In their second quarter 2024 earnings call, scPharmaceuticals Inc. (ticker: NASDAQ:SCPH) reported a net revenue of $8.1 million, marking a 33% sequential growth. The company announced positive study results for their low-volume auto-injector and an FDA acceptance to expand the FUROSCIX label for edema treatment in chronic kidney disease patients.
scPharmaceuticals plans to increase its sales territories to 90 by the end of the third quarter. Despite these advancements, the company faced a net loss of $17.1 million for the quarter. The financial position included $38.5 million in cash and cash investments as of June 30, 2024, a decrease from $76 million at the end of the previous year.
Key Takeaways
- scPharmaceuticals reported a net revenue of $8.1 million in Q2 2024, a 33% increase from the previous quarter.
- FDA accepted the company's filing to expand the FUROSCIX label to treat edema in chronic kidney disease patients.
- The company plans to expand its sales force to 90 territories by the end of Q3.
- A net loss of $17.1 million was reported for Q2 2024, with cash and cash investments totaling $38.5 million.
- Positive results from a study on a low-volume auto-injector were announced.
- The company is executing a multi-channel marketing campaign and expects an increased presence at the Heart Failure Society of America Conference.
Company Outlook
- scPharmaceuticals is optimistic about future growth, expecting an increase in the average number of doses per prescription.
- The company is preparing for potential approval for CKD patients with edema by expanding its field force size.
- They anticipate a long-term gross-to-net rate of 30% to 35%, influenced by IDN business and Medicare rebates.
Bearish Highlights
- The company's net loss increased from $14.2 million in Q2 2023 to $17.1 million in Q2 2024.
- Cash and cash investments decreased from $76 million at the end of 2023 to $38.5 million as of June 30, 2024.
Bullish Highlights
- The transition to an online hub has improved efficiency and increased prescription rates.
- scPharmaceuticals expects mandatory rebates with Medicare to contribute to a positive long-term GTN outlook.
Misses
- There was a significant net loss reported for the second quarter, and a decrease in cash reserves compared to the previous year-end.
Q&A Highlights
- The company discussed the impact of the new online hub on prescription rates and efficiency.
- They addressed the anticipated increase in GTN due to more IDN business and Medicare rebates.
- Education campaigns are planned to help Medicare beneficiaries and physicians understand the changes in co-pays, which will be capped at $166 next year.
scPharmaceuticals remains committed to expanding its market reach and improving treatment options for patients with chronic conditions. The company's strategic initiatives, including marketing campaigns and sales force expansion, are aimed at driving brand awareness and adoption. With the anticipated changes in Medicare and the positive reception of their online hub, scPharmaceuticals is poised to navigate the challenges ahead and capitalize on opportunities for growth.
InvestingPro Insights
As scPharmaceuticals Inc. (SCPH) navigates through a pivotal phase with strategic initiatives and product developments, it's essential to consider key financial metrics and expert analysis that could impact the company's valuation and investor decisions. According to the latest data from InvestingPro, the company's Market Cap stands at $230.18 million, reflecting investor valuation of the firm.
One of the InvestingPro Tips highlights that analysts are expecting sales growth in the current year, aligning with the company's reported increase in net revenue and market expansion efforts. This anticipation of growth is further substantiated by an impressive 754.68% revenue growth in the last twelve months as of Q1 2024, indicating significant market traction for scPharmaceuticals' products.
In terms of profitability, another InvestingPro Tip indicates that analysts do not expect the company to be profitable this year, which is consistent with the reported net loss of $17.1 million for the second quarter. This is also reflected in the company's negative P/E Ratio of -3.99, suggesting that investors are currently valuing the company's growth prospects over immediate earnings.
However, it's worth noting that scPharmaceuticals is trading at a high Price / Book multiple of 9.37, suggesting that the market assigns a high value to the company's assets relative to its equity, which could be due to the potential of its product pipeline and proprietary technologies.
For those interested in a deeper analysis, InvestingPro offers additional tips that can provide more nuanced insights into scPharmaceuticals' financial health and market position. There are currently 7 more InvestingPro Tips available for scPharmaceuticals at https://www.investing.com/pro/SCPH, which could help investors make more informed decisions.
