scPharmaceuticals Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 13, 2024

There are 11 speakers on the call.

Operator

welcome to SC Pharmaceuticals 4th Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce PJ Kelleher with LifeSci Advisors.

Operator

Thank you. You may begin.

Speaker 1

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 SC Pharmaceuticals' expected future financial results and men's expectations and plans for the business and Pharosix. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project and other similar expressions are typically 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 SC Pharmaceuticals business, financial condition and other operating results.

Speaker 1

These include, but are not limited to, the risk factors and other qualifications contained in SC Pharmaceuticals' annual report on Form 10 ks, 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 call, including responses to your questions, are based on current expectations as of today, and SC Pharmaceuticals expressly disclaims any intent or obligation to update

Speaker 2

Pharmaceuticals. John? Thank you, P. J, and thanks to everyone listening to this afternoon's call and webcast to review our Q4 and full year 2023 results. As has been our practice, I will begin with an operational update before turning the call over to Steve Parson, our Senior Vice President of Commercial for a more detailed update on the furosix launch and then Rachel Knowles, our Chief Financial Officer for a review of our financials.

Speaker 2

We will then open the call for your questions. The Q4 of 2023 represents our 3rd full quarter of PRIOROSIX commercial availability as we launched the product in late February of 2023. Demand has continued to grow reflected in our key indicators including number of doses, number of total prescribers and doses filled per prescription. We believe 406 is meeting the needs of heart failure patients suffering from fluid overload and the continued positive trend in these KPIs demonstrates that specialists continue to gain comfort prescribing it. For the Q4 of 2023, we reported net revenue of $6,100,000 representing a sequential increase of 61 percent from $3,800,000 for the Q3 of 2023 and at the upper end of the range that we provided in our preannouncement press release on January 4.

Speaker 2

This was driven predominantly by doses shipped to patients through our specialty pharmacy network. We also had direct sales of Pharosix integrated delivery networks. In fact, our 4th quarter net revenue included a sizable order by 1 of the largest closed IDNs in the country towards the end of Q4. Going forward, while we expect to have sales to IDNs every quarter, including in Q1 of this year, the size of these orders can vary. We'll cover this in more detail shortly.

Speaker 2

Before diving in further, I would like to note that in the Q4, we adjusted our KPIs from prescriptions to doses. There's a number of doses as the metric we use across our internal projections is more reflective of our current business, especially as the number of doses per prescriptions vary. Our gross to net discount from launch through the end of Q4 was running at approximately 18%, down from 21% through the end of Q3. We continue to expect the GTN discount to increase over time as contracting with payers and the marketplace evolves. We anticipate that the GTN discount Q1 of 2024 will increase relative to 2023 levels due to discounts we anticipate paying.

Speaker 2

Inventory levels at the end of the 4th quarter at our specialty pharmacy partners were consistent with the inventory levels at the end of the 3rd quarter. Shifting now to payers. We continue to have productive discussions with commercial, Medicare Part D and Medicaid payers in an ongoing effort to make PHYRO6 broadly available to patients at the most favorable terms possible. As mentioned earlier, in late October, we reached an agreement with 1 of the largest closed IDNs in the United States, providing unrestricted access to Pharosix without prior authorization to over 8,000,000 lives at a fixed co pay ranging from $16 to $75 Also as of November 1, 2023, Ferosix has been added on formulary as preferred brand, one of the largest government retired payer formulary. Increasing the lives of preferred access to furosix by an additional 1,100,000 lives.

Speaker 2

With these favorable payer expanded the population of heart failure patients with access to Pharosix with fixed co pays of $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 more announcements like these 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 for long term growth strategy. In August, we announced favorable Type C meeting feedback from the FDA regarding the potential expansion for the Pharosix indication to allow for use in New York Heart Association Class 4 heart failure patients. PRO-six is currently indicated for the treatment of congestion due to fluid overload adult patients with New York Heart Association Class II and Class III chronic heart failure.

