Baudax Bio, Inc.
Q1 2021 Earnings Call Transcript

Published: 5 May 2021

[Operator:]

Good morning and welcome to the Baudax Bio First quarter 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this conference is being recorded at the company’s request. I would now like to turn the call over to Claudia Styslinger, Investor Relations. You may begin.

[Claudia Styslinger:]

Good morning and thank you for joining us on today’s conference call to discuss Baudax Bio’s first quarter 2021 financial results. This is Claudia Styslinger and I am joined today by Gerri Henwood, President and Chief Executive Officer; and Rick Casten, Chief Financial Officer. On today’s call, Gerri will begin by providing some introductory remarks, Rick will then discuss the financial highlights from the quarter and Gerri will with a business update and discuss the continued progress around the commercialization of ANJESO.

[Gerri Henwood:]

Thank you, Claudia and good morning everyone. We hope that all of you joining us are keeping safe and healthy. This morning, we're looking forward to updating you on the continuing progress of ANJESO. But first, I'll pass the baton to Rick Casten, our CFO for the financial update.

[Richard Casten:]

Thank you, Gerri. Good morning, everyone. Since we issued a press release and filed our Form 10-Q earlier this morning outlining our full financial results, I will just touch on some of the key highlights. As of March 31 2021, we had cash, cash equivalents and short-term investments of $38.2 million, reflecting the two financing transactions in the quarter mentioned in our Q1 recent business highlights section of our earnings release, net of our operating cash spent. On slide three, you can see our net product revenue for the first quarter of 2021 was $0.2 million and was related to sales of ANJESO in the US. There was no product revenue recognized during the first quarter 2020 as we received FDA approval for ANJESO in February 2020, and began to sell product in the subsequent quarter. Cost of sales for the first quarter was $0.8 million and consisted of product costs, royalty expense and certain fixed costs associated with the manufacturing ANJESO, including supply chain and quality costs. We expect that over time cost of sales will increase as sales increase and inventory values change to include all costs and expenses post FDA approval. There was no cost of sales for the first quarter of 2020. Selling, general and administrative expenses for the first quarter of 2021 were $12 million, compared to $8 million for the first quarter of 2020. The increase of $4 million was primarily due to the commercial launch of ANJESO, specifically, an increase in personnel related costs, medical affairs and regulatory support, marketing and public company costs. Baudax Bio reported a net loss of $16.9 million or negative $0.27 per share, including a non-cash charges of $5.1 million for the first quarter of 2021. The non-cash charges primarily relate to stock-based compensation, depreciation, amortization, and changes in fair value of contingent consideration. This compares to a net loss of $40.3 million, or negative $4.03 per share, including non-cash charges of $32 million for the first quarter of 2020. With that, I will now hand the call back to Gerri. Gerri?

[Gerri Henwood:]

Thank you, Rick. I'm now going to take some time to walk you through some recent highlights. If you look at the slides, I'm starting with slide number four. So during the first quarter of 2021, launch progress was made. There is still COVID around, it varies by location, of course, but that does provide some degree of disruption of access into hospitals were to certain physician groups.

[Operator:]

That concludes our prepared remarks. We will now open up the call for questions. The first question comes from the line of Leland Gershell with Oppenheimer.

[Leland Gershell:]

Good morning, Gerri. Thank you for this update, and taking my question. Wanted to ask, you know, as we look at the sales numbers over time, looks fairly kind of linear and regular. Obviously, COVID has been an issue for some time now. And, you know, maybe a little bit up and down over that time. I want to know if you could just talk about kind of the differences in the trajectory between what’s in the sales and kind of the pull through versus the formulary acceptances and, you know, making progress at various centers? And, you know, perhaps, you know, if we were in a more normalized environment, to what degree would you have expected to see, perhaps more kind of a pull through more and more in terms of sales over that time versus what we've been seeing, you know, because of COVID. And any commentary on kind of the most recent trends in that area? Thank you.

