Q4 2020 Earnings Call Transcript

Published: 25 Feb 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 Full Year 2020 Radius Health Inc. Earnings Conference Call. Please be advised, today's conference is being recorded. I would now like to turn the call over to your speaker today, Mr. Martin. Thank you. Please go ahead, sir.

[Kelly Martin:]

Thank you very much, operator. Good morning, everybody. Thank you for joining us this morning for our Q4 2020 and full year 2020 earnings call. At the end we'll be happy to take some questions. Slide wise, first page that's important obviously is the Safe Harbor statement, I won't read the whole thing is be clearly refers to discussions and statements we make prospectively for the future, or things that are subject to significant change. Importantly, though, for this particular presentation, because it's full year, we would highlight that there are certain GAAP and non- GAAP disclosures from a financial point of view, which we've included in this deck for your reference.

[Jim Chopas:]

Thanks, Kelly. I will briefly walk through the financial highlights of 2020. And afterwards, I will share and confirm our financial guidance. On Slide 6, Radius had a strong financial performance during 2020 with 20% TYMLOS revenue growth, a successful exit from oncology and a reduction in costs which contributed to ending the year with $115 million in cash and investments. With a strong focus on new patient growth and specialists to treat osteoporotic related fractures, were really able to complete the year with $208 million in product revenue, an increase of 20% over 2019. During Q3 2020, we successfully exited oncology through the license agreement for RAD1901 and the divestment of RAD140. During 2020, we realized and collected $30 million in licensing revenue for RAD1901. Additionally, we incurred reimbursable costs of $39 million in connection with RAD1901 services performed under the transition services agreement, which reduced our research and development costs. We also reposition the company's overhead structure, resulting in a $13 million reduction in selling, general and administrative expenses excluding stock based compensation.

[Sal Grausso:]

The morning, just a brief update on mutations starts. TYMLOS U.S new patient starts increased by 26% in Q4 2020, versus Q3 2020. That momentum carry forward to January 2021 with 1692 mutations starts representing 17% growth over the prior four month average. With that, I'll turn it back over to Kelly for Q&A. Thanks.

[Kelly Martin:]

Thank you, Jim. And thank you, Sal. Again, as we said at the beginning, we've spent a lot of time, updating the markets on various pieces of our business and providing monthly updates on patient growth. I just reiterate what Sal outlined, we view that new patient starts in the US, which is defined as patients on drug is the key to our both current and future growth from a net revenue point of view. So it remains a significant focus of Sal and the really fantastic commercial team that we have. And Jim did a great job walking everyone through in a very transparent manner, our business, how we look at it and how we're managing it. So with that operator, we'd be happy to open it up for questions that people may have.

[Operator:]

Your first question in line of Mohit Bansal with Citigroup.

[Mohit Bansal:]

Good. Thanks for taking my question and congrats on all the progress. Two questions if I may, please. Number one, so if I look at year-on-year basis for Q4, it does seem like there is a high single digit growth in your business. Do you think I mean, I know you're not writing guidance but do you think this is a trend we think could probably continue this momentum could continue in 2021? And the second one is, could you remind us what was the issue with European filing last time and where do you think the discussions could move forward we talk more about Europe?

[Kelly Martin:]

Sal, you want to comment on your view of the continued opportunity in the US on the commercial side and then I'll handle the European topic.

[Sal Grausso:]

Yes, absolutely. So, as relates to the commercial business, as we said earlier, new patient starts is the leading indicator for future growth. And we are laser focused on executing, you know, against generating the patient starts. So, as, as all can imagine, COVID had a damper on the patient starts, we saw that momentum increased in q4, we finished very strong and January, we have got off to a fast start. So, I foresee that we will continue to build our new patients and see that trend go up or down new patient starts.

