Better Therapeutics, Inc. (NASDAQ:BTTX) Q3 2023 Earnings Call Transcript

Better Therapeutics, Inc. (NASDAQ:BTTX) Q3 2023 Earnings Call Transcript November 10, 2023

Operator: Good day and thank you for standing by. Welcome to the Better Therapeutics’ Third Quarter 2023 Business Update Call. At this time all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Mark Heinen, Chief Executive Officer. Please go ahead.

Mark Heinen: Thank you, operator. Good morning, everyone, and welcome to the Better Therapeutics conference call. Our press release was issued this morning and can be found in the Investors section of our corporate website, bettertx.com. Joining me on the call today is Frank Karbe, our President and Chief Executive Officer; Dr. Mark Berman, our Chief Medical Officer; and Diane Gomez-Thinnes, our Chief Commercial Officer. During today’s call, we will provide a business update and a financial overview of the third quarter of 2023. A Q&A session will follow our prepared remarks. Before we begin, I’d like to remind everyone that any statements we make or information presented on this call that are not historical facts are forward-looking statements that are based on our current beliefs, plans, and expectations that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Actual events and results may differ materially from those expressed or implied by any forward-looking statement. With that, I’ll pass the call over Frank. Frank?

Frank Karbe: Thank you, Mark, and good morning, everyone. Thanks for joining us on the call today. I am delighted to start this call with the exciting news that AspyreRx is now available for commercial use. We’ve started receiving prescriptions and have patients on active treatment. Over the past quarter, we have made substantial progress following the news in July that the FDA authorized AspyreRx as a Class 2 medical device, indicated to treat adults with Type 2 diabetes. Our team completed development work to prepare the product for commercial release, established the necessary organizational infrastructure to launch a regulated prescription product into the market, and continued engaging payers to obtain coverage. Our first opportunity to engage directly with healthcare providers was at this year’s American College of Lifestyle Medicine’s annual meeting a couple of weeks ago, and it was exciting to see the strong interest in AspyreRx. I believe we’re truly at an inflection point with the possibility of commercial success now within our grasp.

Now, a few months ago, I laid out the three areas we need to de-risk in order to successfully advance better therapeutics. This was one, obtain FDA authorization, which of course we have, two, demonstrate commercial traction, and three, improve our financial position. In October, we raised approximately $3 million through our at-the-market or ATM facility at an average price per share of $0.42. We intend to further strengthen our financial position in the coming weeks, and extend our runway sufficiently to first demonstrate meaningful commercial traction, particularly in our initial launch geographies to inform the full commercial potential of AspyreRx, and then second, advance discussions with payers in secure initial coverage. As you will hear from Diane, we are confident both can be accomplished.

I will now recap other accomplishments in the third quarter and October of this year. In September, we announced the completion of enrollment of 1,000 participants in our clinical programs evaluating the long-term effectiveness of AspyreRx in Type 2 diabetes. Also in September, our patent, ‘managing lifestyle and health interventions with Predictive Analytics’ was issued in the European Union. Now, this is our second patent issued for four patent families filed by Better Therapeutics, covering the breadth of our novel method of delivering cognitive behavioral therapy, innovative use of patient engagement data, and AI methods, such as machine learning, to predict outcomes and adjust treatment. In October, we announced the preprint publication of the results of our LivVita liver study in Gastro Hep Advances, a peer-reviewed journal produced by the American Gastroenterological Association, or AGA.

Authors concluded, the totality of positive efficacy, safety, and usability data indicates the potential of Better Therapeutics digitally delivered CBT to help address the significant unmet clinical needs observed in metabolic dysfunction-associated steatotic liver disease, or MASLD, and metabolic dysfunction-associated steatohepatitis, or MASH. Now, these are the newer terms now for NASH and NAFLD. Also, in October, we announced new data from a subgroup analysis that revealed that adjunctive use of a AspyreRx with standard of care, including GLP-1 receptor agonists, leads to a substantially greater clinical improvement compared to control participants who used GLP-1 ones but did not incorporate the AspyreRx into their regimen. We plan on submitting this data for peer review and publication.

With healthcare providers prescribing a AspyreRx and patients engaging in a CBT treatment, we have now transitioned from an R&D organization to a fully integrated commercial one. Our focus for the remainder of the year is to further lay the foundation for a successful commercial launch. And in doing so, we have the benefit of incorporating lessons learned from those that came before us. We are pursuing a very targeted go-to-market strategy with the objective to demonstrate meaningful commercial traction in our initial launch geographies to inform the full commercial potential of a AspyreRx, which would then allow us to rapidly expand our commercial footprint to other parts of the country. Over the past few months, we have and we continue to prioritize our market access activities with a goal to achieve peer coverage.

