Theravance Biopharma, Inc. (NASDAQ:TBPH) Q1 2023 Earnings Call Transcript
Theravance Biopharma, Inc. (NASDAQ:TBPH) Q1 2023 Earnings Call Transcript May 8, 2023
Theravance Biopharma, Inc. misses on earnings expectations. Reported EPS is $-0.35 EPS, expectations were $-0.26.
Operator: Ladies and gentlemen, good afternoon. I’d like to welcome everyone to the Theravance Biopharma First Quarter 2023 Conference Call. [Operator Instructions] Also, today’s conference call is being recorded. And now I’d like to turn the call over to Rick Winningham, Chief Executive Officer. Please go ahead.
Rick Winningham: Good afternoon. And thank you for joining the Theravance Biopharma first quarter 2023 earnings conference call. On Slide 2 I’d like to remind you to that this call will contain forward-looking statements that involve risks and uncertainties, including statements about our development pipeline, expected benefits of our products, anticipated timing of clinical trials, regulatory filings and expected financial results. Information concerning factors that could cause results to differ materially from our forward-looking statements is described further in our filings with the SEC. Turning your attention to Slide 3, I’m joined today by Rhonda Farnum, Chief Business Officer; Rick Graham, Senior Vice President of Research and Development; and Aziz Sawaf, Chief Financial Officer.
On Slide 4, I’d like to begin my presentation by focusing your attention on Theravance’s immediate future. Those of you who are familiar with the company recognize the tremendous work that our team and partners have done to bring the organization to this point. Through a combination of perseverance and resilience, we’re now in a position to focus our energies behind two key initiatives, capitalizing on the tremendous opportunity we have to grow YUPELRI and executing on an unambiguous regulatory pathway for ampreloxetine in multiple systems atrophy patients with symptomatic nOH. These are reflected in the 2023 targets we outlined in our last quarterly call and I am pleased to share with you the progress that we’ve achieved today. On Slide 5, beginning with YUPELRI, our team in collaboration with Viatris, turned in a solid quarter with sales up 8% year-over-year.
As we previously discussed, there are many COPD patients not well controlled on their existing therapy, a good benefit from either the addition of or switching to YUPELRI. We bring a coordinated approach to reducing the barriers that prevent patients from receiving YUPELRI and or working diligently to translate this into tangible results. Importantly, we know our hospital customers comprehensively and we meet them with solutions that fit their individual needs. This quarter, we were successful at driving growth in both the hospital and the community settings with hospital volumes up 62% and retail patient news starts up 61% year-over-year. We reached new highs in market share in both the hospital and community settings. Rhonda will go into greater detail regarding YUPELRI’s performance and new growth opportunities later in the presentation.
However, I’d remind listeners that YUPELRI demand currently doesn’t reflect any upside that we may enjoy should our PIFR-2 study be successful. Rick Graham will provide an update on PIFR-2 later in the presentation. On Slide 6, while we’re excited about YUPELRI’s continued performance, we’re just as excited for the potential of ampreloxetine’s success in CYPRESS. We worked extremely hard to optimize a Phase 3 design in consultation with the FDA and believe the results from this study could support a full approval for MSA patients suffering from symptomatic NOH. We are pleased with the progress we’ve made having now opened the study and plan to continue to add a number of important recruitment sites in the coming weeks. We’ve also submitted a request for an orphan drug designation and expect to hear back from the FDA sometime this quarter.
As Rick Graham will discuss, ampreloxetine has the potential to offer significant efficacy, safety, and dosing advantages over existing therapies and could represent a life-changing therapy for MSA patients with symptomatic NOH. We project that enrollment in CYPRESS will be complete by the second half of 2024 and look forward to providing additional guidance around regulatory milestones and commercial plans as we move forward. Now, turning to Slide 7, I’d like to offer a brief update on our capital allocation strategy and financial condition. Year-to-date and through the end of April, we’ve returned approximately $215 million to shareholders through our share repurchase program. We remain on track to return the $110 million that remains outstanding by the end of the year.
Importantly, we are doing this from a position of financial strength. We have positioned ourselves by reducing our expense base and remain on track to reach non-GAAP profitability on an ongoing basis sometime in the second half of the year. Finally, I’d like to publicly welcome Jim Kelly of Weiss Asset Management to our Board and express my enthusiasm for the contributions that we expect from Jim, Susannah Gray and our other Board members continue to make. Jim brings a unique skill set and shareholder perspective to the Board as well as remarkable energy. With that, I will now hand the call over to Rhonda to review YUPELRI’s first quarter 2023 performance and the opportunities we see to deliver robust growth for the remainder of the year and beyond.
Rhonda?