Full transcript - Scpharmaceuticals Inc (SCPH) Q2 2024:
Operator: Greetings, and welcome to the scPharmaceuticals Second Quarter 2024 Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] It is now my pleasure to introduce your host, PJ Kelleher, Investor Relations. Thank you. You may begin.
PJ Kelleher: Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements on this conference call, other than historical facts, are forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding scPharmaceuticals expected future financial results management's expectations and plans for the business, the ongoing commercialization and marketing of FUROSCIX and the potential label expansion and other regulatory approvals of FUROSCIX. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project and other similar expressions are used typically to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other important factors that may affect scPharmaceuticals business, financial condition and other operating results. These include, but are not limited to, the risk factors and other qualifications contained in scPharmaceuticals annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by the company with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and scPharmaceuticals expressively disclaims any intent or obligation to update these forward-looking statements, except as required by law. It is now my pleasure to turn the call over to Mr. John Tucker, Chief Executive Officer of scPharmaceuticals. John?
John Tucker: Thank you, PJ. Thank you to everyone listening to this afternoon's call and webcast to review our second quarter 2024 results. As has been our practice, I will begin with an operational update before turning the call over to Steve Parsons (NYSE:PSN), our Senior Vice President of Commercial for a more detailed commercial update on FUROSCIX, and then Rachael Nokes, our Chief Financial Officer, for a review of our financials. We will then open the call for your questions. I would like to begin this afternoon with a recap of the financing up to $175 million that we announced earlier this week. Upon closing of these transactions, approximately $75 million was added to the company's balance sheet, which extends our cash runway through profitability. Through this financing, the company also has access to an additional $50 million through debt and/or royalty facility. Financing is comprised of three parts. First, $75 million of senior debt facility with Perceptive and Pfizer (NYSE:PFE)'s, of which $50 million was funded at closing to repay $50 million of existing debt with Oaktree. An additional $25 million will be available subject to the achievement of certain pre-specified commercial and regulatory milestones. The debt carries a five-year term, of which the first four years are interest-only with a bullet repayment in year five. Facility lowers our interest rates and pushed out the amortization as compared to the retired Oaktree facility. Second, a synthetic royalty agreement of up to $50 million, also with Perceptive Advisors, $25 million of the royalty financing was funded at close, and the additional $25 million we made available subject to the achievement of certain pre-specified commercial milestones. And finally, a public offering of approximately $50 million of equity led by leading life science investors. Together, we believe this financing extends our cash runway through profitability. Turning now to our launch progress. During the second quarter, we generated sequential net revenue growth that we believe reflects increasing awareness and utilization of FUROSCIX by cardiologists and heart failure specialists. As Steve will detail shortly, our leading indicators suggest that providers are increasingly more comfortable prescribing FUROSCIX to their heart failure patients during critical intervention windows, which are pre-hospital mission or post discharge. We reported net revenue of $8.1 million, representing sequential growth of 33% as compared to the first quarter of 2024. Our gross net discount during the second quarter was approximately 8%, down from 19% in the first quarter. We expect the GTN discount to increase over time as contracting with payers evolves and IDN demand grows. Looking to the back half of the year, we currently anticipate our GTN to range from 10% to 15% for the next two quarters. Over the longer term, we continue to believe that a GTN in the 30% to 35% range is appropriate. Although there will be some variability from quarter-to-quarter as we continue to expand our roster of payers and IDNs. I would like to now provide an update on several long-term growth initiatives that we previewed last quarter that we view as critical to our long-term growth strategy. We announced that the FDA has approved our Supplemental New Drug Application seeking to expand the FUROSCIX label to include all heart failure patients, including the most symptomatic patients and those with the greatest limitation on physical activity categorized at New York Heart Association Class IV. FUROSCIX was previously indicated the treatment of congestion due to fluid overload in adult patients with New York Heart Association Class II and Class III chronic heart failure. By expanding the label to include the New York Heart Association Class IV, which accounts for approximately 10% of heart failure patients and 30% of heart failure hospitalizations, we estimate that as many as 40% of these patients may potentially benefit from FUROSCIX. Given FUROSCIX's ability to improve signs and symptoms of congestion, which may lead to a reduction in unnecessary hospital admissions and re-admissions with the potential to improve patient quality of life while reducing overall and heart failure related healthcare costs. We believe uptake among cardiologists and heart failure specialists who treat these very symptomatic patients could be meaningful. Turning now to the low-volume