Theratechnologies Inc

TSX:TH

Earnings Call Transcript 2021-Q1

[Operator]

Welcome to the Theratechnologies Conference Call. [Operator Instructions]I would like to remind everyone that this conference call is being recorded today, April 14, at 8:30 a.m. Eastern Time. And I would like to now turn the conference over to Denis Boucher, Vice President, Communications and Corporate Affairs. Mr. Boucher, please go ahead.

[Denis Boucher]

Thank you, and welcome Mr. Paul Levesque, President and Chief Executive Officer of Theratechnologies; and Mr. Philippe Dubuc, Senior Vice President and Chief Financial Officer will be the speakers on today's call. A Q&A period open exclusively to financial analysts will follow their presentation. Before Paul begins his remarks, I've been asked by Theratechnologies to read the following message regarding forward-looking statements. I would like to remind everyone that Theratechnologies' remarks today contain forward-looking statements about its current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or other future events or developments. In preparing these forward-looking statements, several assumptions were made by Theratechnologies, and there are risks that results actually obtained by the company will differ materially from those statements. As a consequence, the company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on them. Theratechnologies refers current and potential investors to the forward-looking information section of its management's discussion and analysis issued this morning and available at www.sedar.com and on EDGAR at www.sec.gov. Forward-looking statements represent Theratechnologies' expectations as of April 14, 2021, except as may be required by securities laws. Theratechnologies does not undertake any obligation to update any forward-looking statement, whether as a result of new information. future events or otherwise. I would now like to turn the conference over to Paul.

[Paul Levesque, President, CEO & Director]

