Q3 2023 G1 Therapeutics Inc Earnings Call

Participants

Will Roberts; Communications Officer, IR & Corporate Communications; G1 Therapeutics, Inc.

Jack Bailey; CEO; G1 Therapeutics, Inc.

Andrew Perry; Chief Commercial Officer; G1 Therapeutics, Inc.

Raj Malik; Chief Medical Officer; G1 Therapeutics, Inc.

John Umstead; CFO; G1 Therapeutics, Inc.

Gil Blum; Analyst; Needham & Company, LLC

Dane Leone; Analyst; Raymond James & Associates, Inc.

Anupam Rama; Analyst; JP Morgan Chase & Co

Troy Langford; Analyst; Cowen and Company, LLC

Presentation

Operator

Good day and thank you for standing by. Welcome to the G1 Therapeutics third-quarter 2023 financial results call. (Operator Instructions)
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Will Roberts, Vice President of Communications. Please go ahead.

Will Roberts

Thank you, Teresa. Good morning, everyone, and welcome to the G1 conference call to discuss our third-quarter 2023 financial results and business update. The press release on these financial results was issued this morning and can be found in the news section of our website, g1therapeutics.com.
On this morning's call, the team will discuss a business overview on the third quarter of 2023, including an update on our clinical programs and our commercial progress in that period with COSELA, which is approved and commercially available to decrease the incidence of chemotherapy-induced myelosuppression in patients, adult patients, when administered prior to platinum/etoposide-containing regimen or topotecan-containing regimen for extensive-stage small cell lung cancer.
A Q&A session will follow the prepared comments. Before we begin, I want to remind you that today's webcast contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements represent management judgment as of today and may involve risk and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. For more information on these risks and uncertainties, please refer to our filings with the Securities and Exchange Commission, which are available from the SEC or on our corporate website. Any forward-looking statements represent our views as of today, November 1, 2023.
Joining me on the call are Jack Bailey, our Chief Executive Officer; Andrew Perry, our Chief Commercial Officer; Raj Malik, our Chief Medical Officer; and John Umstead, our Chief Financial Officer.
With that, I'll turn the call over to Jack.

Jack Bailey

Thanks, Will. Good morning, everyone, and thank you for joining us on the call today. I'm glad to have the opportunity to discuss our project's progress during the third quarter. We've experienced two quarters of selling into a strong headwind of a national platinum-based chemotherapy shortage. The shortage has been significant and prolonged as you've likely read. The good news is that it appears to be waning, and the FDA report suggests resolution by the end of this year. Yet despite the chemotherapy shortages, COSELA has grown quarter over quarter on a volume basis, although due to wholesaler purchasing patterns, [ex-factory] sales were slightly down in the third quarter.
As you saw in this morning's press release, because of the ongoing platinum shortage, we have decreased our COSELA net sales guidance for 2023 to $44 million to $47 million. While we are disappointed in the impact of the shortage, we remain confident in the opportunity for significant growth as reflected by a record month of sales in October. Andrew will provide additional color on our commercial results momentarily.
Beyond that continued therapeutic innovation for people diagnosed with triple-negative breast cancer is paramount. And as we approach the overall survival readouts from our ongoing trials in TNBC, there is palpable excitement among clinicians regarding the potential for trilaciclib to improve survival and a significant opportunity for G1. Most importantly, all eyes are on the interim overall survival analysis for PRESERVE 2, our pivotal trial of trilaciclib in TNBC.
If the results of the interim analysis in the first quarter of next year are positive, we will work closely with the FDA to expand the indication of COSELA. We look forward to these results and the opportunity for G1 to further establish our position as an innovation leader in this setting.
We will discuss each of these topics in order. Andrew will cover our recent commercial results, Raj will provide an update on our clinical pipeline, including an update on the phase -- on the TNBC Phase 3 trial. John will then provide the financial results for the quarter and remind you of our revenue, expense, and cash expectations. Finally, I'll be back for some concluding comments.
With that, I'll turn the call over to Andrew.