Speaker 2

We estimate that as many as 10% of all heart failure patients are Class IV and a meaningful percentage of these as many as 40% may benefit from cirrhosis. Based upon the feedback that we received from the agency, we filed for the Class IV indication early October of 2023. We've been assigned a PDUFA date for this audit. We are successful. We believe Class 4 represent a meaningful expansion of the market opportunity to enable for 6 to be prescribed to the most severe heart failure patients.

Speaker 2

Turning now to the 80 mg by 1 ml auto injector that we are developing as an additional option in the on body infuser. We believe that an auto injector if approved will reduce manufacturing costs compared to the current on body infuser and confer environmental advantages. We remain on track to initiate a pivotal PK study in Q2 of this year and report results later this year. That, if successful, allow us to submit a supplemental new drug application to the FDA by the end of 2020 4. Finally, we announced feedback from the FDA pertaining to the potential expansion of the Parosix indication to include treatment of edema due to fluid overload in patients with chronic kidney disease or CKD.

Speaker 2

In this feedback, the FDA confirmed that no additional studies are needed to expand the indication provided that we can demonstrate an adequate PK and pharmacodynamic bridge to the lifted drug, which is furosemide injection. PKD 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 to 15 Americans are aware that they have kidney disease and 50% of patients with CKD do not have a diagnosis of heart failure. The fluid overload being one of the most common complications in CKD, which worsens with the disease progression, we believe cirrhosis could be beneficial to patients with CKD who have worsening symptoms through the fluid overload and are not responding to oral loop diuretics. To that end, plan to submit a supplemental new drug application with the FDA for the CKD indication in the Q2 of 2024.

Speaker 2

Now turning to the Q1 of 2024. Despite the normal Q1 headwinds caused by patient out of pocket deductibles resetting, is our highest dose demand in shipment for the first half of the quarter. This growth in demand has further accelerated in March. However, the impact of the cyber on tap, unchanged healthcare began in the 3rd week of February and is ongoing. This has caused the disruption in claims being processed resulting in delays in patients receiving shipments of cirrhosis.

Speaker 2

With the unique position cirrhosis has in the treatment of heart failure patients, we're concerned that we will not see all of these units shipped. We're actively working with our specialty pharmacy partners to ship as many of these units as possible. At this point, we do not know if how much this will ultimately impact the quarter. We intend to provide a more detailed update when we report our Q1 results. At this point, I'll turn the call over to Senior Vice President of Commercial, Steve Parsons for a deeper dive into our launch metrics.

Speaker 2

Steve?

Speaker 3

Thank you, John. As John indicated, the 4th quarter was our 3rd full quarter of furosix commercial availability and we remain pleased with our progress. From launch through December 31, we've had 1696 unique prescribers, up 52% from the 119 unique prescribers from launch through September 30. We're extremely encouraged by this growth as it reflects our strategy in 2023 of establishing a broad prescriber base. Importantly, more than half of these prescribers have written multiple prescriptions by the end of the year.

Speaker 3

During the Q4, we had 13,542 doses written and 7,016 of those doses have already been filled. There were another 4,592 doses that were still pending as Q4 ended. We continue to report doses written and doses filled because of the unique nature of how physicians prescribe cirrhosis. Many of our physicians write prescriptions for patients in anticipation of future need due to worsening fluid overload. While these prescriptions might not be filled in the month or quarter they are written, they do get filled when the patient needs treatment and we report those doses when the patient receives them.

Speaker 3

It's important to note that approximately 14% of our prescriptions were canceled during the Q4 of 2023. Recall that pending prescriptions are not canceled, rather they are still in process with the payers. Some are approved and waiting in queue, while others are still in prior authorization. We filled a significant portion of these pending prescriptions in the 1st few weeks of 2024 and we continue to fill more pending prescriptions written in Q4 into the filled category every day. Now the prescriptions that are canceled are for various reasons, including unreachable patients who are hard to contact, have been hospitalized or a small number that have that are deceased.

