progress towards achieving our strategic goal of being cash flow positive by the end of this year. So in this quarter, we focused on 3 key ACCRUFeR-related initiatives. One is we have reinitiated our digital campaign towards our health care professional and initiated a new digital marketing campaign towards patients. So we are doing that to drive the increased awareness for ACCRUFeR. I will come back to that later in more detail in this presentation. Also new for this year or this quarter is we realigned our sales force territories. What we have done, we focused on the territories where we have the highest potential, best coverage and historically the highest ACCRUFeR sales. And we continue to decrease the impact of our consignment business. So if you remember, that is an initiative that started in the last quarter of last year and the consignment business is the business where we either give away drug for free or where the drug is highly, highly subsidized. We started to see the full impact of these efforts in late February and March. And the reason we couldn't see the full impact earlier was mainly due to 2 events. It was really crazy weather events in January across this country. And secondly, we were fully staffed with our sales force in the new territories by end of February or early March. So just to give you one other data point. In March, we saw our second highest non-consignment sales ever only triumphed by October of last year. So it's a very, very positive sign, and that's why we still are reiterating our goal of being cash flow positive towards the end of this year. The peak revenue potential for the U.S. continues to be very high. The market is stable. So we still think we can reach $450 million in peak revenues and our IP hasn't changed since we spoke the last time. We still have strong IP until 2035. So this is our executive team divided that where David and Jackie are in our Newcastle office and the rest of us are in the Boston office. And across the board, we have a very experienced executive team with extensive U.S. and global commercialization capabilities. So what's the problem sort of with current treatments of iron deficiency with or without anemia? So as you probably are aware, most patients or people with iron deficiency, they start with an oral ferrous iron. The challenge with those is that they dissociate in the stomach. So that free iron causes irritation and damage to the lining of the stomach causing gastrointestinal side effects. So up to about 70% of patients can experience these GI-related side effects, and they include anything from stomach pain, bloating, dark stool, nausea. So some patients even comment that the side effects of oral iron is worse than the symptoms of iron deficiency anemia. And we also know that about 60% will discontinue treatment with the oral ferrous irons because of the side effects. And of course, if you continue treatment, there will be a lack of effectiveness as well. ACCRUFeR on the contrary is not a salt. It has a maltol shield. And this maltol shield very simply explained, makes it pass through the stomach. There's no free iron from ACCRUFeR. It is absorbed instead in the upper intestine. And that minimizes the risk of these side effects that we just described on the previous slide. And in addition, we can give a much lower dose of iron because we have a much better absorption. So that gives us a very unique position in the marketplace with ACCRUFeR. So before ACCRUFeR, if you were an oral iron, you couldn't tolerate it and your anemia became more severe, the only other option was to get an IV. Today, you don't need to jump to an IV immediately, you can go to ACCRUFeR. So that is why we are uniquely positioned in the market, and we are a switch-to product in many instances. But most of the patients we come across have already tried oral irons multiple times. Our global partners, they continue to progress. And as you probably remember, in Viatris, we're working -- in the U.S., we're working with Viatris. In Europe, we work with Norgine. Canada, we work with Kye. Kye just launched a few weeks ago, and I had the pleasure of speaking to them earlier this week. They have a very strong plan in place, and we look forward to see them grow as they get more and more coverage from private and the governmental payers in Canada. In Korea, we're working on the last pieces of the regulatory submission, and we still hope to see an approval sometime soon during this year. So that's moving on very nicely as well. And in China, as we have reported already, the Phase III bridging study has been finalized. And during this quarter, we hope to be able to report the top line results. And in general, for our partners with the exception of Viatris, we have revenue-based royalties -- sorry, we have royalties and revenue-based milestones of various sorts. So as I said initially, there's 3 important things we're focusing on in the U.S. And the first thing is to increase awareness. So this year, we have a larger digital marketing campaign. So we are doing direct-to-consumer marketing to a larger group than before. And that is the darker blue circle, which represents about 5 million prescriptions. It's not people, it's prescriptions. And we know these people are actively seeking an oral iron. And the reason we know that is that we can identify that via something that is called social listing. So we can be rather targeted in these marketing -- digital marketing campaign. In the lighter blue circle, which represents about 2.5 million prescriptions, we also do digital marketing towards health care professionals. As an example, here in the U.S., when they then prescribe using the digital prescription, as soon as they are looking up to prescribe an oral iron, a banner is presented then showing ACCRUFeR. So that is just one of the ways we can do it. And this group represents about 50,000 health care professionals and about 1.3 million patients on the patient side. And then the orange or reddish circle is where we have our sales force. So we target about 10,000 health care professionals and those health care professionals treat about 250,000 patients. And we know these patients have side effects from oral irons. And then again, we can figure that out by social listening. And the whole idea of increasing the awareness is, of course, when patients are searching for an alternative for an oral ferrous iron, they will think about ACCRUFeR. They go to the physician, the physician will prescribe it. And when we don't -- then find new prescribers, that information is passed on to our sales force. I also initially mentioned that we have realigned our U.S. sales team. And the focus, as I said, is on the territories with the highest potential, the best coverage and historically strong ACCRUFeR performance. So on the map to the right is where we have our territories. We hyper focus in 5 states, which is California, Texas, Georgia, Florida and New York, where we have more representatives sort of per territory than we have in the other territories. And the colored in states is typically or rather, it actually represents where people live in this country as well. And our coverage, which is, as you can see to the right, we have about 55% coverage of the total of 173 million commercially insured lives and a very strong coverage when it comes to the managed Medicaid and the Medicaid fee-for-service as well. So this summarizes the 3 initiatives we focus on in the U.S. And the third one that I didn't mention before is the first one on this slide, and that's to decrease the impact of the consignment business. And that is an initiative that we started in the fourth quarter of last year. What we do is we modify the out-of-pocket pricing to decrease the number of prescriptions we either highly subsidized and thereby lose money on those prescriptions or those we give away for free. So that is -- we've seen -- we saw the impact already in the fourth quarter. We've seen, as I said initially as well, we've seen a very strong non-consignment sales during this quarter. So it's something that works and it continued to work. The second was realignment of the sales territories, as I just mentioned. And the third one, which is the broader one is to increase the awareness of ACCRUFeR across patients that are looking for an alternative online and health care professionals. So by that, I pass over to Santosh.

