Q1 2024 scPharmaceuticals Inc Earnings Call

Participants

PJ Kelleher; IR Contact Officer; LifeSci Advisors LLC

John Tucker; Chief Executive Officer; scPharmaceuticals Inc

Steven Parsons; Senior Vice President of Commercial; scPharmaceuticals Inc

Rachael Nokes; Chief Financial Officer; scPharmaceuticals Inc

Glen Santangelo; Analyst; Jefferies Group LLC

Stacy Ku; Analyst; TD Cowen

Roanna Ruiz; Analyst; Leerink Partners

Chase Knickerbocker; Analyst; Craig-Hallum Capital Group LLC

Naz Rahman; Analyst; Maxim Capital Group LLC

Douglas Tsao; Analyst; H.C. Wainwright & Co., LLC

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the scPharmaceuticals first-quarter 2024 earnings conference call. (Operator Instructions)
Also note that the call is being recorded Tuesday, May 14, 2024. And I would like to turn the conference over to PJ Kelleher, Investor Relations. Please go ahead.

PJ Kelleher

Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements.
All statements on this conference call other than historical facts are forward-looking statements within the meaning of the federal securities laws, including but not limited to, statements regarding scPharmaceuticals, expected future financial results, management's expectations and plans for the business, the ongoing commercialization and marketing of Furoscix and the potential label expansion and other regulatory approval of Furoscix.
The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other important factors that may affect scPharmaceuticals' business, financial condition, and other operating results.
These include, but are not limited to the risk factors and other qualifications contained in scPharmaceuticals' annual report on Form 10-K quarterly reports on Form 10-Q and other reports filed by the company with the SEC, to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements.
Any forward looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and scPharmaceuticals expressly disclaims any intent or obligation to update these forward looking statements, except as required by law.
It is now my pleasure to turn the call over to Mr. John Tucker, Chief Executive Officer of scPharmaceuticals. John?

