IMPL - Impel Pharmaceuticals Inc. (IMPL) Q4 2022 Earnings Call Transcript

2023-03-24 15:20:02 ET

Impel Pharmaceuticals Inc. (IMPL)

Q4 2022 Earnings Conference Call

March 24, 2023 08:30 ET

Company Participants

Adrian Adams - Chairman & Chief Executive Officer

Leonard Paolillo - Chief Commercial Officer

Rajiv Amin - Controller & Interim Chief Financial Officer

Conference Call Participants

Stacy Ku - Cowen

Eddie Hickman - Guggenheim Partners

Laura Chico - Wedbush

Sean Kim - JonesTrading

Presentation

Operator

Good morning, ladies and gentlemen and welcome to Impel Pharmaceuticals Fourth Quarter and Full Year 2022 Earnings and Business Update Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded.

I would now like to turn the conference over to Impel's Chairman and Chief Executive Officer, Mr. Adrian Adams. Please go ahead, sir.

Adrian Adams

Thank you, operator and good morning, everyone. We are delighted that you could join us today for Impel Pharmaceuticals' earnings conference call to review our fourth quarter and full year 2022 commercial and financial results as well as to provide a general business update. Joining me from Impel this morning is Len Paolillo, our Chief Commercial Officer; and Rajiv Amin, our Controller and Interim Chief Financial Officer.

Before we begin, I would like to remind everyone that we have a slide presentation to accompany our conference call this morning which can be viewed on our website at www.impelpharma.com. If you are listening to this call on your telephone, you may access a synchronized slide deck on our website by choosing the link on our webcast page that says Click Here to listen. I would also like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. During the call this morning, I will provide an overview of the commercial performance of Trudhesa in 2022, our first full year of commercialization in addition to covering some early positive performance indicators in 2023. I will then briefly review the financial results for the fourth quarter and the full year 2022 before summarizing and highlighting Impel's core priorities for 2023.

With this said, let's now turn to Slide number 4 to begin our commercial performance review with Trudhesa. On the left-hand side of this slide, you will note the sustained growth in prescriptions throughout 2022 with almost 20,000 normalized prescriptions written in quarter 4 alone. This represents a 52% increase versus the second quarter or last quarter before we expanded our sales force from 60 to 90 sales professionals. This was also a 19% increase versus quarter 3.

Moving to the right-hand side of the slide. This consistent quarter-over-quarter growth delivered over 58,000 normalized prescriptions in 2022. Very pleasing since this was the first full year of commercialization with Trudhesa.

Turning now to our next slide, Slide number 5. As I've mentioned in previous calls, given our targeted and disciplined approach to commercialization, we believe the most appropriate way of measuring our success over time is by market share evolution within our targeted group of physicians. We are delighted, therefore, to see continued market share evolution already reaching 4.3% share among prescribers of Trudhesa in the fourth quarter of 2022, just 5 quarters into the launch.

Driving depth of prescribing amongst our high-value prescribers, a larger proportion of neurologist is a critical success factor for continued growth in 2023. According to a report from Spherix Research, neurologists predict a 12% peak share for Trudhesa, reinforcing the positive experience of both physicians and patients and of course, the value creation opportunity.

Please now refer to our next slide, Slide number 6, where we will take a closer look at the important leading indicators of Trudhesa growth and early progress in this, the first quarter of 2023. The increase in new patient starts illustrated on this slide reinforces the impact of our expanded sales force as growth accelerated in the third and fourth quarters with 23% and 24% growth, respectively, versus the previous quarter.

You will also note that our quarter 1 2023 new patient starts are on pace to surpass our quarter 4 number and continue the robust growth we have seen post expansion of our sales force. As expected, quarter 1 normalized total prescriptions are slightly down from quarter 4 as deductible and prior authorization resets slow down refills.

Additionally, we have taken steps to tighten our free goods program [ph], leading to predictive pressure on nonreimbursed refills. However, as you will see on the next slide, these changes are having the desired effect on the business.

With this in mind, please refer to our next slide, Slide number 7. You remember that we secured key pharmacy benefit managers and pair contracts quickly after launch in 2021, securing 80% of commercial lives under contract in the first quarter of launch. This enabled consistent improvement in the percent of prescriptions reimbursed over the course of 2022, peaking at 60% in quarter 4.

