Radius Health, Inc. (RDUS) on Q4 2021 Results - Earnings Call Transcript
Operator: Good day, and welcome to the Fourth Quarter Radius Health, Inc. Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I’d now like to turn the call over to Ethan Holdaway, Head of Investor Relations. You may begin.
Ethan Holdaway: Thank you. Hello, everyone, and thanks for joining us today. The 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 will also be available on our website following 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 the 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. Kelly Martin, President and CEO will kick off the call with his opening comments. Steve Helwig, Principal Finance and Accounting Officer, will then provide a financial update. Bob Valentine, Head of Business Intelligence & Digital will follow with a commercial update; Chhaya Shah, Senior Vice President of Abaloparatide & Elacestrant, will provide an update on Abaloparatide & Elacestrant progress; and Cole Ikkala, Head of Neuroscience Business Operations, will finish up with a neuroscience update. From there, we’ll open up the call for questions. Now I’d now like to turn it over to Kelly.
Kelly Martin: Thanks, Ethan. Welcome, everybody, to our call, which is both Q4 and full year 2021 and some discussion on full year 2022. Obviously, a little unusual giving an earnings call doing a outbreak of a European war, but we’ll do our jobs and hopefully, everything winds up in the right place for all concerned. As Ethan said, a few of the senior team of Radius will be speaking today, Steve, Bob, Chhaya and Cole. They represent an outstanding leadership team for the company, some of whom you’ve heard from, some of whom you’ll hear from in the future. It’s part of the 2020 and 2021 remake of the company to move leaders into the right seats and/or recruit people and vastly improve the opportunity to create value for shareholders. Next slide. In the release, which was rather exhaustive, there’s a fairly long quote from myself, some of you know me well, some of you don’t know me at all. I rarely have quotes in there, this is a doozy. It’s pretty long. There’s lots of things that we could talk about. What I tried to do in the quote was frame out those things that are most important, at least to me and my seat. There’s dozens of other relevant and important items to be aware of and for us to share over the course of the year. From a progression of the company point of view, as I say in my quote, 2022 is absolutely a year to pivot the company. The company went public in 2014. I joined the company in the second quarter of 2020. We had a new Chairman in the second quarter of 2020, and we’ve added three new Board members since the second quarter of 2020. From an approach and philosophy point of view, as you can see on the slide, number one, return of capital. Elacestrant was a critically important asset for the company, you’ll hear more from Chhaya Shah later on it. We did a transaction as many of you know with Menarini. We took all of the risk out of the future prospects of that molecule. We also saved future spend of somewhere between $100 million and $150 million. We’re working exceptionally well with our partner, Menarini. As and when that asset gets clarity from a regulatory point of view and then into the commercial arena, we will return all of that capital of milestones or royalty – net milestones and royalties to shareholders, and you’ll hear more on that later. I’ve said dozens of times our goal is to go from cash burn into cash generating. So that’s an underpinning philosophically of how we run the business and how we will continue to run the business. We have over the years accumulated $1.7 billion of NOLs, the vast majority of those are federal NOLs, some of those are state NOLs. We will endeavor to crystallize those, as I say, we say in the release through either earnings, or asset sales or some combination of those things. Now some of us have a lot of experience with NOLs, and we look forward to utilizing those and crystallizing the value to shareholders. The TYMLOS business, you’ll hear from Bob Valentine a bit more. The team that we have in charge of that product, Bob, Danielle and Chhaya are outstanding. And in every way, we have an outstanding understanding of all the pieces of this business. It’s a pretty complicated product. But I am highly confident and very constructive on the 2022 and 2023 and beyond opportunities in that business. RAD011 is something that we have not spoken a lot about. You’ll hear from Cole Ikkala around that molecule, how we purchased it and what we’ve been doing to strengthen the molecule from a quality point of view. And as we said in the release, as and when it’s appropriate in a gating way, we have plans to move forward and in particular plans to move forward in the seizure arena, orphan epilepsy space, which is one that the market seems to perceive as somewhere between very valuable and exceptionally valuable. We manage the assets as a portfolio between balance sheet, liabilities and cash, assets be they commercial or financial from an Elacestrant point of view, or clinical from a RAD point of view. Last but not least, particularly in this era, talent and culture is the only way to really sustain yourselves in the world of both hybrid and virtualization. Having the right people in the right seats with the right culture is just paramount to any continued or intermediate term success, and we are working exceptionally hard on that. Next slide. By here are some of the key 2022 objectives. There are more, as I said, underneath all the different pieces of the puzzle. Financially, our target for TYMLOS net revenue was – specifically $232 million. It’s a modest uptick from where we ended 2021. And we did that deliberately to frankly, to emphasize the operating leverage within the company that with modest TYMLOS growth, we could significantly change the operating