John Tucker

Thank you, PJ, and thanks, everyone listening to this afternoon's call and webcast to review our first-quarter 2024 results. As has been our practice, I will begin with an operational update, before turning the call over to Steve Parsons, our Senior Vice President of Commercial, for a more detailed commercial update on Furoscix, and then Rachel Nokes, our Chief Financial Officer, for a review of our financials. We will then open the call for your questions.
During the first quarter, we saw a continuation of the positive trends that we believe reflect growing awareness and utilization of Furoscix as a new and innovative part of the heart failure care continuum.
As Steve will detail shortly, our leading indicators, including doses written, unique prescribers, and in services completing, suggest that providers are increasingly more comfortable prescribing Furoscix to their heart failure patients during critical intervention windows, which are pre hospital admission or post discharge.
We reported net revenue of $6.1 million, despite experiencing approximately 10% negative impact on doses filled during the quarter due to the widely reported and previous lead disclosed Change Healthcare cyberattack. We also experienced some seasonal impact during the first quarter, as patient deductibles reset with the new year.
We continue to take steps to increase and improve our prescription fill rate. In March, we transitioned our patient service provider, or as we call it the [hub], which we think will result in improved patient and physician experience. We are very pleased to have turned in another solid quarter, notwithstanding these temporary headwinds.
Our gross-to-net discount during the first quarter was 19%, up slightly from 2023. We continue to expect the GTN discount to increase over time as contracting with payers in the marketplace evolves. And we expect that the GTN discount will approach 30% to 35% on a quarterly basis by the end of this year, consistent with our prior long-term guidance for GTM.
Inventory load levels at the end of the first quarter at our specialty pharmacy partners were generally consistent with the inventory levels at the end of 2020.
Shifting now to payers. We continue to have productive discussions with commercial, Medicare Part D, and Medicaid payers in an ongoing effort to make Furoscix broadly available to patients at the most favorable terms possible.
With favorable market dynamics in Medicare, we had expanded the population of heart failure patients who have access to Furoscix to fix tiered co-pays from $100 or less, to 70%, moving us closer to our previously stated goal of 75% or more over time. We are progressing with many other health plans and we hope to have updates in the months to come.
At this point, I would like to provide an update on several long-term growth initiatives that we previewed last quarter that we view as critical to our long-term growth strategy. As we discussed previously, last year, we received positive feedback from the FDA regarding the potential expansion of the Furoscix indication to allow for use in New York Heart Association Class 4 heart failure patients.
Recall that Furoscix is currently indicated for the treatment of congesting due to fluid overload in adult patients with New York Heart Association Class 2 and Class 3 chronic heart failure. We estimate that only 10% of all heart failure patients are Class 4, and a meaningful percentage of many as 40% may benefit from Furoscix.
Based upon the feedback that we received from the agency, we filed for Class 4 indication in early October of last year, and we have been assigned a PDUFA date for this August, although the possibility does still exist that the PDUFA date could occur sooner.
If we are successful, we believe Class 4 would represent a meaningful expansion of our market opportunity as providers will be able to prescribe Furoscix to the most severe heart failure patients.
Turning now to the 80 milligram over 1 mL, low-volume auto-injector that we are developing as an additional option beyond body infusion, just a few weeks ago, we announced that we initiated a pivotal PK study, and we plan to report results later this year that if successful, will allow us to submit a supplemental new drug application to the FDA by the end of this year.
We have stated previously, we believe an auto-injector, if approved, would reduce manufacturing costs compared to the current on-body user and confer environmental advantages as well, in addition to giving treating providers and their patients more treatment flexibility.
Finally, we previously discussed feedback that we received from the FDA pertaining to the potential expansion of the Furoscix indication to include treatment of edema due to fluid overload in patients with chronic kidney disease or CKD.
Recall that in its feedback, the FDA confirmed that no additional clinical studies are needed to expand the indication to CKD provided that we can demonstrate an adequate PK and pharmacodynamic bridge for the listed drug, which is furosemide injection, 10 migs over mL.
CKD is a progressive disease characterized by worsening renal function over time, resulting in frequent episodes of fluid overload that are treated with loop diuretics. It is estimated that 12 million to 15 million Americans are aware that they have kidney disease, and 50% of patients with CKD do not have a diagnosis of heart failure.
With fluid overload being one of the most common complications of CKD, which worsens with disease progression, we believe Furoscix could be beneficial to patients with CKD, who had worsening symptoms of fluid overload in are not responding oral loop diuretics.
To that end, earlier this month, we submitted a supplemental new drug application with the FDA for the CKD indication. At this point, I'll turn the call over to our Senior Vice President of Commercial, Steve Parsons, for a deeper dive into our launch metric.
Steve?

Steven Parsons

Thank you. As John indicated, we continue to be pleased with our progress since launch. From launch in February 2023 through March 31, 2024, we had 2,184 unique prescribers, up 29% from the 1,696 unique prescribers we had from the launch through December 31.
We are encouraged by the prescriber growth in this quarter as we believe it reflects our strategy of establishing a broader prescriber base. Importantly, more than half of these prescribers have written multiple prescriptions.
During the first quarter, we had 17,736 doses written, and 8,074 doses have been filled. As John indicated earlier, our doses filled during the first quarter were negatively impacted by the widely reported Change Healthcare cyberattack. We also face normal calendar seasonality as patient deductibles reset at the start of the year.
Despite those headwinds, we are pleased with the trajectory that we are currently on, and we continue to explore steps to increase our fill rate going forward. One of those steps is a change in our patient services hub that we completed in March.
An increasing number of our providers are writing prescriptions for patients in anticipation of future needs. These prescriptions may not be filled in the month or a quarter in which they are written, and make up a significant portion of the spread between doses written and doses filled that we report on.
Preapproved prescriptions are reported in the doses written statistics, and we report on them as doses filled when they actually ship to patients as the prescriber directs. There's a portion of doses that do get canceled by prescribers or patients for a variety of reasons. Some patients are very difficult to reach, or have been hospitalized, or are deceased.
Other reasons for cancellation for a high co-pay, or because the patient resolved with standard of care before filling Furoscix. The Change Healthcare situation did lead to an increase in cancellations during the quarter as some prescriptions could not be processed when needed. Cancellation was 19% in Q1 of 2024.
Over time, we anticipate that the cancellation rates will normalize. Better position on prescription formularies, quicker coverage decisions by payers, and lower patient out-of-pocket costs will improve fill rates and stabilize the percentage of cancels.
In the first quarter, the average number of doses per prescriptions filled was 6.1, which remains higher than our long-term expectations, and up slightly sequentially from 5.9 in the fourth quarter of 2023. Personnel resources conducted 2,938 in services from launch through March 31, up from 2,331 in services completed as of December 31 of last year.
End services provide important training to offices on the prescribing process of Furoscix, and this ensures office readiness. As we open more new accounts, the execution of end services remains fundamental for Furoscix's success, and we regard the number of end services conducted each quarter as an important leading indicator.
Regarding our sales force, we have said previously that we stand ready to add additional territories as demand warrants. We plan on adding additional territories in advance of potential Class 4 and CKD long-term growth initiatives.
From a marketing perspective, we are engaged in a broad multichannel marketing campaign to drive brand awareness, adoption, and commitment. This program encompasses many different activities for some of the key ongoing activities include engagement and development of key opinion leaders, conference presence, print and electronic collateral, and the development of both provider and patient websites among other critical tasks.
We continue to reach out to heart failure patients and their caregivers with patient education materials for Furoscix. Overall, we are pleased with our continued progress and the path that we are on. That concludes my update.
I would like now to turn the call over to our CFO, Rachael Nokes, for a review of our financials. Rachael?

