Radius Health, Inc. (RDUS) on Q2 2021 Results - Earnings Call Transcript
Operator: Welcome to the Second Quarter 2021 Radius Health, Inc. Earnings Conference Call. My name is Hilda, and I will be your operator for today’s call. I will now turn the call over to Ethan Holdaway, Head of Investor Relations. You may begin.
Ethan Holdaway: Hello, everyone, and thank you for joining us today. A press release and presentation that we will use to guide the discussion can be found in the Investor Relations section of our website. A replay of the call will also be available on our website 3 hours after the call. Before we begin, I’d like to remind everyone of our safe harbor statement on Page 2. This presentation includes forward-looking statements and non-GAAP financial measures. You can find a reconciliation of GAAP to non-GAAP at the end of the presentation. Our most recently filed 10-K and subsequent filings identify factors that could cause our actual results to differ materially from those indicated by the forward-looking statements. Any forward-looking statements represent our views as of today only. On today’s call, Kelly Martin, President and CEO, will start with his opening comments. Jim Chopas, our Principal Finance and Accounting Officer, will then provide a financial update. Sal Grausso, Chief Commercial Officer, will follow with an update on the TYMLOS commercial business. Chhaya Shah, Chief Business Officer, will provide an update on the clinical and regulatory progress; and Liz Messersmith, SVP and Head of the Orphan Business Group will finish with an update on RAD011. We will then open the call up for questions. I’d now like to turn it over to Kelly.
Kelly Martin: Thanks very much, Ethan. Good morning, everybody, for those of you in the U.S. I know some are calling in from Europe. So good afternoon. I do have some opening comments. Then I’ll turn the call to Jim Chopas, who will then turn the call to Sal, Chhaya and Liz. So it’s my pleasure to have the chance with my teammates here to go through where Radius is from a Q2 perspective and importantly from a half year perspective. On Page 4, opening comments. I’ve been asked by a few investors and analysts, Kelly, you’ve been here roughly a year. It’d be great to hear some of your thoughts, kind of putting things in perspective over the course of the last year or so. What do you think? What are we doing? Why have you done certain things? And how do you philosophically want to move things forward? So I -- my comments this morning will be a little bit longer than I would normally do for our quarterly earnings report. So hopefully, it’s helpful for you. So first initiative was reposition the company. The company went public in 2014. There’s been a lot of progress, different iterations, particularly around the original molecules in the company. And the company made a tremendous amount of progress with regard to advancing the original thesis. There is a point in time where all companies need to rethink and reposition perhaps how it’s going to go forward. And over the last year, we’ve been working on that sort of a repositioning of the company. And how do you do that in a manner that would create potential for enhancing the shareholder value proposition of the company from a short-term, intermediate-term and long-term point of view. Sort of fundamental to that is creating as much operating leverage as possible, so that the P&L would come forth and that you become a self-sustaining company from a P&L and earnings point of view. That is a major goal for us. And in doing that, in bullet point 3, you got to set the direction and take the steps necessary to do that. Very simply, from an operating point of view, we want to generate more cash than we are spending. And we are well on the way to that, as Jim Chopas will go through from a P&L point of view in a few minutes. We had last year 3 pivotal trials in flights, all of them needed to be completed from an enrollment point of view. And once completed from an enrollment point of view, preparation and anticipation of readouts. And again, pleased to say with the work of the team that we have in the company, the trials were fully enrolled and currently are in tremendous preparation for readouts over the course of the next few months. Three pivotal trial readouts, obviously, it will be an exciting time in the coming months for the company. From a BD point of view, as everyone knows, we out-licensed elacestrant. I’ll talk a little bit more about why we did that, but it had significant event risk for us. We think it’s a fantastic molecule. We think the opportunity in the space is fascinating. It’s interesting. But for where we were at a point in time, it was a significant amount of event risk. So taking that risk out of the equation, that was something that was a primary focus of ours. And then we in-licensed some additional technology, RAD011, which Liz Messersmith will talk about in a few minutes, was something that we were able to bring in, something that we’re able to integrate to the company, and we’ll talk about that a bit more. And that allowed us to distribute the risk around now 3 different molecules, all with different -- slightly different business models but between abaloparatide, elacestrant and RAD011, we have exposure to 3 technologies at much less risk than we had a year ago. Last but not least, certainly, abaloparatide is a phenomenal molecule in its characteristics, in its behavior and its data in this real-world data. It is a molecule that we are blessed to have. And very simply, we are working on how do we make sure that, that molecule is positioned both in the U.S. and globally to create the most value possible for shareholders and get to or be in front of patients with the most significant need for the molecule. So that’s sort of the last 12 to 14 months. So what we have been