P&L of the company. We also have learned over the years, and we certainly learned last year that it’s a very seasonal business. So we’re going to budget our business as 42%, specifically for the first six months of the year in net revenue and 58% for the second half. We will be roughly a break-even company plus or minus from a net loss or net profits point of view. Lots of pieces of that puzzle. You’ll hear some from Steve, as far as look back in 2021 and some discussion about 2022. Productivity is a very important piece of our puzzle as we manage the business. I’ll talk about that in a second. But we have worked extremely hard to be more efficient. We don’t run the company on headcount, but we run the company on how do we get the best people in the best seats and what do we need actually functionally or organizationally to move things forward. And last but not least on the financial side, we want to grow the cash flow and increase the margins. We did significantly increase the abalo operating margin in 2021, despite the fact that our revenue – our final revenue number was below our initial guidance, but we significantly improved the margin of Abaloparatide and we will continue to do that. On the asset side. It’s – it was a very busy 2021. It will then be a busy 2022. To follow up on that, you’ll hear a bit more from Chhaya later. Abaloparatide, the male indication outputs was outstanding. From a statistical point of view, that’s a very important indication for this molecule and we plan on filing that sNDA in Q1 of 2022. Elacestrant is on target with our partner, Menarini, to file that NDA in the second quarter of 2022, more on that later from Chhaya. The patch, the last time we had a conference call with people was in December about the patch. We said there were three important things for the patch to move forward. I fully understand has been the investment thesis of many investors since 2017 and 2018. To move forward, we need clarity from the regulator, and we’re in the process of securing a meeting to have that discussion. The second piece of the puzzle is to fit the business construct that we have on the supply chain. Currently, that business construct is mostly redacted as far as the details, but from my seat the risk is asymmetric that, that Radius has a preponderance of the risk in that supply chain and would have to be fixed in order for us to move that forward. And thirdly, we would need capital that’s not Radius capital. We spent an up on the patch. We think it’s very interesting. We think it’s potentially strategically attractive. But from our shareholder and stakeholder point of view, we would need external capture in some project finance structure, some of which – some of us have dozens of years of experience doing those things. From RAD011 point of view, you’ll hear from Cole. Liz Messersmith is on a well-deserved vacation. And so we have Cole pitching in. He’s not a clinician, but he’s in charge of gluing that business together and all the various pieces. You’ve heard us talk about Prader-Willi. In the past, we had data from that when we purchased the asset. For the first time, we’re going to talk about Angelman syndrome and Infantile Spasms. Why that is particularly relevant is both of those are in the families of seizures. And as you’ll hear from Cole, there’s a walk across from the botanical competitor in the seizure space. And it’s a validated both mechanism and target for us to pursue on the synthetic side of things. Before I turn it to Steve, I want to emphasize a couple of things – a couple of additional things. The adjusted EBITDA in 2020, the company lost $54 million. In 2021, the negative was $24 million. Our target this year, our objective is plus $35 million to plus $45 million. So that’s a swing of – from 2020, when I started, we had a new Chairman, three new Board members, the swing is roughly $100 million. The swing from 2021 is $60 million to $70 million. So we continue to make progress and are exceptionally focused on the P&L, the operating P&L and the performance of the company. Secondly, productivity on this in the commercial space has been a spectacular success. 2020 the revenue per commercial employee was roughly $1.1 million. 2021, it was $1.6 million as we had in the release. And our objective for this year is $1.9 million. The uptick year-over-year in productivity for commercial is about a 50% increase 2021 versus objective. And the uptick in productivity from 2020 is 70% to 75%. So we’re doing way more with less. The sales force we have is spectacularly talented. I have even through COVID met most of them. The RBD team that we have is spectacular. I have definitely met all of them and they have met me. We have a new Head of Sales with Danielle. And I again couldn’t be more pleased on the sales force, how they’re focused and the ability to grow productivity and grow net revenue. And you’ll hear more from Bob Valentine, who has to piece all this together from a business analytics product marketing point of view shortly. Second – lastly, in 2021, all-in, we burned about $3 million of cash. There was many, many things that we did. We in-licensed and purchased RAD. We refiled abalo for the EU. We completed the male study. We completed the Infantile Spasms study. We completed mostly the second source for abalo because we only had a single source. We began to sort out the supply chain for RAD011 and we had modest growth in RAD. So the operating infrastructure and the leverage we have is very significant. And despite all those ins and outs, we end the year with roughly the same amount of cash that we started from. And I would say that bodes very well from an execution point of view and direction point of view for the company as we go into 2022. So with that, you’re probably sick of listening to me. I will now turn it to Steve Helwig, who has done a great job as our Principal Finance Officer. And now I’ll turn it over to Steve.