Rachael Nokes

Thank you Steve. As of March 31, 2024, we held $58.4 million in cash and cash equivalents compared to $76 million in cash, cash equivalents and investments as of December 31, 2023.
Now I will cover a few income statement items. We reported a net loss of $14.1 million for the first quarter of 2024, compared to a net loss of $11.2 million for the first quarter of 2023. Product revenues were $6.1 million for the first quarter of 2024, compared to $$2.1 million for the first quarter of 2023.
Cost of product revenues were $1.8 million for the first quarter of 2024 compared to $0.6 million for the first quarter of 2023. The increase in both product revenues and cost of product revenues for the quarter ended March 31, 2024, due to a full quarter of sales in the first quarter of 2024 and an increase in demand of Furoscix further into the commercial launch and related manufacturing costs.
Research and development expenses were $2.7 million for the first quarter of 2024 compared to $2.1 million for the comparable period in 2023. The increase in research and development expenses for the quarter ended March 31, 2024, was primarily due to an increase in device development costs, employee related costs, and clinical study costs.
Selling, general and administrative expenses are $17.4 million for the first quarter of 2024 compared to $10.9 million for the comparable period in 2023. The increase in selling, general and administrative expenses for the quarter ended March 31, 2024 was primarily due to an increase in employee related costs, commercial costs and patient support. As of March 31, 2024, we have 36,054,409 total shares outstanding.
That concludes the financial update. John?

John Tucker

Thanks, Rachael. That concludes our prepared remarks. At this point, we will open the call for questions.

Question and Answer Session

Operator

(Operator Instructions)
Glen Santangelo, Jefferies.

Glen Santangelo

Yes, thanks for taking my question. Hi John and Rachael. I'm not sure who wants to answer, but I guess my my first question is on revenues. Just sort of looking at the $6.1 million, it's sort of flat sequentially from where you were in 4Q, and I'm just trying to reconcile that versus the fact that the doses build was up 15% sequentially. So I just want to make sure I understand how the math and all that revenue recognition works?

John Tucker

Yes, sure, Glenn, this is John. So in the $6.1 million was similar to the last quarter. Again, we had the impact of the Change Healthcare, which knocked that down. You always have the headwinds in Q1, of patients out of pockets resetting, but the difference in the in the higher amount of doses filled versus last quarter and why the revenue stayed the same, was just in Q4, we had a as we've talked about in the Q4 call, a very large order from Kaiser direct that doesn't go into our fill doses, but is in our net revenue.
So that's why there's a difference between what you would think the difference in the net revenue would be from doses filled.

Glen Santangelo

Alright, maybe I can take a look at that. And then John, maybe just one quick follow-up. Obviously, a lot of people are focused on the compelling value proposition for the managed care companies. But maybe either you or Steve can just sort of give us some sense of how the conversations are going with the feedback from the doctors?
And are you getting any pushback at all at this point in terms of wanting to prescribe more, what the barriers are to prescribing more? Thank you.