Rhonda Farnum: Thanks Rick. Moving to Slide 9, we are pleased to share the latest performance for YUPELRI. During the quarter, total net sales of YUPELRI reached $47 million, up 8% year-over-year. Theravance’s implied 35% share of net sales for YUPELRI during the first quarter of 2023 was $16.4 million. As a reminder, Theravance and Viatris co-promote YUPELRI in the United States. Theravance’s commercial and medical teams covering the hospital segment and Viatris is responsible for outpatient based community healthcare needs and promotion for the product. This quarter, as we expected and previously communicated, seasonal factors impacted reported YUPELRI net sales. Changes in ordering patterns, which are typical of the pharmaceutical business and often more pronounced during the first quarter, had a larger than normal effect this period.
However, we remain confident that our team will deliver strong YUPELRI performance for the year based on a number of positive key performance indicators. To this end commercial – I’m sorry, customer demand once again, increased quarter-over-quarter and as well I will show later in the presentation, patient fulfillment continues to reach new highs. As Rick mentioned in his opening comments we have formulated a winning strategy for driving YUPELRI growth in the hospital setting. We focus our efforts in a number of areas including formulary wins, clinical pathways, and discharge planning protocols, all with a goal of making YUPELRI available to COPD patients who may benefit from the only once a day long-acting nebulized LAMA. Looking at Theravance’s hospital results on the right side of Slide 9, [indiscernible] doses sold exclusively in the hospital setting, represented an increase of 15% from the previous quarter and 62% compared to the same period a year ago, therein reaching the highest quarterly total launch to date.
We have driven significant growth in the YUPELRI’s hospital business every quarter since the third quarter of 2020, the point at which our team was able to reengage more fully following the initial impact of COVID. Launch to date, Theravance has secured 616 hospital formulary wins leading to approximately 1,350 hospital outlets purchasing YUPELRI. By comparison, we reported 580 formulary wins and approximately 1200 purchasing hospital outlets at the end of 2022. Turning to Slide 10, YUPELRI’s share of the long-acting nebulized market in the hospital setting once again reached a new record high of 15% in Q1 of 2023. We believe these account wins and forthcoming system additions will yield continued growth through 2023 as YUPELRI will be the first LAMA of choice in many hospitals due to the growing recognition and acceptance of YUPELRI’s clinical benefits, and once-daily value proposition.
As a key component of the joint strategy between the Theravance and Viatris teams’ data continue to show that approximately 90% of patients receiving YUPELRI in the hospital setting are discharged with a prescription to continue their treatment in the outpatient setting, allowing for continuity of YUPELRI maintenance therapy post-hospitalization. Reflecting further on the outpatient care setting, YUPELRI’s market share in the overall community setting increased to 27.7% through January of 2023, which is our latest data point. We have also been encouraged by the growth trends seen specifically in the retail channel as Q1 total prescriptions grew quarter-over-quarter, while historically script volumes have decreased in the first quarter due to seasonal factors.
On Slide 11, we provide a snapshot of YUPELRI retail new patient starts, which during the first quarter increased a robust 61% year-over-year and 23% quarter-over-quarter. New patient starts are key to future performance and the recent exceptional growth can be attributed to the realization of new commercial initiatives, which includes concomitant use education, expansion into additional site of care channels and additional focus on fulfillment support. Looking beyond this quarter's success, there still exists significant long-term growth opportunities for YUPELRI. Starting with the current long-acting nebulized patient population, we expect our market share to continue to grow both from switches as well as an add-on therapy with further deployment of concomitant use education.
There are also many patients inappropriately using short-acting nebulized treatments for maintenance who may benefit from switching to a once-a-day long-acting therapy such as YUPELRI. Lastly, there are even more patients on handheld maintenance regimens that remain uncontrolled due to a number of reasons, including dexterity challenges, cognitive impairment and/or low peak inspiratory flow. In total, these patients segments represent a sizable niche opportunity for YUPELRI and we've only started to scratch the surface. Given this significant remaining opportunity, we expect to be able to continue, if not accelerate the pace of YUPELRI’s adoption moving forward. One of the ways in which we plan to do so is by making available and communicating data from our Phase 4 PIFR-2 study results of which we expect later this year.
With that, I will turn the presentation over to Rick Graham. Rick.
Photo by National Cancer Institute on Unsplash
Rick Graham: Thanks Rhonda. In my section today, I'll be discussing the YUPELRI PIFR-2 study at a high level and we'll spend most of the time discussing the underappreciated opportunity of ampreloxetine in development for the treatment of MSA patients with symptomatic nOH. Slide 13 serves as a reminder that we conducted a prior clinical trial called PIFR-1 that served to inform the design for the ongoing PIFR-2 trial. The left hand figure shows the results of the intent-to-treat population in PIFR-1. PIFR-1 included GOLD 2, 3, and 4 patients with a PIFR value of less than 60 liters per minute at inclusion, the left axis is least squares mean change from baseline and FEV1 at day 30. While the results demonstrated a larger change from baseline for revefenacin relative to tiotropium, this effect was not statistically significant.
