RVL Pharmaceuticals plc
Q1 2019 Earnings Call Transcript

Published: 11 May 2019

[Operator:]

Good day, ladies and gentlemen, and welcome to the Osmotica Pharmaceuticals First Quarter 2019 Financial and Business Update Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Ms. Lisa Wilson, Investor Relations for Osmotica Pharmaceuticals. Ma’am, you may begin.

[Lisa Wilson:]

Thank you, Daniel. Welcome to Osmotica Pharmaceuticals First Quarter 2019 Financial and Business Update Call. This is Lisa Wilson, Investor Relations for Osmotica. With me on today’s call are Osmotica’s Chief Executive Officer, Brian Markison; Chief Operating Officer, JD Schaub; and Chief Financial Officer, Andrew Einhorn. This afternoon, the company issued a press release detailing financial results for the three months ended March 31, 2019. This press release and a webcast of this call can be accessed through the investors section of the Osmotica website at osmotica.com. Before we get started, I would like to remind everyone that any statements made on today’s conference call that express a belief, expectation, projection, forecast, anticipation or intent regarding future events and the company’s future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to Osmotica’s management as of today and involve risks and uncertainties, including those noted in this afternoon’s press release and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. Osmotica specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. The archived webcast of this call will be available for one year on our website, osmotica.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 9, 2019. Since then, Osmotica may have made announcements related to the topics discussed, so please reference the company’s most recent press releases and SEC filings. And with that, I’ll turn the call over to Osmotica’s CEO, Brian Markison.

[Brian Markison:]

Good afternoon, and thank you for joining our call. During the first quarter, and more recently, we continued to make significant progress in driving our promoted portfolio, advancing our pipeline and transitioning to a specialty branded pharmaceutical business. Our non-promoted portfolio, which includes generics, continues to generate meaningful cash in support of operations, while facing expected competition in a generic market. In the first quarter, we completed the full commercial launch of Osmolex extended-release, and while early in its launch, we’ve been encouraged by growing prescription trends and patient acceptance. We continue to see month-over-month prescription growth in M-72 as well. Regarding our late-stage pipeline, we most recently announced completion of 2 Phase III trials for RVL-1201, our ophthalmic solution for treatment of ptosis or droopy eyelid; Study 202, our second Phase III safety and efficacy trial; and Study 203, our long-term pivotal safety study. Our positive top line results provide additional evidence of the efficacy seen in our prior study results, which showed statistically significant improvement in the visual field of patients that were administered our once daily drop. RVL was well-tolerated by all patients in the studies. We hosted a conference call on May 7 with key opinion leaders to discuss the top line results of the study in detail. For those of you who were not able to join the call, I would encourage you to refer to the transcript and related presentation posted on the company’s website for additional clarity and insights surrounding this exciting opportunity. We believe there’s a large prevalence of patients that have ptosis today, and for which there is no approved pharmacologic intervention. If approved, RVL will be the first nonsurgical options for patients with acquired ptosis. With respect to arbaclofen, we recently reported top line results for Study 3004, our second Phase III clinical efficacy trial for the treatment of spasticity in multiple sclerosis patients. While the study failed to meet one of the co-primary endpoints, the efficacy signal for the treatment of spasticity identified by the TNmAS, or Ashworth endpoint, was quite positive. We have now completed three of the largest clinical trials for the treatment of MS spasticity in the world

[Andrew Einhorn:]

Thank you, Brian. Total revenues were $57.1 million for the three months ended March 31, 2019 compared to $59.8 million for the three months ended March 31, 2018. Net product sales were $56.4 million for the three months ended March 31, 2019 compared to $58.8 million for the three months ended March 31, 2018, a decrease of $2.4 million. This decrease was driven by lower sales of methylphenidate ER, inclusive of M-72, which decreased 26% during the quarter compared to the prior year due to increased market competition, which led to lower net selling prices, partially offset by higher volumes. Net sales of venlafaxine ER tablets increased 46%, reflecting lower than estimated product returns and government rebates, partially offset by lower volumes. Selling, general and administrative expenses increased to $21.7 million in the three months ended March 31, 2019 compared to $17.2 million in the three months ended March 31, 2018. This increase reflects additions to our field force headcount and marketing costs associated with the launch of Osmolex ER, together with share compensation expense and higher costs associated with being a public company. Research and development expenses were $9.8 million in the three months ended March 31, 2019 compared to $10.2 million in the three months ended March 31, 2018. The decrease reflects completion of the Phase III clinical trial of arbaclofen ER during the quarter, offset by clinical trial expenses related to RVL-1201, additional development expenses and shared compensation expense. Net loss for the first quarter of 2019 was $6.2 million compared to net loss of $4.6 million in the first quarter of 2018. Adjusted EBITDA for the first quarter of 2019 was $16.4 million compared to adjusted EBITDA of $20.5 million in the first quarter of 2018. For a reconciliation of adjusted EBITDA to net income or loss, please see the tables at the end of our press release. As of March 31, 2019, Osmotica had cash and cash equivalents of $63.1 million and $267.9 million of debt, net of deferred financing costs. The company also had $50 million of unused borrowing capacity available under its revolving credit facility. Now I’d like to turn the call over to JD.

