scPharmaceuticals - Q2 2024

Transcript

Operator (participant)

Welcome to the scPharmaceuticals second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, PJ Kelleher, Investor Relations. Thank you. You may begin.

PJ Kelleher (Head of Investor Relations)

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 scPharmaceuticals' expected future financial results, management's expectations and plans for the business, the ongoing commercialization and marketing of FUROSCIX, and the potential label expansion and other regulatory approvals of 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 scPharmaceuticals' 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 scPharmaceuticals. John?

John Tucker (CEO)

Thank you, PJ. Thank you to everyone listening to this afternoon's call and webcast to review our second quarter 2024 results. As has been our practice, I will begin with an operational update before turning the call over to Steve Parsons, our Senior Vice President of Commercial, for a more detailed commercial update on FUROSCIX, and then Rachael Noke, our Chief Financial Officer, for a review of our financials. We will then open the call to your questions. I would like to begin this afternoon with a recap of the financing up to $175 million that we announced earlier this week. Upon closing of these transactions, approximately $75 million was added to the company's balance sheet, which extends our cash runway through profitability. Through this financing, the company also has access to an additional $50 million through debt and/or royalty facility.

Financing—financing is comprised of three parts. First, $75 million of senior debt facility with Perceptive Advisors, of which $50 million was funded at closing to repay $50 million of existing debt with Oaktree. An additional $25 million will be available subject to the achievement of certain pre-specified commercial and regulatory milestones. The debt carries a five-year term, of which the first four years are interest only, with a bullet repayment in year five. Facility lowers our interest rates and pushed out the amortization as compared to the retired Oaktree facility. Second, a synthetic royalty agreement of up to $50 million, also with Perceptive Advisors. $25 million of the royalty financing was funded at close, and the additional $25 million were made available subject to the achievement of certain pre-specified commercial milestones. Finally, a public offering of approximately $50 million of equity led by leading life science investors.

Together, we believe this financing extends our cash runway through profitability. Turning now to our launch progress. During the second quarter, we generated sequential net revenue growth that we, we believe reflects increasing awareness and utilization of FUROSCIX by cardiologists and heart failure specialists. As Steve will detail shortly, our leading indicators suggest that providers are increasingly more comfortable prescribing FUROSCIX to their heart failure patients during critical intervention windows, which are pre-hospital admission or post-discharge. We reported net revenue of $8.1 million, representing sequential growth of 33% as compared to the first quarter of 2024. Our gross-to-net discount during the second quarter was approximately 8%, down from 19% in the first quarter. We expect the GTN discount to increase over time as contracting with payers evolves and IDN demand grows.

Looking to the back half of the year, we currently anticipate our GTN to range from 10%-15% for the next two quarters. Over the longer term, we continue to believe that a GTN in the 30%-35% range is appropriate, although there will be some variability from quarter to quarter as we continue to expand our roster of payers and IDNs. I would like to now provide an update on several long-term growth initiatives that we previewed last quarter that we view as critical to our long-term growth strategy. We announced that the FDA has approved our supplemental new drug application, seeking to expand the FUROSCIX label to include all heart failure patients, including the most symptomatic patients and those with the greatest limitation on physical activity, categorized as New York Heart Association Class IV.

FUROSCIX was previously 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. By expanding the label to include New York Heart Association Class IV, which accounts for approximately 10% of heart failure patients and 30% of heart failure hospitalizations, we estimate that as many as 40% of these patients may potentially benefit from FUROSCIX. Given FUROSCIX's ability to improve signs and symptoms of congestion, which may lead to a reduction in unnecessary hospital admissions and readmissions, with the potential to improve patient quality of life while reducing overall and heart failure-related healthcare costs, we believe uptake among cardiologists and heart failure specialists who treat these very symptomatic patients could be meaningful. Turning now to the low-volume auto-injector that is in development.

We announced earlier this week, positive top-line study results from a PK study, which demonstrated that FUROSCIX achieved primary pharmacokinetic and secondary pharmacodynamic endpoints. Some of the highlights from the study results include: SCP-111 demonstrated a bioavailability of 107.3, achieving the 90% confidence interval limit of 80%-125%. Participants that received SCP-111 had similar urine output, urinary sodium excretion, and urinary potassium excretion at six, eight, and 12 hours compared to IV furosemide. Participants reported a median pain score of 0 across all time points assessed. The most common adverse events with SCP-111 were localized at the injection site, and systemic adverse events were consistent with those reported in the prescribing information for intravenous and oral furosemide.