auto-injector that has in development. We announced earlier this week positive top line study results from a PK study, which demonstrated that FUROSCIX achieved primary pharmacokinetic and secondary pharmacodynamic endpoints. Some of the highlights from the study results include, at SCP-111 demonstrated bioavailability of 107.3%, achieving the 90% confidence interval limit of 80% to 125%. Participants that received at SCP-111 had similar urine output, urinary sodium excretion and urinary potassium excretion at 6, 8 and 12 hours compared to IV furosemide. Participants reported a median pain score of 0 across all time points assessed. The most common adverse events with SCP-111 were localized at the injection site and systemic adverse events were consistent with those reported in the prescribing information for intravenous and oral furosemide. With these results, we continue to work towards our target submission of an sNDA to the FDA by the end of the year. As we have stated previously, we believe an auto-injector, if approved, will reduce our manufacturing costs compared to the current on-body infuser, confer environmental advantages and give treating providers in their patients' treatment flexibility. Finally, we announced that FDA has accepted our filing of a supplemental new drug application speaking to expand the FUROSCIX label to treatment of edema due to fluid overload in patients with chronic kidney disease or CKD. The FDA previously indicated that no additional clinical studies were required to expand the FUROSCIX syndication to include CKD, if we can demonstrate an adequate PK and pharmacodynamic bridge to the listed drug, which is the furosemide injection. CKD is a progressive disease characterized by worsening renal function over time, resulting in frequent episodes of fluid overload that are treated with loop diuretics. It is estimated that there were 6.6 million Americans with CKD that are treated with loop diuretics and has made 60% of patients with CKD do not have a diagnosis of heart failure. This results in a potential incremental increase of $3.1 billion to the already existing $9.4 billion addressable market opportunity in heart failure, with fluid overload being one of the most common complications in CKD, which worsens with disease progression. We believe FUROSCIX has been beneficial to patients with CKD who have worsening symptoms due to fluid overload and are not responding to oral loop diuretics. The FDA has assigned a PDUFA date of March 6, 2025. If approved, we would make investments in our sales and commercial infrastructure to expand our reach to nephrologists. At this point, I will turn the call over to our Senior Vice President of Commercial, Steve Parsons, for a deeper dive into our launch metrics. Steve?
Steve Parsons: Thank you, John. As John indicated, we continue to be pleased with our progress since launch. From launch in February 2023 through June 30, 2024, we've had 2,713 unique prescribers, that's up 24% from the 2,183 prescribers we had from launch through March 31st. We are encouraged by the prescriber growth in this quarter, and we believe this reflects our strategy of establishing a broad prescriber base. Importantly, more than half of these prescribers have written multiple prescriptions. During the second quarter, approximately 9,300 doses were filled. That's up 15% sequentially from approximately 8,100 doses in the first quarter of 2024. During the second quarter, the average number of doses per prescription filled was 6.3 doses, which remains higher than our long-term expectations and up slightly from the 6.1 doses per prescription in the first quarter of 2024. With the label expansion to now include Class IV heart failure patients, we anticipate that the average number of doses may rise further as those patients may need additional doses to treat more severe symptoms. Our sales force has conducted 3,324 in-services from launch through June 30th, that's up from 2,938 in-services from launch through March 31st. In-services provide important training to offices on the prescribing process of FUROSCIX, and this ensures office readiness. As we open more new accounts, the execution of in-services remains fundamental to FUROSCIX's success and we regard the number of in-services conducted each quarter as an important leading indicator. Regarding our field sales force, we have said previously that we stand ready to add additional territories as demand warrants. As demand continues to grow, we plan to add 22 territories for a total of 90 territories by the end of the third quarter. This will support the expanded label and increase our reach and frequency with more targeted cardiology and some nephrology specialists that treat chronic kidney disease patients who also have co-morbid heart failure. At the beginning of the second quarter, we made the decision to change our patient services hub. This transition took several weeks to get up and running effectively. But by the end of the quarter, the hub was operating very well and has been an asset in increasing the number of fill doses for Q3 and into the future. From a marketing perspective, we continue to execute a broad multi-channel marketing campaign to drive brand awareness, adoption and commitment. Our marketing encompasses many different activities, including a significant patient awareness component. Other ongoing activities include engagement and development of key opinion leaders, conference presence, message evolution and medical education programs, among other critical tasks. We plan to have a very large presence at the Heart Failure Society of America Conference coming this September in Atlanta. Overall, we are pleased with our continued progress, and we are excited about the opportunity and the path ahead. This concludes my update. I'd now like to turn the call over to our Chief Financial Officer, Rachael Nokes for a review of our financials. Rachael?