John Tucker

Here, Steve, you wanna handle that?

Steven Parsons

Yes, we're not getting pushback from the doctors. Here you can see our demand is going up and down month over month. Continuing our conversations with payers, most of our prescriptions are getting covered and they're getting covered at affordable co-pay. As you heard John say, 70% of our co-pays are $100 or less.
We're engaging with them. They're all calculating what they're going to do in 2025. So we're meeting with them regularly, and it's been pretty positive for us, and the doctors aren't having an issue really at all getting the product that they want.

Glen Santangelo

Okay. Thank you.

Operator

Stacy Ku, TD Cowen.

Stacy Ku

Hey, thanks so much for taking our questions. Congratulations on the progress, especially navigating the Change Healthcare cyber attack. So we just had a few questions. First, sounds like we're seeing good prescriber and patient demand. So can you just comment on expectations regarding seasonality this year?
And if so, if you think there is going to be seasonality, what do you have planned that could allow you to capture patient share during crucial high-demand quarters? Just trying to get a lot of infrastructure in place ahead of the summer, for instance, where you might have a higher need for Furoscix, unfortunately?
And then the second question is going to be around formulary additions. So when you talk about the hospital systems and it comes to kind of the Furoscix opportunity, how are you thinking about it long term? And how long do you expect that process will take with kind of IDNs, and that kind of formulary access? So where are you in that progress as we think about accounting targets? Thanks so much.

John Tucker

Thanks, Stacy. It's John, I'll let Steve comment as well. Seasonality, so it's interesting. So there's some seasonality. You get an impact in Q1, mainly because out of pockets reset patients' deductibles, and their out of pockets reset. So there's always a little headwind in Q1.
If you look at Q2 and Q3, we don't see that same seasonality. Into the end of Q4, on, you know, second half of Q4, you have something Steve calls holiday heart, where patients or doctors are worried they're going to grab too much salt.
So you tend to see doctors writing a lot more scrips for the patients just in case. And a lot of the patients end up using them. So I do think there's some seasonality based on the holidays in Q4. We don't see it quite as much like around July 4 or something as opposed to Christmas and Thanksgiving.
And the question on the IDNs, I'll just jump in. So IDNs come in all shapes and sizes. Obviously, the biggest one is the VA. Our goal this year is to get on national formulary. The VA, we're selling the VAs, you know, every month. These separate VAs. But again, we want to have a national formulary.
The second biggest VA is Kaiser. We've talked about being in our formulary there, and we did ship a big almost 1,000 unit order there at the last at the end of Q4. And they put it in their protocol. So they're using it now on patient. So we anticipate them continuing to order. That's your second biggest IDN.
And then you have a number of IDNs, again, IDNs all look different, that are sometimes this hospital system. Maybe, Steve, you could talk about some of the ones we're working with now?

Steven Parsons

Yes, for example, the University of California system. That's UC Davis, UC San Francisco, UCLA, San Diego, Irvine. We're working with them for them to direct purchase Furoscix, put it into all of their sites, load it into their EMRs.
So they're fully integrated. It's really fast, really easy having that integration, having the patient information and being able to see who got what when across the whole system. So that's one that's Q2, we think.
There's other ones all over the country. Think of big IDNs that are academic or university systems, they have the same interest in bringing Furoscix in directly and giving their patients access through them.

Stacy Ku

Okay. Okay. Very helpful. Thank you so much.

Operator

Roanna Ruiz, Leerink Partners.

Roanna Ruiz

Great. Afternoon, everyone. I noticed you mentioned you completed a transition to a new patient services provider and specialty pharmacy network. I was curious, does that impact inventory or stocking at all? And could it help streamline or even boost the process of getting Furoscix to patients?

John Tucker

So it doesn't really impact our inventory at all. But yes, we're really looking to improve the patient and physician experience, streamline getting product to patients as fast as we can, and actually get better data as well. So that was the reason we made the change, but it didn't have any impact on on inventory.