Now in 2023, with established payer policies, we are taking steps to tighten the business rules associated with our free-goods program and have seen the percent of prescriptions reimbursed jumped from 60% in quarter 4 to 71% and 73% in January and February, respectively. Importantly, our refill rates in every quarter since launch have remained consistent and solid in the low 60% range. The increasing reimbursement and high refill rates provide a solid foundation for meaningful revenue growth in 2023.

Turning now to our final commercial slide, Slide number 8. We continue to monitor the favorable market dynamics and source of business for Trudhesa. Symphony data continues to show that a very high percentage of patients around 60% on gepants, specifically Nurtec and Ubrelvy, drop off or switch away from these products at some point in therapy. Given the tolerability of these products, it is our contention that the primary reason for this continued churn or with gepants is that prescribers and indeed patients are not finding the rapid sustained and consistent efficacy they're looking for in acute migraine treatments.

This churn over in the market opens up a large pool of eligible patients and, more specifically, a significant ongoing opportunity for Trudhesa. The source of business for Trudhesa remains diverse with approximately half of new Trudhesa patients coming from a triptan and a half from a gepant. We also note that Trudhesa is most often added to existing therapy as an efficacious, reliable and non-oral option. We are pleased with all these market dynamics and the momentum we are seeing with Trudhesa in 2023 already.

I would now like to provide a brief overview of our financial results for the fourth quarter and full year 2022. Please refer to our next slide, Slide number 9. The net product revenue for the fourth quarter of 2022 was $5 million versus $0.6 million for the same period in 2021. For the year ended December 31, 2022 and 2021, Trudhesa reported net product revenues of $12.7 million and $0.7 million, respectively.

As mentioned on past calls, initial shipments of Trudhesa to specialty pharmacies began in September of 2021, ahead of the October '21 of commercial launch. Research and development expenses for the fourth quarter of 2022 were $0.7 million versus $4.5 million for the same period of 2021. For the years ended December 31, 2022 and 2021, research and development expenses were $11.5 million and $20.6 million, respectively. The decrease in research and development expenses during 2022 is primarily due to reduction in Trudhesa clinical expenses as the Phase III STOP 301 study was closed in 2021 and due to a return of the $2.9 million new drug application fee from the FDA received in quarter 4 2022 related to Trudhesa. These decreases were partially offset by an increase in spending for the clinical development of INP105.

Selling, general and administrative expenses for the fourth quarter of 2022 were $20.3 million which compares with $19.9 million the same period in 2021. For the years ended December 31, 2022 and 2021, SG&A expenses were $77.9 million and $50.9 million, respectively. The increase in SG&A expenses during 2022 is primarily due to the ramp-up in spending to support the commercialization activities with Trudhesa.

For the fourth quarter of 2022, Impel reported a net loss of $23 million or $0.97 per common share compared to a net loss of $24.7 million or $1.07 per common share for the same period in 2021. For the year ended December 31, 2022, Impel reported a net loss of $106.3 million or $4.53 per share compared to a net loss of $76.7 million or $5.25 per common share for the same period in 2021.

And finally, as of December 31, 2022, the company had cash and cash equivalents of $60.7 million. With that, I would like to close with our final slide, Slide number 10 which provides a summary of Trudhesa's performance in 2022, in addition to outlining our business priorities in 2023. We are pleased with the overall performance of Trudhesa in what was its first full year of commercialization. The overall revenue and prescription performance together with continued momentum across all lead indicators provide a solid foundation for growth in 2023.

With regard to Impel's core priorities in 2023, the focus is an accelerating prescription and share gain amongst our target physicians, evolving net price and result in positive impact on revenue growth, securing additional financing in a disciplined way and, finally, aggressive and opportunistic business development.

And finally, I would like to share our prescription guidance for Trudhesa for 2023. We anticipate delivering prescriptions in the range of 80,000 to 110,000, the midpoint of which would represent a 64% growth over 2022. Thank you and we will now open the line up to your valued questions.

Operator, can you please give the instructions?

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Stacy Ku with Cowen.

Stacy Ku

And congratulations on the progress. So we have a few questions. First, to get right down to business. There -- what are your expectations for 2023 consensus? Right now, we're seeing roughly $33 million, maybe $34 million. As we think about the prescription guidance that you're providing, can you talk about how you think the year might go in terms of net pricing? Just -- since you feel good about the consensus for 2023, it does assume a nice step-up from Q4. So just help us understand what the net pricing might look like this year as well as your thoughts on consensus? That's the first question.