Speaker 3

Of those that are reached to cancel, a high co pay is the main reason given. We anticipate the cancel rate will continue to decrease with furosix as is expected to become better positioned on more health plan formularies, lowering patients out of pocket costs and providing quicker coverage decisions. During the Q4, the average number of doses per prescription filled was 5.9 doses, which remains higher than our long term expectations. Our sales force has conducted 2,331 in services as of December 31, which is up from 1806 in services conducted as of September 30. In services provide important training to offices on the prescribing process for furosix and this ensures office readiness.

Speaker 3

As we open more new accounts, the execution of in services remains fundamental to furosics success and we regard the number of in services conducted each quarter as an important leading indicator. We've said previously that we stand ready to add additional territories as demand warrants. We plan on adding additional territories in advance of our Class 4 and chronic kidney disease initiatives. From a marketing perspective, we are engaged in a broad multi channel marketing campaign to drive brand awareness, adoption and commitment. This program encompasses many different activities, but 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.

Speaker 3

We've begun reaching out to heart failure patients and their caregivers with patient education materials for furosics. Overall, we're pleased with our progress, our continued progress and the path we are on. That concludes my update. I'd like to turn the call over to our Chief Financial Officer, Rachel Noakes for a financial update. Rachel?

Speaker 4

Thank you, Steve. As of December 31, 2023, we held $76,000,000 in cash, cash equivalents and investments compared to $118,400,000 as of December 31, 2022. Now I will cover a few income statement items. We reported a net loss of $13,800,000 for the Q4 of 2023 compared to a net loss of $9,200,000 for the Q4 of 2022. For the full year 2023, we reported a net loss of $54,800,000 compared to a net loss of $36,800,000 for the full year 2022.

Speaker 4

Product revenues were $6,100,000 for the Q4 of 2023 and cost of product revenues were $1,800,000 For the full year 2023, product revenues were 13,600,000 dollars and cost of product revenues were $3,800,000 We did not generate revenue during the Q4 or full year 2022 as Bureau VI was approved in October 2022 and commercially launched in February 2023. Research and development expenses were $3,300,000 for the Q4 of 2023 compared to $2,300,000 for the comparable period in 2022. The increase in research and development expenses for the quarter ended December 31, 2023 was primarily due to an increase in device and pharmaceutical development costs. The increase was partially offset by a decrease in employee related costs. Research and development expenses were $11,800,000 for the full year 2023 compared to $15,500,000 for the full year 2022.

Speaker 4

Decrease in research and development expenses for the full year 2023 was primarily due to a decrease in clinical study and medical affairs costs, employee related costs and quality and regulatory consulting costs. The decrease was partially offset by an increase in pharmaceutical development costs. Selling, general and administrative expenses were $16,200,000 for the Q4 of 2023 compared to $7,200,000

Speaker 5

for the

Speaker 4

comparable period in 2022. The increase in selling, general and administrative expenses for the quarter ended December 31, 2023 was primarily due to an increase in employee related costs and commercial costs. For the full year 2023, we reported selling, general and administrative expenses of $53,400,000 compared to $20,600,000 for the full year 2022. The increase in selling, general and administrative expenses for the full year 2023 was primarily due to an increase in employee related costs and commercial costs following commercial launch of Eurofix in February 2023

Speaker 3

as well

Speaker 4

as an increase in legal costs. The increase was partially offset by a decrease in insurance related costs. Based on our current operating plan, we expect our operating cost to increase in 2024 as we further support the launch of Euro 6 and the development of the 80 base by 1 ml auto injector. As of December 31, 2023, we had 35,968,510 total shares outstanding. That concludes the financial update.

Speaker 4

John?

Speaker 2

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

Operator

Thank Our first question comes from the line of Roanna Ruiz with Leerink Partners. Please proceed with your question.

Speaker 6

Hi, everyone. Rosa Chen on for Roanna Ruiz at Leerink Partners. Thanks for taking our questions. So first one from us. Can you guys share some additional details on your efforts securing more additional IDN agreements and how you expect that could impact some of the current trends that you're seeing in the uptake of PHYRO-six by the individual prescribers?

