Adamas Pharmaceuticals, Inc.
Q4 2020 Earnings Call Transcript

Published: 23 Feb 2021

[Operator:]

Welcome to the Adamas Pharmaceuticals Fourth Quarter and Full Year 2020 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Peter Vozzo, Investor Relations Representative for Adamas Pharmaceuticals. Please go ahead.

[Peter Vozzo:]

[Operator:]

Neil, your line is live. You may go ahead. Neil, your line is live. You can go ahead. Unable to hear you. One moment, please. Please go ahead.

[Neil McFarlane:]

Sachi, can you hear us okay?

[Operator:]

We can hear you now. Thank you very much.

[Neil McFarlane:]

Fantastic. Sorry for the delay. And thank you, Peter. Good afternoon, everyone. Thanks for joining us today. To start, I would like to take a moment to personally express my appreciation to Team Adamas for their professionalism and unwavering dedication to making a positive impact on the patients' lives. Our team has worked diligently to advance the business in line with our corporate strategy. Their efforts accelerated our ability to bring our products to a greater number of patients. I'm pleased with the significant progress we achieved in 2020 and have continued into 2021, especially against the backdrop of a challenging macro environment. Let me recap key achievements that strengthened the foundation of our business and outline strategies for continued success. Then I'll turn it over to Vijay to provide more details on our commercial performance. Total revenues for 2020 increased 36% as compared to 2019, primarily driven by a 30% increase in GOCOVRI product sales and the addition of royalty revenue from sales of NAMZARIC beginning in the second quarter of 2020. This strong sales growth reflects the sustained execution of our commercial strategy implemented in late 2019.

[Vijay Shreedhar:]

Thank you, Neil, and good afternoon, everyone. I will begin my comments with highlights of our performance in Q4, outline our commercialization strategy for the launch of the second indication for GOCOVRI for the treatment of Parkinson's patients with OFF episodes, and provide an update on the ongoing integration of OSMOLEX ER into our product portfolio. Starting with performance. Q4 total GOCOVRI paid prescriptions, or TRx, that exclude product from the free trial program were the highest in 2020 at 8,165. This represented year-over-year growth of 14% versus Q4 of last year and 5% higher versus the prior quarter. Full year TRx for 2020 were 31,070, representing a 21% increase over TRx in 2019.

[Chris Prentiss:]

Vijay, and good afternoon, everyone. Please refer to our press release issued earlier today for a summary of our financial results for the fourth quarter and full year 2020. Total revenues for the fourth quarter of 2020 were $21 million, which includes GOCOVRI product sales of $19.8 million and royalty revenue earned from NAMZARIC of approximately $1.2 million. Product sales of GOCOVRI in the fourth quarter increased 21% over the same quarter last year. This was driven by approximately 14% volume growth year-over-year. R&D expenses for the fourth quarter of 2020 were $2.4 million compared to $5.2 million for the prior year quarter, as we progress through the final stages of closing out the ADS-5102 multiple sclerosis program. SG&A expenses for the fourth quarter of 2020 represent the execution of our commercialization strategy for GOCOVRI in a fluid environment. Current quarter SG&A expenses were $33 million, compared to $30.3 million in the prior year quarter. The fourth quarter of 2020 includes approximately $5 million related to one-time charges for the settlement of patent litigation associated with the acquisition of the global rights to OSMOLEX ER. Cash and investments as of December 31, 2020, we’re approximately $83.4 million. Subsequent to year-end, we closed our $7.5 million acquisition of OSMOLEX ER, as well as raised approximately $7.2 million through an aftermarket common stock sale. net operating cash burn for the fourth quarter was $10.3 million, a decrease from the approximately $10.9 million in the third quarter of 2020 and $18.3 million from the prior year quarter. this decrease marked six consecutive quarters of reduced net operating cash burn, which demonstrates continued progress on the top line as well as thoughtful expense management. Now, let me turn to our outlook for 2021. consistent with our experience in previous years and typical for specialty products, we anticipate an impact on first quarter product sales due to benefit plan resets impacting the Medicare Part D coverage gap as well as commercial co-pay deductibles. We expect the gross to net percentage in the low-to-mid 20s for the first half of the year and for gross to net percentage to decline over the second half of the year to the mid-teens.

