RVL Pharmaceuticals plc
Q2 2019 Earnings Call Transcript

Published: 10 Aug 2019

[Operator:]

Good day, ladies and gentlemen, and welcome to the Osmotica Q2 2019 Earnings 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 follow at that time. [Operator Instructions]I would now like to introduce your host for today’s conference call, Ms. Lisa Wilson, Investor Relations of Osmotica. You may begin.

[Lisa Wilson:]

Thank you, operator. Welcome to Osmotica Pharmaceuticals second quarter 2019 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 June 30, 2019. This press release and a webcast of this call can be accessed through the Investor 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 30 days 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 August 8, 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 the call. I’m pleased to report that Osmotica continues to advance its strategy to transform to a specialty pharmaceutical company. First and foremost, we are on track to submit the NDA next month for RVL-1201, our breakthrough product for the treatment of ptosis, more commonly known as droopy eye. The company has completed its assessment of the global potential and outreach to prospective partners begins in earnest this month.Furthermore, we’ve begun to realign our operating expense base to prepare for commercial introduction possibly as early as Q3 2020. The company’s outreach the KOLs, presence at key scientific meetings and publications will begin take this story come to life. We have already received notifications of acceptance to various publications and live presentations at upcoming medical meetings, which will be the topic of future releases.We believe that RVL-1201 has the potential to improve peripheral field of vision and will be a meaningful option for those who have ptosis but are not appropriate candidates for surgery. Second, I am pleased to report that our neuroscience programs continue to advance. The company is in dialogue with the FDA to discuss filing the arbaclofen NDA. While we can make no assurances at this time, we remain optimistic and believe that our baclofen has a meaningful risk-benefit ratio when compared to the parent molecule, baclofen.And third, the Company’s branded products and generic business continue to perform as expected. The generic oral solid dosage for market remains challenging. However, we continue to derive meaningful cash from these assets to help fund our transformation.Now I’d like to turn the call over to Andy Einhorn, who will discuss the Company’s financial results, and he will be followed by JD Schaub, the Company’s Chief Operating Officer, who will discuss the company’s promoted products in further detail. Andy?

[Andrew Einhorn:]

Thank you, Brian. Total revenues were $57.5 million for the three months ended June 30, 2019, compared to $71.9 million for the three months ended June 30, 2018. Net product sales decreased by $15.8 million to $56.2 million for the three months ended June 30, 2019, as compared to $72 million for the three months ended June 30, 2019.Net sales of methylphenidate ER, including M-72, which was launched in the second quarter of 2018, decreased 56% during the quarter due to additional competitors entering the market resulting in significantly lower net selling prices. Venlafaxine net sales decreased 7% reflecting lower sales volume following the launch of a competing product and largest dosage strength during the quarter partially offset by higher realized net selling prices due to lower-than-estimated product returns.We expect the additional competition for both methylphenidate ER and venlafaxine from these competitors as well as additional generic product approvals and launches in the future, if any, will continue to negatively impact our sales of these products during the remainder of 2019 and in future years.Selling, general and administrative expenses increased $8.8 million during the second quarter of 2019 to $25.5 million as compared to $16.7 million in the second quarter of 2018. The increase reflects additions to sales 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 decreased by $3.5 million during the quarter to $5.4 million as compared to $8.9 million in the prior year quarter. This reflects the completion of Phase 3 clinical trials for both our arbaclofen ER and RVL-12.1 during the first and second quarters of 2019, respectively, partially offset by share compensation expense.During the quarter, a $125.8 million of intangible asset impairment charges were recognized, which reduced the book value of venlafaxine by $107.8 million and included a write-off of Osmolex ER of $17.7 million and core weight of 200,000. Net loss for the second quarter of 2019 was $124.7 million compared to net income of $5.9 million in the second quarter of 2018.Adjusted EBITDA for the second quarter of 2019 was $14.5 million compared to adjusted EBITDA of $34.6 million in the second 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 June 30, 2019, Osmotica had cash and cash equivalents of $63.7 million and $271.4 million of debt, net of deferred financing costs. The company also had $50 million of unused capacity under its revolving credit facility.Now I would like to turn the call over to JD.

[JD Schaub:]

Thanks, Andy. In the second quarter, we continue to see solid prescription growth from our key promoted brands with Divigel, M-72 and our most recent launch Osmolex, up 20%, 10% and greater than 200%, respectively, versus Q1, recognizing Osmolex is growing off of a smaller launch TRX base since promotion began only in January of this year. We are encouraged by the strong sequential volume growth through the first half of the year and expect continued momentum as we move through the back half of 2019.Importantly, the growth from existing brands also serves to establish a stronger commercial framework for the future pipeline. Larger national field force scale, channel strategies, pharmacy networks, patient access programs and marketing programs, all represent key infrastructures supporting capabilities that will drive the continued growth with our existing business. It also allows us to further leverage these investments as we begin our commercial preparations for RVL-1201 in earnest.More specifically, in its first full calendar quarter of promotion, Osmolex ER continues to gain momentum in the market. Every new product launch in today’s environment comes with its unique set of challenges, but we are encouraged by the overall receptivity. Through June, 233 health care providers wrote or enrolled at least one patient via Access Osmolex program for a total of 596 prescriptions compared to 104 health care providers and 284 prescriptions at the end of March 2019.Importantly, our clinicians who are early adopters have seen strong clinical success, further validated by patient refill rates, while payer coverage continues to increase and 9 out of 10 claims are ultimately approved with requisite payer criteria. Our limited, yet focused effort has provided key insights and learnings, which will support the expansion of our field sales and promotional footprint behind Osmolex in the latter part of this year. And we expect the growing awareness in trial from our target audiences to continue to accelerate growth and utilization as we move forward.With regard to M-72, we continue to see steady growth through the second quarter. Despite seasonal pressures on overall ADHD market demand as we moved through Q2, total prescriptions grew 10% over Q1. This quarter, we also introduced an M-72 voucher program to encourage trial from HCPs as well as transitioned to a 30-count bottle with our retail pharmacy partners to allow for a more convenient unit of use configuration for this C2 product.To wrap up, the organization remains focused on execution and growth from our current brands, while beginning to further prepare and align our resources to support and ultimately maximize the potential transformative opportunities from our late-stage pipeline.Now I would like to turn the call back to Brian for closing remarks.