Speaker 2

Sure, Rosa. This is John and I'll have Steve jump in. So the 2 largest IDNs in the country are Kaiser and the VA, the VA being the largest. And we're working with the VA. We've been selling into individual VAs.

Speaker 2

This year, a key initiative for us is to be a national formulary for the IDN, I mean for the VA. We think that will drive uptake. And then with Kaiser, more of a closed system where we've already struck the contract and we have sales in there. So we think those 2 kind of are a little unique and that they're really the closed integrated system. And you have Geisinger, who's one of those as well.

Speaker 2

So we'll continue to sell into those really hard closed systems, But we really see a big expansion opportunity into what you would call IDNs that might not have the closed part of the pharmacy involved. So the docs might be employees, but they're not in the pharmacy. They don't have the pharmacy benefit. This is good for us because we can still talk about the 406 value message, but also be able to track the prescription. So those would go through our regular distribution network.

Speaker 2

But we anticipate that growing as a percentage of the business. There's still a lot more patients outside of the IDN world than there are in it. But we've always thought that this would be a good market for us as the value proposition is so well defined. I don't know Steve if you want to add anything to that.

Speaker 3

Yes. We get approached by integrated delivery network hospital systems quite regularly and they see an opportunity to shorten the length of stay in some cases by having the product available right there on campus, as well as preventing unnecessary readmissions, which they paid penalties for. So they'd like to be involved in the cirrhosis distribution directly and have their doctors order it right through their EMR systems in the hospital. So there'll be more and more of that happening this year.

Speaker 6

That's helpful. Thanks. And second one from us on your CKD label expansion effort. So thinking of the potential launch there, if it's approved and the nephrologist you may call on, what learnings from your current 406 launch would you apply there? And anything you would do differently specifically for that patient population and prescriber base?

Speaker 2

So when we look at nephrologists, they actually prescribe they're more productive in a way than the cardiologist around how many loop diuretics they use. So I think, again, one learning we've had, early on and I think this will apply to nephrologists as well is really that treating that patient as soon as that patient starts showing a reduced response to the oral diuretic is critical. Critical to get that patient feeling better, critical to keep that patient from being totally fluid overloaded. So that message in our market research really plays well to the nephrologists. In fact, when we look at any of the market research with nephrologists, I think they understand the value prop and I think they're going to embrace it.

Speaker 2

We would think perhaps even earlier than cardiologists. I mean, Steve, I don't know. We've been calling on a small number of nephrologists already due to them having heart failure patients that

Speaker 3

are with fluid overload. Some of them are seeing cardiology patients that have been referred to them to deal with the fluid overload. So we're calling on them already and they're very anxious to have the broader indication to include CKD.

Speaker 2

Yes. We've been very enthused and I'm not sure John Moore if you want to add anything. He's done most of the work on kidney. But we've been incredibly enthused with the response of the nephrologist to the product profile, the value prop. And there's less of them, so we can cover more of them with our sales force.

Speaker 2

So we're anticipating a really a quicker uptake in nephrology than we've even seen in cardiology. I'm not sure, John, if you have anything you'd like to add to that since you've done multiple?

Speaker 7

Yes, I'll just add that. When doing research and talking with nephrologists and you hear the story and you hear the description of the problem that they're describing in their patients with chronic kidney disease, if you didn't know that they were nephrologists, you'd think that they were cardiologists. They're describing the exact same problem. And so when a patient reaches out to their nephrologist for worsening signs and symptoms of fluid overload, the nephrologist is inclined to treat them. They don't say, we'll go to your cardiologist, elect your cardiologist do it and vice versa.

Speaker 7

So it's the exact same problem, just different individual being presented. And now that nephrologists will have that will have the opportunity. They'll use it just like the cardiologist to just additional touch points.

Speaker 2

Great. Thanks.

Speaker 5

Great. I

Speaker 6

really appreciate the perspective. So last one, I'm going to squeeze one in. Can you just share the range in doses that you're seeing right now for VEROSIQ? You mentioned the 5.5 average. What's the range?