These discussions have progressed in a positive direction, and combined with overall feedback received thus far, we’re confident peer coverage will be obtained. As with any new product launch, particularly in a new category like PDTs, peer coverage, of course, will take time to ramp up. And in the meantime, to ensure physicians can gain clinical experience with a AspyreRx and that eligible patients have affordable access to a AspyreRx, we’re offering a self-pay option for a limited period of time. Now, I’ll address the question of revenue guidance. Our plan is to begin sharing guidance once we have obtained a solid understanding of our launch dynamics, which we expect to take at least two to three quarters of commercial experience. Now with that, I’ll hand it over to Diane to provide a commercial update.

Diane?

Diane Gomez-Thinnes: Thanks, Frank. It is exciting to be at this point launching a AspyreRx into the market and continuing to build up our commercial footprint to drive awareness and educate providers. And with that, I thought I’d start by sharing initial reactions since our market release. The news of AspyreRx’s commercial availability was picked up by over 20 news outlets, and this included AspyreRx being featured in the medical breakthroughs and diabetes section in the October-November issue of AARP. We reviewed AspyreRx at the American College of Lifestyle Medicine’s 2023 annual meeting in Denver, giving us the opportunity to engage with hundreds of health care providers, share our clinical data, demonstrate our products and educate providers on how to prescribe AspyreRx. Providers reacted positively to AspyreRx seeing its main benefits as helping patients make lifestyle changes in provider resource constrained environments, complimenting existing diabetes care management programs, and addressing a gap in care in a scalable way.

A combination of the pivotal clinical trial data, including A1c efficacy, reductions in adverse events, and fewer increases in anti-hyperglycemic medications were cited as compelling reasons to prescribe AspyreRx, and this reinforced our findings from our market research that we completed last quarter. And providers were pleased to hear about our efforts to seek coverage by payers, and were complimentary of our affordable self-pay options for patients until broader insurance coverage is available. I will now share our progress with payers. Since our authorization in July, we have engaged with 21 payers, which includes both national and regional payers, and thus far, 13 of those engagements have progressed to clinical presentations with two more schedules before Thanksgiving, and so far, seven have advanced to deeper product and clinical discussions furthering potential coverage decisions.

In general, there is great receptivity and willingness from payers to engage with us. Managing costs associated with Type 2 diabetes is a top priority for payers due to the escalating costs associated with this disease, and they are seeking solutions. And given the positive feedback, we recently onboarded additional payer-field resources to broaden our outreach. While payers may have different processes, we have been successful in meeting with key decision-makers and gaining support to facilitate reviews with broader clinical teams. We have also published our price in all major compendia, and we expect to be able to announce a payer agreement by year-end. Overall, payers continue to be impressed by the size of the design of our randomized control trial, including the diversity in the hard-to-treat uncontrolled patient populations, the studies’ clinically meaningful endpoints, and the quality of clinical evidence that we generated.

We have reacted positively when hearing about our development of health economic models, and we recently submitted our comparative effectiveness analysis for peer-reviewed publications. As a reminder, a CEA evaluates the long-term or lifetime economic impact of an intervention with an incremental cost-effectiveness ratio, which describes the cost for quality-adjusted life-year gains. And we look forward to having this manuscript reviewed. Moving to an update on the VA, we have submitted our federal supply schedule application and are waiting to be assigned the contract negotiator. And once on FSS, AspyreRx would be available to be prescribed to veterans that receive care via the VA network. And as a reminder, according to Veterans Affairs, diabetes affects nearly 25% of the VA’s patient population.

A biotherapeutics scientist in a lab coat examining a monoclonal antibody.

With our products now in market, we are focused on building out our commercial organization to support the initial phase of our launch. Our new Head of Sales is on board, and together we are placing field sales personnel in our focused initial geographies to begin educating targeted providers about AspyreRx. We are also deploying medical science liaisons into our target markets to support scientific exchange meetings and engage with key opinion leaders. And for prescribers outside these geographies, we have internal virtual resources, our customer service group, and Phil, our pharmacy partner, who can support prescribing with interested providers. As a reminder, our initial launch geographies and early adopter targets are informed by Type II diabetes patient volumes and associated prescription counts, the providers associated with these patients, and an overlap with top health systems and payers.

A heat map of the highest concentration of targeted providers has informed the locations and initial focus for our sales team in the Northeast stretching down the Mid-Atlantic and out to the Midwest. We have identified a total of 4,300 target providers tied to about 15 million diabetes prescriptions a year, an increase from pandemic era data we previously acquired. This cohort represents innovator and early adopter segments of providers who are more willing to prescribe new medications and devices to treat Type II diabetes and are already actively using technology, including apps in their practices. Together with over 200 leads from the recent ACLM meeting, we are focused on driving provider awareness and adoption as we begin to expand our sales reach with targeted providers, including in the VA, invest further in our medical affairs organization, activate a targeted provider omnichannel approach to include digital awareness campaigns, and establish our presence at key diabetes conferences for the first half of 2024.