[Kelly Martin:]

Hey, Mohit. Thanks for the question. With regard to Europe, the issues previously around Europe, there were some challenges with one or two specific sites in the previous trial, that corrupted or the view of the regulator was it corrupted the data or had the potential to corrupt some of the data. So there was a pretty meaningful sites, I believe two sites, certainly the one that they excluded the data from. And by doing that the power of the full results was a challenge. So I think it was an operational issue with a specific site. We took the patience out of the calculation. And by doing that it changed the results. Because I can further elaborate that the discussions that we are having over the last couple months, in general, I can characterize as constructive. And we hope to gain complete clarity on a path forward on that in the coming month or two. We think that's an important potential step forward for the global miss, if you will, of Abaloparatide, given the strength of the molecule and the opportunity in a place like Europe, at least specifically for certain types of patients. So, I believe it was an operational issue and that was something that occurred last time. Our discussions now are rather constructive. And again, in the next couple months, we hope to get some clarity on that.

[Mohit Bansal:]

Awesome, thank you very much helpful.

[Operator:]

And your next question lined up Jessica Fye with JP Morgan.

[Unidentified Analyst:]

Hey, this is Luke on for Jessica Fye. Thanks for taking our questions. To start, can you remind us what the skin tolerability has been like for the patch and prior studies? And has the FDA indicated anything that they want to see on that front?

[Kelly Martin:]

There has been no significant issue around skin tolerability. And like all other parts of the trial that will be something from an absolute point of view that we have with the phase three data. You know it's part of our natural evolution and output of comprehensive data pack for the patch.

[Unidentified Analyst:]

Okay. And also on EO , have you guys had any discussions on -- following progress towards a path where there what you think about commercially, whether it makes sense to have a team there yourself or if commercial partners could make sense there?

[Kelly Martin:]

It would be 100% of commercial partner.

[Unidentified Analyst:]

Okay, and then just make one more clarifying question. Why was there a $16 million expense for RAD011 highlighted as a driver for 4Q R&D in the press release when that deal was announced in January?

[Kelly Martin:]

Because the deal was closed in December. It was closed, I believe the specific date was December 30 I believe. And it was announced four business days later. I don't have the calendar in front of me. But four business days later was January 6. So it was actually close December of 2020.

[Unidentified Analyst:]

Okay, thanks for that clarity.

[Operator:]

Next question, Lina Pocho with Goldman Sachs.

[Unidentified Analyst:]

Good morning, and thank you very much for taking our questions. I want to maybe just return to sort of the market dynamics and just with regard to the patient ads that that you've described coming in here, can you maybe help clarify whether these are, sort of a backlog of potentially pent up demand to either the pandemic or patients who missed visits during 2020 due to COVID? Or would you say this is largely de novo, you know, sort of fracture market growth here?

[Kelly Martin:]

Sal, I think you should go ahead and comment, I think you have a good read on that.

[Sal Grausso:]

Hi, Paul. That's a really good question. And I think about that often, I think there's a bit of a combination of both of those factors. But I would say that we are seeing de novo new patient growth. And the reason for that is we've really been shifting our selling and marketing effort, as we've previously indicated to specialists that treat postmenopausal patients that have fragility fracture, so we're seeing a lot of our new patient growth in those specialists that were previously not prescribing and using TYMLOS.

[Unidentified Analyst:]

Okay, great, thank you for that context. And I guess, I think one of the factors that has affected multiple classes of medicine is that, because of the shelter in place dynamic, and a lot of sort of outdoor and physical activity isn't limited. Would you sort of think about in terms of what is baked into your 2021 guidance, an increase in de novo growth, patient growth over the course of 2021 as sort of people's normal activity level resumes back to pre-pandemic levels?