Roanna Ruiz

Got it. Okay. And as a follow-up, I was curious, knowing that the PDUFA date is coming up in August for Class 4 heart failure, do you plan to do anything different with the field force strategy, educating physicians at that time, et cetera, to help boost Furoscix education and awareness ahead of the label expansion?

John Tucker

Yes, as soon as -- you know, you can't pre-promote that -- but as soon as we have the approval, we will be doing mailings and notification to all providers. And obviously the sales force would have been trained in advance of that.
Keep in mind, it's really the same physicians that we're calling on. So we'll be educating them through direct and non-direct crowds that, hey, these patients are now eligible for Furoscix use. So it will be, again, direct and non-direct promotion and awareness to the physicians that we now have Class 4 indication. But it's the same docs in the same offices.

Roanna Ruiz

Got it. Thanks.

Operator

Chase Knickerbocker, Craig-Hallum Capital.

Chase Knickerbocker

Good afternoon. Thanks for taking my questions as well.M aybe just to start, I might have missed this, but just to confirm, you see kind of that script fill rate normalized thus far in April where it's kind of back to your usual expectations, and along those same lines.
Any reason to believe that doses written could have potentially been partially impacted as well as physicians maybe were a little less confident around potential script approval in March when we were in the heat of the Change situation? Thanks.

John Tucker

You know, Chase, we don't think so. We were looking at the prescription trends coming in as we were evolving through the cyberattack. There might have been a little lull, but it wasn't it wasn't anywhere near what we were seeing on the fill side.
And doctors knew what was going on. Don't forget the doctors weren't getting paid, because their claims are getting paid at all. So there might have been a little slowdown. Nothing we could really see did it.
I was worried that we've cut some momentum out from underneath us, but we don't think so, because we saw scrips really growing through the end of the quarter and into this quarter, especially. So any impact we really think it was it was it was contained in Q. one and really was the impact on doses shipped.

Chase Knickerbocker

Got it. And that doses shipped has certainly normalized to normal expectations, and so far in Q2 just to tick in, yes?

John Tucker

Yes, yes, correct. Back to that to the similar level where we were before Change.

Chase Knickerbocker

Great. And is it time for us to kind of adjust our thinking on average doses per script? And then how does that also kind of, that same question, does that become a little bit more relevant as well when we contract with some of the larger Medicare Advantage plans.
Are they going to kind of force a cap of four doses per script on the Medicare Advantage side? And that's contracted? Maybe just kind of help us with our long-term expectations around doses per script?

John Tucker

So it's still higher than we anticipated. I do think Change might have had a little impact on it because they were going to get his script through. They're going to make sure you know, it was a six or a seven.
We do think with plans, that plans will bring that back down. You know, our contract with United on their commercial formulary is a script of four. We did get more and more plans adopted, that that will help moderate it.
But it's important to note, we're still seeing about 75% of our business be the pre acute, the pre admission patients. And we just know those doses are going to be are going to be fives and sixes.
So I think that combination of things -- but I do think it will come back down. Is it going to come all the way back down to four? We don't think so anymore. I think we're thinking it moderates in the five area.

Chase Knickerbocker

Got it. And you kind of mentioned on Kaiser's protocols around how they're using Furoscix, can you kind of give us a look into there on how an IDN like Kaiser could be utilizing your product? Is it largely on the front end? Pre-acute? Is it post-acute, after, just to prevent readmissions? Like are they really leaning into Furoscix? And kind of talk about their experience thus far that you've heard.

Steven Parsons

So this is Steve. Their experience -- what they're doing is a little different than what we've seen in preventing admissions. Their hospitalists, their home care staff, they're prescribing Furoscix post discharge pretty regularly to prevent that readmission.
That's their first use case of it. We know that will expand to pre admission to save on unnecessary hospitalization, but they are a little different than what we see.
They're their own animal and they always say, they always think a little differently than everybody else. So that is a nuanced difference, but we expect it to be used in both cases over the long haul.

Chase Knickerbocker

Got it. Thanks for taking the question.

John Tucker

Thanks, Chase.

Operator

(Operator Instructions)
Naz Rahman, Maxim Capital Group.

Naz Rahman

Hi, everyone. Congrats on the progress. Just a couple. On the upcoming Class 4 and also CKD potential launches. Could you comment on what you think the number of doses might be for those indications?