And then a second question, I know you've talked about the sales force addition and what you're seeing so far. But can you just talk about some learnings? What's being adjusted? What approach is most successful? Any updated goals in terms of commission reached this year? So that's our second question. And then the last is, how should we think about now that you've had some experience with Trudhesa, how should we be thinking about the seasonality as we think about the year? Is there any seasonality? Is there seasonality of visits from patients, prescribing habits? Any additional color would be appreciated.

Adrian Adams

Thank you very much for those very clear and, obviously, appropriate questions. I think on your first question, as it relates to consensus, I think we're clearly aware of the consensus that is out there at this particular point in time. And I would say that the kind of consensus that we've seen we are comfortable with that consensus. And clearly, in giving a kind of a range of prescriptions, we recognize that, in any one year, there always can be uncertainties, et cetera. We try to build that into our overall revenue range. But again, to reiterate, we are comfortable with the consensus that we are seeing in the marketplace. And as it relates to net price evolution, Len, maybe you can comment on that. Len? Len? Can you hear? Are you on mute?

Leonard Paolillo

I am not on mute. I should be able to be heard.

Adrian Adams

Okay. We can hear you now.

Leonard Paolillo

Okay. As you saw through the first quarter, we've seen a nice increase in the percent of prescriptions that have been approved. And that is almost a 1:1 [ph] right to the bottom line of our net price. The rest of our gross to net levers are very stable. The co-pay mitigation line item will steadily improve throughout the year. So we feel pretty good about the progress that we'll make throughout 2023 to get to around that $500 net price per prescription.

Adrian Adams

Thank you, Len. And then on your third question, I'll come back to your second one in a moment. On your third question on seasonality, I think, as you will -- as you obviously know, I think if one looks and tracks back over the years within the migraine market, it is not necessarily a seasonal marketplace. That said, as you'll recall, we did see some softening in the kind of May, June, July period last year which was not explainable but obviously impacted all products in the market and all products within the marketplace and obviously impacted Trudhesa to a much lesser extent but certainly, we saw that. We do not feel that, that was a seasonal trend. It almost seemed to be a one-off. But clearly, going back to the range of prescriptions that we have given, whilst we are not expecting any seasonality, we tried to put a range in which gives that kind of broad uncertainty recognizing that, again, that we are comfortable with the kind of guidance that we are currently seeing out there in the -- amongst analysts.

So with that, we'll address point number 2 and I'll ask Len to comment in a moment. And just to reiterate, I think clearly, when we launched with 60 sales professionals, I think we accessed around about 8,000 physicians which gives access to around about 35% of the overall marketplace, very focused, very disciplined targeted approach with a strong consensus towards neurologists and high-prescribing primary care physicians. The additional 30 allowed us with much more efficient and smaller territories to be able to drive higher levels of productivity amongst those target physicians as well as to increase that target physician base to around about 11,000 which gives access to around about 40% of the market.

And we were delighted, obviously but reps which we put in place at the end of July of last year. As we got into the fourth quarter of the year, we started to see some significant productivity gains in terms of efficiency, depth of prescribing. And very importantly, the overall growth in relation to prescribers and new prescriptions. And those lead indicators and the productivity benefit of that we're continuing to see as we moved into the first quarter of this year. So all of our assumptions that went into that increase in size of the sales force, we're actually seeing manifesting in the marketplace. And Len, I'm sure you want to add some additional color as well.

Leonard Paolillo

Yes. So I think to add on to that, you've got the frequency that we've been able to increase to our key targets. As Adrian mentioned, we saw growth not only in existing territories but in new territories. And that's because our reps have smaller geographies and are able to visit these accounts significantly more. And that helps keep the brand top of mind. I mean general awareness is still one of the battles that we fight with the 90-person sales force. And so frequency is a major part of ensuring that clinicians keep Trudhesa top of mind as they're treating their patients as well as providing a very specific place in therapy. I think you could see our source of business is diverse. However, you can see that patients are getting a lot of value from Trudhesa, both because of the efficacy but also because it could be taken late into an attack. One of the very unique and important virtues of DHE is that it can reverse central sensitization even when taking late into an attack. So it's a very valuable tool to healthcare professionals and to patients and really being specific in that messaging, having that pull through in consistent peer-to-peer education meetings which we continue to do at a very good clip in the first quarter, will be important to continue to see the prescription evolution.