Rachael Nokes: Thank you, Steve. As of June 30, 2024, we held $38.5 million in cash and cash investments compared to $76 million in cash, cash equivalents and investments as of December 31, 2023. This excludes the funds we raised through the financing that John discussed earlier. Now I will cover a few income statement items. We reported a net loss of $17.1 million for the second quarter of 2024 compared to a net loss of $14.2 million for the second quarter of 2023. Product revenues were $8.1 million for the second quarter of 2024 compared to $1.6 million for the second quarter of 2023. Cost of product revenues were $2.3 million for the second quarter of 2024 compared to $0.4 million for the second quarter of 2023. The increase in both product revenues and cost of product revenues for the quarter ended June 30, 2024, was due to increased demand for FUROSCIX further into the commercial launch and related manufacturing costs. Research and development expenses were $2.7 million for the second quarter of 2024 compared to $2.9 million for the comparable period in 2023. The decrease in research and development expenses for the quarter ended June 30, 2024, was primarily due to a decrease in pharmaceutical development costs, offset by clinical study costs and employee-related costs. Selling, general and administrative expenses were $17.5 million for the second quarter of 2024 compared to $12.1 million for the comparable period in 2023. The increase in selling, general and administrative expenses for the quarter ended June 30, 2024, was primarily due to an increase in employee-related costs, commercial costs, product samples and patient support. As of June 30, 2024, we had 36,139,802 total shares outstanding. That concludes the financial update. John?
John Tucker: Thanks, Rachael. This concludes our prepared remarks. At this point, we will open the call for questions.
Operator: [Operator Instructions] The first question we have is from Roanna Ruiz of Leerink Partners. Please go ahead.
Roanna Ruiz: Great. Afternoon, everyone. Quick couple ones from me. First, how much could the average number of doses per prescription for FUROSCIX actually increase with the new label for Class IV? And in addition to that, how are you thinking about clinicians, how fast they can prescribe FUROSCIX for Class IV patients? Are there any hurdles or logistics that they might need to get through before they can really get off to the races and prescribe?
John Tucker: Hi, Roanna, it’s John. I'm going to have Steve answer that, those two questions, okay.
Steve Parsons: Yeah. So it will be hard to predict what the impact on the average number of doses is across the whole population. But we do think the Class IV patients will need nine doses or even up to 12 doses based on the severity of their symptoms. And we do think they'll get prescriptions more often than the average heart failure patient as often as every month or every other month. So, that could impact the average doses per prescription over a quarter. And then…
John Tucker: How fast will we…
Steve Parsons: Yeah, we should start to see prescriptions for heart failure for Class IV starting next week. Our sales force will be trained. They'll be in the field. We've been in contact with the payers to make sure they update their systems to reflect PA to label, and the label now will not limit the use of Class IV patients. So we're expecting to see it immediately as we get around to those doctors who have a concentrated population of Class IV patients as the heart failure specialists and the advanced heart failure clinics.
Roanna Ruiz: Got it. Makes sense. And thinking ahead to potential approval for CKD patients with edema, how are you thinking about possibly stepping up the field force size? You kind of alluded to you consider growth there. What sort of metrics are you looking for to give you a signal that you should meaningfully expand the field force at that time?