focusing on, and there are many other things, but these -- those are the highlights. If you go to the next page, just reiterating the time line. So from today through the end of the year, as we have announced, we would anticipate with current plans that we would have 3 different readouts, and these are in no particular order, by the way, so I wouldn’t overread how they’re listed. But the ATOM trial or the male abaloparatide trial will have a readout between now and year-end. We will have -- as publicized before, we will resubmit to the European market abaloparatide. A tremendous amount of work has been going on with regard to that. You’ll hear from Chhaya about that momentarily. We will have the EMERALD readout, elacestrant will read out between now and year-end from a pivotal point of view. We will initiate the Prader-Willi Phase III or the pivotal trial, Phase II/III. We will initiate the trial in the fourth quarter. First patient in will be either the end of this year or the very early part of next year. And last, but certainly not least, the wearABLe trial, pivotal trial will read out, the transdermal system, i.e., the patch. That will read out as well. So these are 5 rather significant events for the company. There are other events embedded in and around these and some additional ones. But I think from a small company point of view, to have this amount of things that will come to fruition over the next few months, having had a reasonable amount of experience in this industry is rather unique. And I can assure all of you that we’re totally focused on the execution and follow-through of all of those things. Some additional commentary, Page 6. Again, keeping things simple, clear and as crisp as I can communicate. And some of these topics I’m specifically speaking to because, again, very legitimately have been asked questions by either analysts or some of our current investors or some potential investors. So the transdermal system or the patch, if approved -- the way we think of it, it’s going to be very accretive to cash flow. We have not put out models. We have not put out targets on it. The way we’re managing it, the way we’re working on it is it’s going to be accretive to our business, accretive to cash flow and certainly a value enhancer to the abaloparatide molecule. Number 2, TYMLOS for male. How big is the male market? How big is it? How should people think about it? How do we think about it? Well, we actually think that the mail opportunity is somewhat bigger than sort of the common understanding or anticipation of the male business or opportunity. Regardless of whether it’s X, Y or Z from a size point of view, everything that we do in male will also be accretive to the cash flow and the P&L of abaloparatide. Number 3, as we have talked about, we are expanding the global footprint of TYMLOS. We have announced Canada at the end of last year. We have an established partner a very excellent partner, Teijin, in Japan, which I’d remind people is the largest anabolic market on the earth. They are making great progress, but we’re also working on and we’re in current dialogue on several additional either regions or countries in addition to the European resubmission. All of that would be accretive to the cash flow of abaloparatide. So we continue to work on pushing forward on the infrastructure and the fundamental value enhancement of abaloparatide across the transdermal system, the male indication and global expansion in addition to all of the work that Sal and the commercial team are doing in the U.S., which you’ll hear a bit more of in a few minutes. In addition to all of that, we had mentioned on a business update that we are looking at a depot opportunity. Some people thought we were looking at the depot opportunity because we didn’t have confidence in the transdermal system, all of which would be a rather erroneous combination of things. We actually think the transdermal system, as I said, is going to add some significant opportunity from an accretion point of view. Why the depot? Well, the depot could be transformational. If there’s a way to administer abaloparatide either on a weekly, biweekly or monthly basis, we think that that would be of enormous interest to patients and patient care. There’s original dogma in the anabolic space, which would indicate that perhaps the depot approach would not work. There’s been scientific data and literature which would suggest that actually could work. And so we’re going to spend some time and a little bit of capital on investigating more fully the preclinical data that you would need to make the go-forward strategy. The good news about the depo is if we did go forward on it, we would have the data in hand to scientifically and clinically justify why. And the time frame on a depot potential delivery is 3 to 5 years as opposed to more multiple, and the cost would be easily absorbable in our P&L. So that’s another piece of the puzzle that would, again, characteristically reinforce the fact that we are continuing to invest very prudently and, hopefully, very intelligently into creating as much value in the abaloparatide business and molecule as possible. Next topic, RAD011. People ask, why did you in-license RAD011? Several reasons. One is we never wanted to be -- you don’t want to be a 1-product company. That’s number one. It’s inefficient and it’s illogical. Number 2, we could acquire this asset at what we thought was a relatively, inexpensive for us, consideration upfront. Number three. The time frame that we can move this asset forward is rather significant from a shortness of time frame. As again, we have already announced a pivotal trial for Prader-Willi. We have indicated that we will add other pieces to the life cycle in the coming near term. And there are multiple orphan diseases that we can move this asset forward in. I would