© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, ladies and gentlemen and thank you for standing by. Welcome to Theratechnologies Fourth Quarter Fiscal Year 2022 Earnings Call. We would like to remind everyone that all figures on this call are quoted in U.S. dollars. At this time, all participants are in a listen only mode. Following the presentation, we will conduct a question-and-answer session with analysts. Instructions will be provided at that [Technical Difficulty]
Hello?
Elif, it looks like the operator is no longer there.
The operator is gone.
Pardon the interruption. I apologize for that.
Okay. Oh, there you are.
We'll begin again. At this time all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session with analysts. Instructions will be provided at that time for you to queue up for questions. Following the analyst Q&A session, investors wish to submit a question, may do so by clicking on the Ask a Question Link on the webcast platform. [Operator Instructions] I would like to remind everyone that this conference call is being recorded today, February 28, 2023, at 08:30AM Eastern Time.
I will now turn the call over to Ms. Elif McDonald, Head of Investor Relations. Ms. McDonald, please go ahead.
Thank you, M.J. And good morning, everyone. On the call today will be our President and Chief Executive Officer, Mr. Paul Levesque; and Chief Financial Officer, Mr. Philippe Dubuc. During our Q&A session, we will be joined by Dr. Christian Marsolais, Chief Medical Officer; and Mr. John Leasure, our Global Commercial Officer.
Before we begin, I'd like to remind everyone that Theratechnologies' remarks today contains forward-looking statements containing its
current and future plan, expectations and intentions with respect to future events. Forward-looking statements are based on assumptions and there are risks that results obtained by the company may differ materially from those assumptions. As such, the company cannot guarantee that any forward-looking statements will materialize and you are cautioned not to place undue reliance on them. We refer current and potential investors to the forward-looking information and risk factors section of our management's discussion and analysis issued this morning and available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Forward-looking statements represent Theratechnologies' expectations as of February 27, 2023.
With that, it is my pleasure now to turn the conference over to Theratechnologies' President and CEO, Paul Levesque. Paul, go ahead.
Thanks, Elif. And good morning, everyone. Today, we will be providing a review of our fourth quarter and full year 2022 financial results, business developments and discuss what lies ahead for Theratechnologies in 20 23. We have a lot to go over, so let's get started.
First, I want to review some of our accomplishments and the milestones we have reached in the fourth quarter, bringing a strong finish to the year. 2022 wasn't just a successful year for Theratechnologies, but also won a big transformation. While Philippe will be providing a deep dive into the financials later on, I can tell you that our fourth quarter consolidated revenues ended at $21.4 million reflecting a 14.2% growth. Moreover, annual revenues reached $80.1 million or approximately 15% growth in line with our 2022 revenue guidance.
We are very pleased with these numbers because they revealed to us that the decisions we made during the year, such as bringing the sales teams in-house under strong commercial leadership and withdrawing from Europe in order to focus on the United States have made a difference. In fact, these are the very reasons or results that give us the confidence to expect revenues for full year 2023 to come in between $90 million and $95 million. With such revenues and tight expense management, we are confident we will achieve positive adjusted EBITDA by year end.
Over the fourth quarter of 2022, our capital markets outreach was stronger than ever. And I was delighted to be [indiscernible] meeting investors face to face for the first time in a long time. We appreciated the support of our capital market partners, and we're pleased to welcome two new teams to our coverage. We look forward to working closely with Louise Chen of Cantor Fitzgerald and Justin Walsh of Jones Trading, and welcome them. We have also been very pleased with our relationship with Marathon Asset Management. We were very fortunate to secure a strong and strategic partner in a market that was very difficult for our sector in 2022. We were able to strengthen our financial position subsequent to Marathon Credit facility in July by utilizing the first tranche towards purchasing $30 million of convertible notes due in June 2023. We look forward to a long and progressive relationship with them in the years to come.
Let's take a moment now to touch on the greater macro environment. For biotechs, the last 18 months have been one of the most difficult periods the industry has ever seen. On average, the sector lost 40% of market value and we were not spared. I want to acknowledge Theratechnologies stock price, which currently trades around $1. I would be remiss if I did not admit, I was surprised at the market's reaction to the enrollment pause for the TH1902 Phase I clinical trials back in December. We know that in the days and weeks that followed our announcement to voluntary pause enrollment, only about 3.5 million shares trade at half and yet those shares cut our market cap by half.
While we have no control over market activity, we were disappointed with the impact it had on our margin cap. We are encouraged, however, that our largest shareholder is at nearly 93 million shares, held strong. In fact, based on recent filings, our top shoulders have added to their positions. I want to thank all of our shareholders, big and small, for their continued support in these uncertain times.
On the flip side, the takeaway from the investor reaction reveals to us that there is significant value assigned to the oncology program. Let me be clear. We believe today as we did on December 1 that the decision to pause enrollment was the right one for our clinical trial, our patients, our company and our shoulders. It was not an easy decision, but the right plan. This decision was also supported by the FDA in our subsequent conversation with them. We strongly believe that by triggering some changes to the protocol, we will increase our probability of success. Our plan for TH1902 is to present an amended protocol to the FDA and resume dosing patients thereafter. Once the Phase I clinical trial has resumed, the company will also evaluate potential partnerships for TH1902.
As outlined in my letter to shareholders in January and on many discussion with investors, we plan to fully lean into the growing commercial business. We have built a strong team under the leadership of industry veteran, John Leasure, and our team has demonstrated their ability to drive business growth and our infrastructure allows us to take on more to accelerate the growth trajectory.
Let me take a minute now to go over the success we've had with our two brands. They have both clearly returned solid double digit sales growth in 2022, a 17.3% increase for EGRIFTA and 10.4% increase for Trogarzo. Our lead product EGRIFTA SV has had the best annual volume growth rate since 2017. In addition, when looking at the pool of patients that started therapy in 2019, 40% of Trogarzo and 33% of EGRIFTA SV patients are still on therapy after 24 months. Increasing long term compliance was a key success factor for us in 2022 and it looks like we have moved the dial in the right direction.
When it comes to Trogarzo, early analysis seems to demonstrate that the method of administration available as an IV push now has been well received and has open new possibilities for the brand. Tactically, we are leveraging our new sales and medical team to expand awareness and utilization of EGRIFTA and Trogarzo with specialty prescribers and people living with HIV across the continuum of care.
We have identified three strategic pillars or imperatives for growing the business. First, we must deliver on science, which means we need to establish scientific rationale for treating adults with HIV and lipodystrophy. Similarly, doctors need to address uncontrolled viral load to make patients undetectable. We are leveraging all scientific publications through medical science liaison to educate the HIV providers with the latest evidence. The second pillar is simply to pull the patient in. Helping them understand what excess visual fat and uncontrolled viral loads are, what it means for them, and what they can do about it. Finally, we have hired nurse educators on the ground for helping patients with their administration and improving their experience for superior compliance.
Although we had a solid plan for building a profitable business with our current assets, we are also looking for opportunities to accelerate our journey. We believe there are accretive opportunities from products that may no longer fit the portfolio of larger firms, but would be a great complement to our products such as those that are in HIV or HIV adjacencies, allowing us to leverage our capabilities. Such opportunities could translate to in licensing deals, co-promotions or even a small acquisition. And in the spirit of leaving no stone unturned, we have entered into an agreement with the World Orphan Drug Alliance, WODA, for the distribution of EGRIFTA SV into 41 countries through name patient programs. This experiment may bring EGRIFTA SV to a number of new patience outside of the United States and maybe to additional revenues.
While we are working towards achieving profitability, defined as positive adjusted EBITDA, I can tell you that we have turned to tightening our spending. Moving forward, we will be driving leverage P&L. This means a pivot to more stringent monitoring of expenses during the course of normal business. And we have many one-off R&D expenses that will phase out as a function of time, such as the human factor study, and the development costs associated to bacteriostatic water for injection.