Steve Helwig: Thank you, Kelly. First, I’ll speak to the 2021 financial highlights. For fiscal year 2021, we had net product revenue of $219 million or an increase of 5% versus 2020, which was primarily driven by volume. As Kelly just noted, we then ended the year with $112 million of cash and cash equivalents on the balance sheet, and we continue to make improvements with our commercial team that has led to increased productivity of 47% year-on-year. Last, on a non-GAAP basis, we improved our adjusted EBITDA by 56% in 2021 versus 2020, driven by reductions in R&D due to the completion of our three pivotal trials, along with improved efficiencies in SG&A. On the next slide, the Q4 P&L metrics. In Q4, we had a record quarter of net product revenue of $65 million, excuse me, versus $60 million in Q4 of 2020. And this was a 9% increase again, primarily driven by volume. Our R&D expenses were $42 million compared to $36 million in Q4 of 2020. This was a 14% increase that was primarily driven by the Abaloparatide transdermal system and timing on Elacestrant. For SG&A, restructurings that took place in Q2 of 2021, led to expense reductions of $6 million or 16% versus Q4 of 2020. All of this led to a net loss of $15.6 million, a $5.8 million or 27% improvement versus Q4 of 2020. For the full year P&L metrics, as previously mentioned, we ended the year with $219 million in net product revenue compared to $208 million in 2020. R&D expenses were $135 million versus $160 million in 2020, down $25 million or 16%, again, due to our three pivotal studies coming to an end. And with improved organizational efficiencies, we continue to reduce SG&A, which came in at $131 million versus $144 million, or 9% reduction. This driving factor has resulted in a net loss of $70 million versus $109 million in 2020, which is $39 million or 36% improvement year-on-year. On the next slide, some balance sheet metrics. We came in, as Kelly had mentioned, we ended the year with $112 million of cash and cash equivalents, nearly flat with 2020. And we just wanted to point out that our term loan can be refinanced without prepayment penalties beginning in March of 2022. The last slide, we have some commercial productivity. And Kelly mentioned this earlier, but in – through some efficiencies that we’ve continued to make over the years in 2021, we ended with $1.6 million per head – per commercial head versus $1.1 million in 2020, which was a 47%. And with that, I’ll turn it over to Bob for more of a commercial update.
Bob Valentine: Thank you, Steve. Good morning, everyone. So I will provide an update on the TYMLOS commercial progress. And I would like to start with a look at the mechanics of how we are monitoring and tracking. So you’ll recall, for 2021, we focused heavily on communicating about new patient starts. Indeed, this metric is important to the TYMLOS business. However, new patient starts is one piece of a more involved assessment of the business, a simplified version of which you’re seeing on this page. It includes patients that are discontinuing therapy, the resultant active TYMLOS patients currently on therapy and, of course, the conversion of those patients to TYMLOS spend volume. So as you can see for 2021, new patient enrollments improved by 14% for 2020, new patient starts improved by 11%, and the average monthly active patient number increased by 4%. These are all important numbers and together as an example, indicates some room for improvement and conversion of patients to therapy. So finally, in summation, the business grew 5% year-over-year on a net revenue basis. And to reiterate, we will still track new patients over time, but we’ll be – we are monitoring and actioning on all of the levers that impacts the business. So looking ahead to 2022, we project $232 million in net revenue. This growth we anticipate will be driven primarily by growth in unit volume. And as Kelly hinted at, we anticipate the seasonality in the net revenues that we’ve seen and observed in years past, including in 2021, so 40% to 45% in the first half of the year and the balance in the back half of the year. Turning our attention again to the levers of the business. We anticipate continued growth in patient enrollments over what we saw in 2021. And to support this, we’ve focused the sales team’s attention to current major prescribers to maintain and grow the business that we know is strong, and then seek to find the new prescribers that we know are the right balance of endocrinologist, rheumatologists and orthopedics. We also have strong tailwinds from a promotion perspective, from the boxed warning removal and the mechanism of action update in the label. And both of those allow us to further differentiate TYMLOS in a positive way and give us significant momentum moving into 2022. So beyond driving enrollments, we’re also dedicating particular attention to the later stages of the patient journey, specifically, improving conversion of enrolled patients to receiving therapy; and secondly, ensuring those patients stay on therapy for as close to the recommended duration as possible. So these efforts will help grow the TYMLOS active patients and increase the average pence per patient over time. So together, we expect these efforts to translate into a 6% growth in net revenue over 2021. So with that, I’ll hand it over to Chhaya Shah, who will take over and discuss Abaloparatide development.