also stress, also easily absorbable in our P&L and cash flow. So it gives us a lot of potential upside with future progress and any future regulatory success. Other question is, why did you out-license elacestrant? Well, elacestrant at a point in time for Radius as a company was, what I would describe to all of you as I described to others as a way outsized risk. The event risk for elacestrant being positive or negative was way beyond the capacity of what Radius could have handled. Obviously, if it would read out positively, there’s a gigantic upside. If it read out negatively, there was more than a gigantic downside. As a matter of fact, I think it was probably a catastrophic downside. So in order to maintain a participation in elacestrant, massively reduced the enterprise risk for Radius, we out-licensed it. We have a great partner with Menarini. They are moving it forward with us. There’s lots of plans, which you’ll hear from Chhaya, about some life cycle opportunities. Our relationship with them is excellent. And Menarini and ourselves are delighted to be in the position we are. The SERD market is very exciting. It’s rather crowded. We’re in the lead. We have a monotherapeutic molecule. We’ve talked to multiple oncologists about how they would use that kind of molecule. And I would say that we’re in a very good position relative to where we were, where we’re kind of betting the farm on a molecule readout as opposed to still having a participation, but no longer needing to bet the enterprise. From a commercial point of view, and again, you’ll hear a bit more from Sal. Our strategy has been to narrow and deepen the focus around the fracture centers, the bone health centers, the orthopedic-related rheumatologists, to go to where the fractures are as opposed to be -- to have big breadth, that we’re more focused on depth. As Radius with approximately 80 to 100 salespeople in our company, there is absolutely 0 chance that we’re going to win on a breadth strategy. But we can win and we could win very significantly on a depth strategy, and we’re making great progress with that, and we expect to make more progress with that. Last but not least, then I’m going to turn it to James Chopas, we try to announce approximately every 5 weeks how we’re doing with patient additions. I think you have seen, if you’ve been the following, that our patient additions, particularly going from towards the end of last year kind of coming out of some of COVID and into the first 6 months of this year have been fairly robust. So that focus, from our commercial point of view, has -- is working and will continue to work. In addition to the new patients or the patients we’re adding to the drug, we are also doubling back and focusing on our existing patients or refill patients, those patients that were already on drug and how can we continue to focus with, in an appropriate manner, on the refills of the existing drugs, the existing patients, and that’s a focus from both Sal and his team on increasing that. And it’s those 2 pieces of the equation that, over time, give us our confidence that we have upside and the ability to continue to grow the revenue of this molecule in the SC product in the U.S. So I can go on. I’m sure there’s more important things to get to, but I think these things are all important to understand, as a point in time, what we’ve been focusing on for the last 12 to 14 months; why have we made certain decisions, and; what it is we are trying to accomplish. And very simply, from a cash flow point of view, we want to be positive. From a risk point of view, we want to be distributed. And from an optionality point of view, i.e., equity optionality value or the potential, we want to provide some significant optionality to shareholders for their judgment. So with that -- and I apologize for going on slightly longer than I would normally, but I’ll turn the call now to Jim Chopas, and he will take you through the financials with particular highlights on particular parts of the equation. So Jim, over to you.
Jim Chopas: Great. Thank you, Kelly. Our Q2 results show progress towards our 2021 goal of positive adjusted EBITDA. Our net loss on a non-GAAP basis narrowed from $31.1 million in Q2 2020 to $10.5 million in Q2 2021. The Q2 net loss per share narrowed by $0.60 or 63% as a result of the strategic exit from oncology and the realignment of selling, general and administrative resources. Revenue increased by $1.7 million or 3% in comparison to Q2 2020. The increase in product revenue was primarily driven by increased unit volumes, which was partially offset by a decrease in net price in 2021, which we expect to be transient in nature. Later in the presentation, we will discuss new patient growth which, in combination with the dissipating impact of COVID-19 on net product revenue, will improve our revenue outlook for the second half of the year. On a non-GAAP basis, research and development decreased by $17.6 million, which is mainly the result of decreases in abaloparatide-TD program specific costs of $10.7 million and elacestrant program specific costs of $9 million and other R&D expenses of $1.5 million, partially offset by increases in RAD011 program-specific expenses of $3.6 million. The decrease in abaloparatide-TD program is the result of the timing of expenditures on the Kindeva scale up of the commercial supply agreement and clinical supply costs. The decrease in elacestrant program was the result of reimbursed costs related to the transition services agreement entered into with Menarini related to our exit from oncology. RAD011 was initiated in 2021. On a non-GAAP basis, selling, general and administrative costs decreased by $4.2 million, primarily as a result of a realignment of the selling, general and administrative cost structure driven by a $3.9 million decrease in professional support