[Operator:]

thank you. The first question is from Marc Goodman from SVB Leerink. Please go ahead.

[Marc Goodman:]

Yes. Good afternoon. A couple of questions. Number one is, can you talk about the breadth of prescribing doctors, just how that’s changed over the past few quarters? That’s for a second any feedback that you’ve gotten from your sales force just with regarding the new indication yet? Anything just curious if there’s been any feedback whatsoever. And then third, just talk about the additional SG&A from year-to-year, are you talking about just an additional $10 million of spend for the new indication and everything else is the same, or maybe, you could just give us a little bit of push and pulls, Chris? Thanks.

[Neil McFarlane:]

Thanks, Marc. It’s Neil. I’m going to hand over to Vijay for the first few questions, and then I’ll ask Chris to address the SG&A question as well. Vijay?

[Vijay Shreedhar:]

Thank you, Neil. To your first question, Marc, in terms of our breadth of prescribers, one of the highlights of our performance in 2020 and our disciplined execution of our strategy is that we’ve continued to see new prescribers to brand every quarter of the year. So, we continue to expand our footprint in terms of prescribers choosing GOCOVRI for their patients and that continues to remain a focus; both breadth and depth of prescription are an important strategic focus for us. in terms of the feedback on, off the uniformly positive feedback comes in through the sales force as well in terms of the interactions with physicians. GOCOVRI perceived as a dyskinesia-only drug, is now expanding in their mindset to include off time. It is seen as a highly differentiated product, now being able to address off without worsening dyskinesia, and we get that feedback as well and we have started to see evidence of prescriptions in the early phase of the launch. So, we’re excited about what we see.

[Neil McFarlane:]

Chris?

[Chris Prentiss:]

from an SG&A expense standpoint, so the range that we disclosed today is $110 million to $120 million, which is consistent with the same range that we were disclosing a year ago at this time. So, we feel really good that we’ve added the authentication as well as the integration and the commercialization of OSMOLEX, and still stayed within that range. Actual expenses in 2020 ended up a little bit lower than that range as obviously we’re all impacted by COVID and lower travel et cetera. So, we’re certainly being optimistic that we’re going to get back to normal on those aspects and then adopted off as well as OSMOLEX and stayed in that range.

[Marc Goodman:]

Thanks, guys.

[Neil McFarlane:]

Thanks, Marc.

[Operator:]

The next question is from Stacy Ku from Cowen and company. please go ahead.

[Stacy Ku:]

Hey, congratulations on the progress and thanks for taking my questions. I have a few. So, my first question is on the GOCOVRI commentary you provided, wondering if you would at all feel comfortable commenting on 2021 consensus of roughly $80 million to $90 million for the product, any potential pushes and pulls to getting to that number or alternatively, when you might be comfortable getting guidance. And then my second question is for Vijay, if you could provide some updated commentary on the fulfillment rate and maybe some expectations of getting drug to this broader set of clinicians. What are some of the commercialization strategies that you and your team could implement? Thank you.

[Neil McFarlane:]

Thanks, Stacy. I’ll ask Chris to talk a little bit about our guidance and when we might feel comfortable moving forward then we can switch over to Vijay. Chris?

[Chris Prentiss:]

Yes. thanks, Stacy. So, as we think about guidance, what’s important for us is that patients have the ability to see their physicians on the cadence that they want to. And obviously, that has been impaired as we’ve commented previously on Michael J. Fox surveys, et cetera, that’s a real challenge in this environment. So, as we’re able to see a little bit more consistency there, we’re going to feel a more comfortable to provide guidance at a later date.