Chhaya Shah: Thanks, Bob. Good morning, everyone. I’ll walk us through the development and regulatory progress for Abaloparatide as well as the update for TYMLOS. As we announced last year, October 18, we had positive top line results for our mill indication. We’re in the process of submitting an sNDA, which is a 10-month review. We’ll do that in quarter one. We also have been approved for an oral presentation at the ACE meeting coming up in May, where we will present further detailed data. With transdermal program, the patch program, we announced last year that we didn’t meet the non-inferiority as compared to TYMLOS. However, the data for the bone mineral density, the BMD increase was clinically meaningful. Due to that clinical benefit, we have now requested a meeting with the FDA to figure out a regulatory path forward. As Bob noted, we’ve made great strides with regards to enhancing our label and adding the mechanism of action section in our label. And now we can state that TYMLOS is an anabolic agent that helps dope . FDA approved this update in 2021 after reviewing the excellent customer repository study that showed TYMLOS do like bone formulation in human. Additionally, FDA approved the removal of boxed warning from our label. This further clarifies our safety profiles for TYMLOS as an anabolic agent. So overall, really good development in regulatory progress for our abalo product. I will now talk about Elacestrant. As Kelly mentioned earlier in the opening remarks, we view Elacestrant as a financial asset. 100% of cash received will go directly to Radius creditors and shareholders. The mechanism of cash return is a debt pay down, share buybacks and/or dividend. From a regulatory perspective, based on the positive top line results for EMERALD trial, where elacestrant was evaluating as the monotherapy versus standard care in metastatic breast cancer patients that are HR+/HER2-, we are progressing towards the U.S. NDA submission in the second quarter of this year. Menarini will also be submitting EU submission in – also in the second quarter of this year. Our partner, Menarini Group, plans to also test Elacestrant in earlier treatment lines, including adjuvant setting as well as one or more combinations with Elacestrant. Menarini is making great progress in Phase 2 combination trial for metastatic breast cancer that has metastasized to the brain. So all of this is really good lifecycle management programs that they’ve got going on. And we’re certainly partnering with them. It’s truly a pleasure in partnership with Menarini to be able to develop our first ever oral SERD for metastatic breast cancer. On the next page on this slide, we’re showing two illustrative monotherapy net revenues scenarios and associated cash to Radius from a net royalty and milestone payments. We assume a five-year peak in this illustrative model, loss of exclusivity is way out there in 2038, and peak sales that fall within range of our sell-side analysts estimates. So the key assumptions are noted here. And as you see on the graph, those are our cash to Radius by 2030 illustratively. Other relevant facts that I want to point out here is the intellectual property. On this slide, we’ve shown that we currently have three issued patents for Elacestrant, and they’re listed here. Additionally, we’ve also framed out Elacestrant opportunity and what it means to Radius. As part of the agreement with Menarini, we are eligible to receive $20 million in development and regulatory milestone payments and up to $300 million in sales milestone payments, and a tiered net royalty up to 9%. The royalties and sales milestones are based on global net sales of Elacestrant and includes, as I mentioned before, the monotherapy, the combination therapy that Menarini is working on as well as any other potential therapeutic applications for Elacestrant. So all of that together, that amounts saw the royalties and the sales milestones. So with that, I will now turn it and hand it over to Cole Ikkala to cover neuroscience.