With these results, we continue to work towards our target submission of an sNDA to the FDA by the end of the year. As we have stated previously, we believe an auto injector, if approved, will reduce our manufacturing costs compared to the current on-body infuser, confer environmental advantages, and give treating providers and their patients treatment flexibility. Finally, we announced that FDA has accepted our filing of a Supplemental New Drug Application, seeking to expand the FUROSCIX label to treatment of edema due to fluid overload in patients with Chronic Kidney Disease or CKD. The FDA had previously indicated that no additional clinical studies were required to expand the FUROSCIX indication to include CKD, if we can demonstrate an adequate PK and pharmacodynamic bridge to the listed drug, which is the furosemide injection.

CKD is a progressive disease characterized by worsening renal function over time, resulting in frequent episodes of fluid overload that are treated with loop diuretics. It is estimated that there are 6.6 million Americans with CKD that are treated with loop diuretics, and as many as 50% of patients with stage CKD do not have a diagnosis of heart failure. This results in a potential incremental increase of $3.1 billion to the already existing $9.4 billion addressable market opportunity in heart failure, with fluid overload being one of the most common complications in CKD, which worsens with disease progression. We believe FUROSCIX to be beneficial to patients with CKD who have worsening symptoms due to fluid overload and are not responding to oral loop diuretics. The FDA has assigned a PDUFA date of March 6, 2025.

If approved, we would make investments in our sales and commercial infrastructures to expand our reach to nephrologists. At this point, I will turn the call over to our Senior Vice President of Commercial, Steve Parsons, for a deeper dive into our launch metrics. Steve?

Steve Parsons (SVP, Commercial)

Thank you, John. As John indicated, we continue to be pleased with our progress since launch. From launch in February 2023 through June 30th, 2024, we've had 2,713 unique prescribers. That's up 24% from the 2,183 prescribers we had from launch through March 31st. We are encouraged by the prescriber growth in this quarter, and we believe this reflects our strategy of establishing a broad prescriber base. Importantly, more than half of these prescribers have written multiple prescriptions. During the second quarter, approximately 9,300 doses were filled. That's up 15% sequentially from approximately 8,100 doses in the first quarter of 2024.

During the second quarter, the average number of doses per prescriptions filled was 6.3 doses, which remains higher than our long-term expectations and up slightly from the 6.1 doses per prescription in the first quarter of 2024. With the label expansion to now include Class IV Heart Failure patients, we anticipate that the average number of doses may rise further as those patients may need additional doses to treat more severe symptoms. Our sales force has conducted 3,324 in-services from launch through June 30th. That's up from 2,938 in-services from launch through March 31st. In-services provide important training to offices on the prescribing process of FUROSCIX, and this ensures office readiness. As we open more new accounts, the execution of in-services remains fundamental to FUROSCIX success.

As we open, and we regard the number of in-services conducted each quarter as an important leading indicator. Regarding our field sales force, we have said previously that we stand ready to add additional territories as demand warrants. As demand continues to grow, we plan to add 22 territories for a total of 90 territories by the end of the third quarter. This will support the expanded label and increase our reach and frequency with more targeted cardiology and some nephrology specialists that treat chronic kidney disease patients who also have comorbid heart failure. At the beginning of the second quarter, we made the decision to change our patient services hub.

This transition took several weeks to get up and running effectively, but by the end of the quarter, the hub was operating very well and has been an asset in increasing the number of filled doses for Q3 and into the future. From a marketing perspective, we continue to execute a broad multi-channel marketing campaign to drive brand awareness, adoption, and commitment. Our marketing encompasses many different activities, including a significant patient awareness component. Other ongoing activities include engagement and development of key opinion leaders, conference presence, message evolution, and medical education programs, among other critical tasks. We plan to have a very large presence at the Heart Failure Society of America conference coming this September in Atlanta. Overall, we are pleased with our continued progress, and we are excited about the opportunity and the path ahead. This concludes my update.

I'd now like to turn the call over to our Chief Financial Officer, Rachael Noke, for a review of our financials. Rachael?