[Gerri Henwood:]

Sure. Thanks. A pretty loaded question. This is the well part one, I'll do my best to try to parse it. So I think it's fair to say that we're not impressed by the economic value of the sales that we have at this moment in time. But we also are really seeing this as the first quarter that looks anything like a normal valance quarter. And we think that's because the environment is beginning to get back to normal. I don't know how to put a percentage on that. But I would say that we're somewhere between, you know, like 30% to 50% of normal right now. And depending on what region of the country you're in. I think we would like to see an expanded and accelerated rate of formulary reviews and approvals. I think there are a couple factors behind that. Hospitals suffered $102 trillion loss, according to the US Hospital Association last year. And so hospital pharmacists, often the keeper of the purse in hospital systems, they are not anxious to have formulary meetings where there could be additional adds to their expense that they have to regulate. It is happening now, as we build advocacy, as we get more clinicians. Too often trial usage is possible in hospitals before we're on formulary. So we're getting more of those opportunities. Building that advocacy does help us to go back and have other internal pushes on pharmacy to expand and to be open to having formulary meetings. So we have expanded that, we would like to see that expand at a greater rate over the rest of this year and beyond. In terms of the product potential, I think key fundamentals that we see are important for the success of any product are, that when a clinician uses the product, they are spontaneously telling you that the product is living up to its profile or more, that is their experiencing a product that does last for an extended period of time and their experience, typically they're getting 24 hours of efficacy from the product and that they are not having, you know, onerous or untoward or unexpected side effects. And that seems to be feedback. The product is well tolerated. And it's working well. And they like it. And it's convenient. And in their experience, again, not every physician, as we don't touch every physician to talk to them, but a high percentage of the user population is telling us that it's helped them to have ability to manage their patients better. So we think that that augurs well for the ultimate success of the product. I think, we wish we weren't in an altered environment. But we're - like going like how fast speed keep moving, we have a small team, as you know, we've 20 people on the street now, added another three to that. So we're pushing very hard with what we have, and trying to get the most out of it. We think ultimately, the product has the opportunity to still live up to its potential. But because of the effects of COVID last year and intermittently this year, we do expect that it will take us a little bit longer to reach that kind of peak your sales. So we're looking forward to more momentum, pushing hard, trying to get more formularies. To get approved, we did make it through with, you know, more than 28 very meaningful formulary storing the first quarter. And we're looking forward to continued progress hopefully at a higher rate as we move forward. So I hope that answers your questions, Leland.

[Leland Gershell:]

That's very helpful. Thank you.

[Gerri Henwood:]

Thanks.

[Operator:]

Your next question comes from the line of Jason Butler with JMP Securities.

[Unidentified Analyst:]

Hi. It’s Schwab for Jason. Thanks for taking our questions. I guess, to kind of follow up on that question. The institutions that you're in now the 90 - the 90 institutions, are there any restrictions on use within these institutions once you get on formulary? And I guess, can you kind of characterize how many are using the product readily?

[Gerri Henwood:]

Yeah. So I mean, an excellent question and a complicated one, because it is - I would say is unusual these days, that one would get onto a formulary of a reasonable size institution with zero restrictions. That would probably be very terrifying for most clinicians. And that was not part of our forecasts assumptions for this product, much like Opermaz which was sort of our – look at target comp as we look at it, we saw that that product was restricted to certain indications and did very well, staying in that lane, it would get usage outside of those, but that was more by exception regularity. So the two areas that we've been targeting from the outset, as I think your team knows, have been orthopedic uses, in particular major orthopedic procedures, and then major intra abdominal procedures. And that is where we're seeing usage heaviest in orthopedics right now, excuse me, I think in part because orthopedic surgery can be done at the outpatient setting, as well as the inpatient setting. And so its surgery rates coming back a little bit faster in some cases than other elective intra abdominal surgery rates. But I would say in most places we're on for those two indications. There may be one or two where it's orthopedics only. And then if we look at - there are a couple, some of them big institutions where we're on unrestricted, but we think it's in our interests, and the interests of the institutions that we're partnering with, you know, to keep the usage in the major pain procedures, so they're going to get the best results there. And overtime, we think there will be spin-off from that. But focusing on these, which are very deep opportunities, more than 11 million surgeries in the orthopedic procedures we're categorizing and a similar number in intra abdominal once they return to normal levels again.

[Unidentified Analyst:]

Okay, great. That's helpful. Thank you. And then you mentioned it in the last question, but I kind of missed it. Can you remember - remind us the number of field reps and it sounds like you're going to add reps as you get on formulary throughout the year. Can you just give us some implications for the expenses for the year? Thanks.