Speaker 2

So the range, we you'll see every once in a while a script for 1 unit. I think usually that's something weird going on. But typically it's 2 or 3. I think the maximum you'll see is 8 and that's for a patient's fairly volume overloaded who's in a pre admission. But I think you're looking at 2 to 8 is the range.

Speaker 6

Great. Thanks so much guys.

Speaker 2

Thank you, Rose.

Operator

Our next question comes from the line of Stacy Ku with TD Cowen. Please proceed with your question.

Speaker 5

Hi. Thanks so much for taking our questions. We had a few. So first, Steve, understand you're currently focused on establishing the infrastructure and driving uptake for prescribers, but just curious your views on expanding patient activation for DTC, especially as reimbursement continues to progress. And we have a few more questions.

Speaker 5

So we'll just kind of lay them out first. As you also brought in out the prescriber base, are you helping these clinicians get a good sense of which patients will have reasonable co pays just to help kind of ease the prescribing for the clinicians as they think about appropriate patients and as we think about long term improvements of fulfillment? And then just a follow-up, your comments around the change health care. Clearly that cyber attack is pretty well understood issue at this point, but curious if you could provide any other additional details. Is this just a delay in adjudication for co pays from Q1 to Q2 as you implement kind of the temporary workarounds?

Speaker 5

Do you anticipate any prescriptions will be lost? And then last question, if we may. When do you think you might break out that IDN contribution? And what are your thoughts about types of disclosures? Thanks so much.

Speaker 5

I can repeat the questions if needed.

Speaker 2

Okay. We probably getting that wasn't right fast, Stacy. Let me do

Speaker 3

the first one. I think I'm going to take

Speaker 2

them from the end. I'll talk about change first. As I said, what's happened since February 21st that when the system went down is really the prescriptions coming in being able to adjudicate them, copays and ship them. So we have I think I said it in my prepared remarks, our demand, the number of prescriptions and units being written is way higher than at this time quarter to date last quarter dramatically different. Obviously, our units filled is higher, but it's lagging the prescriptions because of the delays we're seeing.

Speaker 2

So your question is, is it just a delay? Do you lose some of them? I think that's the big question is, yes, they're delayed, but do you get them back? We have a workaround with our specialty pharmacy partners. We're hoping change comes back up fully online here.

Speaker 2

They've said next week. And the question is, can we shift everything that we should have shipped? And we're just not sure of that right now. We don't think unless something weird happens, it's a long term issue. And we remain optimistic about making consensus for the year, but this is a disruption for us right now.

Speaker 2

Again, it started February 21. It's ongoing now. We have a workaround. We've been shipping units just not as many as we should be because of the slowness of the system. We talked a little bit so that's the first question.

Speaker 2

We talked a little bit about the reporting of the IDN. It will depend on the IDN and in our contract with them of what metrics we can report. We could break the sales out. I think we've said that for Q4, we think it was in the 10% to 15% range for the IDN purchases. That will vary.

Speaker 2

Again, we had a large purchase at the very end of the year from Kaiser. We don't have visibility into what Kaiser doesn't let you see what doctor wrote. They want you to detail on the doctors, which is crazy. But some of the IDNs that Steve mentioned, hospital based ones will have more metrics to be able to share. But unfortunately with Kaiser, I think the metrics are going to be somewhat scarce.

Speaker 2

And then Steve, do you want to do you have the other questions?

Speaker 3

Yes. I think you asked about helping doctors identify patients who are going to have what the co pay is going to be for those patients so they can have success. And yes, we can do that. We're pretty confident like 70% of our patients are able to access furosemide co pay of $100 or less, some of them much less. Like the average co pay for the patients with $100 left is in the $20 range.