Andrew Perry

Thank you, Jack. I'm glad to be with you today to provide an update on our third-quarter 2023 sales performance and the progress we've made in our commercial execution over recent months, despite facing some continuation of the external challenges we described last quarter.
Our goal in Q3 was to continue to expand our quarter-over-quarter growth by broadening our platform of deeply adopting customer organizations. The strategy helps to secure growth even when we face external challenges such as the platinum chemotherapy shortage, which we described in our Q2 call. I'll discuss some of the factors underlying our Q3 performance to date.
And beginning with sales results, we ended the quarter with 3% final volume growth compared with Q2. As discussed in our Q2 call, we entered the quarter with the continued impact of well-publicized national shortages of both carboplatin and cisplatin. In fact, a recent survey conducted by the National Comprehensive Cancer Network showed that as of the first week of October, 72% of centers surveyed experienced a shortage of carboplatin and 59% were still seeing a shortage of cisplatin.
Customers are managing through it and have dealt with the shortage by substituting chemotherapies, swapping out cisplatin for carboplatin or reducing cycles and doses. We have seen these items stabilized somewhat during Q3 and in some cases return to more normal levels. And while it may impact the fourth quarter to some extent as well, FDA report suggests that it should fully resolved by the end of the year. In terms of the effect in our COSELA business, this may have impacted the number of continuing patients from second quarter on new patients in the beginning of third quarter. From a volume growth perspective, the impact was similar in size to that in the second quarter.
We showed similar growth this quarter across both top 100 and non-top 100 customers with 56% of our volume and top 100 organizations. Community clinics and hospitals represented 80% of sales and academic centers represented 20% with the community segment growing a little faster this quarter.
We saw a number of indicators that our COSELA business continues to build a stronger base of deep adoption during the quarter, 58 of the top 100 organizations order during the quarter compared to 56 in Q2, and we saw a similar number of customers purchasing more than 100 vials during the quarter. We brought onboard 56 new accounts. And since the end of the quarter, we have also added one new top 100 organizations, meaning 74 of the top 100 have ordered COSELA launched today.
During the quarter, we added two new community contract customers and we estimate roughly 30% of our business as customers who have a volume agreement. Our estimate of COSELA patient share continues to grow, and although claims data for Q3 are not fully available, we estimate patient share of approximately 11% in the first-line market, which demonstrates ample opportunity for future growth.
98% of our volume in the quarter was in commercial supply with 2% provided through our patient assistance program. Our payer mix remained stable with the majority covered by Medicare and third-party payer reimbursement has remained strong.
Moving into Q4 2023, we're encouraged to see a healthy start for the quarter with continued strong demand in October, which was a record month for sales. As always, we will continue to evolve as necessary to achieve our ambitions for COSELA.
I'll now turn the call over to Raj for a pipeline update.