costs as a result of changes in our sales and marketing strategy, which Sal Grausso will cover in his update later in the presentation. Moving on to the year-to-date income statement. The year-to-date Q2 net loss per share narrowed by $1.07 or 61% as a result of the factors previously mentioned for Q2 as well as licensing activity. Total revenue increased by $10 million or 10% over the prior year as a result of an $11 million increase in license revenue, partially offset by a $1 million decrease in TYMLOS revenue. The $11 million increase in license revenue was primarily from the approval of asset Abalo abaloparatide hesitate for the treatment of osteoporosis in Japan, which earned a milestone of $10 million. The decrease in revenue was driven by volatility in patient activity as a result of COVID-19 during 2020 and 2021 and a small decrease in price, which we expect to be transient in nature. Research and development costs decreased by $25 million on a non-GAAP basis, primarily as a result of the exit from oncology and related reimbursement of costs, resulting in a $16.6 million reduction in net less rent costs, the timing of expenses for abaloparatide-TD, resulting in a $14 million reduction in expenses and a decrease in it. Net shared services cost of $4.1 million, primarily as a result of reimbursements. The decrease was partially offset by a $6.1 million increase in abaloparatide-SC and a $3.6 million increase in RAD011, which initiated during 2021. The increase in abaloparatide-SC is largely driven by a payment due to Ipsen in connection with the approval of abaloparatide in Japan. Selling, general and administrative costs have decreased by $9.4 million or 14.5% on a non-GAAP basis. The decrease is mainly the result of decreases in compensation of $4.2 million and professional fees by $5.2 million as a result of our efforts to reposition our selling, general and administrative cost structure. Our total headcount decreased by 24% from 363 at the end of Q2 2020 to 276 at the end of Q2 2021. The cost reductions contributed to the operating leverage of the company and the ability to achieve positive adjusted EBITDA. Moving on to the cash flow trend. As Kelly noted earlier, we have made meaningful and sustainable improvements in our P&L operating leverage and have taken steps necessary to become cash flow positive while completing 3 Phase III trials and investing in RAD011. Our cash burn for the first half of the year of $15 million was negatively impacted by the timing of a $15 million reimbursement under our agreement with Menarini, which we received in July. With forecasted increases in revenue and the completion of our 3 Phase III trials in 2021, we are well positioned to become cash flow positive. Moving on to our next slide. We are reaffirming our adjusted EBITDA guidance of $10 million. We are reducing our TYMLOS revenue guidance by $10 million to $240 million as a result of the timing of new patient additions. Given new patient growth during Q4 2020 and the first half of 2021, we anticipate net revenue for TYMLOS in the second half of 2021 to be stronger than the first half of 2021. Our initiative to improve the operating leverage of the company will allow us to offset the decrease in revenue and achieve our EBITDA guidance. With that, I’d like to turn over the presentation to Sal Grausso to provide an update on our commercial business.
Sal Grausso: Thank you, Jim. Good morning, good afternoon, everyone. On Slide 13, I’ll start off with an update on our new patient starts. So in the second quarter, we achieved 5,094 new patients. That was a 42% increase over same quarter prior year of 3,585. And then looking sequential, second quarter was 3% higher than first quarter. I think that we are set up very well in looking at the graphic on the right. We’ve had really good patient additions for the first 2 quarters, which should bode well for us to see increasing amount of continuing patients for the rest of the year. The rebound from COVID clearly is taking time. It’s been an incremental build, and we’ve leading indicator for future revenues. Moving on to Slide 14. I would say we’ve achieved that and I did mention on the previous slide that, that is a record high for abaloparatide since launch in terms of a quarterly new patient start. So reiterating that was 40% over the same quarter, which was the COVID quarter in the second quarter of ‘20. But I think it also was important to say that it’s 18% in the first half of ‘21, higher than the first half of ‘20. So we’re able to achieve this with the consolidation of focus. And the next bullet point is some evidence of that. We’re seeing much more productivity in our top 500 prescribers whereby they account for 50% of our business in the second quarter versus 32% in the first quarter. Also 50% of our top 125 prescribers are orthopedic or spine focus, which is aligned to the strategy that Kelly talked about before. Lastly, the new patient growth. In that cohort, it is actually growing faster than the overall growth. In addition to that, we’ve -- our sales organization focus, we’ve consolidated that focus around the new strategy around the orthopedic space. We’ve added 20 fracture account specialists. These are people that have orthopedic sales experience to generate more depth in that important customer segment. We’ve achieved these new patient starts with an increase in productivity, a substantial increase of our revenue per new employee from second quarter versus first quarter, and we will continue to focus on depth, not breadth, in order to further penetrate this market. There’s still work to do. There’s going to be continuous refinement of our account segmentation in order to continue progressing on more depth versus breadth. With that, I will hand the baton over to Chhaya Shah, who is going to give the clinical and regulatory update.