Cole Ikkala: Thank you, Chhaya. Turning on to Slide 17 and as a reminder, in January of 2021, we acquired RAD011 from modest terms, from Benuvia Therapeutics, a company formed to acquire the distressed CBD assets out of the Insys Therapeutics bankruptcy. This opportunity was both identified and sourced by the Radius team. And over the course of a four-month period, an extensive diligence process was completed, resulting in what we view as an opportunistic and discipline transaction for several reasons. It has the necessary data package to advance directly into orphan pivotal programs, and with further data generation and success, additional disease areas and disorders of interest. Importantly, existing clinical proof of concept data is available in seizure reduction established by botanical CBD asset Epidiolex, validating a path forward in other epilepsy syndromes. And finally, RAD011 is differentiated as a synthetic CBD oral solution, and among other things, contains no THC or alcohol, an important consideration for the pediatric neurodevelopmental disorders we are targeting. Since the acquisition, the team has significantly enhanced the underlying asset quality detail, which we will walk through on the next slide. Transitioning into Slide 18, this slide highlights the extensive progress the team has made in standing up RAD011 as a core asset for Radius. From a clinical perspective, our team has done a tremendous job with input from global patient-facing advocacy groups and key opinion leaders, developing clinical protocols for three programs that Kelly referenced, a seamless Phase 2/3 in Prader-Willi syndrome with the primary goal of hyperphagia reduction, a Phase 3 in Angelman syndrome with a primary goal of seizure reduction, and a Phase 3 in Infantile Spasms with the primary goal of spasm resolution. We intend to share further detail around the respective disorders and pivotal programs during an upcoming R&D Day in the second quarter. From a regulatory perspective, we are actively pursuing protocol feedback and orphan designation from both the FDA and EMA. To highlight a few key points, we have recently received very constructive and thoughtful feedback from the FDA on our PWS protocol call, and this month also were granted orphan drug designation in the U.S. for Angelman syndrome, two great milestones for the team. And then finally, from an operational perspective, in order to support and execute these late-stage clinical programs, we have built a stellar team with neuro, orphan and cannabinoid experience, strengthened our global CBD oral liquid formulation patent estate, and are building out our global supply chain to support both global clinical development and eventually commercialization with success. And with an internal team of experts, we have also identified and are engaged in opportunities for both therapeutic and global expansion. Moving on to Slide 19, why are we pursuing seizures and why are we pursuing seizures in Angelman syndrome. In addition to the CBD, clinical and commercial validation from Epidiolex and the drive to address the high unmet need for a novel efficacious, convenient and safe drug for these patients, from a market value perspective, there are a few recent data points highlighted on the screen. On the left-hand of a slide, Takeda’s acquisition of the remaining 50% stake of soticlestat from Ovid, and UCB’s recent acquisition of ZOGENIX, both of which tell us that a late-stage rare epilepsy asset can possess significant value, the underlying value of both of these in the $2 billion range. Wrap it up in on Slide 20. We have summarized our guiding clinical framework. We have designed our two lead pivotal programs in Prader-Willi and Angelman, with robust endpoints to generate valuable data across a range of symptomologies. First, focusing on the RAD PWS circle on the left-hand of the slide. Success with hyperphagia, the primary endpoint of our pivotal study could inform advancement into other obesity disorders, where hyperphagia is a prominent feature. And moving to the Angelman circle on the right-hand of the slide, seizure reduction, the primary endpoint of the study has been clinically and commercially validated and success with Angelman syndrome could lead to development and other rare genetic epilepsy syndromes or broader epilepsies. Then together the irritability, behavioral sleep, and other data we collect from these pivotal studies in a range of secondary and other endpoints and scales, could inform the advancement into other neuro psychiatric or neurodevelopmental disorders highlighted in the center of the slide. So we view the opportunity with RAD011 as robust, we will progress it in a gated fashion, and we will continue to follow the data as we strategically advanced the molecule. With that, I will turn it back over to Kelly for any closing remarks and Q&A.
Kelly Martin: Well, thanks, Cole, and thanks for everybody who contributed today from the Radius team. Again, you’ll hear from others as we move forward. But just some concluding comments. I wrote parts of my quote several – some time ago, didn’t necessarily realize that my comments about the disruption and challenge in the sector and in the markets would be somewhat long lasting. Obviously, the tape is very challenging in lots of different ways. And we think in particular in the biopharmaceutical biotech space, there’s incredible dislocation. We track on any given day or week or month 100 or 200 companies that have some similarities to us. And many, many of those are trading either at or below cash, or at two-year lows or three-year lows, very few of them are cash flow positive. So our objective here in positioning Radius is, as I articulated, to generate cash, to have long-term cash flows, and to provide in a prudent way, in a gated way, potentially some very interesting optionality on late – very late-stage pivotal pipeline, in a manner that allows us to continue to grow cash, grow margin, and strengthen the company. So we look forward to sharing additional progress over the course of 2022. And operator, now we’re happy to open it up for any questions that the analysts may have. Thank you.
Operator: Our first question comes from Corinne Jenkins with Goldman Sachs. Your line is open.
Corinne Jenkins: Hey, good morning, everyone. Maybe just to start, I’m curious, as you’ve recently updated the label both of the black boxed warning and the mechanism of action, if there’s any feedback you can highlight from the field, in terms of the response you’re getting, and as you promote to most with this update?
Kelly Martin: Yes, sure. Hi, Corinne. So we’re in the process of updating all of our promotional assets to reflect the boxed warning as well as the mechanism of action. But I can tell you that already, we’re hearing that the fact that the boxed warning has been removed, is news – good news that’s getting our field in the door. And the mechanism of action update has enabled us now to explicitly state, as Chhaya mentioned, TYMLOS is an anabolic agent that helps form new bone. That message is pretty powerful and simple. And so it enabled us to kind of really simplify the message and that’s really helpful for our sales team and it’s definitely a place we’re going to be emphasizing in 2022.
Corinne Jenkins: That’s helpful. Thanks. And then maybe with respect to Angelman syndrome and Infantile Spasms, which you announced recently, can you just provide a little bit more detail on what the specific preclinical or translational work you did to assess RAD011 in these additional indications, and maybe when we could expect to see or if you plan to provide publicly some of that work?
Kelly Martin: I’ll – Cole will comment shortly, but I just want to emphasize, Corinne, and thanks for the question there. We will have a very extensive R&D session in the second quarter, because there’s obviously been a tremendous amount of work done on the underlying science, target mechanism and data. But Cole, do you want to comment on anything?
Cole Ikkala: Yeah, sure. Thanks for the question. So Rupert Haynes and John Foster really led a long and diligent process last year to identify these two seizure populations. Angelman syndrome is particularly attractive due to the prevalence, the prevalence of seizures within the population and the similarity of these seizures to Epidiolex’s approved indications and LGS and Dravet. Infantile Spasms is an area that we have historical data on, that we analyzed, tore apart, spoke with many KOls and believe we have designed a new study going forward, that would be fairly attractive. The Angelman study, which we’ll share more detail on and at the R&D Day, is a Phase 3 study, which, in summary, will look a lot similar to previous studies performed by Epidiolex. And in Infantile Spasms, similarly, we’ll share more detail on later, but two attractive indications that we spent a lot of time assessing.
Kelly Martin: Yeah, let me just reemphasize or emphasize that with the seizure cluster, there’s a tremendous amount of read across for Epidiolex, which we can utilize and we do utilize and have utilized pretty, pretty aggressively. And as close as we’ve had extensive discussions with the clinicians that specialized clearly in these areas and have gone through with them under CDA, all the various details, the safety issue – safety – any safety data efficacy data. And so we’re – we would be most interested and excited to lay out all the pieces of RAD when we have our R&D update.
Corinne Jenkins: Thank you.
Operator: Our next question comes from Jessica Fye with Morgan Stanley. Your line is open.
Unidentified Analyst: Hi, this is Nick on for Jessica. Thanks for taking our questions. First one, when you talk about significantly improving TYMLOS margins in 2021. Can you provide specifics about how you accomplish that? And kind of maybe looking forward, how do you see the total osteoporosis market, in particular, an anabolic market growing over the next one to three years? And if so, what do you see driving that growth?
Kelly Martin: Well, those are like three different zip code questions. Peter Schwartzman, who is our Head of Corporate Finance. He will go through the margin details for our product. I can give you some comments on anabolics for what that’s worth, which we don’t think as much, but we will comment on that, so.
Peter Schwartzman: Thanks for the question. So as Kelly pointed out, we’ve substantially improved the footprint and productivity of the sales force, as well as taking out costs that were unnecessary to both sales growth and development, which enabled us if you look at our prior disclosures, we’re not going to comment today on the segments, but we were able to almost entirely offset our change in guidance to the reported to 2020 to achieve the segment earnings level that is about the same. So we’ve increased the margin several 100 basis points. And we think that in 2022, we’ll be able to expand that even further. And at the EBITDA line for TYMLOS, we’ll bring more dollars as sales grow to that line, which will increase the company’s operating flexibility.
Kelly Martin: Well, that’s great. And I don’t know, Bob, if you would like to comment on the anabolic, or you want me to comment on the anabolic syndrome ? Is that makes sense?
Bob Valentine: Sure. So the anabolic market. the way that’s measured is, it shows that Forteo is somewhat declined. We are marginally increasing in that small bucket versus Forteo. And we obviously look at the anabolic components of the space. But we don’t look at the market opportunity as what’s an anabolic and what’s not an anabolic. We look at the opportunity as and there’s these very large numbers that you’ve all heard before 10-plus million osteoporosis patients, which is interesting. But what’s really interesting for us is to focus on those patients with fractures of wishes, 1 million to 2 million, just to highlight, we just – we will be filing the male indication. We think the male indication is another growth area, no pun intended. And particularly, if you look at some of the secondary endpoints of the male trial and the intersection with metabolic disease, particularly diabetes, another very interesting place to go. So – and I know historically, the market kind of looked at anabolics market share Forteo versus our product and that was the whole way to look at it. I understand that. I can appreciate that. But I think that’s only a small way to look at the underlying opportunity. The underlying opportunity is broader than just who is or is not on anabolic. Hopefully, that roughly answers your question.
Unidentified Analyst: Nope, it does. Thanks so much.
Bob Valentine: Thank you.
Operator: Our next question comes from Greg Harrison with Bank of America. Your line is open.