John Tucker

Steve, you want to?

Steven Parsons

I would say for Class 4, they are a little bit sicker. They are more severe. They tend to have excess fluid more often and more times a year, where they lose control a little bit. So I don't think the script says will moderate down for the Class 4 patients specifically. It could be in that six range, or maybe they'll get refills more often, than a standard patient.
For CKD, our market research tells us it's about the same as heart failure. It'll be in that four to five range unless they're sicker with chronic kidney disease ,and have more fluid. And then it might be similar to a Class 4 heart failure.

Naz Rahman

Got it. Thanks. That was helpful. And on my last question is on, you mentioned that an increasing number of providers are writing scrips in anticipation of future needs, do you have an idea of what percentage of the scrips providers are writing that are for potential future needs?

John Tucker

So it's sometimes hard to tell. You can look at the expedited ones because those are definitely needed. But I think it's 20% or so that they kind of put on layaway.

Naz Rahman

Got it. Thanks. Thanks for taking my questions.

Steven Parsons

Thanks.

Operator

Douglas Tsao, H.C. Wainwright.

Douglas Tsao

Hi, good afternoon. Thanks for taking the questions. John, maybe as a follow up, I guess in terms of the physicians who were prescribing in advance, can you maybe just help us understand how far in advance that is and maybe what's the sort of process between them or sort of the value of writing the scrip?
I mean, I guess is it just pre-adjudicated and then it sort of shifts when they tell you to ship it?

John Tucker

Hey Doug, it's John. Yes, we filled one from January to September, I saw last week, that was put on layaway. The doctor checked to make sure you know that everything cleared, and understood what the co-pay was, and as soon as the patient ran into the trouble, the doc was ready to send it to the patient.
Steve, you want to --

Steven Parsons

Yes, I think that that's certainly an example that these scrips aren't gone. They're not lost. They're not canceled. Every week we see the prescriptions come and getting filled from months ago. But the most common utilization is the doctor sees a patient, they have excess fluid.
They have symptoms. It's maybe early, they order Furoscix because they think they might need it. The patient progresses. They do the normal standard of care a little bit, and if that doesn't work, they immediately called out Furoscix.
So sometimes these layaway scrips are only a matter of days, other times, you know what, I know we have a group of frequent flyers. Let's just send in a few prescriptions, get those approvals, get the known co-pay. Get it all ready to go.
And when we see them, if they're in trouble, we'll just call it down. So it's good housekeeping for them in some cases in terms of fluid management. Other cases, they're just wanting to see if the patient resolves under standard of care.
And then in some cases, it is filled more remotely, from when it was prescribed. (multiple speakers) Highly variable.

Douglas Tsao

And then a follow-up, it sounds like you sort of navigated the Change Healthcare disruption well. I'm just curious if you have a sense of either how many scrips you ultimately lost? Or was it just a matter that most of them ultimately just fell out of the first quarter, and maybe were filled in 2Q?

John Tucker

Yes, I think I don't think they were filled in Q2, Doug. I think we said about 10% of units, if you look at units, that if you looked at what we were filling, and we think it's about 10%. When we looked at what was coming in, that should have been going out that wasn't going out, it was higher than that.
We recovered and some of them did ship later in March. So we recovered some of them. I was worried it is going to be closer to 20% and 25% because it was shut down, but I think we recovered most of it. So we think we lost about $600,000 or $700,000 in there.

Douglas Tsao

Okay, great. Thank you so much.

Operator

Thank you. At this time, I would like to turn the call back over to Mr. John Tucker.

John Tucker

Thank you. Okay. That concludes our call this afternoon. We are very pleased with our first quarter results, which we generated, notwithstanding the headwinds of the Change Healthcare cyberattack, and the annual resetting and out-of-pocket patient deductibles.
We expect this momentum to continue as more treating physicians gain comfort prescribing Furoscix for their heart failure patients, and as we make incremental progress with payer formula.
At the same time, we are excited about our lifecycle initiatives having had productive discussions with the FDA, and look forward to providing more updates as we progress through 2024. I look forward to a successful year, providing our next update in August. Thank you again and have a good evening.

Operator

Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines.