2023-11-12 02:57:45 ET
Summary
- Q3 earnings report shows positive performance, with Furoscix net sales exceeding consensus estimates.
- scPharmaceuticals' progress in securing payer coverage and IDN agreements is driving confidence in its prospects.
- The company's healthy financial position and potential market opportunity for Furoscix make it an undervalued investment.
- We maintain our buy rating moving into 2024.
Q3 earning: Maintaining buy rating
We affirm our Buy rating on scPharmaceuticals ( SCPH ) based on the company's positive Q3 2023 earnings report. Importantly, Furoscix net sales soared to approximately $3.8 million, outperforming the consensus estimates of $3.4 million; although the absolute number looks small, we see the Q3 ramp to be positive, based on various factors, including a) heightened patient and physician demand, b) an expansion of the salesforce, and c) a greater number of physician in-services using Furoscix during Q3. Furthermore, the management highlighted that the company secured a significant agreement with a large IDN (more than 8 million lives) in late October, providing unrestricted access to Furoscix at a fixed tier copay of ?$75 per prescription, which we believe can provide a positive boost to Furoscix ramp during 2024. Looking ahead, we anticipate that scPharma's efforts to secure favorable payer coverage and additional integrated delivery network [IDN] agreements will support Furoscix's continued growth into FY24.
We emphasize that the key catalyst driving our confidence in scPharma's prospects is its progress in navigating the regulatory landscape. The company has made significant strides in securing positive payer coverage and forging partnerships with IDNs. Moreover, scPharma filed a supplemental New Drug Application [sNDA] for Furoscix expansion into Class IV heart failure and has plans to submit another sNDA for chronic kidney disease by YE23/early 1Q24. These strategic moves, along with the development of a new auto-injector, are expected to accelerate the growth and adoption of Furoscix, further solidifying its position in the HF market.
Financials position
Financially, scPharma appears to be on solid ground. As of the end of Q3 2023, the company boasted approximately $90 million in cash reserves; considering that the company's OPEX is around $15M, we see ~1.5 years of cash runway. We believe this financial cushion provides a strong foundation for supporting the business and the ongoing Furoscix launch into FY2025. Despite the increased expenses associated with the expansion of the salesforce and commercialization efforts, scPharma's financial position remains stable, reassuring investors about the company's ability to weather potential challenges.
Valuation
We believe SCPH is undervalued. If we do a back-of-the-envelope calculation using Furosemide's 2020 total prescription numbers (TRx) , assuming that Furosemide captures 1% of the market, we get something around 0.26M prescriptions. That should lead to close to $780m in sales using USD3,000 per patient. Net net, we view Furoscix's market opportunity as highly compelling and believe the market is underestimating the drug's potential.
Risks
scPharma might encounter difficulties in launching Furoscix without a larger commercial or strategic partner. Payers could implement more aggressive restrictions on Furoscix usage than initially anticipated, potentially limiting its market penetration. Additionally, the uptake of Furoscix by physicians could be slower than expected, impacting sales growth. Lastly, unforeseen issues related to the on-body device's performance in clinical practice could hinder physician adoption. Nevertheless, despite these potential challenges, our overall assessment remains positive.
Conclusion
In conclusion, we reaffirm our Buy rating on scPharma based on the encouraging Q3 earnings report, significant progress in securing payer coverage and IDN agreements, robust demand for Furoscix, and the company's healthy financial position. While there are inherent risks in any investment, we believe that Furoscix's potential to reduce healthcare costs and improve patient outcomes in the HF market positions scPharma for continued success in the coming year. Investors should keep a close eye on the evolving dynamics of the HF market and scPharma's ability to navigate regulatory hurdles and secure additional partnerships. However, as it stands, scPharma presents a compelling opportunity for growth in the healthcare sector.
For further details see:
scPharmaceuticals Q3 Earnings: Cruising Toward Success