Adrian Adams

Thank you, Len and clearly, Stacy, what else bought out here? I mean, you did touch a little bit on incentive aspects, et cetera and I think, obviously, having the right disciplined incentive schemes to drive the appropriate compliance activity with the sales force is very, very important to all of the incentive schemes that we've got in place for our quality sales professionals are all with those -- driving those lead indicators of new prescribers and new prescriptions very much in the right direction. And we are very pleased with what's going on at the moment, Stacy.

Operator

Our next question comes from the line of Eddie Hickman with Guggenheim Partners.

Eddie Hickman

Congrats on all the progress. Adrian, can you provide like a bit more color on the assumptions that are going into the guidance that you gave, specifically like in terms of sales force targets and what you would need to see to get to the higher end of that range? And what might need to happen over the year if you were to come in on the lower end of that range? And do you anticipate any inflection at all over the year or a steady cadence? And then I have a follow-up.

Adrian Adams

Yes. Thanks, Eddie. Nice to see you on the call again, I like. And clearly, as it relates to the overall kind of guidance range that we put in place, I think what we've seen over the course of the fourth quarter of last year and moving into this year, to the last point we just made, I think, is we've seen that enhanced productivity from the newer sales professionals. So clearly, I think we do see that kind of productivity build that -- significant part of which we still yet to see from the additional 30 reps. I think it will start to manifest in terms of impact on that prescription guidance range. So -- and clearly, I think as you well know from last year and generally within these marketplaces, there's an awful lot that can happen in any course of one particular year. So -- and we're trying to reflect so much uncertainty but just managing to make sure that in the event that we see any aspects that are outside of our control happening that obviously gives us that breathing room within the overall guidance range. But we feel good about that range and, clearly, our ability to be able to meet that.

And clearly, I think if one looks at the trends over the course of 2022, on those quarterly trends in particular, where we saw that consistent steady growth as we went through the course of 2022, the additional 30 sales professionals which came in and started to have an impact in the fourth quarter, we feel that, based on the data that we're already seeing in quarter 1 and as we go through the course of the year, should lead to that kind of enhanced productivity not just of our legacy target physicians but the additional target physicians we're seeing at the moment. And it's that particular dynamic, I think, that will have an impact in relation to the -- where we end and how we evolve during that range of guidance that we see. And I'll come back to one of the other points. But Len, would you add -- like to add anything else at this point?

Leonard Paolillo

I think as we look through '23, the consistency in the refill rate which has been rock solid throughout '22 is an important metric to watch. Our PODs per prescription on reimbursed fills is also an important lever in that forecast and that has been very, very consistent. So those 2 levers, we feel very confident in. If you look at our new patient start growth which is that leading indicator, we are growing new patient starts in Q1 over Q4 which is a good sign because Q1 is typically a bit softer. And if the refill rates and PODs per prescription stay consistent, you'll continue to see building momentum. But the things to look for are certainly increases in the number of prescribers. We've shared with you previously that our prescribers are rather sticky. Meaning once they prescribe one, very rarely do they lapse, meaning go more than 8 weeks without prescribing another. And so that's the depth that we have to drive as well. So it's the additional new prescribers. And then when we get them, we feel very confident that we'll be able to drive depth among them.

Adrian Adams

Yes. And Eddie, to your point on the what-if scenarios, what happens if things weren't quite as well as we anticipated, first of all, we don't anticipate that. But clearly, I think what we've demonstrated over the course of time is that a key part of our targeted focus and investments in this marketplace is discipline. Commercial and financial discipline, all with a focus on execution. So in the event, what we consider to be the unlikely event that we start to see a lack of kind of feedback from our productivity. Then clearly, we will take the necessary actions at that particular point in time, I think. But we're not anticipating that. I think if one looks at the growth within the overall marketplace which has been consistently double digit for many, many years and is projected to continue in that way. As we look at the dynamics in this market, where all of the growth is being driven by the non-triptan segment of the market and that's the market in which we are operating, that, together with the kind of continued churn over in the -- with the gepants which leads to that strong source of business that we are starting to see, all give us kind of optimism in relation to the execution moving forward.

But again, one of the things that's always been a core philosophy, from my perspective, a business philosophy, is for every dollar that we spend, we want to be able to monitor and see the impact of that spend. And clearly, I think the way in which we had a handle on all the different parameters of the P&L means that we can react accordingly, both on the upside and on the downside in the event that we need to. So -- and that's part of obviously running a business in a disciplined way. But the excellent questions. Thank you very much for that, Eddie.

Eddie Hickman

Great. And maybe one quick follow-up, Len. If you -- like I'm looking at the sort of unit of like around 6 per month. Do you expect that to be flat over this year? Or is that -- should that number change? Like our patients getting around 6 units per prescription? Or is that number going to shift over the year as well?

