Evoke Pharma, Inc.
Q1 2021 Earnings Call Transcript

Published: 12 May 2021

[Operator:]

Good afternoon, and thank you for joining Evoke Pharma's First Quarter 2021 Earnings Conference Call. I would now like to introduce Christine Petraglia for opening remarks.

[Christine Petraglia:]

Good afternoon, and welcome to Evoke Pharma's First Quarter 2021 Earnings Conference Call and Audio Webcast. With me today are Dave Gonyer, Evoke's Chief Executive Officer; and Matt D'Onofrio, Chief Business Officer; as well as Chris Quesenberry from EVERSANA as GIMOTI's Chief Commercial Officer. Earlier today, Evoke issued a press release announcing financial results for the first quarter ended March 31, 2021. We encourage everyone to read today's press release as well Evoke's quarterly report on Form 10-Q, which is filed with the SEC. The company's 10-Q report and press release are also available on Evoke's website at www.evokepharma.com.

[David Gonyer:]

Thank you, Christine, and thank you all for joining us this afternoon for Evoke Pharma's First Quarter 2021 Earnings Conference Call. Today, I'll spend a couple of minutes upfront walking through some key points from our first full quarter since the launch of GIMOTI, albeit in the midst of the COVID surge in January and February. We'll also provide an update on our commercial activities and specific insight on physician and patient feedback and some important trends as we look forward, and then we will review our financials. As many of you may recall, GIMOTI is the first novel pharmaceutical treatment for gastroparesis to hit the market in over 40 years and represents a robust market opportunity with 12 million to 16 million adults reporting symptoms. This market continues to grow fueled by diabetes, which is a common cause of gastroparesis. Currently, only an estimated 2 million to 3 million patients are receiving treatment with limited therapeutic options. GIMOTI is specifically designed to address the unique needs of adult patients with diabetic gastroparesis by delivering an established treatment as a nasal spray that bypasses the GI tract. Adults suffering from diabetic gastroparesis, by definition, have unpredictable stomach emptying and may or may not vomit their medications. For these reasons, oral administration may be erratic which can be problematic since the drug absorption in the small intestine requires gastric emptying.

[Christopher Quesenberry:]

Thank you, Dave. While our sales continue to ramp, we are thrilled by the feedback we are receiving from prescribing physicians. As many of you may recall, Dr. Richard McCallum, who is Professor of Medicine in the Division of Gastroenterology at Texas Tech University Health Sciences Center at El Paso, provided his insight on GIMOTI at a recent key opinion leader fireside chat on the treatment of gastroparesis. Throughout this discussion, Dr. McCallum emphasized the key differences between GIMOTI and the traditional form of metoclopramide, which is oral.

[David Gonyer:]

Thanks, Chris. We're still in the beginning stage of launching GIMOTI. However, the positive feedback we continue to receive from physicians validates the need for this drug, as more doctor's offices open, patients will be pleased to discover new treatment option for diabetic gastroparesis. Drug launches have been hindered due to the pandemic, but thanks to the recent progress of the vaccine rollout nationwide, patients feel more comfortable returning to the doctor's offices. And additionally, our field force has experienced increased access to speak with physicians about prescribing GIMOTI. So we're excited to capitalize on this recovery momentum and drive the progress of our commercial launch forward. Now let me turn to Matt D'Onofrio to review the financials for the first quarter of 2021.

[Matthew D'Onofrio:]