[Gerri Henwood:]

So we haven't given guidance for expenses. We are the managing things very carefully. But we do believe that as we have more opportunities to get on formulary at significant institutions, that could be the nexus for a territory, that it makes sense, we're not going to - we're not going to benefit from just having a formulary approval if we're not going ahead and getting it extended into the order sets, the automatic order sets that are part of the EHRs, if we're not actually talking to the clinicians who will use it, to the CRNAs and anesthesiologists who will be involved in this administration early on. And if we can't do those, we don't get the benefit of getting onto formulary. But we're trying to lead with non-personal selling, up to the point of formulary approval. So that's where we got to, you know, the three that we added in the first quarter, they actually came on in like late March and the beginning of April. So there are now - we were at 19 prior to that, and then we've added three reps, where we had one opening in the field in the 19 or so 20, you know, plus an additional three new territory…

[Richard Casten:]

So currently, we have 23.

[Gerri Henwood:]

Right. So, you know, we’re not looking at going crazy, but we think on this basis, I'll give you an example. So there is a large hospital in Long Island System. That was – it took us quite a while to get onto formulary, we got onto formulary there with the advocacy of both orthopedics and a number of well known pain specialists there. And we had used our key account managers to work that and to get us on to that big formulary. But then you need somebody to do the pull through. So even though electronic records sets were in process, in order to get business, it is not doable, I believe. And we tried through the fall to use only electronic digital means to get to these clinicians and to convince them of the utility of the product, convince them, it's really helping them to get to a point of trial usage. And the trial usage is what converts them, but that does require some face-to-face. And again, so that's where we're trying to lead with the business opportunity being proximate, the opportunity to develop ROI is proximate. But you know, we've got to put a rep into that, we do find that we're able to source well experienced hospital and in some cases, medical device, orthopedics reps, who we can bring in and train and have in the field in approximately 30 to 40 days from the inception of a search. So it's a pretty quick and timely thing. But we're looking at it being pretty much just in time.

[Unidentified Analyst:]

Got it. That's very helpful. Thank you.

[Gerri Henwood:]

Thanks.

[Operator:]

Your next question comes from the line of David Amsellem with Piper Sandler.

[Unidentified Analyst:]

Hey, guys. It's Tom for David this morning. Thanks so much for taking our questions. Just a couple…

[Gerri Henwood:]

Sure.

[Unidentified Analyst:]

I know you've talked about the challenges associated with scheduling these P&T committee meetings during the pandemic, but now with the worst of it is coming behind us. Can you elaborate more on the pace of these meetings going forward? Secondly, you talked about the mix between the ASC and hospital usage thus far into the launch, and assuming federal normalization in the near term, how do you envision this mix evolving? And if I may sneak in another question. I know you touched on early adoption and the mix of procedures ANJESO is being utilizing, but with the product having been on the market for close to a year. How do you envision this dynamic unfolding? And where do you see expansion? Thanks so much.

[Gerri Henwood:]