Thank you, Anders, and hello, everyone. For our friends who have been following Shield for a while now, this slide should look very familiar. For those who are new on this call, we have key 3 priorities. They're very simple, grow ACCRUFeR net revenues, turn cash flow positive by the end of this year, 2025, and expand global patient access to our medicines through our partners. Let me take each one of them in order. So grow ACCRUFeR net revenues. Q1 was truly a tale of 2 halves. The first 6 weeks, we saw significant weather disruptions in the U.S., specifically the fires in California and snowstorms in the southern states. This led to office closures and affected prescriptions across the market, the entire market of prescription oral iron products. This was unfortunate for the patients who could not access their medicines as well as for the people whose lives were disrupted because of this weather. Now ACCRUFeR was further impacted as we were in the process of realignment of the U.S. sales team, as Anders mentioned before. We were operating with about a 20% vacancy during this time. This means 20% of our territories were without a sales force -- sales rep. However, this changed in the second half of the quarter. We saw a pretty good rebound in our performance, reflecting the fully staffed sales force that we now have in place. You can see that in the numbers. In Q1 2025, $6.4 million was the revenue generated from ACCRUFeR, net revenues. March represented about 50% of those revenues. So you can see that we -- it rebounded, which gives us confidence that this was an acute one-off event. The prescriptions were 36,800. That's the total prescriptions. And we have continued to manage the consignment part of this business, which represents 27% in Q1 2025. As a reminder, the consignment business represents prescriptions that were dispensed at no cost or at a significantly subsidized price and typically does not have reimbursement by payers. The net price for the quarter was $187, but similar to the first half, second half story, March represented $220 in terms of net price. Moving on to the second key priority, turning cash flow positive by the end of 2025. We ended the quarter with $10.5 million in cash and cash equivalents. In addition to this, we also amended our existing $20 million facility with SWK funding. We have a good relationship with SWK that holds the $20 million debt with Shield. In conversations with them, they appreciate the dynamic nature of the market and have high confidence in our ability to execute and repay the loan. So we aligned with them, and we have hence updated the revenue covenant numbers to be a range rather than a point number, giving us more flexibility to manage our business efficiently. And then last but not the least, you can see on the right-hand side, global patient expansion. Kye Pharmaceuticals, as Anders just mentioned, launched ACCRUFeR in Canada. We're excited about that, and we look forward to seeing the growth in Canada as we look into the near term in 2025. And then importantly, we were -- we had a very successful pre-NDA meeting with the FDA on the pediatric submission. This goes a long way. Up until now, we have been focused on adults with ID/IDA. And this opens the door for us in terms of expanding that label and that population into the kids in the pediatric population. This is very exciting for us just on a personal level as well. So with that, I think that's all I had on my slide. I'll hand it back to you, Anders.