Raj Malik

Thanks, Andrew, and good morning, everyone. Today, I will review our clinical work starting with expected timelines for overall survival results from each of our ongoing trials. First, as Jack said, all eyes are on the interim overall survival analysis for PRESERVE 2, our pivotal trial of trilaciclib in triple-negative breast cancer. This trial largely replicates the design of our Phase 2 trial that showed a statistically significant overall survival advantage in both arms for participants receiving trilaciclib prior to standard of care compared to standard of care alone.
The interim overall survival analysis is event driven. And based on the current rate of event accumulation, we remain confident that the analysis will take place in the first quarter of 2024. If the trial meets the interim analysis stopping rule, it will be unblinded and G1 will report the topline results. If the trial does not meet the interim analysis stopping rule, it will continue to the final analysis expected later in 2024.
Regarding the stopping criteria with respect to the hazard ratio, recall that in group two of the Phase 2 study, where patients receive trilaciclib on the day of chemotherapy, the hazard ratio was 0.31. Based on the size of this study, we'll be able to pick up a larger hazard ratio of approximately 0.61 at the interim. So the hazard ratio can be up to approximately two times larger than what we saw in group two of the Phase 2 study, and we would still have a positive outcome.
The mechanism of action of trilaciclib impacts longer-term endpoints like overall survival to a greater extent than shorter-term end points. Preserving bone marrow and immune system function, in addition to enhancing antitumor immunity, should allow patients to benefit while receiving trilaciclib and also while receiving subsequent anti-cancer therapies following trilaciclib.
To that end, we have performed new post-hoc analyses on our Phase 2 TNBC trial evaluating survival outcomes for patients who did or did not receive subsequent therapies after study treatment, and the results are compelling. We have submitted the results to a medical meeting and look forward to discussing that once they are presented in December.
Second, we expect to provide the initial overall survival results from our Phase 2 trial with the antibody-drug conjugate sacituzumab govitecan in the first quarter of 2024. Thus far, we have shown convincing data that trilaciclib can improve the tolerability of sacituzumab. When administered prior to the ADC, trilaciclib reduced the rates of multiple adverse events by over 50% compared to the single-agent ADC, including neutropenia, anemia, and diarrhea.
In addition to the benefit on tolerability, we believe that combining trilaciclib and sacituzumab could also enhance survival, and in doing so provide a path for meaningful improvements in outcomes for people living with triple-negative breast cancer.
And third regarding the bladder cancer Phase 2 trial, we announced this morning that we are concluding the trial following the next protocol defined analysis of survival later this quarter, allowing us to focus our resources on our core areas of TNBC and ADC combinations. We will report the results from this Phase 2 trial in bladder cancer at a future medical meeting.
This is a signal-finding study designed to assess the potential additive contribution of trilaciclib to anticancer therapy, including combination with immune checkpoint inhibitor of avelumab alone without chemotherapy in the maintenance phase of the study. Approximately 30 patients in each arm entered maintenance. To date, although no meaningful benefit was observed with the overall study, we have observed an overall survival trend in favor of the trilaciclib plus avelumab arm in the maintenance phase, suggesting a potential additive benefit when used in combination with a checkpoint inhibitor consistent with the immune-based mechanism of action of trilaciclib. These data will be instructive for future studies in our core areas of focus.
Changing topics to trilaciclib in our first approved indication. Recently presented new real-world data show for the first time that trilaciclib may improve survival in patients with extensive-stage small cell lung cancer. First, our partner, Simcere presented new data at the ESMO Conference from part two of the randomized placebo-controlled Phase 3 study called TRACES where trilaciclib or placebo were combined with chemotherapy in patients with extensive-stage small cell lung cancer.
After a median follow-up of 14.1 months, the median overall survival was 12 months in the trilaciclib group and 8.8 months in the placebo group with a hazard ratio of 0.69. Although this was not statistically significant due to the size of the trial, the hazard ratio in all subgroups favored the trilaciclib group.
In addition, we presented four posters at the ASCO Quality Care Symposium last weekend providing new real-world evidence that trilaciclib can substantially lower the impact of chemotherapy-induced myelosuppression on patients, hospitalizations, and health care resource utilization.
Importantly, we also reported that based on claims data from Medicare and Inovalon, patients receiving trilaciclib at a higher survival at six months of 84% compared to 72% for the group that did not receive trilaciclib. The hazard ratio for the effect on survival was 0.63.
Finally, I'll mention the important recent news that trilaciclib has been recommended as a myeloid supportive agent in the updated ASCO small-cell lung cancer guidelines for patients with untreated or previously treated small-cell lung cancer for undergoing treatment with chemotherapy or chemoimmunotherapy. These guidelines provide evidence-based recommendations to practicing clinicians on the management of such patients, which is vital to ensuring appropriate patient access and strong payer reimbursement.
I'll now turn the call over to John for a review of the financial results. John?