[Kelly Martin:]

No, Paul's, can I give you my view. Again, I joined the company May 1. And I can't explain the dynamics, frankly, whatsoever. But if you look at our activity, through the complete lockdown in our business was actually pretty decent. If you if you go back to Q2 and Q3, we did and certainly, let's assume most of Q2 and almost all of Q3 presumably was almost in some stage of virtual lockdown everywhere. And we did 50 million in a quarter in net revenues. Now, I don't know why we did that. And I don't know all the dynamics, obviously, around the US and US was sort of topsy-turvy in different locations. But you know, this is my view and again, Sal or Jim should comment, but I'm not saying that we're completely not correlated to the COVID situation where patients do or do not. But I think on a relative basis to other you know, in office therapies, I mean, just sort of naturally, I think we're not as correlated. And I think that shows in Sal's team with their ability to kind of grow. These are new patients, these are all, and most of these are new patients. So I don't want to say that COVID has no impact on us. It clearly has some, but I think to us, it's much less than I would have anticipated. I don't know Sal, if you want to comment or Jim either your view on that.

[Sal Grausso:]

Yes, I'll start Kelly, I think, clearly the COVID there's geographic disparities across the country. As we know, but I think that our providers have done is adopted to the situation, or adapted to the situation, sorry. So they've really embraced telemedicine and I think given the fact that TYMLOS is something that could be delivered at home and is self-administered, it kind of has an inherent advantage where specialists can get patients therapy. So I think there's been good adapting to the environment. But I do, I'm counting on once things around those geographies returned to normal that we'll see more patients getting into the office physically and compensations no further, postmenopausal osteoporosis.

[Unidentified Analyst:]

Okay, great. Thank you for that. And if I can maybe squeeze in just one more, I'm really proud of program. Can you provide some sort of broad strokes, but any other incremental, interaction since your last update announcing the program with regard to the agency and registrational ability of your trial design?

[Kelly Martin:]

Yes, Paul, thanks for that. I mean, we're in the process of being getting prepared internally for an outreach to the agency. We hope to do that in the coming 30 days or so to then schedule a meeting. So we're making very good progress on that we're slightly ahead of where we thought we would be. And, we look forward to that. I think once we get a meeting schedule, that probably something we would let the market know about, because I think that's an important step for Radius since we in licensing and bought this asset and Prader-Willi is such an interesting indication. So I would say we're preparing for the agency request for a meeting and then hoping to have one like the spring.

[Unidentified Analyst:]

Okay, thank you very much for taking our questions.

[Operator:]

Your next question lined up Geoffrey Porges with SVB Leerink.

[Geoffrey Porges:]

Thank you very much for taking the question and congratulations on the progress. Few more questions about the market dynamics if I may. So could you give us a sense of what proportion of your thoughts and now post fracture and or immediately x hospital and is that trend increasing? Secondly, could you give us your impressions of your share of new patient stats? And particularly whether the entry of competitors like the Vanity and substitutable Teriparatide? Are they increasing penetration or are they taking share of stats? Which would kind of be hard to imagine, given your trend? And then lastly, Kelly, could you talk about your latest assessment of the approximate percentage upside for the male and also the patch product compared to the current women only indication? Thanks.

[Kelly Martin:]

Sure, those are great questions. Sal, you want to tackle the first two and Jim or I could chime in on that? And then I'll take a lead on the third. And then you guys can chime on that, if that's a good plan?

[Sal Grausso:]

Yes, I'll tackle the first question. I think, looking at third party data, medical claims data, just in general anabolics . For the most part range anywhere between 25% to 30% of their usage is in patients that have a history of a fragility fracture in the last 12 months. So that's why we believe that there's a great opportunity. And we've seen our new patient growth, actually, in that cohort of patients that do have a history of fragility fracture. So we think that bodes very well. And from a competitive standpoint, I think, the way you pose the question is, right. We believe that our market, our competition is the apathy in the market and the unmet need around treating these patients that have really fracture for the underlying condition, at the time when they suffered a fracture, because it is common knowledge or any type of burdened illness will say that the risk of another fracture happened immediately after the first fracture. So that's why I believe that we are growing that market, that very precise market or fidelity fracture. And the second question, was that the first and the second question, so.

[Geoffrey Porges:]

Second question was about the what your share is of new patients, and what effect you're having the substitutable product and also identity is having in the market on both your share and the size of the market?