Talking about the Human Factor study, we are on track to complete the study for EGRIFTA SV in the first half of 2023. We're also confident in successfully addressing the shortage of bacteriostatic water for injection. We have now identified a third party supplier for manufacturing the water and have already manufactured the validation batches. We are still on track to complete the work associated with the supplemental biologic license application filing for the F8 formulation of Tesamorelin with the FDA in the last quarter of 2023.
With regards to Trogarzo life cycle management, as previously said, the IV push method of administration for which we receive FDA approval in October 2022 seems to be very well received by HIV providers and their patients alike. We also working closely with our partner, TaiMed Biologics and completing the data analysis from this study related to the development of an intra-muscular method of administration for Trogarzo and subsequent filing of a new supplemental BLA with the FDA. These projects will serve to ensure lifecycle management for Trogarzo for years to come.
Coming back to our pipeline development of TH1902, we are currently evaluating the changes needed to increase the probability of success of the clinical trial. The scientific advisory committee will be providing expert advice and will be critical to examining different dosing strategies, tumors and patient selections. These changes will be made in alignment with the FDA project optimus guidelines, ultimately improving the chance of success of TH1902.
Let me speak for a moment about the Scientific Advisory Committee as their collective experience and expertise in the field will be paramount to the future of TH1902. In addition to the study's principal investigator, the SAC includes several medical oncologists from across the U.S. who are leading experts in the end to end life cycle of oncology drug development. We will also continue to seek advice and input from Mace Rothenberg, who is currently a scientific adviser to Theratechnologies. Most recently, the company has been preparing response to questions received by the FDA. This work is well underway and the findings will be considered by the SAC as part of their meeting, which is scheduled for the latter half of March when the data analysis are expected to be ready.
Once expert advice is considered, we plan to promptly amend the protocol and resubmit to the FDA. I also want to add in here that the FDA has agreed to responding to us within 30 days of receipt of our submission. Our commitment to resuming our Phase I clinical trial for TH-1902 remains strong and we are confident by having an improved protocol will increase our probability of success.
Let's turn our heads to a reenergized part of our pipeline. The further development of Tesamorelin allows Theratechnologies to maintain its positioning as one of the few options for drug developers to immediately partner with the company in order to launch Phase IIb/III NASH clinical trial. What is more amazing is the fact that repeatedly quarter after quarter, NASH was losing momentum as a target within the life science investment community. But that suddenly changed in the past few months as several companies reported extremely positive NASH data from their clinical trials, putting the disease back into spotlight and highlighting partnering opportunities for our NASH program. Moreover, when we compare our NASH candidate to that of our competitor, the liver fat reduction percentages are favorably comparable. Taking this into consideration, we remain streaming optimistic about partnership prospects in 2023.
To wrap up my portion this morning, I want to reiterate that we are on track to achieving positive adjusted EBITDA by the end of this fiscal year. I want to thank our hardworking teams for their commitment to our goals that are ultimately to the benefit of improving the lives of the patients we serve. Also, we have a path forward for returning TH1902 to the clinic. Finally, I want to thank our investors and industry partners who have been on our side over the past few months. We appreciate your support and your feedback.
With that, I will now pass the microphone over to Philippe, our CFO for his input.
Thanks, Paul, and good morning, everyone. Consolidated revenues for the fourth quarter of our fiscal year 2022 were $21.4 million up 14% versus Q4 of 2021. We are pleased to report that revenues from EGRIFTA SV sales were $14.5 million in the quarter, up 13.4% from the same period last year. Increased sales of EGRIFTA SV were the result of higher unit sales and a higher net selling price.
Trogarzo revenues in Q4 2022 came in just shy of $7 million up from $6 million in the same period of 2021, representing an increase of 16%. Recall that during the fourth quarter of fiscal 2021, Trogarzo net sales were impacted by a provision related to greater than anticipated clawbacks on units sold in France prior to finalization of reimbursement terms pursuant to temporary use authorizations. Trogarzo sales in the fourth quarter of 2022 were up marginally in the U.S. and were affected by lower inventory levels at our distributor at the close of the quarter and slightly higher rebates to government payers.