Chhaya Shah: Thank you. Thank you, Paul, and good morning, everyone. As Kelly mentioned, we have 3 pivotal trials in progress, and I will walk us through the status of each of the trials. I’ll also share with you the status of our globalization efforts for the Abalo asset. So first, for the Abalo trials. We are on track for both top line data results and readouts in the second half of this year for ATOM, our male trial and wearABLe, our transdermal program. So currently, we’re really focused and executing effectively to ensure that quality of data is excellent as patients come off, complete the trials. Our team is doing a tremendous job and staying focused on the top line data. In anticipation of the top line readout, we are in parallel preparing the sNDA module for Male and the NDA modules for the transdermal product, of which it includes the Human Factors Study. Earlier this year, we had positive outcome of the formative Human Factors Study results. And currently, we’re in the process of completing this summative human factor results. So both -- for both of these programs. And all of this work is progressing well and on track to complete in the fourth quarter of this year. So for elacestrant, our oncology drug which we are, as Kelly mentioned, in partnership with Menarini, an Italian-based company. I am so happy to share with you that we have passed our bioequivalent study between our clinical and commercial tablets. This trial was to assure that our commercial drug product would meet the equivalence criteria. The study resulted in meeting the highest bioequivalence criteria set by the FDA. So good progress on CMC front for elacestrant. And from a clinical trial perspective, our EMERALD trial, we are on track for top line readout later this year also. In parallel, just like the Abalo program, we are preparing the NDA modules for filing, again, in anticipation of the top line data. So switching to globalization efforts on abaloparatide. Earlier this year, we announced that in partnership with Japan, our Teijin partners, that we achieved regulatory approval through PMDA for Ostabaro. This was a big milestone and accomplishment for Teijin and us, as Jim pointed out earlier. So in addition to the Japan, we are also in partnership with Paladin Labs in Canada, right? Which continues to move forward, and we’re having regulatory meetings with Health Canada to progress towards this submission. So switching to Europe. Tremendous efforts here as well. We have submitted a letter of intent to EMA, notifying them of intent to resubmit the dossier in the fourth quarter of this year. We’re making great progress here in preparing the dossier based on the feedback we received from our raptours and co-reptours in the first half of this year. Lots of good meetings we’ve had, and we’re progressing well on the dossier. Additionally, we have ongoing discussion at various stages, some in late stage and some in earlier on, with potential commercial partners to outline in various regions across the globe. So in summary, 3 pivotal trial readouts, that’s tremendous for a small company, and we’re on track and great progress on globalization for Abalo. So with that, I will hand it off to Liz Messersmith to cover RAD011. Thank you.
Liz Messersmith: Thank you, Chhaya. Good morning and good afternoon, everyone, and we’ll start on Slide 18. Picking up from our press release in July 23, we have received the written confirmation from the Type C meeting that we held with the FDA. This agency discussion primarily focused on the clinical design and development program to evaluate RAD011 and addressing hyperphagia in individuals with Prader-Willi syndrome. Now that we have the written outcome of these discussions, it enables us to turn our focus towards the execution of the PWS clinical development program. This study is a seamless Phase II/III study evaluating RAD011 in approximately 200 individuals with Prader-Willi across 30 sites around the globe. We are currently targeting the steady start of the SCOUT-015 study in either Q4 2021 or Q1 2022. We view the SCOUT-015 study as the first indication for the RAD011 asset. We intend to continue to evaluate the global opportunities of RAD011 across a number of indications. And as Kelly mentioned, we plan to add 2 additional pivotal studies in orphan indications to the asset pipeline in the later half of 2021. Given what you’ve heard today, our intent is to self-fund the RAD011 development through the existing cash and cash flow. That concludes the update for the RAD011. Ethan, I turn the meeting back to you.
Ethan Holdaway: Thank you, Liz. We’re now going to open it up for questions.
Operator: We have a question from Corinne Jenkins from Goldman Sachs.
Corinne Jenkins: Yes. So I think the obvious question here is, as you think about the updated guidance of $240 million, that still implies pretty significant revenue growth half over half. And so I’m curious whether you get visibility from that on the existing patients that you’ve added over the prior few quarters, or if that requires pretty significant new patient growth through the rest of the year as well?
Kelly Martin: I think, Sal, you should -- you and Jim should take that.
Sal Grausso: Yes, absolutely. Thanks for the question. That’s precisely what I think the work we’ve done to grow our new patient starts in the second quarter and the first quarter and the fourth quarter is going to translate to a higher amount of continuing patients for the rest of the year, and we will see a ramp based on that, commensurate with hitting our updated guidance.
Corinne Jenkins: Okay. And then I’m curious if you can talk to if there’s any sort of switching effects as you -- I don’t know if that’s the right word for it. But as you think about switching from your prior focus on endocrinologists, rheumatologists to this bone health-centered strategy. Is there any sort of switching impact in terms of new patient growth or durability that patients are staying on therapy?
