2023-03-28 08:52:13 ET
Summary
- SCPH launched Furoscix in February 2023 with 100% coverage by Medicare Part D and Medicaid and a fixed co-pay of approximately $100 for 60% of the target population.
- The company has made significant progress in physician detailing, reaching about 40% of its target prescribers, which is promising considering its small sales force.
- Despite the risks of a competitive market and limited market access, SCPH offers a highly lucrative market opportunity with a clear differentiation, cost savings, and a reasonable valuation for investment.
- The street consensus of $15-20M for 2023 sales may be conservative, given the clear health economic rationale and promising market access the company has demonstrated so far.
Q4 2022 earnings update
scPharmaceuticals ( SCPH ) provided key updates during the Q4 2022 earnings call on march 22 . The key takeaways for investors are: i) Furoscix was launched in the US market in February 2023, and ii) currently, the drug is covered by Medicare Part D and Medicaid with a fixed co-pay of approximately $100 in 60% of the target population. The company has had successful P&T meetings with all major plans except for one, and they are still negotiating to lower the co-pays. The company anticipates that the number of people paying the fixed co-pay will increase by over 75% by the end of the year.
In terms of marketing, the company is using traditional techniques such as digital ads, banner ads, and email blasts to announce the availability of FUROSCIX to key targeted journals associated with the Heart Failure Society of America and heart failure nurses. The management emphasized that they are pleased with the demand for FUROSCIX so far and are seeing prescriptions from Medicare, Medicaid, and commercial plans. The management also noted that they had made significant progress in physician detailing, visiting more than 300 clinics and practices, and reaching about 40% of their target prescribers, which is promising considering SCPH's small targeted sales force.
Net-net, we expect a robust ramp in sales during the next three quarters, significantly higher than the street consensus (~$15- 20M ), considering the clear health economic rationale and promising market access that the company has shared during Q4 22 earnings.
For a more detailed analysis of Furoscix and its value proposition, please read the initiation article we wrote a couple of months ago.
Key summary of SCPH's financials
- As of Dec 31, 2022, SCPH had $118.4M in cash, cash equivalents, restricted cash, and investments.
- SCPH completed a successful $50M equity offering in Nov and received the first $50M tranche under the debt financing agreement with Oaktree.
- SCPH prepaid all amounts due under the credit facility with some of the proceeds from the Oaktree transaction.
- SCPH reported a net loss of $9.2M for Q4 2022 compared to $7.3M for the same period in 2021, and a net loss of $36.8M for the full year 2022 compared to $28M for the full year 2021.
- R&D expenses were $2.3M for Q4 2022 compared to $4.5M for the same period in 2021, and $15.5M for the full year 2022 compared to $16M for the full year 2021.
- G&A expenses were $7.2M for Q4 2022 compared to $2.2M for the same period in 2021, and $20.6M for the full year 2022 compared to $9.8M for the full year 2021.
- SCPH expects operating costs to increase in 2023 due to supporting the launch of Furoscix, including investments in marketing and a field sales force.
Risks
SCPH's in-house marketing strategy for Furoscix may face challenges due to the dominance of generic players and big pharma in the cardiovascular disease market. This could result in an underwhelming sales ramp, particularly with a lean sales force of only 40 that the company plans to deploy. Additionally, there is a risk of limited market access and difficulty securing favorable pricing from payers. However, SCPH has secured an average wholesale price of $986.40 per box (which contains 4 units per course), which is better than expected. We are optimistic about the company's ability to convince payers of Furoscix's cost-saving potential, as supported by the robust rationale from the FREEDOM HF STUDY.
Conclusion
Despite our usual avoidance of first-time launchers, we are a big fan of SCPH and maintain a buy rating based on four compelling reasons. Firstly, the market opportunity for decompensated heart failure is highly lucrative, with projected peak sales of over $ 500 million dollars. Secondly, FUROSCIX has already received approval and offers clear differentiation with its SC dosage form, providing convenience, comparable efficacy, safety, and cost savings. Thirdly, the current valuation appears reasonable enough for us to take a chance to invest in the launch. Lastly, based on the Q4 2022 earning update, the company is on a good trajectory for launch success; we look forward to seeing the upcoming Q1 2023 earnings.
For further details see:
scPharmaceuticals: Furoscix Launch And Market Access; A Promising Outlook