[Vijay Shreedhar:]

And switching to the other two questions, Stacy, I would say with respect to your second question, in terms of a broader physician base, as we launch in the OFF indication. I want to clarify that we see the bulk of our additional patient – addressable patient population being treated in the same clinics by the same physicians. And we have a sales force that is designed to address this opportunity in a highly efficient manner. So we don't see us reaching a broader physician population. And then in terms of the fulfillment rate, we are pleased with the changes we have made over the year. As you know, one of our top three strategic priorities has been to improve access and customer experience. So the changes we've made at GOCOVRI onboard have paid off in spades with our increased fulfillment rate, and we have maintained that stability at the end of 2020.

[Stacy Ku:]

Thank you so much.

[Operator:]

The next question is from Jason Butler from JMP Securities. Please go ahead.

[Jason Butler:]

Hi, thanks for taking the questions. Obviously, it's still early, but any feedback you can provide on your payer interactions since you've got the expanded label? And then second question, you talked last quarter about the progress you've made with the in-office free-trial program and e-prescribing platforms. Can you give us an update there? And then just lastly, I understand you said you'd give more updates on the OSMOLEX ER integration on the 1Q call. Can you just give us any color about – to what extent have you trained your current reps detailing GOCOVRI about OSMOLEX ER and its relative positioning versus GOCOVRI in the near-term?

[Vijay Shreedhar:]

Thank you, Jason. Let me begin with the feedback on the payer interactions. These have been interactions we've initiated towards the end of last year and they tend to be highly positive. They're focused on our articulation of the highly differentiated clinical profile of GOCOVRI and thereby highlighting the value proposition that GOCOVRI brings to their patients and to their prescribers. And it has been well received and the conversations are happening. At this stage, it's still early, and it's focused on the timing of 2022. As you know, that's the cycle that we're in right now. So we will keep you updated on how those conversations go. To your second question in terms of the e-prescribing and what have we seen with the new ways of prescribing that we've made available. We see a marked increase in physicians utilizing those new ways of prescribing GOCOVRI. To just give you an idea, these methodologies, the vast majority of our prescriptions in the early part of 2020 before the pandemic were coming in through a faxed prescription form as it were. And now 30% to 40% of our prescriptions are coming in through electronic or through the phone. So I would say that in-office samples that you asked for have also been extremely well received and have been a critical element of our increasing our breadth of prescribing with our physicians, which is a strategic focus. To OSMOLEX ER, we are keeping OSMOLEX ER promoted as through the prior regime. We are maintaining that promotion through our teledetail team and not through our sales force. And we are focused through our sales force and articulating the differentiated clinical profile of GOCOVRI and launching the OFF indication.

[Jason Butler:]

Okay. Great. Maybe just as a follow-up, Vijay, what are you – what are your reps communicating to physicians when they're asked now about the fact that you have both OSMOLEX ER and GOCOVRI? Or are you getting questions from physicians about the use of the two products yet?

[Vijay Shreedhar:]

We do. And the answer is based on what we've communicated before and that we see these two as distinct products with a distinct clinical profile, distinct indications and distinct potential for use in patient populations that are different, right? So we have articulated and addressed that question in a similar manner and we direct their questions to our tele-detail team for more assistance.

[Jason Butler:]

Okay, great. That's helpful. Thanks for taking the questions.

[Operator:]

Next question is from David Amsellem from Piper Sandler. Please go ahead.

[David Amsellem:]

Hey guys, thanks. Just a couple. So first, I know I've asked this before, but wanted to get your latest thoughts here on contracting and specifically, your thinking on the need for it, or whether you're going to be opportunistic regarding payer contracting, just help me understand your latest thinking on that these would be the payer landscape. That's number one. And then secondly, I know, Neil, you've talked about, ultimately, getting the company to the profitability, but I have to ask, are you looking at assets that you can tuck-in into the commercial infrastructure and with business development in mind. Would you even take on some R&D, how are you thinking about all that philosophically? Thanks.