Sal Grausso: No, not that I can say, that we’ve really closely monitor and track our persistency rates. Our persistency rates have remained unchanged throughout the switch. I think the issue we faced, like many companies in this situation, is it’s very unusual when you have a growth product to start to experience lower new patient cohorts in the middle of a growth phase, and that’s precisely what happened with COVID. And so those lower ends from last year, right during the lockdown in the pandemic now are starting to have translated into basically lower refills from what should be very productive patients along our persistency curve. And now that those things are -- as we add more new patients, we have a stronger base to grow. So I don’t really see any change in the patients. I would say, though, what we do see is an increase in patients that actually have a history of fractures. So we’ve seen a pretty big increase in the patients who are on TYMLOS who have a previous history of osteoporotic-related fracture.
Operator: The next question comes from Geoff Porges from SVB Leerink.
Anna Baran: This is Anna Baran on for Geoff Porges. First, on TYMLOS, the 40-plus percent patient growth is obviously a big step up from last quarter’s growth. Is the 18% new patient growth that we saw in the first half a more reasonable representation of the underlying demand that you expect for the remainder of the year? And how do you reconcile the 40% new patient growth this quarter with a single-digit revenue growth?
Kelly Martin: Again, I think, Sal you and Jim should -- on the commercial question, just to take the lead and I can chime in afterwards, if it’s helpful.
Sal Grausso: Yes, absolutely. I think that’s a really good question, and I think that’s very observant. I think the way I look at it is the first 2 quarters together. So I do believe that the 18% growth is more indicative. The anomaly was the second quarter of ‘20 with the low starts. From my perspective, in all things kind of along the lines of what I said before is that it takes time to refill your continuing patient pipeline. And why -- what we’re seeing is that our new patient starts are kind of out and ahead and leading overall revenue because it’s leading overall demand. But as we continue to move on for the rest of this year, we will start to see the refills pick up significantly because of the high numbers of new patient start cohorts we’ve seen in the first 2 quarters. So we were very confident that new patients is a leading indicator. Revenue is really driven by your total patients or your continuing patients. I mean in any product, refills usually make up 85% of your total shipments. So really, to me, it comes down to is that 2020 was challenging because of COVID, because we had the low end on new patient starts, which basically played through and has impacted our total shipments, which will now change dramatically. And my last point on this is, even within the quarter, of the second quarter, we see a ramp-up sequentially month-over-month. So we feel very positive where we ended the quarter, and we feel very positive about the monthly trend going forward.
Jim Chopas: To reiterate Sal’s point, we feel comfortable with the momentum just given our business model, as Sal had mentioned, the momentum and the forward-looking numbers are really the new patient starts, but it does take time for that to work through. Just as when the numbers went down last year, our revenue didn’t immediately go down. So it takes time for us to work through our system. And now we feel comfortable with our momentum for the second half of the year.
Anna Baran: That makes sense. I have a separate last question on elacestrant. Are you seeing any discontinuations in that pivotal study? And if so, could you maybe give some color about the rates? And what could be driving any of that?
Kelly Martin: Yes, we keep -- that’s a blinded study. So that -- all that information would come out when we release the top line data.
Operator: Our next question comes from Annabel Samimy from Stifel.
Annabel Samimy: Just to go back on the question of the new patient starts and persistence. I guess you made a point to say that you’re making efforts to focus on refills. So what are the steps that you’re taking to make sure that patients are refilling the prescriptions? And I guess, is there anything else going on within the net sales number, such as decreased -- or increased gross to net new -- from the new Humana contract? Any kind of competitive dynamics that we should be thinking about other than just the 40% new patient starts?
Kelly Martin: Annabel, I’ll start, and I think Jim can follow up. The persistence rate, I mean, I think some of the tactics that we’ve taken and as we communicated historically, made lots of changes to our product acquisition process. In particular, we shipped it to a specialty pharmacy model, which has given us great visibility into our business, more than we’ve ever had. And one of the side benefits of that is that we have now a precise view into our total active patients or discontinuations, the reasons why they’re discontinuing. So we are actively working with the specialty pharmacy partners on programs around adherence. We also have a clinical educator program that helps patients with injection training that also are -- is a tactic that could help enhance persistence on therapy. As far as the gross to net or our average selling price, and I remember your question about Humana last time. So thank you for that. We feel from a gross net perspective and average net selling price is that it’s been pretty stable. As all companies, I think what you’re seeing is a lot more seasonality on gross to net. So a lot of the negative impact on gross to net is front-loaded in the first 2 quarters of the year, especially for products like ours, where they have a high population of Medicare patients because of the coverage gap dynamics. And then ability for the rest of the year. So it’s a wild, bumpy ride, and it’s become more bumpy for the whole industry, especially post COVID. But I could say that when the dust settles, I think that our average upselling price is relatively stable if you look at 2021 average versus 2020.
Annabel Samimy: Okay. And if I could just ask one more question. Kelly, you made a big -- you talked very, very deeply about your -- the direction of the company going forward. I know that you’re trying to focus a little bit more on -- some rare diseases endocrinology with RAD011. Should we think about any further BD for you? And are you in a position to consider anything with your current balance sheet position? Or should we just not assume that at this point? Just bigger picture, if you could just give us a little color there.