Rachael Nokes (CFO)

Thank you, Steve. As of June 30th, 2024, we held $38.5 million in cash and cash investments, compared to $76 million in cash, cash equivalents, and investments as of September 31st, 2023. This excludes the funds we raised through the financing that John discussed earlier. Now I will cover a few income statement items. We reported a net loss of $17.1 million for the second quarter of 2024, compared to a net loss of $14.2 million for the second quarter of 2023. Product revenues were $8.1 million for the second quarter of 2024, compared to $1.6 million for the second quarter of 2023.

Cost of product revenues were $2.3 million for the second quarter of 2024, compared to $0.4 million for the second quarter of 2023. The increase in both product revenues and cost of product revenues for the quarter ended June 30th, 2024, was due to increased demand for FUROSCIX further into the commercial launch and related manufacturing costs. Research and development expenses were $2.7 million for the second quarter of 2024, compared to $2.9 million for the comparable period in 2023. The decrease in research and development expenses for the quarter ended June 30th, 2024, was primarily due to a decrease in pharmaceutical development costs, offset by clinical study costs and employee-related costs.

Selling, general and administrative expenses were $17.5 million for the second quarter of 2024, compared to $12.1 million for the comparable period in 2023. The increase in selling, general and administrative expenses for the quarter ended June 30th, 2024, was primarily due to an increase in employee-related costs, commercial costs, product samples, and patient support. As of June 30th, 2024, we had 36,139,802 total shares outstanding. That concludes the financial update. John?

John Tucker (CEO)

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

Operator (participant)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. It is requested that questioners keep to one question and one follow-up. One moment, please, while we poll for questions. The first question we have is from Roanna Ruiz of Leerink Partners. Please go ahead.

Roanna Ruiz (Senior Managing Director and Senior Biotechnology Analyst)

Great. Afternoon, everyone. Quick couple ones from me. First, how much could the average number of doses per prescription for FUROSCIX actually increase with the new label, for Class IV? And, in addition to that, how are you thinking about clinicians, how fast they can prescribe FUROSCIX for Class IV patients? Are there any hurdles or logistics that they might need to get through before they can really, you know, get off to the races and prescribe?

John Tucker (CEO)

Yeah. Hi, Roanna, it's John. I'm going to have, Steve answer that, those two questions, okay?

Steve Parsons (SVP, Commercial)

Yeah. So it's hard—it'll be hard to predict what the impact on the average number of doses is across the whole population, but we do think the Class IV patients will need nine doses or even up to 12 doses based on the severity of their symptoms. And we do think they'll get prescriptions more often than the average heart failure patient, as often as, you know, every month or every other month. So, that could impact the average doses per prescription over a quarter. And then, back-

John Tucker (CEO)

How fast will we?

Steve Parsons (SVP, Commercial)

Yeah, we should start to see prescriptions for heart failure for Class four, you know, starting next week. Our sales force will be trained. They'll be in the field. We've been in contact with the payers to make sure they update their systems to reflect PA to label, and the label now will not limit the use of class four patients. So, we're expecting to see it immediately as we get around to those doctors who have a concentrated population of class four patients, that's the heart failure specialists and the advanced heart failure clinics.

Roanna Ruiz (Senior Managing Director and Senior Biotechnology Analyst)

Got it. Makes sense. Thinking ahead to potential approval for CKD patients with edema, how are you thinking about possibly stepping up the field force size? You kind of alluded to you consider growth there. What sort of metrics are you looking for to give you a signal that you should meaningfully expand the field force at that time?

John Tucker (CEO)

Yeah, so we're gonna move to 90 reps. We're in the process of it right now, based on, you know, the increasing demand we've seen, especially into this quarter, and with the label expansion into Class IV. So that'll have us at 90 reps. With CKD, we're gonna go to probably 130 reps, and that will be based on how many nephrologists we want to cover, and the cardiologists. So our thinking now is this will be one sales force, 130 reps, calling on, you know, cardiologists, heart failure specialists, and nephrologists.

Roanna Ruiz (Senior Managing Director and Senior Biotechnology Analyst)

Got it. Super helpful. Thanks.

John Tucker (CEO)

Great. Thank you.

Operator (participant)

The next question we have is from Stacy Ku of TD Cowen. Please go ahead.