[Kelly Martin:]

Yes, I can give you my sense , and then Sal can probably correct all my views. Look, I know, historically, it's been sort of a market share discussion and I understand that, I think that's one way to look at it. The way we look at it is it's pretty big whitespace out there and, frankly, we don't think it's substitutable to use your words if you go off at TYMLOS and you go to vanity, it's so sort of one to one. We think that there's a fairly large amount of patients that would benefit from in broad definition anabolic therapies, and if vanity grows in some way that's actually good for us. We have no issue, we have we have no current thoughts with regard to concern about Abaloparatide, substitutable or generic, like on the horizon, we don't factor that into even our thinking to any great degree. So, I think -- so we look at our basic measurement system is how many new patients can we get on drug whether they come from another anabolic, or they're brand new patients? And I think Sal; you can talk about the number of fracture patients per day, per month that is out there. There are no drug, Sal, you want to just outline for Jeff to the amount of fracture patients that are out there just in the US that's our market, because they're not on any drug currently.

[Sal Grausso:]

I would love to. So I mentioned earlier that we had 1692 new patient starts on TYMLOS in January. And just to put that in context, 8000 patients a day suffer fragility fracture, 2000 of them are patients that suffer vertebral fracture, which where our value proposition clinically is strongest. So that's why we believe there's a huge opportunity because that 1,692 is a drop in the bucket in terms of the patients that need this therapy.

[Kelly Martin:]

So that's the way we look at it, Geoff. And we continue -- the more data we have quarter-over-quarter about new patients, the more we believe that new patients and, in particular, fracture patients, there's plenty of patients to go around for -- if it's just really currently of Vanity and ourselves, that's up to us to execute against growing -- growing net patients, basically; growing new patients.

[Geoffrey Porges:]

And then, your latest thinking on male and patch?

[Kelly Martin:]

So, male, I can't necessarily quantify yet. But I can tell you we've done a lot of work on male, we think that the underlying population of male osteoporotic patients is somewhat bigger than might be normally or institutionally understood. If you -- again, it's not in our label. But if you think about osteoporosis as both a bone disease and an agent disease, it's a pretty significant opportunity. Our challenge with male is how do you get, how do you find those patients, and I think what we'll probably find is the same thing as Sal has articulated to be male patients who are fracture patients. What we're going to do with both male and patch from a broad market and financial framework point of view, is by the middle of the year talk about both of those, adding both of those to our underlying SC female postmenopausal market in the US. But what does that mean to our business? We view both as incrementally positive, we view both as very positive for the market opportunity for various kinds of patients. For the patch, we've done working on existing patients, we've done work on potentially new patients. And we've done work on different kinds of new patients, some who may not like needles, some who may be in more of an acute setting, if you will, from a surgery point of view. So sometime in the middle of the year, we will have a framework that outlines layering both male and the patch on top of the US SC business. And we look forward to having a chance to do that.

[Operator:]

Your next question comes from the line of Annabel Samimy from Stifel.

[Annabel Samimy:]

Hi, thanks for taking my questions. So just looking at the numbers, you've had some pretty good retention of the price increase that was taken and the gross net ; so I'm guessing part of that is your switch over to specialty distribution that you've been able to generate some cost savings. How much is that sustainable going forward in 2021? And are there any other programs you're going to be implementing, patient programs? Or is there any additional rebaiting that you have to do through 2021 that we should factor into net price? Second question I had, I guess I'm a little bit curious. You talked about the new patient starts, I'm a little bit curious about the retention. So I guess, more than net new patients, perhaps, maybe you can talk about that. And then, switching gears on the RAD011 program. I guess you've mentioned several times that the FDA is very familiar with this asset. And they had historically some constant dialogue on it. I know that you haven't had discussions yet with FDA. But maybe you can help us understand what the FDA has specifically always honed in on with this asset and anything that needs to be designed into the trial that would satisfy any of their concerns or issues that they might have? Thanks.