Thanks, Dave. And once again, thank you all for joining us this afternoon. Restating the basics of the EVERSANA agreement, EVERSANA will receive reimbursement of its commercialization costs pursuant to an agreed-upon budget and are only pay back through a portion of the revenue as it is recognized and received. Once those costs are covered, EVERSANA will receive a percentage of product profits in the mid-to-high teens and Evoke retains over 80%. Net product profits are the net sales of GIMOTI, less reimbursed commercialization costs of both manufacturing and Evoke administrative costs set as a fixed percentage of net sales and third-party royalties. During the term of our agreement with EVERSANA, they have agreed not to market promote or sell a competing product in the United States. Now let me review our financials for the first quarter of 2021. For the first quarter of 2021, net sales were approximately $90,000, and the net loss was approximately $2.6 million or $0.08 per share compared to a net loss of approximately $1.8 million or $0.07 per share in the first quarter of 2020. This increase was primarily due to costs associated with the commercialization launch of GIMOTI. Research and development expenses totaled approximately $0.3 million for the first quarter of 2021 compared to approximately $0.5 million for the first quarter of 2020. For the first quarter of 2021, selling, general and administrative expenses were approximately $2.3 million compared to approximately $1.3 million for the first quarter of 2020. We expect that selling, general and administrative expenses will increase in the future as we continue to progress with the commercialization of GIMOTI and we reimburse EVERSANA from the net profits attained from the sales of GIMOTI. Total operating expenses for the first quarter of 2021 were approximately $2.7 million compared to total operating expenses of approximately $1.8 million for the same period of 2020. As of March 31, 2021, the company's cash and cash equivalents were approximately $18.2 million, which includes approximately $13.1 million in net proceeds raised from our common stock offering in January of 2021. We expect sufficient runway to fund our operations into the first quarter of 2022. Also, last week, a proposal was voted in on the company's annual proxy to consider an increase in the total authorized shares allowed in the company. The recommendation by Evoke was to increase the shares from 50 million to 100 million. Although the amendment to the company's amended and restated certificate of incorporation to increase the authorized number of shares of common stock received a substantial majority of votes cast, it did not receive a majority of the outstanding shares of common stock as required. So it was not approved. The company proposed the measure based on a few basic guiding principles. One that the fully diluted share count for the company is currently approximately 41 million based upon 32 million outstanding plus another 9 million reserve for warrants, stock options and the company's employee stock purchase plan, leaving about 9 million remaining for various circumstances, such as employee hiring, retention, product acquisitions, fundraising, et cetera. Point two, the authorized shares provide an additional financial safety net should the more funding be deemed prudent to support the ongoing activities of the company. And three, similar companies typically maintain far more shares in the 50 million authorized shares currently within Evoke for such prudent uses. Nevertheless, the company will press forward with the current authorized shares and expect to revisit this matter in the future. Let me turn the call back over to Dave for closing remarks.

[David Gonyer:]

Thank you, Matt. I'd like to close the call today by saying that we have the foundation in place for growth of GIMOTI, and we believe we are on the right track to make GIMOTI an important product in the gastroparesis market. We will continue to implement our commercial strategy and will improve upon it every day, along with expanding reimbursement and access for GIMOTI to make sure GIMOTI is available for healthcare providers and their patients. I'd like to thank our shareholders for their continued interest in our company and our progress. Throughout the rest of 2021, our team remains focused and committed to ensuring the successful commercial launch of GIMOTI, and we are confident and committed in our efforts to increase awareness, help patients and their providers access and unlock the considerable value in GIMOTI. Thank you. I'd now like to open the call to questions. Operator?

[Operator:]

. Your first question comes from the line of Raghuram Selvaraju from H.C. Wainwright.

[Unidentified Analyst:]

This is Mazon for Ram. And congrats on the progress. Just a few from us. So I was wondering what the gross to net discount levels are trending? How they look at this point? And what -- how they've been trending in the last quarter?

[David Gonyer:]

Thanks, Mazon , this is Dave. I'll let Matt to answer that question for you.

[Matthew D'Onofrio:]

Sure. So we haven't put out any specific guidance on that. I'll just say in relationship to the rack price, we are still receiving a substantial portion of that as it relates to the average net realized price. If that helps provide some guidance, of course, with early days that, that number can move around quite dramatically. But thus far, it's remained, again, substantially a large portion of the original pricing itself.

[Unidentified Analyst:]

Okay. Good. Understood. And I was wondering if you've made any progress on R&D activities in terms of the lower dose of GIMOTI?

[David Gonyer:]

Yes, we have. So we -- according to the FDA and when we were approved, we had to put in a protocol for their review by March of this year. We did that in early March. And so we're waiting now for them to provide some feedback on that protocol. So yes, we have. We've also manufactured a dose as well to have it available.

[Unidentified Analyst:]

Excellent. And just finally, we wanted to get your views on tradipitant by Vanda Pharmaceuticals and whether you think it's likely to be a competitive threat in the future?

[David Gonyer:]

Sure. Well, there's -- as we've discussed, there's a huge need in this marketplace for new drugs and different drugs. My understanding, they're looking for an indication for nausea as it relates to gastroparesis. We'd like to try to understand how that will differ from like a Zofran, different products like that, that has different effects than those products would have on nausea for these patients. So our understanding is that they're moving through their clinical trial. We know through experience the clinical trials in gastroparesis patients are very difficult. It's tough to find these patients. It's tough to do patient-reported outcomes with these patients. So I guess, we'll have to wait and see what the data looks like. Matt, I don't know if you had any comments.