As our first quarter is ending today, I can confirm that we are happy with unit sales for the quarter and that we are on track to meet our recently announced guidance of $90 million to $95 million, representing growth of approximately 13% to 19% compared to 2022 revenues. Cost of goods sold in Q4 2022 was $5.9 million compared to $5.2 million the same quarter last year. The increase is mostly due to certain write downs during the quarter of inventory related to the manufacturing relaunched batches of the F8 formulation of Tesamorelin.
R&D expenses amounted to $9.5 million in Q4 2022 compared to $8.7 million in the same quarter of last year. This increase is largely due to higher spending in our oncology program, including the Phase I and the Human Factor study for EGRIFTA SV and also spending related to the development of the intra-muscular formulation of Trogarzo. In Q4 2022, selling expenses amounted to $7.8 million compared to $8.2 million for the same period last year. The decrease in selling expenses is largely associated to the decision to exit the European market in 2022 and is somewhat offset by a higher spending to support our commercialization efforts in the U.S.
G&A expenses amounted to $4 million in Q4 2022, up from $3.5 million in Q4 2021. The increase is due to an overall increase in activity to reflect the growth of our business in North America related to the onboarding of our field force during 2022, which is offset by lower spending in Europe. In Q4 2022, net finance costs were $2.1 million compared to $1.8 million in Q4 of 2021. Higher net finance cost is mostly due to the increased interest rate paid on our long term debt compared to the interest paid on the convertible debentures in 2021.
Net loss for the quarter came in at $7.9 million compared to $9.9 million in the same quarter last year, mostly as a result of higher sales and gross margins in 2022 compared to 2021. We ended the fiscal year with cash funds and money market funds of $33.1 million. As mentioned before, we anticipate ending the year on a solid path to becoming adjusted EBITDA positive. We believe our continued and anticipated top line growth combined to lower spending, mostly in research and development will help achieve this objective.
In particular, we should complete many important projects in the first half of this year including the development of the IM mode of administration of Trogarzo, both Human Factor studies for EGRIFTA SV and for the F8 formulation, as well as the development of our own source of bacteriostatic water for injection necessary to reconstitute the F8 formulation. The completion of these projects along with the stated goal of partnering our clinical development programs should allow us to benefit from substantial leverage from our operations in the latter part of 2023 and through 2024 and 2025.
We also announced this morning that Marathon had removed the filing of the HFS with the FDA as a condition to access the second tranche of the term loan for $20 million through an amendment to the credit agreement. As a reminder, the proceeds of this second tranche are earmarked for the redemption of the remaining outstanding convertible notes due in June of this year.
So Paul will be back for a few final comments after the question period. We're now ready to take questions from the line, operator.
Thank you. We will now take questions from analysts. [Operator Instructions] Today's first question comes from Louise Chen with Cantor. Please go ahead.
Hi, good morning everyone. This is Carvey on for Louise Chen here. Thank you for taking my questions. First of all, we're wondering if you could provide additional color in terms of your potential partners for Phase III NASH opportunity? Has there been any recent events or changes in NASH base that you're seeing an impact of discussions with potential partners? Second, you mentioned you are potentially tightening your spending moving forward. So how are you thinking about OpEx in relative terms to fourth quarter numbers? Thank you so much.
Thank you very much for your question. Let me just address your first question about partnership for NASH. We have been active for a long time. We've said that in previous calls. I just want people to understand that there's something significant that has changed and it's the context. So the context we believe is far more favorable now than it was a year or year and a half ago. Once a lot of people started challenging the fact that maybe the mission was impossible when it came to NASH and with the data that was produced last fall by two active companies in NASH, I think has changed the perspective over the mission being possible.
And what we are saying is, in that context, there were very, very few companies that are at the point where we are with a compound that has established its safety profile that has a protocol that is ready to go with Phase IIb/3. And also that has a dose that has been determined. So we have a lot going for ourselves. We have secured IP as well for this new journey that we may start. So I'm more enthusiastic than ever that we can find a partner in 2023. And I can only tell you that we will devote a fair amount of our efforts to make that happen. We've got a lot of contacts and we'll reach out. And I think that there are some companies that were standing on the sidelines in the last 18 months that will come forward and [indiscernible] that's what I'm expecting.