Thank you, Denis. Good morning, everyone, and thank you for being with us today. I would like to begin today reflecting the last 12 months and also give thanks to what Theratechnologies team has accomplishing this time, helping to position us for growth in the medium and long term. Coincidentally, I have been with Theratechnologies for 1 year now and in my time here as CEO, we've made strong headways toward unlocking the additional potential of the company's commercial and pipeline businesses. I am confident in the strategic plan that we have mapped out and believe that Theratechnologies is at a unique point in its evolution. We have a tremendous opportunity ahead of us to further strengthen our business. Nonetheless, while setting our road map in motion over the course of the year, pandemic was also taking hold of the world on a global scale and placing additional and unforeseen challenges in front of us. As a result of the pandemic, global economies, businesses of all sizes and sectors, families and individuals were thrusted into operating in a completely different way, and we were certainly not immune to this. But we're now aligned with the company's mission and values more than ever, which is to bring new treatment options to healthcare providers and patients by developing and commercializing innovative therapies in areas of high unmet need. For people living with HIV, this was even more poignant in 2020 as a result of the pandemic. I am very humbled by what we have achieved. We exited 2020 as a stronger, more focus and aligned organization and have continued that momentum into the start of 2021. Even though our business has been challenged by the pandemic, we continue to move forward based on the execution of our strategic road map engrained with the commitment to our external stakeholders and the patients and communities that we serve. As a result, I believe we have reached an inflection point underpinned by our strategic investment in and attention placed on 2 critical objectives: advancing our clinical development pipeline programs in NASH and oncology and growing our HIV commercial franchise. With regards to our clinical pipeline in oncology, we are extremely pleased that our Phase I clinical trial is elevating our lead peptide-drug conjugate, TH1902, for the treatment of sortilin positive solid tumors commenced last month ahead of our targeted time frame. In just a few months, we have moved TH1902 through the regulatory initiation process, identified and onboarded clinical sites and completed screenings and dosed our first patient in March. We received Fast Track designation from the FDA for TH1902 in February of this year, which was a remarkable accomplishment. To date, very few companies have been granted Fast Track designation based on preclinical research, and we are excited and feel fortunate to be able to advance our oncology pipeline so swiftly. Through our SORT1+ technology, we believe that we have developed TH1902 as a fit-for-purpose peptide-drug conjugate that could potentially change the way cancer is treated. Just a few days ago, new positive preclinical data on TH1902 were presented at the American Association for Cancer Research annual meeting. These data demonstrated sustained tumor regression, better antitumor activity and tolerability with TH1902 compared to docetaxel alone in all cancer types studied. namely melanoma, pancreatic, ovarian, endometrial, colorectal and triple-negative breast cancers. The antitumor effect of TH1902 also persisted longer post treatment than with docetaxel alone. For TH1902 to demonstrate the positive tumor response in colorectal cancer was particularly remarkable, as this is a known hard to treat cancer that normally does not respond to docetaxel, the psychotoxic used with our SORT1+ technology to build TH1902. Furthermore, these data showed that in all cancer study, neutropenia was absent after 6 consecutive treatments with TH1902 at an equivalent dose of the maximum tolerated dose of docetaxel. We believe this is a major advantage of our SORT1+ technology. As many current cancers are known to cause neutropenia, even the most recent ADCs which increases a patient's susceptibility to develop infections and forces them to stop their cancer treatment to avoid this potentially severe side effect. These new data presented at AACR further support the development of TH1902 in various cancers as well as highlight its broad applicability for the potential treatment of all sorted and expressing solid tumors that are unresponsive to standard therapy. We have contracted with a well-recognized global CRO to assist with our Phase I clinical trial and plan to collaborate with some of the most influential clinical center sites in the U.S., including Anderson Cancer Center in Houston, Texas, Gettysburg Cancer Center in Pennsylvania, Cedars-Sinai Medical Center in L.A. and Karmanos Center Institute in Detroit, Michigan, to name a few. We are excited for the opportunity to bring this innovative method of treatment to patients and look forward to providing you with additional updates. In NASH, Theratechnologies also has the potential to provide an opportunity to bring an innovative treatment in an area of high unmet need. The initiation of our Phase III clinical trial of tesamorelin for the treatment of NASH in Stage 2 or 3 fibrosis is on track to begin in the third quarter of the calendar year. Per the FDA's recommendation, we have confirmed a day to meet with the agency and discuss the proposed trial design and protocol. To prepare for the start of this trial, our Chief Medical Officer, Dr. Christian Marsolais and his team have worked diligently to engage with key hepatologists in the NASH space in North America to actively build support for our Phase III program evaluating tesamorelin in NASH. We're using the same strategy in Europe to indicate KOLs ahead of the trial and aligned with the regulatory agencies. Given the well-established clinical history and unique mode of action of tesamorelin, which is designed to work upstream to reduce the accumulation of liver fat that feeds the NASH. The feedback we have received from pre-KOL has been very positive. We have contracted with a global large-scale CRO that will assist in working with key centers to execute the trial. Based on the insight that we have received from the FDA thus far, including a study we proceeded later in January of this year and the support and feedback we've received from the global experts in hepatic diseases in NASH, we are fully confident in our ability to initiate the Phase III trial on time.It is also important to highlight that we are in a unique and very favorable position entering Phase III development with a treatment that has a support of 10 years of safety data in a predetermined dose at the start of the trial. Combined with an intellectual property position that has been further strengthened by a newly issued patent for the treatment of liver disease, tesamorelin has the potential to become a best-in-class candidate for the treatment of the serious and deadly condition. We plan to use the FA formulation