[Neil McFarlane:]

Great. Thanks, David. Let me ask Vijay to tackle the payer question. And hopefully, we provided you with a little bit of macro lens to look at what our gross to net guidance, but Vijay, I want you to talk a little bit about our payers.

[Vijay Shreedhar:]

Sure. David, I will say, we are committed to making GOCOVRI as broadly available to patients as possible. And our focus is to remain engaged actively with the payers even through this COVID environment, to ensure that GOCOVRI is as broadly available to patients as possible. We have focused our conversations on the differentiation of GOCOVRI, the value proposition of GOCOVRI, the kind of unique and profile that GOCOVRI has with these two indications. And we're having positive conversations so far and we'll keep you posted on how those conversations progress. Neil?

[Neil McFarlane:]

So David. Great question and to your comment in regards to cash flow breakeven and our ability to continue to be capital efficient in what we do, we plan to continue to be capital efficient. I will say to you that we're now in a process of launching a second indication for GOCOVRI. We've just acquired a new product in OSMOLEX. We've integrated that product and kept our focus on what we do. And our mission around taking care of patients. No patient's been left behind. That was a great learning for us as an organization. Can we effectively integrate new products? I think as we look at our current focus it's around GOCOVRI and the launch of GOCOVRI, integrating OSMOLEX ER, and executing on that. We'll be opportunistic in the future. Now knowing that we can check the box of acquiring products, integrating them and making sure we focus on patients. So stay tuned for the rest, but it's about GOCOVRI – the launch GOCOVRI and OSMOLEX integration at this point.

[David Amsellem:]

Okay, great. Thank you.

[Operator:]

The next question is from Tim Lugo from William Blair. Please go ahead.

[Tim Lugo:]

Thanks for the question. Given the GTN dynamics that Chris outlined, shall we expect Q1 to be a down versus Q4? I know that historically been kind of a pace of GOCOVRI and a lot of similar therapies. I'm just wondering if that should again, be expected given that 2020 was a bit of an OFF year in terms of broadly not for GOCOVRI?

[Neil McFarlane:]

Yes. We can use OFF in different ways. But thanks for the question, Tim and I have to say that, we made tremendous progress against our strategy in 2020, without a doubt, a strong execution is a word that that is a synonymous with what we talk to each other about here in the organization. When we think about how we're coming out of Q4 with our highest NRx’s of the year in 2020 that momentum is coming into 2021. And we're feeling good about that. I'll ask Chris talk a little bit about the dynamics, but our gross to net guidance is not too dissimilar from previous years. And Chris, do you want talk a little bit about that?

[Chris Prentiss:]

Yes. Tim, we do expect the dynamics to be similar in terms of that transition from Q4 to Q1. And it really is, having a close to low double-digit GTN in Q4, and then you popup to something in the low to mid-20s in Q1. So for that reason, because we're so heavily Part D you have the reset of the coverage gap. You have commercial co-pay deductibles, those new plan year dynamics are with that play here.

[Tim Lugo:]

Okay. Understood. And given, I guess this is a similar question with what I've been asked before, but maybe a little bit slightly different perspective. Can you just describe maybe some of the initial physician experience for those who are writing GOCOVRI for the OFF indication versus the late indication for so many prior quarters, has that changed at all for those physicians, if they are prescribing it specifically for OFF?

[Neil McFarlane:]

Yes. So we are still in the early days of the launch and we are tracking that quite carefully. What we are excited about is the physicians are starting to recognize that this is a large opportunity for GOCOVRI to address the patient's needs within their clinics. As we have estimated it has doubled our total addressable market and it is being seen as a differentiated option. In terms of their experience in prescribing for OFF episodes versus dyskinesia, we are starting to see the prescriptions. We're tracking them when, and we'll continue to monitor and keep you posted on this form.

[Tim Lugo:]

I understand. Thank you for that.

[Neil McFarlane:]

Sure. Thank you, Tim.

[Operator:]

The next question is from Tazeen Ahmad from Bank of America. Please go ahead.