[JD Schaub:]

Thanks, Andy. Overall, we had a solid start to the year, continuing to drive the transition toward specialty brands, while maintaining strong volumes in sales contributions from key non-promoted products such as methylphenidate ER and venlafaxine, despite expected competition in generic markets. Specific to our promoted brands, we continue to see strong growth in Divigel, highlighted by the launch of a new strength in February, further enhancing our market-leading position in transdermal estrogen replacement therapy. On the CNS side of the business, and as I’ll discuss in a bit more detail, M-72 growth trends continued throughout the first quarter, as does Osmolex ER, which we began promoting in January of this year. Starting with Osmolex. Obviously, it remains early days in our launch and only about 6 weeks since our last update, but we are encouraged by the ongoing progress. Keep in mind, Osmolex has been a controlled and measured launch by about 30 sales professionals laying the groundwork for an expanded effort as we go. Through March, 104 unique HCPs have written or enrolled at least 1 patient via Access Osmolex for a total of 284 prescriptions. The strategy and investments in patient-focused support through Access Osmolex have been critical to the launch thus far, providing reimbursement assistance, ensuring product availability through our pharmacy partners and better overall support of the prescription journey. We are building on the early successes with positive feedback and anecdotes from prescribers, expanding commercial coverage and robust patient adherence, as seen in refill rates. We remain focused on building a strong base and continuing to drive demand and subsequent utilization as we move through the year, while we continue our work through the Part D bid cycle in anticipation of Medicaid coverage in 2020. Turning now to M-72. The first quarter was highlighted by a continuation of the steady growth we’ve seen with this brand throughout the first year of launch. TRxs were up about 35% over Q4, and we continued to see strong growth in new to brand prescribers with 1,300 new HCPs writing their first prescription during the first quarter. We are launching several new initiatives in the second quarter, including a voucher program to encourage HCP trial, and support expanded breadth of prescribing in this large market as well as the addition of a 30-count bottle to address the desire of our retail pharmacy partners to have a simpler unit of use option available. Lastly, we expect growth in our promoted brands to strengthen throughout the remainder of the year, and as an organization, are excited by the progress we continue to make as we invest and transform the promoted brand business. Now I’ll turn the call back to Brian for closing remarks.

[Brian Markison:]

Thanks, JD. I’ll wrap up with a few final thoughts. This is an exciting time at Osmotica. Our first quarter was highlighted by month-over-month prescription growth with our recently launched new products, Osmolex ER and M-72, and most recently, we made significant advances in our late-stage pipeline. With the positive top line data from our RevitaLid studies, we have the potential to meaningfully expand our branded commercial platform. At the same time, we continue to examine external development opportunities that we believe would be a good fit with our platform. Thank you for your time this afternoon, and we look forward to continuing to update the market on our progress in the near future. And with that, I’d like to turn the call back to the moderator for any questions.

[Operator:]

[Operator Instructions] Our first question comes from Randall Stanicky with RBC Capital Markets. Your line is now open.

[Randall Stanicky:]

Great. Thanks guys. Brian, can you talk about EBITDA outlook for this year, given some of the trends in top line, R&D spend a little bit later than we had modeled this quarter and how you’re thinking about overall EBITDA? And then the second question I had for you is on business development. Stock is seeing a little bit of pressure. Is the focus on getting a potential deal or at least looking at possible deals, is that focus still there? Is it high? And then when you think about the various buckets that could come in, whether it’s CNS, women’s health or, I guess, even ophthalmology with RVL, how are you thinking about areas of interest?

[Brian Markison:]

Yes. Thanks, Randall. I think, with business development, it’s not sort of a major emphasis, but it’s a continuous process for us where we are looking for really good fits for our commercial structure and for our capability and possibly manufacturing. We’re in, as you would imagine, a number of interesting conversations with third-parties around a host of assets. And for the most part, they all are very good fit with our current plans, particularly in neuro. In ophthalmology, our plans are to look for a partner, ex-U. S., and we’ll be going down that road fairly soon and starting a process. And in the U.S., it’s our intention to go it alone, although we recognized that if we were to work with a third-party that has greater expertise than us, there may be more to consider and bring to the table. And we’ll certainly think that through. I think the commercial potential for RVL is quite large and we just want to be careful on how we maximize revenue and earnings for our shareholders with that particular asset. So the U.S. market is ours, but ex-U. S., I think we’re going to be pretty aggressive in seeking a partner. On EBITDA outlook, I’ll start with the answer and turn it to Andy. But I think, Randall, we’re transitioning right from a generic base to a branded business. And I think we’re in the midst of that transitions right now. So we’re seeing the pricing pressure on our big generic assets as they get more competitive, particularly methylphenidate. But we take a lot of pride in being able to provide high-quality products, and we are committed to them. So Andy, do you want to add to that?

[Andrew Einhorn:]

Yes. I’m sort of following up on what Brian said. As you know, Randall, we don’t give guidance, but as we think about EBITDA, we are looking at competitive pressures in our large generics. We also have clinical trials, which are finishing off, and we also continuously look at ways we can save costs without hurting investment in the business in terms of our promoted products and some of the other initiatives that we have.

[Randall Stanicky:]

Okay. Great. Thanks guys.

[Andrew Einhorn:]

Thank you.

[Operator:]

[Operator Instructions] And I’m not showing any further questions at this time. I would now like to turn the call back over to Brian Markison for any further remarks.

[Brian Markison:]

Okay. Thank you, everybody, for listening in today and participating with us. We look forward to future updates. And thank you. Have a good evening.

[Operator:]

Ladies and gentlemen, thank you for participating in today’s conference. This does concludes today’s program. And you may all disconnect. Everyone, have a wonderful day.