of tesamorelin in our Phase III NASH trial. The FA formulation has a number of significant improvements over our current F4 formulation, which is carefully commercialized as EGRIFTA SV for the treatment of HIV-associated lipodystrophy. Unlike the F4, the FA formulation is twice as concentrated, resulting in a smaller volume of administration and is intended to be presented in a multidose buyout that can be reconstituted once per week. In addition to the FA formulation, we're also developing a multidose pen injector to be used with the FA, once approved, which is progressing as planned. We believe a multidose pen formulation of FA presents a number of significant advantages for not only our NASH program, but also for our current commercial opportunity in HIV-associated lipodystrophy as it has the potential to change that way physicians and patients look at the management of this fab. We will include the multi-dose pen injector and the FA formulation in the same DLA, which we intend to file with the FDA in early 2022 and believe both opportunities serve as an important management in the life cycle management of tesamorelin. We are executing a similar strategy with Trogarzo, which is currently approved for multidrug-resistant HIV-1. In conjunction with our agreement with TaiMed Biologics, we are evaluating 2 new methods of administration of Trogarzo as we build upon the life cycle management of this important therapy. A study is underway and waiting an IV push administration of Trogarzo, and the trial is expected to be completed in the third quarter of 2021. Theratechnologies and TaiMed are also planning to evaluate an intramuscular method of administration for Trogarzo. We are very excited about both trials and these new modes of administration have the potential to improve overall patient compliance and improve their sustained quality of might, further strengthening our commitment to bring a long-acting and efficacious therapeutic option for MDR HIV to patients and HAPs. We continue to seek opportunities to invest in the life cycle management of our HIV medicines, building upon our position in the niche HIV markets we serve in order to further support our patient communities. For Trogarzo, we have been focused on doctor and patient education as our independent research indicates a clear medical gap in regards to understanding the health management of a person with MDR HIV. In terms of unmet medical need and commercial importance, there is not a higher prior orientation population for us. Pandemic aside, the MDR HIV population poses a significant health concern. As for many of these patients, there are no other treatment options left. Additionally, we know from independent market research that the fair majority of these patients and doctors have a high intent to pursue new therapies once their current treatment stops working. In the U.S., our marketing and community liaison team have been working to provide resources to patients based on real-world evidence and data, that they can be more empowered and indicated on their disease. Additionally, our teams have conducted patient case studies that provide important insights into the profile of MDR HIV patients and can be used as a helpful resource for HEP to identify patients and increase MDR HIV disease awareness. To further our efforts, during the first quarter, we conducted a field study to better understand the patient experience while being treated with Trogarzo. This study focused on understanding patient access, advocacy in support as well as their satisfaction with dosing, administration and overall treatment. The feedback we received was extraordinary in gratifying with the majority of patients expressing a very high satisfaction rate of more than 90% across virtually all aspects of treatment, while 93% of patients indicated that they would recommend Trogarzo to other people living with HIV. Of particular note, patients express feeling more protected from their disease and optimistic that they have found a treatment that can offer a potentially long-term sustained effect, especially related to the reduction of their viral and improvements in their CD4 counts. We've taken a similar approach with doctors conducting outreach to better understand their experience with Trogarzo and created resources and data-driven guidelines to inform them on how to advance the care of their patients living with MDR HIV. In Europe, our team has been working hard to make headways with KOLs to better inform them of the benefits of Trogarzo through advisory meetings and science-based virtual events in addition to building a base of newly identified patients. We continue to work towards obtaining reimbursement for Trogarzo in key European countries and believe we have created a strong foundation for our medicines for when the pandemic associated lockdown measures are lifted. For EGRIFTA SV, we continue to educate doctors and patients that visceral fat is a serious metabolic condition and is more serious in the lifetime disease. In HIV patients, better understanding the consequences of visceral fat they are more likely to explore treatment options with their condition. We recognize that patient activation and profiling is key to bringing more patients on our therapy. To that end, we have launched a digital strategy that provides tools to allow both HCPs and patients to have more meaningful conversations about treatment options for this serious medical condition. For example, we recently launched a new and enhanced website with EGRIFTA SV that provides tools and resources for HIV patients to help them identify their condition and also connect them with specialists that can help them overcome the burden of visceral fat. But a key barrier still remains, with the COVID-19 pandemic limiting resources in hospitals and clinics, doctors continue to be overwhelmed by treating COVID patients. In many cases, infectious disease, doctors and HCPs have been transferred to serve on the front line to fight against COVID, further impeding patients' ability to start treatment with 1 of our HIV medicines. While first quarter sales were relatively flat year-over-year. We believe that the trends with the HIV medicines are moving in the right direction. This can be attributed to the momentum that our commercial and medical teams have built to create a stronger base of patients and physician support. Over the last 12 months, the prescriber base for both Trogarzo and EGRIFTA SV has more than doubled, which I believe is an indication that we are well positioned for commercial growth, particularly as we emerge from the pandemic. The fact that our business did not suffer more than it did is a testament to our team adjusting there rapidly to the necessary changes that were made during the pandemic. These strategic and marketing initiatives and commercial changes have now been laid out according to plan. Through these continued efforts, we now have a solid global commercial base that will provide an optimal landscape to grow our HIV medicines. Let's now turn to Philippe for the first quarter results. Philippe, please go ahead.