When it comes down to tightening expenses, I'll turn to Philippe for this, so that he provides additional color. But I said in my speech that we intend to drive leverage P&L moving forward. So what we mean by that is, definitely having the top line growing faster than the expense line. So we've already factored that in, in 2023 we will carry that philosophy forward in 2024 and 2025 and we have many one-off expenses that will go away as a function of time. Philippe, you want to provide additional color?
Sure, Carvey. It's mostly on the R&D that will be more reasonable in 2023 compared to 2022. And again, if you look at Q4, it might not be the best as comparator. But if you look at 2021, that's kind of where we think we'll end up in this year. And a lot of that spending will be in Q1 and Q2. So the spending will decrease in Q3 and Q4, again with the projects that are ongoing that should complete in Q2.
Selling expenses again, close to 2021 versus -- closer to 2021 than closer to 2022. And SG&A, if you look at Q4, it's a pretty good proxy for what we'll have in 2023.
Thank you for your question.
Thank you.
The next question comes from Andre Uddin with Research Capital. Please go ahead.
Good morning, Paul, Philippe, Johnny and Christian. It sounds like your NASH partnership discussions have picked up. Can you please elaborate on what ideally you're looking for in terms of a partner?
Well, I mean, there's -- at this stage of the game, I think that the global partner is what we have in mind. There's, obviously, many companies that have activities in Europe only, so we could have that sort of geography split as well. But what is at play now is global partnership and that is what we would like to embark. As you may know, when it comes to get the product approved in Europe and the guidelines from the agency over there is slightly different from North America, but the protocol that we currently have developed under Christian's leadership has taking that into account, it will be [indiscernible] as part of the trial, both the NES score and the impact on fibrosis. So the protocol should be equipped to actually satisfy both agencies in due time.
Philippe, do you want to carry on in terms of what would be an ideal type of partnership?
Sure. And in keeping with our objective to become EBITDA positive, we'd be willing to do some R&D and do some of the development with the partner, but the cost would have to be borne by the partners. So it would be a neutral effect on our bottom line. So that's really what we're looking for is for someone to share in the development and take some of the cost away from us.
That's great. Thank you.
Andrea, I would like just to add that, as you know, the protocol as it stands now, we have embedded an interim analysis after the first 350 patients or so are treated and pick up data on fibrosis and the NES score. So to some extent, we believe that the full cost of the trial, if the signals are not good, will never have to be bared either by ourselves or the partner as have indicated.
Okay, that's great. And so just -- maybe just another question here, just could you please explain what would be required for the EGRIFTA SV HFS?
Christian, do you want to –
Andre, the HFS, there are guidelines and what we have to do, we have to change the instruction for use to ensure and test it with some patient, people that have used the EGRIFTA in the past and people that have not used EGRIFTA in the past. We did a formative study indicating that the work that we've done so far is very good. Most of the patient passed the test. We submitted the protocol to the FDA. We're waiting for their feedback and we're ready to do the study. And at the moment, our time lines are good for submission of the dossier by -- for mid-year this year.
That's great. And just one last one.
Go ahead, Andre.
Sure. I was just going to ask on maybe could you also discuss the next steps that would be required in terms of development of the intra-muscular formulation of Trogarzo and how that's proceeding?
Sure. Christian?
Yes, at this stage, we completed the trial and it's really a question of completing the blood analysis and the statistical analysis and completing the dossier for submission to the FDA, that should be done this year and seeking for approval from the FDA.
That's great. Thank you.
Thank you, Andre.
The next question comes from Endri Leno with National Bank. Please go ahead.
Good morning. Thanks for taking my question. The first one I wanted to ask, I mean, Paul, you mentioned that you're looking at potentially new products to add adjacent to HIV or HIV related ones. Can you expand a little bit on that? What would be kind of an ideal product for you in terms of size, in terms of revenues, cost to acquire, a mature or recently product? Like just kind of like how do you think about it and whether it would be an ideal product for you to consider?