Mary Kate: Good morning. This is Mary Kate on for Greg. Thank you for taking our question. Maybe regarding Elacestrant, how to see increasingly competitive sort of development landscape impact your expectations for Elacestrant moving forward?
Kelly Martin: I can give you some comments and Chhaya try to add whatever she would like. The competitive information so far is mostly blinded in on though. There’s lots of noise. There’s lots of articles. There’s lots of research, but there’s no data. And so we don’t really not to be flippant at all. But we don’t really have a view of how does Elacestrant compare it to the Sanofi molecule or the AC molecule because we have some previous data, but we don’t have the pivotal data. We – or Menarini don’t have the pivotal data. We work very closely with Menarini. We have been fortunate to listen into and had lots of discussions with clinicians who actually will be utilizing therapeutics, I would only characterize those as very constructive vis-à-vis Elacestrant. And as the first oral served, as Chhaya mentioned, and this is monotherapy the data, I think not to speak at all on behalf of Menarini, but I would understate that they think that the patient need and the commercial opportunities rather significant with where we stand today. But Chhaya, would you like to add anything?
Chhaya Shah: Just – thanks, Kelly. Just to add that, at the San Antonio Breast Cancer, Dr. Bardia gave an excellent presentation on the third and our personal third. And I think we’re focused on that versus worrying about our competitors and getting this to the market for our patients and was well received by other physicians KOLs. And I think that’s what we continue to stay focused on like, other data’s blinded. So we’re right there, and we’re pushing forward to the NDA submission.
Bob Valentine: We would also comment that the trials amongst the oral search had somewhat different patient basis and are somewhat differently designed. We’re entirely focused on getting our molecule through the process and into the hands of patients as soon as possible. And over the course of time, we’ll see what the different SERDs are.
Kelly Martin: And I would just lastly, the slides that Chhaya went through, the – our own analysts, of which we have some great ones, some of those numbers 400 and 800, kind of back into what they this sort of range of what they think there are other analysts who follow the broader space. There’s lots of other numbers. Net-net, breast cancer is one of the top three cancers unfortunately from a mortality point of view, still today. The intersection of genetics is even more important. And as we outlined Menarini has quite aggressive plans and activities undergo – underway for both combination adjuvant and other indications, particularly potential metastasis into the brain. So it’s a powerful molecule. And I think the application in oncology – the oncology setting is that’s a story that will unfold and to be told over time. From our point of view, the return of the cash generation to us, depending on what the full net revenue is over time is meaningful and possibly extremely significant.
Mary Kate: Absolutely. Thank you.
Operator: Our next question comes from Jack Padovano with Stifel. Your line is open.
Jack Padovano: Hi, this is Jack calling in for Annabel Samimy. Thanks for taking our question. I know you mentioned that RAD011 is going to become a major upcoming focus in the pipeline. But could you maybe offer any additional insight into whether you’re looking to pursue any additional near-term business development at this time? And if so, how will you balance that with your profitability and cash flow positive goals? Thanks.
Kelly Martin: Anything – this is Kelly. Thanks for the question, Jack. Anything that we do on the BD side, whether that’s incoming or outgoing or structured trades, we will do nothing to change the cash flow generation, the margin extension of the company, i.e. anything that we do that’s opportunistic would have to fit into the improvement – a radical improvement of the P&L over the last 18 months, we’re not going to slide back. So as good companies would be and this – I mentioned it because the dislocation in the market, there’s dozens and multiple dozens and dozens of companies that don’t have cash, they can’t fund their programs, and they have no way forward. That’s unfortunate for them. We’re not this or the lifeline to that, but opportunistically, if we can add something and continue to keep the growth in cash flow and improvement in P&L, and it makes sense strategically, then we would think about it. But I think that we have our hands fairly full as we sit here today between RAD and abalo and all the pieces of abalo and the Elacestrant piece, and also the globalness of the Abaloparatide asset, which we’ve been working on. So I guess the overriding theme would be we’re not going to do anything to change the amplitude and improvement of the operating cash flow of the company.
Jack Padovano: Thank you.
Kelly Martin: You’re welcome.
Operator: Our next question comes from Vikram Purohit with Morgan Stanley. Your line is open.
Gospel Enyindah-Asonye: Good morning. This is Gospel on for Vikram Purohit, and thanks for taking our question. My question is this for your 2022 U.S. TYMLOS sales guidance, how much contribution, if any, is expected from the male osteoporosis population? Thank you.
Kelly Martin: Sure. As – because we would launch it towards the very end of 2022 at best, so say December, but they’re right approximately…
Chhaya Shah: 23 months.