[Philippe Dubuc, Senior VP & CFO]

Thanks, Paul, and good morning, everyone. Consolidated revenues for the first quarter of fiscal 2021 were $15.4 million, essentially flat over Q1 of 2020, and what is usually our most difficult quarter of the year, mostly because of public and private insurance factors in the United States. Revenues from EGRIFTA SV were $8.7 million, up 2% from the same period last year. While unit sales compared to Q1 2020 were essentially flat, inventory levels at our distributor at the end of the quarter were somewhat lower and this was compensated by higher selling price. Trogarzo revenues were down 6% year-over-year as a result of lower unit sales to specialty pharmacies compounded by lower inventory levels at the distributor level. Although patient retention continues to be quite strong for Trogarzo, new patient starts remain below where we think they should be. As the U.S. emerges from COVID-related lockdowns, we are confident this situation will be resolved. In the EU, we are seeing evidence that sales trends are moving on. But it's still early days yet to see a major impact from our sales and marketing efforts. Additionally, COVID in the EU is still problematic and is affecting patients' initiation of therapy. Our team in Europe is identifying patients, and we are confident that once restrictions related to COVID-19 are eased, we will see a meaningful flow of patients initiating therapy. Pricing discussions are progressing in the EU and reception has been positive. With this in mind, we have laid the groundwork to growing revenues of the Theratechnologies franchise, both in the U.S. and the EU and expect to see our efforts bear fruit from these strategic initiatives. Cost of sales in Q1 2021 was down to $5.4 million compared to $6.8 million for the same quarter last year. The decrease is mostly due to higher gross margins on EGRIFTA SV compared to EGRIFTA as well as a lower transfer price for Trogarzo given the achievement of a predetermined sales milestone in Q3 of last year. R&D expenses amounted to $4.9 million in Q1 '21 compared to $3.4 million for the same quarter last year. This increase is largely due to higher spending in our oncology and NASH programs, increased spending in medical and patient education as well as higher medical affairs initiatives in Europe. For the 3-month period ended February 28, 2021, selling expenses were down to $6.1 million compared to $6.3 million for the same period last year. The decrease is mostly associated with the transfer of resources from marketing to medical education activities. General and administrative expenses amounted to $3.6 million in Q1, up from $2.6 million in Q1 of 2020. This increase is mainly attributable to the overall increase in business activities as well as increased activity in Europe. In Q1 2021, we recorded $1.4 million of finance costs compared to $1.3 million in Q1 2020. As previously stated, finance costs comprised of interest on the convertible notes as well as accretion expense. For the first quarter of 2021, we recorded a negative EBITDA of $1.8 million compared to negative $1 million in Q1 2020. The difference is mainly due to a higher net loss during the quarter. Reflecting the impact of the capital raised during Q1 '21, we ended the first quarter with a cash and equivalent sum of $57 million. I will now turn the call back to Paul for some closing remarks.

[Paul Levesque, President, CEO & Director]

Thank you, Philippe. As we proceed to build momentum in 2021 and beyond. I can't stress enough the Theratechnologies of today is far from where we were in the past, and we're well positioned for future growth. In line with our growth efforts is our continued progress to strengthen our business with talent that have a proven track record of being innovative in successfully leading organizations and developing important medicines. This is particularly highlighted by our recent announcements of 2 new strategic additions to our team. I would like to take this opportunity to formally welcome and introduce John Leasure as Theratechnologies newly appointed Global Commercial Officer; and Peter Kowal as the company's Vice President of our U.S. HIV commercial operation. Both John and Peter bring important capabilities that are needed to bring Theratechnologies through our next stage of growth. Peter experience and leadership will be integral in enhancing our efforts to grow sales for our HIV business in the U.S., while John will lead our global efforts to build our capabilities to be more competitive in HIV and take on the global landscape for NASH and oncology. I am very pleased that we were able to attract such talented and experienced individuals with sales and marketing expertise across HIV, endocrinology and oncology, and I look forward to their contributions toward the growth of our commercial assets and the development of our pipeline. Additionally, we have added a newly created function from our commercial organization with the appointment of a head of Global Manufacturing, sourcing and pharmaceutical development to oversee our North American and European supply chain, procurement, logistics and pharmaceutical development operations. On the capital markets side, the recent offering we closed in January has afforded us the resources to further support our strategy to enhance our commercial initiatives, R&D development and working capital needs. Additionally, we are devoting more resources to enhance our outreach to the investment community, and the deal has allowed us to cultivate new institutional investors who are focused on life sciences and support our strategy. I am absolutely confident that Theratechnologies now has the resources, talent and infrastructure needed to succeed, and we are committed to doing so to drive future sustainable growth and value creation for all our stakeholders. Thank you for your time today. And with that, we will now open the call to take your questions.

[Operator]

[Operator Instructions] I'm not showing any questions at this time.

[Denis Boucher]

Thank you very much, operator. If there are no questions at this time, we will conclude this morning's investor conference call. Thank you very much for being with us this morning. Have a very good day. Bye-bye.

[Operator]

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