Speaker 3

So you can imagine anything like $0 co pay, dollars 10.50 a lot of the doctors are now they're submitting prescriptions in advance of needing the product, anticipating that they're going to need gurazix for a specific patient who's going towards them. It's just a matter of time and they get a cost and coverage feedback, they get an answer and they get an approval on the product, they know the company is good. And then when the patient does get sick and does need it, that's when they call it down and it's ready to go very, very quickly. So they'll tell the patients who have the really good co pays, no hesitation at all. And some people who have higher co pay, they may not talk about the product to them until there's foundational charitable funding support for those.

Speaker 3

So I don't know if that answers the question, but they are able to get pre clearance on a lot of these patients and know who has the really good co pays.

Speaker 5

That's really helpful. And then the first question we asked was really curious your thoughts around activating patients by DTC Now you're focused on the prescribers right now. But as you progress your reimbursement, as you get the auto injector, what are your thoughts there long term?

Speaker 3

Yes, we have a plan. We have a strategy to reach directly out to patients and their caregivers. We give an awful lot of market research to be ready so that we know what how they like to be communicated to, how to reach them, where to reach them. We've begun in office direct to patient with brochures and the doctors giving them out things and we're building a website just for patients. We have advocacy groups, Mended Hearts and Heart Brothers that are connecting us with patients through their networks of people who have opted in signing up.

Speaker 3

So the patient is a big focus for us this year

Speaker 2

more than it was in year 1. We spent the 1st 12 months as our plan was educating cardiologists before we educated patients. So this year, there'll be a lot more targeted outreach to patients and to caregivers. We're going to be doing a giant DTC campaign on survivor or something, probably not. You won't see that, but I think you'll see some targeted things to patients including potentially media as well.

Speaker 5

Okay. Wonderful. That's really helpful. Thank you for all the details.

Speaker 2

Thanks, Jason.

Operator

Our next question comes from the line of Douglas Tsao with H. C. Wainwright. Please proceed with your question.

Speaker 8

Hi, good afternoon. Thanks for taking the questions and congrats for the progress. So John, I'm just curious in terms of the change health, I mean, what percent of your business has been affected by this? Because it really was it really just United and that one payer?

Speaker 2

No. Doug, it's really so you think of United, United owns or Optum owns, United owns change. But our specialty most of all of the specialty pharmacies and of the payers use change healthcare. So the adjudication of the scripts go through change. So you could say all of our scripts for that period of time and ongoing are impacted now.

Speaker 2

That said, it was really slow for a couple of days because what happened was everything had to be called in manually and everyone was doing the same thing. So it was incredibly slow. We have managed workarounds. There's another system in place called Relay that one of our other specialty pharmacies utilizes. So we were able to move business there.

Speaker 2

That's slow as well. But I think the workaround has started to work and really what we need do and what we're focused on is making sure we ship all of those scripts that were caught up, when it was totally down and we didn't have a workaround. It's not I'm not saying you're saying it's working smoothly now. It's obviously with the workaround working better. And I think the specialty pharmacies are getting better at working through the limitations in the system.

Speaker 2

We've heard that it will be coming back online here next week. So we're going to continue work. We've asked specialty pharmacies to put more people on to man the phones to ship the drug. So if you ask what percentage of our business got impacted, the question would be what percentage of the business what percentage of units prescribed aren't going to ship that should have shipped. That's the question that is relevant.

Speaker 2

It's impossible for us to give you that final answer right now. We have recovered a good portion of it. Have we recovered all of it so far? No. The good thing is we're still seeing the demand come in very robustly.

Speaker 2

The dogs are still writing and they're writing kind of more than they've ever written. We just need to be able to keep up, ship what's coming in now and then deal with that deal with those that are still sitting in the system.

Speaker 8

Okay. That's helpful. And then also just are you from in terms of nephrology, are you starting to see any off label scripts being written? I mean, I know it's challenged in terms of getting paid for, but I'm just curious, some plans are somewhat liberal.

Speaker 2

We haven't. When we mentioned that we go to some nephrologists. So you'll see a lot of times even the cardiologists will say, boy, they have heart failure and CKD, I just let the nephrologists take care of it. So that's on label for us. That's part of our heart failure TAM is those patients even if they're cared for by a nephrologist.