Sure. So maybe let's just talk about where is the environment right now? And because I think that kind of weaves its way through all these questions, and then I'll come back and you know, try to be more specific on each of the sub questions that you've asked. So we're not out of the pandemic yet. I mean, I really - I want to have that be the case. I want that to be real. I see vaccination rates as a really big help to getting to there. But we're not there right now. We're at 20% to 30% of the country immunized that's great. It's way better than it was. But it is a - you know, it's still - COVID is still thing that's happening everywhere and most hospitals, it is like out of hand right now in Michigan, for instance, and in certain other areas, but it is - it's still a big thing. It is somewhat less of a big thing in the south. And that is an area where we see approaches beginning to get closer to normal, but most P&T committees in many, many hospitals are not meeting monthly, which they might have in normal times. In some cases, they're meeting quarterly. In some cases, there's one very large south eastern system that, you know, we were due to be reviewed in April, and they've decided they're not doing any P&T reviews until third quarter. And it's in what would be more of a southern area. So it's just not done yet. But you know, what we're - I think what's happening is that we're working with that adverse situation, and being compliant, but creative about, you know, trying different ways to get through things, trying to get approvals for trial usage, because the trial usage really helps to build more exuberant advocacy, that when they are having P&T committees really helps for these clinicians the push for, why not only because of national concerns about opioid usage, but because of the impact of opioid usage in many systems on what they are able to do in terms of patient management and having earlier time to discharge, which for the systems that are hurting economically helps them to be more prudent with their monies and to operate under the DRG and not exceed what they're going to get paid on the inpatient side. So that's a kind of real look at the environment that we're in right now. In terms of the pace of P&T, I would say that is - that's right up there as the most problematic, it's just much slower than it would be. Now we keep looking for are there other places where there - they have perhaps sustained fewer losses, because they weren't as large a medical center and proportionally, they're not as hurt, where we can get on, they have big orthopedic practices, and they would be good opportunities for us. So we're looking for, you know, where can we play while we're working with bigger institutions, which in normal times, in a normal launch, and there are many folks that you guys know, who are familiar with hospital products, hospital product launches would be slow for the first 18 months, start picking up 18 to 24. And then you would start seeing more of a growth because you're putting all of this kind of infrastructure in place, while you're trying to also get pull through from the places that you have. So we do see P&T is getting better than they were, they're still not, you know, on a totally predictable or close to normal schedule. In terms of outpatient versus inpatient. We are looking at right now a higher percentage of usage, not by a lot, you know, probably, this is the ball parking. And I don't have the exact latest monthly numbers in front of me, it's a second, but it's maybe like 60 versus 40 or 55, 45 in that range, skewing to the outpatient side usage. I think that part of that is economics. It's easier to use this non-opioid product in an outpatient environment with ANJESOs that we have, that makes it easier for them to get reimbursement. And we are able to operate in group - groupings that are not wholly dependent or tied to what their core institution may have had this formulary. So I think that's responsible for. But we are getting impatient usage in the product and that is beginning to grow. We have less usage in the inter abdominal surgeries. And again, I think that's in part because some of this elective surgery rates are not as back as they would like them to be. Orthopedics are still not close to 100%. They're closer like 50%, 60% of what they were before. The next we would see evolving, I think it is clinicians who have used meloxicam in the outpatient setting, which largely with orthopedic guys. They are familiar with the product as an entity. And I think that's familiarity gets them a little bit easier to think about trial usage in the IV form at the higher dose and getting this NanoCrystal technology to give them the product characteristics that they're looking for. So we would see that as probably being - its still on the forefront, although we are intending to continue to grow, there's other areas as well. We've begun to see which was really not part of the core plan, but we've begun to see plastic surgery practices and many of them having their own surgery centers, finding this product of good utility because of its both anti inflammatory properties, as well as its pain relieving properties, and the longer lasting nature of that to cover the period of most intense pain around plus - many plastic surgery procedure. So that's an area that we're evaluating and looking at, you know, is there a way to grow that and to grow that a little bit faster as well. Podiatrists have begun to show adoption of the product, I think because of the long lasting nature of the pain relief and the fact that they - you know, a lot of their patients tend to be older, they would prefer not to see as much opioid usage in this patients in the immediate perioperative period. In terms of early adoption, orthopedic surgeons historically are more willing to try new things and a number of other surgical areas are. We think that's part of why we're seeing this adoption, like I said, I think, because they had experience with the molecule in other settings that helps them be a little more prepared for it. But I think as we said before, the opportunity to limit or reduce opioids and get good pain management as part of a multi modal surgical approach, using for instance, you know, containing product or an Expodel type product for certain types of pain using a product like ours for some of the deep pain, and some of the other agents that clinicians would typically use in their multimodal analgesia. We think that's a benefit for colorectal and intra abdominal surgeons, because they don't want to have opioids that further slowed down the bow after they had to handle it as part of the surgery. So those are areas where we're in and we're anticipating that we'll see some growing usage of the product. If that's helpful.

[Unidentified Analyst:]

All right. Thanks, guys.

[Operator:]

We're showing no further questions. I will now turn the call back to Gerri for closing remarks.

[Gerri Henwood:]

Thank you very much operator. And I am very appreciative all of you have joined at this early hour to hear the progress with ANJESO. Hope you have a great rest of your day and we look forward to talking to you during the coming quarter. Thanks. Bye.

[Richard Casten:]

Thanks a lot. Bye-bye.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.