[Brian Markison:]

Thanks, JD, and thank you for your time this afternoon. And we look forward to continuing to update the market on our progress in the near future.With that, I’d like to turn the call over to the operator for any questions that we would be happy to field today.

[Operator:]

[Operator Instructions] Our first question comes from Randall Stanicky with RBC Capital.

[Dan Busby:]

Hey, guys. This is Dan Busby, on for Randall. Few questions on RVL to start. One, have you held your pre-NDA meeting with FDA yet? And if so, can you share any feedback from that? Two, regarding your commercial strategy, are you committed to launching this product yourselves in the U.S.? Or would you still consider out-licensing it here? And three, if you choose the former, can you just remind us of the extent to which you will be able to leverage your existing commercial infrastructure for that lunch versus where you’ll need to add resources?

[Brian Markison:]

Great. Yes, we did have a pre-NDA meeting with the agency and it was unremarkable and quite positive. Nothing unusual that I can really pull out of it that was troublesome. So we’ll be filing next month, and we anticipate a first-pass approval. We’re very confident in our approach and, again, happy to take you through it more off-line. But it was a complete agreement on all fronts with the agency.With respect to launching it ourselves and seeking a partner, right now, our plan is to seek a partner outside of the U.S. We’ve been pretty consistent with that story, and we’re going to begin the outreach in earnest really next week. We believe we have the capability to launch it ourselves. We have the resources, but if somebody is extraordinarily interested and would like to get together and may have a very compelling value proposition, we’d be fools not to listen to it. JD, you wanted to add on to that.

[JD Schaub:]

Yes. Dan, this is JD. And just to close the loop, I think the last part of your question was launching it ourselves in the U.S. out of our existing infrastructure versus additional. And I think we continue to be very comfortable with the existing infrastructure serving as the majority of the foundation from field perspective. Will we add reps over time? I think, absolutely. When we go back to the potential for a product like this, where there is no competition and it has the potential to be first in class, I think over time, that’s what I would expect. But when we look at 15,000 to 20,000 targets in terms of ophthalmology and optometry at the root of this from a medical standpoint, I think our existing footprint is exactly what we need to get off the ground successfully.

[Dan Busby:]

Great. That’s helpful. And then just a couple on arbaclofen. First, can you share any feedback from your interactions with FDA? And based on what you know today, what’s the likelihood that you’ll have to run another clinical trial? And second, with respect to Osmolex ER not quite meeting your early launch expectations, is this influence just thinking around the arbaclofen opportunity, assuming you’re able to bring that product to market? Thank you.

[Brian Markison:]

The answer to the last question is absolutely not. But we’ll come back to that and elaborate a little bit further. The interaction with the agency right now has been truly procedural. We do not anticipate having to do another study. We would prefer not to, and we feel very confident that the data package that we have is fairly comprehensive. But you never know until you get there and you file, but we are – we’re dead set on resubmitting this NDA. And we look forward to discussing it further with the FDA.So back to Osmolex. I think it’s important to keep in mind that we launched the drug a short while ago only with 30 representatives. And we wanted to make sure that we had our proposition correct, that we were scoping the market size and opportunity correctly, and we readily admit and we did before we launched that this was not going to be a major drug for the company, but really another extension of our foray into the movement disorder space and growth to our neuroscience marketing presence.Arbaclofen and the data that we have is certainly an outsized opportunity when looking at it compared to Osmolex. So I don’t really think we can compare the two. I think we can leverage Osmolex for the learnings and the presence with the movement disorder specialists. So JD, anything that you – any color you’d add to that?

[JD Schaub:]

No. I think Brian captured everything, Dan. They’re really two different opportunities from a product perspective, given the clinical program and data associated with arbaclofen versus Osmolex. But again, leverage in terms of building and having a presence to launch an even bigger commercial opportunity out of with arbaclofen.

[Dan Busby:]

Okay, great. Understood. And just one last clarifying question. Do you plan to meet anymore with FDA before you submit your NDA for arbaclofen?

[Brian Markison:]

Yes. For sure. We’re working that out as we speak.

[Dan Busby:]

Okay, cool. Thank you.

[Brian Markison:]

Right. Thanks.

[Operator:]

And I’m not showing any further question at this time. I’d like to turn the call back to Brian for final remarks.

[Brian Markison:]

Okay, everybody. Thank you for joining us today. We’re excited about our prospects and stay tuned for the RVL NDA filing, which will happen next month. Thank you, and good day.

[Operator:]

Ladies and gentleman, this does conclude today’s presentation. You may now disconnect. And have a wonderful day.