John Tucker: Yeah. So we're going to move to 90 reps. We're in the process of it right now based on the increase in demand we've seen, especially into this quarter and with the label expansion into Class IV. So that will have us at 90 reps. With kidney, we're going to go to probably 130 reps, and that will be based on how many nephrologists we want to cover and the cardiologists. So our thinking now is this will be one sales force, 130 reps calling on cardiologists, heart patient specialists and nephrologists.
Roanna Ruiz: Got it. Super helpful. Thanks.
John Tucker: Great. Thank you.
Operator: The next question we have is from Stacy Ku of TD (TSX:TD) Cowen. Please go ahead.
Unidentified Analyst: Hi, this is [Vish] (ph) on for Stacy. Congratulations on a stellar quarter, and thanks for taking our questions. We have a couple. So first, I guess, following up on the previous question, some of your remarks. Can you talk about some of your ongoing preparations for the expansion this month? What sort of level of enthusiasm are you hearing from KOLs? Do you expect some of the early adopters have already identified some key recurring Class IV patients to start prescribing? So that's the first question. Ten the second, so you've made some great progress in establishing your launch infrastructure. So could you talk a bit about the fill rate, how it's been performing for Q2? And then how do you expect this going to improve with some of the improvements that you've made and what your expectations there are? Thank you.
John Tucker: Okay. Thank you, Vish. I'll answer the second question first and then turn it over to Steve for your question about the Class IV preparation. So, I think Steve mentioned in his prepared remarks that we did a change in our hub. Some of this was due to the Change Healthcare (NASDAQ:CHNG). But we did move our pulp to a hub that now has Change Healthcare and Relay. So if anything ever cyberattacked one, we can build through the other one. But hub transitions are tough. They had hurt us in April at our fill rate and that hurt us for the quarter could hurt our net sales. It probably cost us 5-ish percent on net sales shift to patients because, again, once we lose that script, we lose that patient because of the acute event nature of the product. So we saw a fill rate in the 40%, in the mid to high 40% for the quarter. It was really bad in April, when we made that hub move, it was tough. But with the hub change, what we've seen in Q3, and again, it's only five or six weeks here, but our fill rate has moved up dramatically. And that was the whole idea of making the change to the hub. So a little short-term pain was pretty painful. But we'd be able now to have a hub in place that is really seeing a dramatic increase in our fill rate. So again, in the mid to high 40s for Q2 starting out really low. And then for this quarter, right now, we're closer to 60% and even a little over for this month, 60% fill rate. So we think that will have a meaningful impact on our net sales this quarter. Steve, do you want to answer the first question?
Steve Parsons: I think the first question around our preparation to take advantage of this indication expansion with heart failure specialists. They are a subset of the general cardiology practice. We know them well. We know where the advanced heart failure clinics and office locations are. We know who tried to use FUROSCIX in Class IV early on and was frustrated by the PA, the prior author label, that didn't allow that. So I'm sure the reps have been anxious to go in there and give the good news, they'll be able to do that starting next week. We have to do a little training. We have to update some of our promotional materials and submit those. But, everyone has a hit list of folks that they're going to go to first and often, and then we'll do some e-mail blast and stuff to reach people in a mass way. So well prepared to do this. It's a good opportunity. It's an unmet need, and we're going to fill it.
Unidentified Analyst: Perfect. Thank you very much.
Operator: The next question we have is from Chase Knickerbocker of Craig-Hallum Capital Group. Please go ahead.
Chase Knickerbocker: Good afternoon, guys. Thanks for taking the questions and congrats on a lot of recent progress here. Maybe just first to start kind of probably not the hub change. Can you just speak to kind of what the hub is doing differently. Your new hub is doing differently to kind of drive that dramatic improvement? Obviously, some of it was just kind of maybe some of that change kind of hangover. But 60-plus percent is well above what we've seen at any point historically. So what are they doing differently that's really driving that improvement?
John Tucker: Hey, Chase, it's John. Thanks for the question. I'll let Steve answer how that probably is different than the old hub.