[Matthew D'Onofrio:]

The only other comment I would make is it's still an oral tablet, which we know from direct experience in the patient support groups that these patients vomit up these tablets and/or don't metabolize them in a normal predictable way already. So given it doesn't have any pro motility action, and it's not some other non-oral delivery, we still think there's a definite differentiating factor between the 2.

[Unidentified Analyst:]

Great. Yes. You have a competitive edge with the oral administration. Okay, thanks for clarifying.

[Operator:]

Next one on the line is Yale Jen from Laidlaw & Company.

[Yale Jen:]

Congrats on the progress last quarter. My first question is that in terms of the new -- prescribed new scripts versus the total amount -- total scripts. If I remember correct or heard correctly, is that 86% new scripts? If that so, was the increasing the -- or maintaining the high proportion of the new scripts will be the major goal for the marketing team over the next couple of quarters?

[David Gonyer:]

Yes. So Yale, the 86% number refers to the patients that have completed their first month of therapy and are eligible for taking their second month of therapy and also have a refill associated with the prescription. 86% of those patients filled in the first quarter compared to 85% in the fourth quarter of last year. So we're kind of maintaining that quarter-to-quarter.

[Yale Jen:]

And from the marketing team perspective, is that continuing having a high percentage of new script that the major goals for the next couple of quarters before you're getting more patients refilled as well?

[David Gonyer:]

So we're actually seeing an increase in the total number of prescriptions and the contribution that refills are making. So we're encouraged by that. And obviously, we want to make sure that for those patients that are on therapy continue on therapy according to their physicians' plans. So of all refill opportunities, so that's the first, the second or third, fourth refill. That rate of refill for patients, again, that have refills associated with the prescription is 73%. And so we're encouraged by that number as well.

[Yale Jen:]

Okay. Great. And maybe two quick ones. The first one technically related to R&D. How should we think about the expenses for remaining of the year compared to the first quarter figures? Should we think that maybe the trial could start in the third or maybe fourth quarter? Or how should we help to -- how it will help us to model that?

[Matthew D'Onofrio:]

Yes, Yale, this is Matt. So as you know, we're a small virtual team and we take pride in being extremely frugal and making sure we're spending those dollars correctly. As it relates specifically to R&D, there's a good chance that we will not have to run a clinical trial. So we're still investigating some alternative pathways to approval for that. And if that's true, that would greatly diminish any potential costs. Even if there was a clinical trial associated with that, it's a straightforward PK trial with healthy volunteers. That in and of itself is usually a couple of million dollars or something of that nature. But at this point, we're still investigating the more speedy and cost-efficient route through in-vitro studies.

[Yale Jen:]

Okay. Maybe the last question here is that given the societies open up, particularly with the increasing vaccination, are the reps increasing their chances with the face-to-face time with the physician or in the doctor's office? Or do you think that you still will do a lot of the online marketing efforts?

[David Gonyer:]

Yes. So I think, Yale, the answer is we're going to continue to leverage both routes to be able to get access to physicians and the office staff. In the first quarter, we did see a paradoxical decline in access because of the increased patient volume and physician offices were kind of overburdened with the load. Now as the first quarter ends and the second quarter starts, we're seeing access to offices increase. And we're also seeing increased access to the physicians themselves. We have always been out in the field and trying to promote and gain access live. So that's our preferred route of administration. We only use virtual and phone to supplement those efforts and to follow-up. So I'm encouraged by the fact that we are increasing our access. And as I mentioned earlier, when we do have time with the physicians and especially when we have extended time, that is resulting in a positive interaction and in many cases, a prescription.

[Yale Jen:]

Okay. Great. Maybe just second last question. One more question here. You mentioned during the call about sampling. Is that something that you can increase or start to do to help the marketing effort?

[David Gonyer:]

So thanks. Absolutely. We're planning to do that. We're hoping that we can accelerate our plans to do that and plan to do so over the next month or so to give access to physicians to gain experience with patients on GIMOTI. So it's an important part of what we're trying to do. But what I'll say is it's part of an overall plan to increase promotion. And so as I look at it, you kind of have a couple of positive things happening here at the same time that has increased patient visits for that catch-up care, increased access to the HCPs and increased in our sales force and overall promotional effort and execution is going to help us to hit our stride in the upcoming quarter.

[Operator:]

There are no further questions at this time. I will now turn the call over back to the presenters.

[Christine Petraglia:]

Great. I'd like to thank everyone for participating in the call today, and we look forward to be providing updates next quarter. Thank you.

[Operator:]

This concludes today's conference call. Thank you for participating. You may now disconnect.