Thank you, Santosh. And then our last slide in our presentation is just a summary. So as we mentioned, there's still a very big opportunity in the U.S. and of course, across the world. So we see -- we have still -- we're scraping the surface on the U.S. market even as we grow rather strongly, as you've seen over the quarters. Our Shield-Viatris partnership continues to drive -- is behind the growth here, of course. And as I mentioned, we have 3 focus areas this year. It is the awareness, increased awareness, the realigned sales territories where we focus our on-the-ground efforts on the best-performing territories and also continue to work with our consignment business to get it down as much as possible to be able to increase our net selling price. Our global footprint continued to grow as we went through with launch in Canada, the regulatory process in Korea, which we hope we will see an approval during this year and the study in China. The increased balance sheet, as we mentioned, has given us operational flexibility, and we can really, really look ahead this year and into the future, where we can bring the company next instead of just focusing our efforts on raising money to be able to operate sort of from a day-to-day point of view. And the goal is to be cash flow positive by the end of this year. So that ends the formal presentation, and we'll move on to a Q&A.

[Operator Instructions] As you can see, we received a number of questions about today's presentation. Ms. Stephanie, could I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Yes, of course. Thank you. Thank you, Santosh. Thank you, Anders. If I could just go to the first question, please. So the first question we received was, will Shield be moving manufacturer to the U.S.A. to avoid further forthcoming pharmaceutical tariffs?

Well, it's a very timely question these days. Our situation right now is that, first of all, we have stock that lasts us at least 12 months. So we're well prepared in that. The other comment of that is it's too early to say. But in general, as you probably have seen from other companies is that what is the real impact to be perfectly honest, even if they put a 10% or 20% tariff on the imported goods from abroad. And quite frankly, the value of pharmaceuticals being orals, injectables, biologics, whatever it is, the typical cost of goods is max maybe 10%, 15% of the actual price of the products that come in. So that's why the impact isn't that big. which some of you may have seen that J&J said the other day. But of course, we don't know what the end will be. They say they will come. But then again, as we've seen with other tariffs, they come, they go, they get negotiated. But for us, in general, it will have a very small impact, and we have no current plan to move our manufacturing out of France at this stage.

Thank you, Anders. Next question. Could you give an indication of the extent of the impact on market segment prescriptions for oral during Q1 as a result of the weather and how your own volumes moved in comparison with reference to the wider market?

Santosh, I think that you will look at the total market and things like that, yes.

Yes, absolutely. I mean, without going into the details of every single product, there are lots of prescription OTC products, specifically for iron deficiency in the market. When we look at the market as a basket or the market basket, the whole market has taken a similar turn as ACCRUFeR in Jan and Feb, and you can attribute that to weather. We do look at ourselves compared to some of the leading products in that market basket. And we are one of the top 2 products prescribed right now, which is a pretty big move for us from about a year ago where we were not the top prescribed product. And so we see the same trend even for those bigger branded products in the market. This is not anything unique to ACCRUFeR as of now.

Thanks, Santosh. Do you think a material proportion of March revenues were a catch-up from January and February slate sales?

So I'll start, Santosh. So what we typically see is -- so sales we see in March typically starts earlier. So just to give you a couple of facts. So when a prescription is written, it takes about 1 to 2 weeks before it's filled, right? So there's a lag there. And then, of course, that is not the filling of a prescription, so i.e., when the patient gets the ACCRUFeR out of the pharmacy is not when we get our revenues. Our revenues are actually 2 steps behind that. So first, the drug needs to get to the pharmacy, which is something we call ex-factory sales. But we don't get paid from those either. We get paid when our main wholesaler, Cardinal buys from us, and they are a step before the X factor. So what we see in March is something we started to see already in the second half of February. And I can also tell you that what we see in April is a continuation of what we sort of see in March. So that's why there isn't a direct correlation in that sense. But March is a huge step up, of course. And we are -- what we see in March is in line with what we would expect to see going forward. Santosh?