John Umstead

Thanks, Raj, and good morning, everyone. As Will mentioned, full financial results for the third-quarter 2023 are available in this morning's press release and will be in the 10-Q, which we expect to file after market close. Our total revenue for the third quarter of 2023 was $12.3 million, comprised of net to seller revenue of $10.8 million and license revenue of $1.5 million.
As mentioned by Jack, although there was a decrease in net revenue during the third quarter, our vial volume grew by 3% over the second quarter despite the continued impact of the platinum shortage. This disparity is related to the timing of the sales. Recall that we recognized revenue at the point of sale to our distributors.
We experienced an increase in patient vial demand towards the end of the quarter, but the impact of our sales to the distributor will be reflected in revenue in the fourth quarter, where we've seen our highest gross sales to date in October.
Regarding our lerociclib license agreement with EQRx. In August, we received formal notice of their intent to terminate the license agreement and to revert the product rights back to us as part of the proposed acquisition by Revolution Medicines. Both parties have signed the side letter agreement pursuant to which EQRx agreed to pay $1.6 million to us for the remainder of the costs to wind down the company-sponsored lerociclib study.
The payment was received during the third quarter. No milestones have been achieved through September 30, 2023. And as a result of the termination, we will not receive any further milestone payments or future royalties from EQRx.
Cost of goods sold for the three months ended September 30, 2023, was $3.1 million compared to $1.1 million for the same period in 2022. This difference was primarily driven by an increase in sales volume coupled with a onetime inventory reserve for potential product obsolescence.
We mentioned on the call that we expected our 2023 operating expenses to be close to 30% lower than that of 2022. We have continued to recognize these savings. And as an update, we now expect our 2023 operating expenses to be at least 30% lower than that of the prior year.
Our research and development expenses for the third quarter of 2023 were $8.8 million compared to $19.1 million for the third quarter 2022.
Our selling, general, and administrative expenses for the third quarter of 2023 were $16.8 million compared to $24.4 million for the third quarter of 2022. This reduction is primarily related to decreases in expenses associated with commercialization activities, personnel costs, and medical affairs activities.
Regarding our cash position, we ended the third quarter with cash, cash equivalents, and marketable securities of $94.4 million compared to $145.1 million as of December 31, 2022.
Finally, regarding revenue and cash runway guidance for 2023, as Jack mentioned, as a direct result of the impact of the ongoing platinum-based chemotherapy shortage extending from the second quarter through the third quarter of 2023, we have adjusted our net product revenue guidance for 2023 to a range between $44 million and $47 million. Based on the FDA's ongoing reporting, we continue to expect the shortage in this quarter.
There is no change to our 2023 gross-to-net expense percentage estimates. We now anticipate a year-end cash, cash equivalents, and marketable securities balance in the range of $75 million to $80 million and based on the foregoing, we now believe that our cash runway currently takes us beyond the third quarter of 2024.
With that, I'll turn the call back over to Jack for some closing comments. Jack?

Jack Bailey

Thank you, John, Raj, Andrew, and Will. I also want to recognize the cancer community. We are thankful for the opportunity to be part of your recovery journey. We continue to be encouraged with the mounting real-world evidence confirming the benefit of COSELA to patients and hospitals and the support of organizations like ASCO through their recent small-cell lung cancer guideline update recommending COSELA use. And as you heard from Andrew, we remain confident in its potential in its initial indication of extensive stage small cell lung cancer as the leading indicators of growth showed continued progress.
Importantly, we accomplished quarter-over-quarter volume growth in the face of the ongoing platinum chemotherapy shortage. And while we have a clear path to profitability with COSELA in its first indication, our focus is on driving therapeutic innovation in triple-negative breast cancer and building our position as a leader in this space.
We are executing on our clinical pipeline to help clarify the future potential for trilaciclib and in combination with anti-cancer drugs, including ADCs. Most importantly, the interim analysis of the Phase 3 TNBC trial planned for the first quarter of next year is positive, we intend to meet with the FDA to discuss filing an sNDA to expand the use of COSELA to this indication as quickly as possible.
Thank you for your time this morning. We will speak again in this format on the fourth quarter 2023 earnings call, and we'll see you at the fall and winter investor and medical meetings.
With that, I'll close the call and turn it over to Q&A. Operator, would you please remind our listeners how to ask a question?

Question and Answer Session

Operator

(Operator Instructions) Gil Blum, Needham & Co.

Gil Blum

Hi. Good morning, everyone, and thanks for the updates. Maybe first one here on the upcoming interim for the TNBC study. Just help me understand, would there be sufficient data not just the stuff for efficacy, but also the stuff for futility?