Kelly Martin: Yes. No, thanks. As I said, we have to be very judicious if we were to add anything, how we would do that and the size, scope from both the cash and -- cash flow point of view. So the overriding principle, just to be clear, is we’re going to become a cash flow positive company. Kind of a very basic way to run a business is you got to generate more money than you’re spending. And so that is our overriding principle. So if we could tuck in some other technology that makes sense, that doesn’t deviate from that, then we should do that or we should explore that. But we certainly are not going to do anything that would require a significant financing situation at all. And so I think what we’ve done, which again, appreciate the question, is we basically swapped what was a $100 million risk with -- additional capital for elacestrant was $100 million of risk capital, and we swapped that for $12 million of a pivotal opportunity in RAD011. That’s one pivotal. And as Liz Messersmith outlined, we anticipate adding 2 other orphan diseases from a pivotal opportunity point of view. So we swapped $100 million risk asset for a $12 million asset that we can do 3 pivotal trials on and absorb all of that in our balance sheet and our cash flow. So I think that was a great way to reposition the company from a risk and an optionality point of view. If we could do that again, it would be crazy not to. Those things are few and far between as you would, no doubt, understand. But we continue to look and see if we can add things. At the same time, as you heard and we are trying to do, the underlying commercial asset we have, abaloparatide is one that we believe we can continue to add both incremental and substantial value to by broadening it. So I’m not directly answering your question other than to say, we should always be looking at things. And if we can do things in a way that is absorbable from a cash and cash flow point of view and adds to the optionality, we’ll do that. But other than that, we got a very full plate. We have 3 pivotal readouts in the next few months. And what you’ve heard from us today is we have a pivotal that we’re going to initiate in orphan, and we have 2 other pivotals that we’re going to initiate in orphan. So that’s 6 pivotal activities for a company of 280 people. And I think that’s plenty for now. And so I hope that gives you a bit more context, and I do appreciate the opportunity to answer that kind of question.
Operator: Our next question comes from Douglas Tsao from H.C. Wainwright.
Douglas Tsao: So just -- I understand the explanation that there seems to have been some disruption in terms of new patient starts last year because of COVID and sort of created a hole in your sort of patient backlog, if you will. But I’m just curious what sort of changed and why versus the guidance and why that wasn’t sort of incorporated into expectations for this year? And then I have a follow-up.
Kelly Martin: Yes. Well, let me start Doug. Then I’ll turn it to Jim and or Sal. But the -- again, just to emphasize, we’re kind of managing the P&L. So we didn’t change our EBITDA cash flow guidance at all. We changed the top line net revenue for the product in the U.S. and some of it as Sal, I think, explained pretty well, is there’s still -- which is fairly consistent with many companies. There’s still some fair amount of noise from patient reconciliation and patient starts, if you will, through the balance of last year, we’re kind of catching up to that. And so I think the $240 million number relative to $250 million, it’s kind of material, but it’s not that material. I mean what I focus on, frankly, is year-over-year, we have revenue that’s about flat, and we’ve reduced the loss by 65%. So the operating leverage in the P&L is dramatic. And the second half of the year, as Sal went through, should have stability as sort of a fleshing out, if you will, of the patient stability numbers, number one; number 2, the volatility of some of the gross to net pricing, which Sal referred to, that should be dampened down dramatically. And then the catch-up of all these new patients have added -- should bode well for the second half of the year. So hopefully, that explains the various pieces in a way that’s helpful. I don’t know if Jim, if you want to add anything? Go ahead.
Jim Chopas: Thanks, Kelly. I, also, there reiterate -- there obviously was kind of variability in terms of some of the things that were going on with COVID during the year in terms of -- we could track our leading indicators. I think that a lot of other companies in the industry have experienced volatility in their numbers. So I think it’s not unusual, but we feel like we’re getting a better read in the data. Things are stabilizing more and we’re able to be more predictive with the data we have now than we were earlier in the process, but it’s just a normal evolution in terms of our ability to predict our numbers.
Douglas Tsao: Okay. And then just in terms of the new focus on specialty centers or bond centers, do you think that that would apply to the patch system as well? Or do you think that, that product would potentially have sort of greater breadth across the prescribing universe as well?
Kelly Martin: Maybe, Sal, you should take lead on that.
Sal Grausso: Yes, Thanks, Doug. From my the most from this molecule of abaloparatide are those that are very high risk of fracture or those who have recently suffered osteoporotic-related fracture. So at that end, we certainly see this as an important option for those patients. And so we believe that this is accretive because it is consistent with our strategy and fits right into what we’re doing now.
Douglas Tsao: Okay. And then if I can, just one final question. In terms of the depot. Is the question that you need to answer regarding to sort of the need for pausitility in terms of the PK for the product?