[Tazeen Ahmad:]

Hi, good afternoon. Thanks for taking my questions. Just a couple from me. No one's really asked about NAMZARIC on the call. I just wanted to get an updated guide from you guys on how to think about royalties there and then talk level as you embark upon of OSMOLEX ER, in terms of detailing. Are there any learnings from what you've applied to GOCOVRI that you think could make the promotion of OSMOLEX easier or have uptake faster in the situation of it, you kind of have done this once before with another drug. Thanks.

[Neil McFarlane:]

Thanks, Tazeen. Great questions. I'll ask Chris to talk a little bit about our NAMZARIC business. And I will tell you just before I hand it over to Vijay as well. There are a lot of learnings that we can take from our GOCOVRI experience. Along the lines of as we were on our listening tour in late 2019 and establishing our strategy. A lot of those learnings I think can be applied here too. So Chris you want to talk about NAMZARIC, and then we'll have…

[Chris Prentiss:]

Sure. From NAMZARIC perspective, I think it's important to keep in mind, it's a mature brand. We started earning royalties in mid May of this year. So Q3 and Q4 were our only full quarters and they were both at approximately $1.2 million. So I would say that that's probably the best run rate I can give one to think about going forward. Vijay?

[Vijay Shreedhar:]

Thank you, Chris. Tazeen, I think in terms of the learning, now that we have OSMOLEX and GOCOVRI both in the portfolio. The major learning is around the articulation of the differentiation of these products, right. At the first glance, everybody seems to think, oh, the active ingredient is amantadine, why would these products be different than amantadine immediate release? And there is a big difference and a big difference between OSMOLEX and GOCOVRI and I think the FDA recognized that with our unique indication and our indication statements and so articulating that differentiation, articulating the patient types that are appropriate for these patients to be treated with the different products has been the biggest learning that we’re applying every day.

[Operator:]

The next question is from Serge Belanger from Needham & Company. Please go ahead.

[Serge Belanger:]

Good afternoon. Just a couple of questions from me. First, can you talk a little bit about the persistence rates for GOCOVRI? Have they remained stable during the pandemic relative to the pre-pandemic and expecting them to move that all as your TAM increases with a label expansion? And then secondly, on OSMOLEX, I think when this product launched back in early 2019, it’s kind of seen as – even that a potential competitor to GOCOVRI, but maybe, one that could lead to some confusion since it wasn’t another amantadine product. Just curious if you think that now that it’s in your hands, whether GOCOVRI consistent benefits?

[Neil McFarlane:]

Thanks, Serge. I’ll ask Vijay to talk a little bit about the persistence and also how we can continue to differentiate OSMOLEX and moving forward. Vijay?

[Vijay Shreedhar:]

Thank you, Serge. I would say persistence rates have been remarkably consistent ever since our launch and through GOCOVRI on board, it has been a large area of focus for us, particularly during the pandemic. We do not want our patients to struggle through getting refills and physicians and their offices to find any additional challenges. So, we have seen persistence rates consistent throughout this period of 2020, which we’re very pleased about. With respect to OSMOLEX being a potential competitor, I would say the launch of OSMOLEX has seen limited impact in Parkinson’s to date. And therefore I think any confusion that might have existed is being actively addressed with our differentiation message, which is why it has been a central pillar of our commercialization strategy for the last year and a half to articulate the clinical profile and the efficacy data for GOCOVRI. So, we see that as resolving itself, as we continue to commercialize both products.

[Neil McFarlane:]

Thank you, Serge.

[Operator:]

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Neil McFarlane for closing remarks.

[Neil McFarlane:]

Thank you, Saatchi. So in summary, I’m incredibly pleased with the tremendous progress we’ve made to deliver strong growth, expand our neurology portfolio and strengthen the company’s foundation. We enter 2021 in a strong position, and I remain confident that our continued momentum will drive long-term value. I want to thank you for joining the call. I appreciate your time and I look forward to updating you on future calls.

[Operator:]

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.