Kelly Martin: Yeah, so it’s really 23 months, wherever you would start to look at male. And as I indicated in Chhaya, Danielle and Bob are working on the – the interest in male seems to be pretty interesting for us and reminding people of entities not approved for male. Obviously, Forteo isn’t we are and we have some interesting secondary endpoints and the the black boxed warning removal is interesting. So, I think the male population is one that if you talk to docs, which I have, unfortunately, males that have osteoporosis that suffer a fracture, and this is a broad statement, will tend to decline much faster and more severely than female. So the ongoing therapeutic need for male osteoporotic patients with fractures is pretty high and that’s fairly well known by treating physicians.
Gospel Enyindah-Asonye: All right. Thank you very much.
Kelly Martin: You’re welcome.
Operator: Our next question comes from Eun Yang with Jefferies. Your line is open.
Unidentified Analyst: Hi, this is Milan on for Eun. Thank you for taking the question. Could you please talk a little bit about what pricing point would be reasonable for Elacestrant based on the PFS data compared to Faslodex, that’s about $19,000 per year? Thank you very much.
Kelly Martin: Yeah, that would be in the hands of Menarini. We – and Chhaya should comment. We work with them on all the pieces, but that’s not. That’s – since we sold them the asset, that would clearly be in the intersection of their commercial strategy reimbursement team. Chhaya, you want to add anything to that?
Chhaya Shah: Yeah, they’re just working through those pieces. And again, like Kelly says, it’s in the hands of Menarini and they’ve hired some good commercial folks, as well as pricing folks to evaluate all of the market.
Kelly Martin: I can add editorially, that pricing is not something that we collectively speaking again, not for Menarini, but maybe representing a little bit of thinking. That price is something that we’re not overly concerned about relative – on a relative basis or an absolute basis.
Unidentified Analyst: Got it. Thank you.
Kelly Martin: You’re welcome.
Operator: Our next question comes from Douglas Tsao with H.C. Wainwright. Your line is open.
Chris Bialas: Good morning, everyone. Chris Bialas here on for Doug. So two from us. So you know that patient conversion and keeping them on therapy are the weaker links in the patient journey. So how do you find and improve these? And is there any update on the depot formulation? And when can we expect an update or any potential human studies? Thank you.
Bob Valentine: Yeah. Thanks, Chris. This is Bob. So one area of clarification as well, is that at least we still believe that the sort of the lion’s share of growth will emanate from the sort of the top of the funnel and enrollments. But there’s definitely leverage to be found. In those areas, you mentioned conversion of patients to therapy and then duration of therapy. So we’re taking a very deep dive into the the process by which we onboard patients and that they’re treated during the onboard process. It’s very administrative. So how can we streamline some of that work, and make sure that that sort of some of the administrative pieces don’t get in the way of the patient with a script getting on therapy. From the perspective of duration of therapy as well, I’d say this is – maybe particularly more cross-functional across the board from the way we message to physicians to the way we interact either we or partners interact with patients while they’re on therapy after their first time is important to make sure that the patient understands the criticality of staying on therapy for the recommended duration. That, again, the administrative issues do not get in the way of them refilling their pens. And that they’re sort of aware of the benefits of staying on therapy for longer periods of time. So we’re taking a very, very detailed in-depth look at all of this, or dedicating a lot of attention to it. And we anticipate we’ll be able to incrementally improve both of those items.
Chhaya Shah: I’ll take the depot question – the second part of your question. Yeah, great question. It’s one of our lifecycle management processes that we’re working through. By the end of the first quarter, in the next month or in half or so, we’ll have a bit of a from a lab and a scientific perspective of Go/No-Go decisions on the people formulation. We’re working with some fantastic scientists who are really experts in long acting peptide fine. And we’re working through again, that those pieces next step, if it’s ago will be the animal studies, and then we’ll progress through the future preclinical phase as we want to. But everything looks as we wanted to for timeline, and we’ll get some Go/No-Go decisions in the next month, month and a half.
Chris Bialas: Awesome. Thank you very much.
Chhaya Shah: Yes. Welcome.
Operator: There are no further questions. I can turn the call back over to Kelly Martin for any closing remarks.
Kelly Martin: Well, thank you all very much for your questions. Give us an – giving us an opportunity to explain a lot of progress from 2021 and our main areas of focus for 2022 just recognize the whole Radius team top to bottom is doing a great job. And in this market volatility, which I’m sure will extend now for some time, we will continue to – try to differentiate ourselves, generate cash, be exceptionally disciplined, increase the margin and selectively advance our products whether it’s abalo, Elacestrant with Menarini or RAD. So thank you very much for your time and look forward to sharing more as the year progresses.
Operator: This concludes the program. You may now disconnect. Everyone, have a great day.