Kelly Martin: Yes. Chhaya, why don’t you take the lead on that as somebody who is rather expert in this topic.
Chhaya Shah: Yes, great question. For the depot program, we’re in progress of looking at -- we’ve partnered with a company that would help us get to that in vitro profile. And exactly what you’re saying is looking at the PK study and getting to that point. So it’s discovery, right? But it’s -- we have partnered with somebody that’s excellent and have done this before. So we’re progressing on that very quickly.
Kelly Martin: But Doug, it’s Kelly, you’re zeroing in on what sort of traditionally been the dogma of anabolics. And let’s just say that there is other research and there’s other papers that would indicate that a depot administration could have a similar impact. And so anyway, we’re going to explore that because we think it’s worth exploring and it’s something that we look forward to kind of sharing with the market when we have those answers because it -- if it is possible, we think that that would be obviously highly attractive. Just for reference, there is a -- in the Japan market, there is a 1-week administration of a drug. And so there’s certainly a fair amount of evidence to suggest that if we can tease it out the right way, that there could be a path forward that would be attractive for it.
Operator: Our next question comes from Jessica Fye from JP Morgan.
Vardhman Chhajed: This is Vardhman on for Jess. In the latest business update in July, you mentioned that you plan to price the transdermal system at a premium to TYMLOS as you may approve. Can you talk about the rationale behind that and maybe quantify the price you have in mind? And also as a follow-up, curious on your thoughts about how the patch would drive long-term revenue growth for the business.
Kelly Martin: I’ll start. It’s Kelly. On the patch pricing, kind of simple concept. The COGS for the patch, which would be sort of natural because it’s a different administration, is different from the injectable. And therefore, in order to make sure that the great progress we’re making on this molecule from an injectable and business point of view for us isn’t -- this isn’t something that’s eaten away at by a lower-margin product. There’s obviously an intersection there between the breadth and the opportunity of a new administration, i.e., a transdermal system and the existing one. And so while we completely understand that. We think that to make sure that we capture or recapture or maintain some reasonable margin parity at a minimum is something that would be prudent for us to do, and that’s sort of the direction that we’re going to go in. And with regard to the revenue opportunity in the patch or the transdermal system or the market opportunity, more specifically, as I kind of went through in my comments. The way we’re going to position it from a price point of view and a market point of view is that it will be additive to the P&L in cash flow. It will not be something that detracts from it. And that’s kind of where we’re going to stand for now. We’re not going to start putting out different numbers on the patch. And one of the main reasons for that is we don’t have the data. We would like to see the data that would be rather normal before you start talking about market opportunities to actually see the data. And so we’re certainly going to wait to see if we have data. But however, we position it, it will be accretive to our current business because we think that’s very important to maintain and preserve and enhance shareholder value.
Operator: The next question comes from Vikram Purohit from Morgan Stanley.
Vikram Purohit: So staying on the topic of pipeline, I just had 2 more, I guess, kind of housekeeping questions for you. So for the 3 readouts expected in the second half of this year, is there any clarity available about the cadence of those readouts? And then secondly, for the ATOM and wearABLe studies, what would you anticipate being included in those top line readouts in terms of specific data parameters, level of detail, et cetera? Any color there would be helpful.
Kelly Martin: All right. I would tell you -- Vikram, thanks it’s Kelly. There is -- we’re not going to share the cadence or the sequence of what’s coming first, second, third, fourth. There’s obviously a lot to juggle. We do have obviously an internal schedule based on data and where things are. But it’s -- we’re talking about over the next 4 months, approximately, lots of different readouts. I don’t know, Ethan or Chhaya, if you want to go through the specifics. But clearly, the readout’s top line will include the primary and/or secondary endpoints. They obviously include any reference to any safety details. Ethan or Chhaya, do you want to add anything more specific to that?
Chhaya Shah: Yes. I think you hit it, Kelly. Basically, it’s the primary, secondary points for the ATOM, which is the bone mineral density and then the wearABLe, it’s a 2% inferiority. So it’s a basic safety information, and we’re anticipating, like Kelly said, at the second half of this year for both.
Operator: We have no further questions. Do you have any final remarks?
Kelly Martin: It’s Kelly. I would just thank everyone for their time. Pretty comprehensive review at a point in time of where we are and some important dialogue as far as how we’re thinking about the pieces, how they come together and the balance of this year with regard to the activity. So we appreciate everyone’s participation and look forward to sharing progress as and when we can do that. Ethan, do you want to add anything?
Ethan Holdaway: No, that’s it, Kelly. Thanks, everyone, for joining, and this concludes the Q2 earnings call.
Operator: Thank you. Ladies and gentlemen, this concludes your conference call. We thank you for participating. You may now disconnect.