Leonard Paolillo

No, you should expect that to stay consistent at 6 to 6.2.

Operator

Our next question comes from the line of Laura Chico with Wedbush.

Laura Chico

I guess following up on the last question. Adrian, I'm wondering if you could comment a little bit further on cash runway? And what are kind of the current strategies to extend that? And then you also mentioned the Spherix data on peak share estimates. I'm wondering if you could comment as to kind of your expectations? And what is the level of revenue needed for breakeven?

Adrian Adams

On the cash runway, I think as we've articulated and what's clear is that we finished the year with $60.7 million cash equivalents. So that, as we mentioned in our press release this morning, gets us into the third quarter of this year. So clearly, I think we are looking and have ongoing discussions in relation to financing strategies that will allow us to enhance that cash runway moving forward. So we've got activities going on in the background in relation to that. And clearly, I think that will be important as we build and continue to invest into this opportunity moving forward, I think, as it relates to breakeven, I think, Rajiv, maybe you can just make some comments on that.

Rajiv Amin

Sure. Sure, Adrian. So in terms of getting to a breakeven point, I think we need to be at a range of around $100 million to $120 million in revenue -- net revenue.

Adrian Adams

And then as it relates to your comments on Spherix, I think where they have a projected 12% [ph]. And again, just stepping back to some comments we've made, Laura and I know you're very familiar with these. And in relation to the key measure that we see of our success is the market share evolution amongst the acute branded market with prescribers and it's that 4.3% number that we've already achieved that we're very pleased with. And whilst we've not obviously given guidance in terms of peak sales potential, what I've always mentioned is that in this marketplace, if one looks at all those patients in that post triptan segments of the market, close to 2 million patients, so -- and that's the market we're operating in competitive with the gepants. If based on the kind of price evolution that we see, if we just got a 5% share of that, just a 5% share of that overall market that would lead to kind of peak sales revenue potential in excess of 400 [ph].

So the Spherix number of 12%, whilst you could always dilute those numbers and assume some optimism in that, it points to the very real potential there is with this product is if we continue to execute, invest into the opportunity, the one thing that does not change with this market, first is the continued churn over that will create ongoing opportunities for Trudhesa. Secondly, the consistent tolerability and efficacy profile we see with Trudhesa and it's not that's going to drive the overall market share evolution towards that kind of peak projected revenue potential. So it's not that gives us that very nice optimism for the future.

And as with all things, as you know, I think the most important thing is execution and having incentive schemes and strategies and practice to make sure that you invest into that opportunity appropriately and drive that market share. So again, I think we're very pleased with the evolution we've seen to date and we'll look forward to further increasing and enhancing that this year and into the future towards that peak sales potential.

Operator

Next question comes from the line of Sean Kim with JonesTrading.

Sean Kim

I got just one quick question on the gross to net discount. So I noticed that there has been some improvement in the fourth quarter in terms of gross to net. I am just wondering what the trend might be in the first quarter of this year and the rest of the year.

Adrian Adams

Okay. Len, do you want to touch on that?

Leonard Paolillo

Sure. Yes, there was certainly improvement in the fourth quarter. That's a result of both the improvement as a percent of our prescriptions that were approved by payers versus Quick Start as well as much less pressure on the co-pay card co-pay mitigation for approved patients. As you move through a year, patients often hit their out-of-pocket maximum and the burden on the co-pay card begins to go down, providing some benefits on gross to net. That does reset in Q1. So while we have seen our percent approved jumped, we did see a bit more pressure on the co-pay card. That being said, our percent approved is going to continue to escalate throughout 2023. And as in previous years and across most brands, the pressure on the co-pay card is going to begin to diminish. So we should see very good net price evolution throughout the course of '23. Our managed care contracts and government business which are the other levers or distribution schemes which again is a lever of our gross to net, are all very stable.

Operator

I would now like to hand the conference back over to Mr. Adrian Adams for closing remarks.

Adrian Adams

Thank you. Thank you, Norma and thank you all for joining us this morning. We are looking forward to updating you on our continued progress during what will be our first quarter call in May as we strive to continue to create value for patients, healthcare professionals and indeed for the shareholders we serve. Thank you very much for your time this morning and we'll look forward to touching base in the near future. Thank you.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

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Impel Pharmaceuticals Inc. (IMPL) Q4 2022 Earnings Call Transcript