No, I think you hit it. I don't have anything to add.

Thank you. Why was the net price lower in March at $220 than in Q4 '24, which is $237?

Yes. The way the price is calculated is based on the number of units that we transfer in terms of title. So when we sell to the wholesaler, that's when we recognize the revenue. And then you do look at the distribution of the different channels that support the sale in that quarter. Typically, in Q1, you do have what you call an insurance reset. Most patients reset their insurance on Jan 1. There are different commercial payers and different Medicaid payer approaches that take place in Q1, especially in terms of co-pays, et cetera, that impacts how much we buy down in terms of co-pay versus how much we get reimbursed. So the net effect of that typically is lower in Q1, and that's what we expected to see, and that's what we saw in March.

Next question is, are there any other safeguards that we're going to be implementing to protect against any other adverse events that may occur in the U.S., similar to the weather events we experienced in January?

Well, I mean, we don't have those powers. Maybe some will soon have those powers because it's been rather devastating what we've seen, especially with the fires in California, of course. But I mean, the freakish thing with the weather is that there's snow in Florida, there's snow in other southern states. And when there's snow there, it's utterly chaos because people can't get out of their homes and so forth. So now, I mean, this is what we call force majeure. We cannot safeguard us from any of that. What we can do is to continue to do what we told you we are focusing on. So we -- that's what we put our focus. So that is sort of -- we are very confident in the things we have implemented in the beginning of this year when it comes to 3 initiatives, we will continue to support the portfolio.

Thank you, and somebody is asking what is the impact having for the direct-to-customer marketing initiatives having at this early stage?

So what we did already last year, so we launched a smaller campaign last year with digital marketing towards health care professionals and a little bit towards patients as well. We know these campaigns has a positive return on investment. That's why we continue to invest and invest more dollars behind those this year. The direct effect this year is too early to tell actually. We need more data. And -- but in the months to come and probably when we speak again after the second quarter, we can show you what the impact is from these campaigns. We know from that, as I said, from previous data that impressions leads to prescriptions. So that's why we're doing it.

Can you describe the average duration of a patient that has been prescribed ACCRUFeR, for example, how many months do they tend to buy the product? What is the patient lifespan with ACCRUFeR?

Yes. So again, I think it depends on the type of patient between a commercially covered patient versus a Medicaid covered patient. They have different behaviors and different profiles. But on average, we see on the commercial side, somewhere in the 2.5 to 3. Sometimes it can bump up to even close to 4. And on the Medicaid side, we typically see somewhere in the 1.5 to 2 refills. So that means they get the first prescription and then they get an additional 1.5 refills, so a total of 2.5. Similarly, on the commercial side, they get the first prescription and then they get an additional, let's call it, 3. So they get a total of 4 months of product -- using our product. Anything to add there, Anders.

No, no, I think you're spot on. That's the closest answer we can give. And we -- of course, we looked into that data as well. So that's -- we have that type of data.

And someone is asking as well about sort of the ongoing dependency for existing sales and prescriptions in relation to our sales reps. How long does it take for a physician -- sorry, for a physician not to need any sales handholding?

A physician, is that what you said?

Yes, physician.

Yes, it's an interesting question. And you have to make a distinction here between a product that is for a chronic therapy and a product that is for an intermittent therapy. Typically, for products like ours that Santosh just explained, they take 3 to 4 months. You have to be there more often compared to a product that is for a chronic therapy because, of course, a patient on a chronic therapy will be on the therapy chronic, right? That's what the word implies. So we are dependent on having our sales territories covered because they make a big impact, as we have told you, which was, for us, the sort of the slow start of the year because 1/5 of our territories didn't have people in them. So that's very important we have that. It's very important that they go out and remind the prescribers about ACCRUFeR because still at this point, a good -- at least over 80% of the patients are on an OTC product. And as Santosh explained earlier, yes, we see on those who are exclusively prescribed, we're doing well. And we also -- but still the great majority of the market -- I mean, still today are OTC products and an OTC product can be prescribed as well. That's why we have the data. We don't have data on products that picked up from the pharmacy. So the true market is probably even bigger, just to finish my last sentence, but they are very important. They are our most important driver of revenue, to be perfectly honest. And the other activities we do like the marketing, digital marketing and so forth is to support the sales.