Vishwesh Shah (VP of Biotech Equity Research)

Hi, this is Vish on for Stacy. Congratulations on a stellar quarter, and thanks for taking our questions. We have a couple. So first, I guess following up on the previous question, some of your remarks, can you talk about some of your ongoing preparations for the expansion this month? What sort of level of enthusiasm are you hearing from KOLs? Do you expect some of the early adopters have already identified some key recurring Class IV patients to start prescribing? So that's the first question. And then the second, so you've made some great progress in establishing your launch infrastructure.

Could you talk a bit about that fill rate, how it's been performing for Q2, and then how do you expect it's going to improve with some of the improvements that you've made and what your expectations there are? Thank you.

John Tucker (CEO)

Okay, Vish. Okay, thank you, Vish. I'll answer the second question first and then turn it over to Steve for your question about the Class four preparation. So, I think Steve mentioned in his prepared remarks that we did a change in our hub. Some of this was due to Change Healthcare, but we did move our hub to a hub that now has Change Healthcare and Relay, so if anything, ever cyberattack one, we could build through the other one. But you know, hub transitions are tough. They could hurt us in April with our fill rate, and that hurt us for the quarter. It hurt our net sales.

It probably cost us 5-ish% on net sales, units shipped to patients, because, again, once we lose that script, we lose that patient, because of the acute event nature of the product. So, we saw a fill rate in the 40s, in the mid- to high 40s for the quarter. It was really bad in April when we made that hub move. It was tough. But with the hub change, what we've seen in Q2-Q3, and again, it's only five or six weeks here, but our fill rate has moved up dramatically, and that was the whole idea of making the change to the hub.

So a little short-term pain was pretty painful, but we're able now to have a hub in place that is really seeing a dramatic increase in our fill rate. So, so again, in the mid- to high 40s for Q2, started out really low, and then for this quarter, you know, right now we're closer to 60%, maybe a little lower for this month, 60% fill rate. So we think that'll have a meaningful impact on our net sales this quarter. Steve, do you want to answer the first question?

Steve Parsons (SVP, Commercial)

Yeah, I think the first question around our preparation to take advantage of this indication expansion with heart failure specialists. They're a subset of the general cardiology practice. We know them well. We know where the advanced heart failure clinics and office locations are. We know who tried to use FUROSCIX in Class IV early on and was frustrated by the PA, the prior auth to label it, didn't allow that. So, I'm sure the reps have been anxious to go in there and give the good news. They'll be able to do that starting next week. We have to do a little training. There's some... You know, we have to update some of our promotional materials and submit those.

But, everyone has a hit list of folks that they're gonna go to first, and often, and then we'll do some email blasts and stuff to reach people, you know, in a mass way. So, well prepared to do this. It's a good opportunity, it's an unmet need, and you know, we're gonna fill it.

Vishwesh Shah (VP of Biotech Equity Research)

Perfect. Thank you very much.

Operator (participant)

The next question we have is from Chase Knickerbocker of Craig-Hallum Capital Group. Please go ahead.

Chase Knickerbocker (Senior Equity Research Analyst of Healthcare)

... Good afternoon, guys. Thanks for taking the questions, and congrats on a lot of recent progress here. Maybe just first to start, kind of probably not the hub change. Can you just speak to kind of what the hub is doing differently, your new hub is doing differently to kind of drive that dramatic of improvement? Obviously, some of it was just, you know, kind of maybe some, some, some of that change kind of hangover. But, you know, 60+% is well above what we've seen at any point historically. So what are they doing differently that's really driving that improvement?

John Tucker (CEO)

Yeah. Hey, Chase, it's John. Thanks for the question. I'll have Steve answer how the hub is different than the old hub.

Steve Parsons (SVP, Commercial)

Mm-hmm. Yeah, so our launch hub was all manual. Everything was a faxed-in paper order, and, you know, that reached a, you know, kind of a critical limit to us. We didn't think they could grow with us, and then we had the problems with that, you know, everything going through Change. They had one processor, and we needed two. The new hub is all online. It can be all online. The docs can, you know, submit their orders. They immediately see that it's been received. They immediately see that the prior auth has been submitted, that it's been approved, what their copay is, that it's been shipped to the patient, and they love all of that. And it encourages them to prescribe more, but also things are getting filled well and faster.