[Kelly Martin:]

I think on the gross to net, I think maybe Jim, you start off from your perspective as the Principal Finance Officer, and then Sal, you should fill in from your point of view and then tail that into the specialty for the model. Why don't we do that first?

[Jim Chopas:]

Certainly, in terms of the sustainability on some of the gross to net improvements, we do feel that the improvements from the distributor change are sustainable and something that we'll be able to realize on a go-forward basis. So we'll continue to reap the benefits from that. On a go forward basis, there are usually headwinds on a go-forward basis in terms of expansion of government programs, in terms of coverage gap, but we feel like that is manageable within our structure and is baked in your guidance.

[Kelly Martin:]

Sal, you want to talk about . And then, also talk about retention, patients and duration?

[Sal Grausso:]

Absolutely. So, just add on to what Jim said, I think there's a bit of seasonality that's front-loaded earlier in the year, because of out-of-pocket support for patients. And there was the government programs that Jim mentioned, and, I think, tailing into adherence and the point about the limited Specialty Pharmacy network, one of the main drivers of that was to improve, have enhanced support for patients and, namely, to help improve adherence. So we believe that adherence continues to be a good opportunity for us. We think that by working with them, and especially pharmacies, that we can work with them on programs to improve adherence. So public knowledge, and there's been papers on it that -- you have clearance rate anabolics of eight or nine months. And we think that we can improve that dramatically.

[Kelly Martin:]

And then, on RAD011, a couple things. First of all, this molecule was in clinical trials as we've outlined before, so it went through an FDA process. So that's number one. Number two, again, not speaking at all for the FDA, but from a safety point of view, it's a safe agent slash molecule. I think in this particular indication and other related and/or similar indications in orphan metabolic integrated diseases, the discussion with the agency is around -- we anticipate would be around further teasing out or clarity around endpoints and the calculation of endpoints with specific focus on hyperphagia, which is a critical -- frankly, the critical endpoint for the Prader-Willi syndrome disease. There has been -- previous to our getting involved, a lot of discussion around how it's calculated, there has been some discussion about the scale itself, and is the scale something that can -- is it giving false readings, i.e. the scale has been around for a while, when patients come in from a placebo point of view, do they already know what the scale is and how to, in quotes, game that. I think the agency has been open to rectifying or slightly adjusting or teasing out or refining or whatever the right word is, that particular scale, the hyperphagia scale. A couple other companies have tried in Prader-Willi space, to date, nobody has been successful from a hitting endpoints point of view, we know all of those trials almost patient by patient, so presumably, a part of our discussion with the agency will be around the hyperphagia scale. And are there refinements that we could make or should make relative to teasing out from a patient point of view, the proper effect and impact of the underlying drug versus the behavioral change that you might see, because somebody is trying to -- somebody has anticipated what the scale is. So that, I presume, would be a good part of our discussion with the agency.

[Operator:]

Your next question comes from the line of Douglas Tsao with H.C. Wainwright.

[Douglas Tsao:]

Hi, good morning. Thanks for taking the question. So, obviously, we started to see some nice new patient start growth. I'm just curious, given the new commercial focus for the franchise, have you seen a similar increase in the prescriber base, or a shift to these new targeted clinicians? Thank you.

[Sal Grausso:]

That's a great question. And I think what we're seeing is, for these patients that have fragility fractures, where they're showing up in the healthcare system, our accounts are areas that are oriented around orthopedic centers and bone health centers. And therefore, we have a situation where endocrinology is a very broad field. And orthopedics and bone health centers are more concentrated. So I would say that what we're doing is we're seeing deeper penetration in those centers where these patients are being treated for their fragility fracture, and we're able to make inroads in those accounts.

[Douglas Tsao:]

Okay, great. And then just when you think about global expansion for the franchise, you know, I'm just curious, given some of the early success that Amgen is enjoying with the vanity, are you sort of targeting some of those markets to piggyback their sort of commercial efforts in terms of expanding the bond formation message?