Thank you, Andre. So first of all, let me call this out and I'll turn John who's very active in that space to try to identify a good complement for the portfolio we have. But I just want to call this out is that, we want to actually, we are open to new business, but it's going to have to be accretive. So we want to have something that is typically already approved, that is on the market, typically reimbursed, but deprioritized by some of the major firms. And I'll turn to John. He's going to tell you how we actually think about it so that it could be a good fit for our business. John?
Paul said it right. I mean, you just have to look at our two assets right now and similar products to that. These are deprioritized or at least a grip to certainly deprioritized by bigger pharma, smaller niche products that we can launch with a targeted sales force. So more in the sort of rare disease space. And again, they don't have to be necessarily HIV or in the metabolic space, but if they're adjacent to that, obviously, we have expertise that would be nice, but we're looking into other categories as well. So yes, I think we're open to different things. We're also looking at potentially co-promote deals where our sales force would -- other companies would take advantage of our commercial capabilities and sales force.
Thank you, John. So the bottom line here is that, it has to be accretive generating positive EBITDA, adjusted EBITDA so that we don't have any setback in our journey to turn this organization positive from an adjusted EBITDA point of view.
No, that's great. Thank you. And another question perhaps still for John, but I mean, it is also mentioned that you're looking to expand awareness and utilization of a EGRIFTA and Trogarzo. I mean, the question there is that, like, is there room to actually do that? I mean, EGRIFTA is been in the market for a very long time and Trogarzo for 5 years now, like how could you expand awareness more -- more than what it already is?
Well, first of all, I mean, we have a new sales and marketing team completely. So we're looking at new strategies all the time. We're looking at programs, as Paul mentioned, in activating patients through social media, creating awareness and driving them into physicians. This has proven to be very successful. There's also a lot of increased interest in weight loss drugs in particular, the GLP-1s which you all may be familiar with, we're finding it’s causing increased interest in marketed expansion. We're seeing increased interest in testing with ways to hip to identify patients with lipodystrophy. So there's a lot of things happening in the space. And if you look at the amount of literature that is being published around weight loss and HIV, it's grown exponentially. So I think for those reasons, I'm optimistic.
And similarly, if you look at Trogarzo, there's increased interest in long acting injectable products and new ones are being released and that sort of opens up the market to new possibilities of combination therapy that never existed before. So for both those reasons, I'm fairly optimistic.
That's great. Thank you. And one last for me. Is there any way you can give us guidance on -- guidance in the sense that for 2023 sales, could you possibly break down the gross what you expect between price and volume there? And that's it for me. Thank you.
Well, we've taken price increases on January 1 of 7% and so the rest that should come through unit growth sales.
Great. Thank you, Philippe. Thanks, everybody.
Thank you, Endri.
[Operator Instructions] Seeing no further questions, I would like to turn the call back over to Paul for final words.
There's a few questions from the webcast and most of them have been addressed, but there is one on the TH-1902 program. So in a general sense knowing that the SAC will be looking at the full data in the CMO's opinion, what is the main issue with the construct of the PDC? Is it the short one as a target, the linker stability or the chemo agent that's not powerful enough. So any thoughts on what's happening here?
Yes. I think that the -- well, the construct the PDC is the right one and we've done many, many tests and preclinical tests we have seen that are very good and show a very strong efficacy. What we have to do [indiscernible] question for the sec will be more related to the clinical data and what we've seen so far. And it will be more linked to the frequency of administration of the drug. We do believe by changing the frequency on a weekly basis, we can show more efficacy. The selection of patients will be very important. As we had mentioned in the past, there are patients that have received more than 11, 12 or 15 prior cycle or prior treatment for cancer. This is normal in the dose escalation. But we certainly want to reduce the number of prior treatment in the new basket trial, the new part of this study. And there will be also selection of tumor type because at the moment we have seen signs of efficacy and we'll certainly select the tumor type in which we have seen the best signs of efficacy.
Okay. Well, thank you very much for attending this morning. Thank you, operator, and thank you everyone for joining us on this call and for being a part of our journey. We look forward to our next quarterly call with you and providing an update on our efforts. Thank you and have a great day.
The conference is now concluded. Thank you for your participation. You may now disconnect your line.