How confident are you that you'll be cash flow positive by the year-end?

So we said it several times on this call. And being a public company, you typically would not say we would reach that if we didn't believe that we would reach that, that would be honest and transparent. So we're very confident that we can still reach cash flow positivity by the end of the year for 2025.

Can you please remind us why it was decided to restructure the sales force to focus on certain states?

Yes. No, that's a great question. So with the data we collected since we launched the full sales force with Viatris during -- in the middle of 2023. So we almost had a full 1.5 years of data, you learn and see where you have the impact you want from having a territory covered by a salesperson. So having all that data, it turned out that all the territories there wasn't viable. They were not profitable. And there's a number of factors to that. Typically, the factor is that the coverage isn't strong enough. So even though we do have, in general, good coverage, there are places where we have very poor coverage. And that's why we decided to create these 80 new territories with the 3 variables, as I described, highest potential, which means the highest total number of prescriptions, best coverage for ACCRUFeR in relation to that territory, which we actually -- because then again, we have that data, too. And then historically, where did we do well with ACCRUFeR? Because why is the last point important? Well, it's important because typically, it takes a salesperson much, much longer to get the first prescription or first and the second, then it will be to get the third, the fourth and fifth and so on. So thereby, we focus on that. And then the reason we focus more on 5 states is just because the opportunity is bigger. And we can already see now in March, this works, it pays off, and that's why we do it. Having said that, it doesn't mean that we would not continue to expand when we see good results from this 80. We could expand back to 100. We could even further, right? But this is where we are right now. And when we sort of analyze this, we'll make the next decision.

Can you describe as well what percentage of the market is Medicare, Medicaid and what percentage is private pay?

Yes. I mean you can assume that when we look at our numbers, consignment represents about 20%, 27%. That's the number that we gave. So this is not -- these are patients who are probably not covered by insurance or they have some level of insurance, but they're still waiting for their insurance to make a decision on what coverage they get. There's a split of commercial versus Medicaid within that percent. The rest of the business, about 1/3 of it is Medicaid and then the remaining is commercial. So 1/3, 1/3, 1/3, I guess, would be a good way to think about the business split.

Cash is a very, very small portion. I mean, single percentage. But yes, there is a part that is cash pay upfront as well.

How does the actual Q1 revenue numbers compare against those with the budgeted or forecasted for the quarter?

We have not provided any guidance on what our Q1 numbers were expected to be, what our internal budgets are or what our internal forecasts are. Obviously, we are not thrilled by Jan, the first 6 weeks of the quarter, but we are pleased by what we saw in March. Hopefully, that helps answer that question.

Do you feel that further funding may be required this year?

We haven't said that we needed additional funding at this point.

So one more question here we've got. Why did you feel that the reorganization occurred? Was it in the Shield team, the Viatris team or both?

Okay. No, no, great question. It's both. So whatever we do in the market, we always do together with Viatris. So that's both teams. So we -- so now we have 80 territories, we have 40 each. So any activity in relation to marketing, market access or sales is always a joint decision between the 2 companies. So we do everything hand in hand.

And just the last question in relation to similar -- are the Viatris reps still focused 100% on ACCRUFeR? Or are they responsible for selling other Viatris products simultaneously?

100% on ACCRUFeR.

Thank you.

Anders, Santosh, thank you for answering all those questions you can from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Anders, could I please just ask you for a few closing comments?

Sure. So first of all, thank you for taking part in our Q1 update for Shield. If there are other questions we didn't get to today, we'll write an answer, and we'll post that as we did the last quarter, so you can all see the written answers as well if there are questions we didn't get to, by that, I mean, thank you all for taking the time and see you in about 3 months.

And Santosh, thanks for updating investors today. Could I please ask investors not to close this session and shall now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Shield Therapeutics plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Thank you.

Thank you.