If something was missing that the doctor needed to provide for the prior auth to go through, a clinical note of some kind, they can see that. There's a chat function where our case managers at the hub are speaking to the office, medical assistants and RNs. And so everything's just more modern, more optimal, and it's, it's been, it's been effective. So, we're, we're, we're very happy, we're very encouraged by that.

Chase Knickerbocker (Senior Equity Research Analyst of Healthcare)

It seems like it's still early days. I mean, just maybe speak to your optimism that that continues to get better as, as you know, physicians get more and more confident with the new hub. And then just second, you know, John or Steve, what should we think about for kind of the cadence of gross to net changes? You kind of said we still expect kind of 30%-35% longer term. I mean, if we look at that next year, do we get there just on some of the Medicare changes that are upcoming, or does that assume that we contract with some of these larger PDP, you know, Medicare Advantage plans? Thanks.

John Tucker (CEO)

So on the second question on the GTN. So, we do expect it to go up in the second half of this year, driven a lot by the IDNs. So we're seeing more IDN business, and, you know, it's a discount versus WAC, so that will have an impact on our GTN for the balance of this year. I think we think it's gonna be in, so for, let's talk quarters, you know, Q3, you know, 10%-15%, Q4 in the same range. So I think we can model it that way. Then I think next year, things change. You have mandatory rebates with Medicare, you know, in the early stage and then in the catastrophic stage.

So, and we'll be doing supplemental rebates with the Medicare payers as well. So we still think that long term, and I mean long term being next year, you could be in a 30%-35% GTN. And we think next year sets up well, like, spectacular for us because with the, the redesign, patient copays are capped. They're gonna smooth it, so it'll be about $166. So where, you know, where we've lost scripts is when a patient has a high copay. So, we really think next year, with the, with the capping at $166, that our fill rate continues to go up. Now, we mentioned it was in the, you know, for August anyways, it's in the, in the 60s, low 60s.

You know, we'll—no brand's gonna get above 80%-85%. We always will have a little gap because we have those scripts that are written, and the doctors kind of put them on layaway. So but, but we think it—once those get filled, and they get, they do get filled, we, we fill them all the time, that we can get to 80%. Part of that is the copay, when that resets next year and some of the progress we're making with the plan. Some of it is continued improvement in the hub. Again, it hurt us in April, but it's helping us now, so it was the right, it was the right move. But there's still things you learn. There's things the reps can do better in the field with the doctors. There's things the doctors can do better.

But we think that's gonna continue to move up, Chase.

Chase Knickerbocker (Senior Equity Research Analyst of Healthcare)

Got it, yeah, and then, John, maybe just last one, and I'll hop back in the queue. But do you think that it's gonna take some time to kind of for Medicare beneficiaries to fully kind of understand the changes that happen next year? Or will they quickly grasp that, you know, their, their copays are essentially now capped monthly, and, you know, the incentives are kind of different? Asked another way, do you think it can get to that 80%-85% range, you know, fairly, fairly quickly once that change happens, or how do you think about that?

John Tucker (CEO)

Yeah, I don't think it happens overnight, with, you know, patients and physicians. So we have education. We're gonna, you know, be doing the patient, I mean, excuse me, physicians about, you know, copays and how they've changed. But, you know, it, it's not gonna change overnight. But we do think, you know, through the year, it's gonna, it's just gonna get better, you know, as it rolls out and more patients understand how it works and physicians understand how it works. But we'll be educating-

Steve Parsons (SVP, Commercial)

I think it goes, I think it'll go up pretty significantly once everyone gets into catastrophic-

John Tucker (CEO)

Yeah.

Steve Parsons (SVP, Commercial)

after 2000.

John Tucker (CEO)

Yeah.

Steve Parsons (SVP, Commercial)

You know, because there won't be any copay, drag and friction.

Chase Knickerbocker (Senior Equity Research Analyst of Healthcare)

Great. Thanks, guys.

John Tucker (CEO)

Thanks, Chase.

Operator (participant)

At this time, there are no further questions, and I would like to turn the floor back over to John Tucker for any closing comments.

John Tucker (CEO)

Thank you. Okay, that concludes our call this afternoon. We are very pleased with our second quarter results, and our leading indicators remain strong. Additionally, the financing that we announced is truly transformational for our company and provides the capital necessary to execute our FUROSCIX commercial plan, while also pursuing long-term growth initiatives. I look forward to a successful year in providing our next quarterly update in November. Thank you again, and have a good evening.