Steve Parsons: Yeah. So our launch hub was all manual. Everything was in fact in paper order and that reached a kind of a critical limit to us. We didn't think they could grow with us, and then we have the problems with that everything going through change, they had one processor and we needed two. The new hub is all online. It can be all online. The docs can submit their orders. They immediately see that it's been received. They immediately see that the prior offer has been submitted, that it's been approved, what the co-pay is, that it's been shipped to the patients and they love all of that, and that encourages them to prescribe more but also things are getting filled well and faster. If something was missing that the doctor needed to provide for the prior auth to go through, a clinical notice sometimes, they can see that. There's a chat function where our case managers at the hub are speaking to the office medical assistance and RNs. So everything is just more modern, more optimal and it's been effective. So we're very happy. We're very encouraged by that.
Chase Knickerbocker: It seems like it's still early days. I mean, just maybe speak to your optimism that, that continues to get better as physicians get more and more confident with the new hub. And then just the second, John or Steve, what should we think about for kind of the cadence of gross to net changes? You kind of said we still expect 30% to 35% longer term. I mean, if we look at that next year, do we get there just on some of the Medicare changes that are upcoming or does that assume that we contract with some of these larger PDP Medicare Advantage plans? Thanks.
John Tucker: So on the second question on the GTN. So we do expect it to go up in the second half of this year, driven a lot by the IDNs. So we're seeing more IDN business. And it's a discount versus [Wax] (ph). So that will have an impact on our GTN for the balance of this year. I think -- we think it's going to be in [stock quarters] (ph), Q3 10% to 15%, Q4 in the same range. So I think we can model it that way. Then I think next year, if things change, you have mandatory rebates with Medicare in the early stage and then in the catastrophic stage. So we'll be doing supplemental rebates with the Medicare payers as well. So we still think that long term, and I mean long term being next year, you could be in a 30% to 35% GTN. We think next year sets up well like spectacular for us because with the redesign, patient co-pays are capped, they're going to smooth it, so it will be about $166. So where we've lost scripts is when a patient has a high co-pay. So we really think next year with the capping at $166 that our fill rate continues to go up. Now, we mentioned it was for August anyways, it's in the 60s -- low 60s. No brand is going to get above 80%, 85%. We always will have a little gap because we have those scripts that are written and the doctors kind of put them on lay away. But we think once those get filled and they do get filled, we sell them all the time that we can get to 80%. Part of that is the co-pay when that resets next year and some of the progress we're making with the plan. Some of it is continued improvement in the hub. Again, it hurt us in April, but it's helping us now. So it is the right move because there's still things you learn. There's things that reps can do better in the field with the doctors. There's things that doctors can do better. But we think that's going to continue to move up, Chase.
Chase Knickerbocker: Got it. Yeah. And then John, maybe just last one, and I'll hop back in the queue. But, do you think that it's going to take some time to kind of for Medicare beneficiaries to fully kind of understand the changes that happen next year? Will they quickly grasp that their co-pays are essentially now capped monthly and the incentives are kind of different. That's another way, do you think you can get to that 80% to 85% range fairly quickly once that change happens? Or how do you think about that?
John Tucker: Yeah. I don't think it happens overnight with patients and physicians. So we have education, we're going to be doing to patients, I mean, [suiting] (ph) physicians about co-pays and how they've changed. But it's not going to change overnight. But we do think for the year, it's going to get better as it rolls out and more patients understand how it works and the physicians understand how it works. But, we’ll be educating…
Steve Parsons: I think it will go up pretty significantly once everyone gets into catastrophic, after 2000. Because there won't be any co-pay drag, friction.
Chase Knickerbocker: Great. Thanks, guys.
John Tucker: Thanks, Chase.
Operator: At this time, there are no further questions. I would like to turn the floor back over to John Tucker for any closing comments.
John Tucker: Thank you. Okay, that concludes our call this afternoon. We are very pleased with our second quarter results, and our leading indicators remain strong. Additionally, the financing that we announced is truly transformational for our company and provides the capital necessary to execute our FUROSCIX commercial plan, while also pursuing long-term growth initiatives. I look forward to a successful year in providing our next quarterly update in November. Thank you again, and have a good evening.
Operator: Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.
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