Raj Malik

Hey, Gil. This is Raj. Yes, I mean, we will -- it's really an efficacy interim analysis based on the O'Brien-Fleming boundary. But yes, if those futility that DMC certainly has that prerogative to stop the trial.

Gil Blum

Maybe on the context around the ASCO guidelines, I'm not familiar with the NCCN guidelines, but maybe you can help us understand what that could mean for COSELA?

Raj Malik

Yes, thank you. These guidelines are obviously put together by well-respected clinicians, academic clinicians who are very influential in their own clinics and in their own right and with their own clinical trial experience. So we're very encouraged to see that additional support from us coming through. I think it cements our position as an emerging standard of care in extensive-stage small cell. So we were excited to see that result come through and it can only strengthen our promotional efforts on our support from payers for reimbursed.

Gil Blum

All right. And maybe a last one on the fund dynamics for the upcoming quarter. In small cell lung cancer, would patients avoid therapy during the holidays. Is this a thing or physicians will treat you immediately as you are received?

Raj Malik

Yeah, so small cell is considered an emergency diagnosis. So when patients present and are diagnosed, they would be treated immediately per the recommendation of the physician.

Gil Blum

Thanks for taking all of our questions.

Operator

Dane Leone, RJF.

Dane Leone

Hi. Thanks for taking the questions and congrats on the progress. The primary question that we've been receiving recently and this morning off of the results is whether your team feels there's overlap in some of the higher volume used centers of COSELA to where some of the newer small cell lung cancer studies are being run with specific reference, I think, to maybe tarlatamab studies within the DeLLphi program there. Is there any color you can provide of where you think some of the utilization might have dropped maybe beyond or utilization maybe inhibiting a bit of momentum or the ability to penetrate deeper at some of these academic centers? Or is the entire headwind more just driven by platinum-based shortage. Thank you.

Yeah, thanks. I see the headwind is driven by the platinum-based shortage. We've yet to pick up any noticeable impact of any clinical trial programs on our demand, any segment of [customers].

Operator

Anupam Rama, JP Morgan.

Anupam Rama

Hey, guys. Thanks so much for taking the question. On your cash position of good till 3Q '24, does that assume that the interim OS on PRESERVE 2 hit? Or does it assume that you're going to go to the final analysis later in the year -- next year? Thanks so much.

So we've provided guidance that we would get through past Q3, and that does not include any expectation from a TNBC readout.

Anupam Rama

Got it. Thanks so much for taking the question.

Operator

Troy Langford, TD Cowen.

Troy Langford

Hi, thanks for taking our questions and congrats on all the progress on the quarter. I just have two quick questions. First, with respect to the Phase 2 TRODELVY combo [OS] result expected next quarter, how quickly do you all think you could initiate additional studies related to that combination should the data look positive?

Maybe I can talk from a clinical data perspective and then Jack can talk about timing. So obviously, we're looking for the survival data which we expect the early data in 2024. So that in the first quarter, I should say, and that would really give us directionally whether this is something we would want to pursue and then I'll leave it to Jack for the time.

Jack Bailey

Yeah, thanks, Troy. Yeah. I mean, it's going to obviously depend on the readout itself, but we will certainly look for different avenues if the data is compelling to be able to pursue that. So I would just say stay tuned and let's see what the data shows.

Troy Langford

Okay, great. Thanks for that color. And then just one other more, I guess logistical question. Can you all just provide any more color on the one-time inventory reserve for potential product obsolescence that you will refer to in the press release issued this morning? And apologies if you mentioned it in the prepared remarks and I missed it.

No, thanks, Troy. So what it is obviously we had mentioned lowering our guidance. We're taking a conservative approach in how we look at our inventory reserves. It's a one-time non-cash impact to the P&L. I mean, obviously something we'll continue to monitor, but we feel like it was a conservative approach for it at this point in the balance sheet.

Operator

Thank you for your questions. I am showing no further questions at this time. I would now like to turn it back to Jack Bailey for closing.

Jack Bailey

Thank you, operator. And as always, I look forward to keeping all of you updated on our progress. Thank you for joining us today. We'll be in touch. Thank you.

Operator

Thank you your participation in today's conference. This does conclude the program, and you may now disconnect.