Speaker 2

So that would be on label. Now if it's Class 4, it wouldn't be. But if it's 23 and it's in nephrologist and they have heart failure, then that's all labeled and will get filled. If they wrote it and it was CKD, first off, we wouldn't be promoting that at all. 2nd off, it probably will not be filled.

Speaker 8

Okay, great. Thank you.

Speaker 2

Thanks, Doug.

Operator

Our next question comes from the line of Chase Knickerbocker with Craig Hallum. Please proceed with your question.

Speaker 9

Good afternoon, guys. I'll share my congrats on the progress as well. Maybe to start, where are we at from an average time for adjudication of the PAs perspective? And give me the average time, I guess, before the change healthcare disruption? And then since then, should we just think of it as those a lot of those adjudications have just been almost completely paused and that's what's causing this underlying disruption that you're talking about that again everybody is experiencing?

Speaker 2

Yes. We couldn't tell you what the average time is since change went down. I mean, it's variable and we've got workarounds now. We still have our primary specialty pharmacy that goes through change that is adjudicating claims or change and then they get triaged if to relay if there's an issue. So that is an impossible question for us to answer due to now again, the thing here is the data itself is very hard to even get your hands on.

Speaker 2

We know the scripts coming in that we can see clearly. It's what's going out, when they went out. And again, we've got a workaround that involves a couple of other specialty pharmacies. And so the data is kind of some report it differently. So prior after change there's just no way this soon we can tell what that is.

Speaker 2

I don't know Steve if you want to talk about that before the change in that.

Speaker 3

Yes. Not ever trying to be evasive, but it's really multi factor question on how fast prescriptions get filled. It depends on what the doctor wants. We have 2 ways for the doctor to order the product. They can check expediting 24 hour review, meaning they want it as quickly as possible or they can check coverage and cost determination.

Speaker 3

And that one, that's more of a layaway, and that could sit there after it's approved very, very quickly with a known co pay, that could sit there for weeks until the doctor wants to call it down. Now let's just focus on the ones where they say, I wanted as fast as possible. Our brand promises we'll get them something the very next day. When we get a quick answer from the payer and we reach the patient, we are able to ship it for next day delivery. If we don't get a quick answer from the payer, we'll still ship them one dose overnight for free so that they have something the very next day and then it buys us another 24 hours to get through to the payer, get the answers and then ship it out for the following day.

Speaker 3

So that's been working very well to the satisfaction of our prescribers. But to do an average, when you add in all these ones that purposely can be there for weeks or even months, We're filling prescriptions this quarter where people wrote them in October or November and they're finally calling them down. We're very happy to have them. We do not discourage the doctors from ordering in advance and getting it pre approved. They like to do that.

Speaker 3

We like to see them doing that, but it does impact our both our fill rate as well as our speed to dispensing.

Speaker 9

Yes, makes sense. Certainly appreciate the complexities there with that answer. Maybe some color, just based on some of the color you've given around gross to net and where you expect to end the year, that indicates that you expect to contract with some of these large Medicare Advantage payers at some point, call it earlier mid year this year in 2024, just kind of speak to some of that activity and the conversations that are happening in the background that kind of give you the confidence to kind of assume that those contracts are going to get done?

Speaker 2

Yes. So we've had ongoing negotiations with there's 4 big payers here in Medicare. And we've talked about it that when we first went out they didn't agree with what we offered them. We didn't agree with what they offered us. We've had a couple of iterations of that.

Speaker 2

These aren't quick iterations. You don't the phone call pick up the phone and call on Tuesday and they give you an answer on Wednesday. It would take some time, but we're making progress. We think it's key, if you look at especially next year that we're on formulary here because of how the Part D is going to reset. But we have to get these done for this year too.

Speaker 2

So we're pretty confident that it's going to happen this year and that's why we keep messaging that the GTN is going to go the discount is going to go up because we're going to be paying these rebates. And again, we're not paying them unless we think it makes sense for the brand. But we do think being able to lower co pays for that 30% of the patients to get them to $100 or less and also to speed adjudication time is important to the brand to go where it's going. So they're progressing. We said once we sign them, we'll announce them And we still plan on doing that.