[Kelly Martin:]

You know, Doug, its Kelly, I think you have to be perfectly honest, I'm not sure where Amgen is or isn't. I think that we we've looked at, we do have a list of countries where we know there's anabolic activity. Some of them are rather surprising. There were at least to me, couple interesting company countries in the Middle East Gulf region, actually a pretty big. And so you know, we're going to places where we think there's a fairly straightforward path from a BD and regulatory point of view. And as I said, initially, there are economies that have, which are many economies, by the way that are aging populations. And or have economies that have robust, relatively straightforward pharmaceutical reimbursements, regulatory processes, etcetera, etcetera. So, you know, I think if we can add some number of countries and slowly expand the platform here, that's what we'll do. And, we're hoping to have some reasonable success on that over the course of this year.

[Douglas Tsao:]

Okay, great. Thank you so much.

[Operator:]

Your next question lined up Igran Poreit with Morgan Stanley.

[Unidentified Analyst:]

Great, thanks for taking my questions. So I had to on the patch program. So thinking forward for both questions, first, assuming the phase three program read that positively later this year? How much do you think you'd need to increase or modify your current TYMLOS commercial infrastructure in order to be able to be ready for a potential U.S launch? And secondly, could you walk us through any key differences we should keep in mind for a potential FDA regulatory review of the patch versus the more traditional therapeutic given the transdermal patch application that's being evaluated?

[Kelly Martin:]

I'll give you my answers, then Sal you can correct, either one, but from an incremental cost point of view, I would describe. I guess my answer to that would be, it would be minimal. It wouldn't be zero. But it'll be minimal, slightly incremental costs for the patch in the US. And with regard to regulatory pathway, I mean, it's fairly well defined, I couldn't articulate necessarily off the top of my head anything specific or unusual or not previously outlined or discussed, with regard to what the regulator is going to want to see and look at? Sal, you want to answer the first question.

[Sal Grausso:]

I completely agree with Kelly, I don't see minimal, incremental costs from a commercial perspective. I would say that the wiring is already in place with what we're doing with the subcutaneous. So things like payer access and contracts are all already set up, so we hope to be able to use our existing access and contracts to that regard and the same thing goes with our distribution network. So from those standpoints, I think a lot of the heavy lifting has been done. And also from a selling and marketing perspective, we are already in the specialist that we will want to see.

[Kelly Martin:]

Yes, I think originally Vikram some of the thought processes were that the patch would lead would allow you to go for instance, to a segment upper decile, or to primary care doctors who may see patients and their well may be a reasonable trafficking of osteoporosis patients through that channel, but we have zero plans to go after that channel. We think it doesn't fit us it would be, the risk reward infrastructure you'd need to go after a disparate amount of patience would be the opposite 180 degrees opposite to what Sal and the team were doing. If we were to go after that, that channel, obviously that would be a reasonable significant commitment as far as time, resources, marketing. But that's not a space that a, we are going to go after and b, doesn't fit our business model. I mean, as we went through some of these slides, we believe, we're going to increase productivity by going much deeper into fewer places from an institutional point of view. And therefore the infrastructure that Sal and his team have built up is completely adequate to do that. And again, there might be some incremental investment in certain things, but it would be kind of on the margin. So it's a very leverageable business as we've tried to communicate the number of times.

[Unidentified Analyst:]

Okay, understood. That's helpful. Thank you.

[Operator:]

And there are no other questions at this time. I would now like to turn the call back over to Mr. Martin.

[Kelly Martin:]

Thank you very much, operator. We'd like to thank everyone for joining us. Hope you found that a good overview with a lot of clarity and transparency. I want to thank both Jim and Sal for a doing a great job and we look forward to continuing to update the market as we may progress in the coming months. So appreciate everyone's time and effort and look forward to keeping you all updated. Thank you very much.

[Operator:]

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