Importantly, a pre-specified analysis of GOLD 3 and 4 patients shown on the right hand figure demonstrated a clear 50 milliliter and clinically relevant treatment benefit of revefenacin over tiotropium. In addition to providing confidence on the probability of technical success, the results of PIFR-1 inform the design of the PIFR-2 study. Turning to Slide 14, the Phase 4 PIFR-2 study continues to actively enroll patients and will potentially provide even further competitive upside for YUPELRI. We continue to guide toward top line results in the second half of 2023. Transitioning to ampreloxetine, a norepinephrine reuptake inhibitor being developed for the treatment of symptomatic nOH in patients with MSA. In MSA, patients with nOH, blood pressure falls when upright owing to impaired release of norepinephrine leading to debilitating symptoms which can have a profound impact on quality of life.
Moving to Slide 16, we are pleased to announce that the Phase 3 study CYPRESS is open and actively recruiting patients. We are projecting that enrollment will be completed in the second half of 2024. Slide 17 illustrates how we believe ampreloxetine works on a cellular tissue and patient level. The top left panel shows the untreated state where the norepinephrine reuptake transporter reduces endogenous norepinephrine levels. In the middle panel, low norepinephrine causes blood vessels to dilate leading to a decrease in blood pressure. This condition can result in syncope when a patient stands up as depicted in the far right panel. In contrast, the bottom panel shows the effect of ampreloxetine by inhibiting the norepinephrine reuptake transporter, ampreloxetine increases norepinephrine levels leading to vasoconstriction and an increase in blood pressure.
This ultimately leads to better organ perfusion and relief of symptoms for patients. As shown on Slide 18, we believe that effective treatment with ampreloxetine requires intact peripheral nerves. This has been a longstanding hypothesis and is supported by the scientific literature. In the previous Phase 3 study, we incorporated a threshold of 40% of the study population to have MSA and we pre-specified a disease type analysis in the protocol for this very reason. MSA is depicted on the left slide is characterized by lesions in the brain that lead to atrophy. However, the peripheral nerves that leave the brain and innovate the vasculature are generally intact. This situation facilitates the potentiation of endogenous norepinephrine in MSA patients.
In contrast, patients with Parkinson's disease and pure autonomic failure tend to have degenerated peripheral nerves which hinders norepinephrine signaling to the vasculature. Moving to Slide 19, previous clinical studies have demonstrated that ampreloxetine increased norepinephrine levels, prevented a drop in blood pressure and prevented symptom worsening in patients with MSA. The left panel of the figure shows that after four weeks of ampreloxetine treatment, norepinephrine levels increased by 57% from baseline. In the middle panel of the figure during the randomized withdrawal period of study 170, patients who continued ampreloxetine maintain their blood pressure, whereas those who administered placebo experienced more than a 12 millimeter mercury drop in their blood pressure.
As depicted in the far right panel of the figure, patients who remained on ampreloxetine during the six week randomized withdrawal period maintained symptomatic benefit as measured by the OHSA composite score. In contrast, patients administered placebo experienced a clinically meaningful one and a half point worsening of the OHSA composite score. Let's take a look at Slide 20, which outlines the unique benefits of ampreloxetine treatment that we've observed. In the Phase 3 study, 170 ampreloxetine was effective at treating a range of cardinal symptoms in MSA patients and the effect was durable over the full course of the 22 week study. Additionally, ampreloxetine improved activities of daily living that require standing or walking for a short period of time.
Ampreloxetine is a single 10 milligram tablet administered once-daily. This is especially beneficial for MSA patients with dysphagia, which is a frequent and disabling symptom of the disease. This feature sets potential ampreloxetine treatment apart from current therapies that require multiple tablets to be taken several times a day. Patients with nOH are at risk for supine hypertension, a dangerous increase in blood pressure while in the supine position. The two FDA-approved therapies for nOH have black-box warnings and the label highlighting this risk. However, in a safety database of more than 800 patients and healthy subjects, no signal for supine hypertension has been observed with ampreloxetine treatment. Slide 21 outlines the design of our registrational study 197, also known as CYPRESS, for the treatment of symptomatic nOH and MSA patients.
The study is comprised of a 12 week open-label period followed by an eight week double-blind placebo-controlled randomized withdrawal phase. The primary endpoint is a change in OHSA composite score. Based on the strength of the prior Phase 3 study results and alignment with the FDA on the primary endpoint as well as the study design, we believe the CYPRESS study has a high probability of technical and regulatory success. Now that the study is ongoing, our development team will begin working proactively on the new drug application. Importantly, we previously met with the FDA to align on the nonclinical pharmacology, toxicology, clinical pharmacology, and CMC strategies to support the NDA. Let's move on to Slide 22. We estimate that the addressable patient population for ampreloxetine is between 35,000 and 45,000 and we are seeking orphan drug designation in the United States.