Speaker 2

And yes, that's the plan.

Speaker 9

Great. Thanks for the color guys. I'll hop back in queue.

Speaker 2

Thanks. Thanks, Chase.

Operator

Our next question comes from the line of Neve Rahman with Maxim Group. Please proceed with your question.

Speaker 10

Hi, everyone. Congrats on the progress. So just a couple of questions from me on your CKD indication. So the first one is, what kind of review cycle do you expect?

Operator

Do you expect a 6

Speaker 10

month review or 1 year review for the product or for the indication label? And 2, how do you think the reimbursement conversation and reimbursement paradigm sort of evolved for this indication? Like, are you already having discussions with payers regarding this potential label expansion, so you might see that benefit upon approval? Or do you have to kind of go back and have additional discussions and we might see the benefit of those discussions and reimbursement sometime later in 2025? Like how do you think that will progress?

Speaker 2

Yes. I'll take the first one. Steve, you can take the other one. As we anticipate a 10 month review, it's not a new molecular entity, which would be a 12 month. But we anticipate and again, we've said we're filing next month and we will file in April.

Speaker 2

We'll receive our PDUFA date, but we anticipate that would be 10 months. Is there a chance it could be 6 months? There's always a chance, but I think to be conservative, we'd say 10 months. But there wouldn't be a way that it could be 12 months. There's not really a path that way.

Speaker 2

We expect a pretty straightforward review. The IV has CKD in their label. Or matching the label of the IV. We did a PK study that matched the label of the that matched the PK of the IV. So we think it's a pretty straightforward review.

Speaker 2

And as I said before, we're excited. Steve, do you want to talk about?

Speaker 3

Yes. We're not negotiating for CKD at this stage. Payers don't really want to do that. But we do know with pretty good assurance that cirrhosis will be covered the same way it is for heart failure with CKD. It will be a simple prior authorization to label and that prior auth means they have to be trying generic oral diuretics and that's just not working before HERO6 would be approved for an acute intervention.

Speaker 3

So it will be essentially the same PA to label, our label will have CKD and it won't be any more complicated than that.

Speaker 2

There's exceptions where the plans will start a review prior to approval. It's pretty rare though that they spend the time to really start reviewing a product or an indication prior to approval. Again, they do it with

Speaker 3

So things are under review at the FDA, they're more likely to. We have the final first.

Speaker 2

Yes, exactly.

Speaker 10

Thanks. That was helpful. And just one last question. So I think you in your prepared remarks, you said you plan on expanding the commercial for us for ferrosix. Could you comment on what the magnitude of that expansion would be?

Speaker 10

And does what the impact of change impact your timing decision making there?

Speaker 2

There'll be no impact unless change went for months here, right, which we don't anticipate. I think anyone anticipates that. There's no impact on how we're looking at expanding the sales force at all. So I think what our thinking has been is that to expand it to 90 here mid year in front of the Class IV approval and then to 125 very early next year in front of the CKD expansion. So that's the thinking right now, but there'll be no impact from change on change health care on that.

Operator

Thanks a lot. Thanks for taking

Speaker 10

my questions. And once again congrats on the progress.

Speaker 2

Thanks, Matt. Appreciate it.

Speaker 3

Okay. There

Operator

are no further questions in the queue. I'd like to hand it back to management for closing remarks.

Speaker 2

Great. Thank you very much. That concludes our call this afternoon. We remain pleased with the trajectory of our Pyrosix launch. We expect that the meaningful progress that we're making with payers will add to our momentum as heart failure patients gain affordable access to Pharosix.

Speaker 2

We're excited about our lifecycle initiatives after having productive discussions with the FDA and look forward to providing some updates as we progress through 2024. Overall, I'm pleased with our progress and believe that we can build on our current momentum and look forward towards a successful year. Thank you again and have a great evening.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Earnings Conference Call
scPharmaceuticals Q4 2023
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