Despite two approved therapies for orthostatic hypertension, there remains a significant unmet need. And ampreloxetine has the potential to offer a unique treatment profile including effectiveness on multiple symptoms, durability of effect, once-daily dosing, and a favorable safety profile. As we enter a new era in treating MSA symptoms, the potential of ampreloxetine offers hope to MSA patients with symptomatic nOH. I'll now turn the call over to Aziz to review the financials.
Aziz Sawaf: Thanks, Rick. Theravance Biopharma is a much different organization with an improved capital structure compared to where we were only a year ago. We've de-risked our balance sheet by eliminating all debt during a period of unprecedented interest rate increases, all while improving liquidity and returning significant amounts of capital to our shareholders. We've done this to focus our capital allocation behind our two most valuable assets, YUPELRI and ampreloxetine. Skipping over to slides to our financial performance in the quarter on Slide 26, I’d draw your attention to the collaboration revenue of $10.4 million. This figure reflects our 35% share of YUPELRI net sales adjusted for expense reimbursements recognized through our partnership with Viatris.
For those modeling our earnings potential going forward, it’s important to note that while we recognize our 35% share of YUPELRI net sales within the collaboration revenue we report, we are technically entitled to 35% of YUPELRI shared profits. Thus, while quarter-to-quarter variance and shared expense recognition impacts the collaboration revenue we recognize, it is up YUPELRI’s profitability in aggregate that matters most to our earnings. I would note that YUPELRI continue to be profitable this quarter with a similar level of shared expenses relative to past quarters, despite the seasonal effects that impacted our net sales. Given the complexity of our collaboration revenue accounting, we have added Slide 35 to the appendix of this presentation to help provide clarity on the calculation.
Shifting to expenses. We reported a combined $27 million of R&D and SG&A expense, excluding share-based comp and restructuring costs compared with $31 million in Q1 2022, a reduction of 13%. When we provided financial guidance in February, we indicated that Q1 2023 expenses should be the highest of the year, owning to the headcount reduction we made within the research organization that was completed at the end of March. During the quarter we completed the restructuring we announced in February and incurred a total of $1.6 million of restructuring costs in line with our guidance of $1 million to $2 million. We do not expect to incur any additional severance or termination costs moving forward. We ended the quarter with $260 million of cash and no debt and during the quarter we repurchased 5.2 million shares, bringing our shares outstanding to 60.5 million.
Turning the Slide 27, I’ll provide an update on return of capital program. Through April 30, we have completed $215 million of our $325 million authorization at a weighted average share price of $10.38. We expect to complete the remaining $110 million of the program by end of 2023. The Board will continue to evaluate Theravance’s financial condition and progress towards the achievement of our financial targets, and in consideration of these factors, we may update the plan in the future similar to when we increased our capital return program from $250 million to $325 million earlier this year. Finally, on Slide 28, I’ll provide updated commentary regarding our 2023 financial guidance. Based on our performance today, we are reiterating our guidance for operating expense between $35 million and $45 million for R&D and between $45 million and $55 million for SG&A, exclusive of share-based comp and one-time items.
It’s worth mentioning that R&D expense at this point largely ties to our ability and intention to enroll patients in the CYPRESS study, which we expect to build over time while driving to a result for PIFR-2 during the second half of the year. Based on our internal projections, therefore, R&D expense should be lower in Q2 compared to Q1 before building throughout the second half of the year. SG&A expense should also be lower in Q2 and then largely stable for the remaining quarters of the year. As a result of a commendable start to Q1, coupled with our expectation to drive YUPELRI sales growth, while managing expenses effectively, we continue to expect to reach profitability from a non-GAAP perspective in the second half of 2023. This is exclusive of any potential one-time milestone payment.
Simultaneously, we are tracking well against our expectations for a material reduction in stock-based comp for the year. Stock-based comp in Q1 is down 34% year-over-year excluding restructuring expenses or 52% including restructuring expenses. With that, I’ll turn the call back to Rick for closing remarks. Rick?
Rick Winningham: Thanks, Aziz. Turning the Slide 29 and summarize our commentary we’re delivering on our strategic focus for 2023. First, we’re making YUPELRI available to many individuals with COPD who are uncontrolled on their current therapy and we are simultaneously laying the foundation for added growth with potentially market moving data from PIFR-2 later this year. Second, we are working with the MSA community and treating clinicians to ensure we meet our CYPRESS milestones for ampreloxetine and advance this important potential therapy as expeditiously as possible. And third, we’ve got a robust plan in place to return capital to shareholders as appropriate for the long-term health of the company and shareholder value creation. Thank you everyone for your time and your participation. I’ll now turn the call back over to the operator for questions.
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