To support physician prescribing, we are tracking availability in electronic health record systems since submitting AspyreRx information to all major compendia, and physicians are already successfully e-prescribing. Before I finish, I will touch briefly on a couple of recent developments in the industry that acknowledge prescription digital therapeutics are gaining awareness among key stakeholders to open up future growth opportunities. In October, the FDA announced the formation of a Digital Health Advisory Committee to support safe and effective regulation of digital health technologies while encouraging innovation. This committee will advise on FDA policies and regulations, providing relevant expertise to improve the FDA’s understanding of the benefits, risks, and clinical outcomes associated with the use of digital health technology.

In addition, the FDA recently issued draft guidance titled Regulatory Considerations for Prescription Drug Use-Related Software, which provides the agency’s use and intent to consider the combined effectiveness of pharmaceuticals and digital therapeutic solutions when making drug labeling decisions. Next, on CMS, regarding the bipartisan bill to provide Medicare and Medicaid patients access to prescription digital therapeutics, in September, the House Energy and Commerce Committee held a subcommittee hearing in which they reviewed the PDT bill. In addition, a Congressional Budget Office score has been requested for the PDT Act this year. We were also pleased to hear at the most recent Academy of Managed Care Pharmacy Nexus meeting that the pending bill and the new FDA Digital Health Advisory Committee are top policy priorities for AMCP.

Before passing on to Mark, let me finish by saying, AspyreRx is now commercially available and providers are prescribing through our pharmacy partner, PhilRx. We have had positive reactions among providers highlighted by feedback we received at our first industry conference. And we are confident with the level of engagement we have had with payers and the progress we are making towards gaining commercial coverage for AspyreRx, and we expect to announce at least one agreement by year end. Mark Heinen, our Chief Financial Officer, will now review our third quarter 2023 financial results. Mark?

Mark Heinen: Thank you, Diane. I will begin with a discussion of our operating expenses for the third quarter of 2023. Our overall operating expenses declined to $5.3 million in the third quarter, compared to $7 million in the second quarter this year, and $11 million in the third quarter of last year. The lower operating expenses are primarily the result of the cost savings initiatives we announced earlier this year. Research and development expenses were $1.8 million for the quarter, compared to $5.5 million for the same period in 2022. The decrease was primarily due to a $2 million decline in clinical study costs, as we completed the BT-001 pivotal trial in the third quarter of 2022, and a $1.8 million decline in personnel-related costs as a result of the restructuring in the third quarter of 2023 and other cost savings initiatives.

Sales and marketing expenses were $1.4 million this quarter, compared to $1.6 million for the same quarter last year. Personnel-related costs increased $200,000 as we prepared for the October commercial launch of AspyreRx. This was offset by a $300,000 decline in real-world evidence costs, as we completed the enrollment in this study. G&A expenses for the quarter were $2.1 million, compared to $4 million for the same period in 2022. The decrease was the result of a $1.1 million decline in personnel and consulting costs related to the cost savings initiatives I previously mentioned, and a $700,000 decrease in business insurance costs. The interest expense for the quarter was $500,000, compared to $400,000 for the same period last year. The increase was the result of higher interest rates associated with our secured term loan agreement with Hercules Capital.

Net loss was $5.9 million, compared to $11.4 million in Q3 last year. On a per-share basis, net loss was $0.15 for the quarter, compared to $0.48 last year. The decline in loss per share is related to the previously mentioned cost savings initiatives, and an increase in weighted average shares outstanding. Moving to our balance sheet, cash and cash equivalents were $6.6 million on September 30, 2023, compared to $15.7 million on December 31, 2022. In addition, in October 2023, we raised $2.9 million through our ATM facility, so on a pro-formal basis, taken into account the ATM utilization, cash and cash equivalents was $9.5 million at the end of the third quarter. Our lower cash burn and the recent utilization of our ATM extends our cash runway into the first quarter of 2024, allowing us to make several key fourth quarter milestones.

I’ll now hand the call back over to Frank for some closing remarks.

Frank Karbe: Thank you, Mark. Before we wrap up, I want to address what the upcoming milestones are that Mark just alluded to. As we’ve shared, we have advanced conversations with a number of regional and national payers to gain commercial payer coverage, and we expect to be able to announce our first agreement by the end of the fourth quarter this year, with more expected to follow, of course, in Q1 and beyond. Following the successful completion of the LivVita liver study and publication of the results of the peer-reviewed journal Gastro Hep Advances, we intend to submit a request to the FDA for breakthrough device designation for an investigational PDT in MASLD and MASH, also by the end of this year. Currently, there is no FDA-proof treatment for these diseases, which affects approximately one in four Americans.

And similar to Type 2 diabetes, behavioral change is foundational to addressing the root cause of these conditions. To support the commercialization of AspyreRx, we expect to announce a business development partnership by the end of this year. And lastly, we expect to further strengthen our financial position before the end of the year to extend our runway so that we can demonstrate meaningful commercial traction, both in terms of payer coverage as well as market adoption of AspyreRx. I recognize our market capitalization and share price significantly depressed, and how frustrating that is for our shareholders. But the fact is that we have made substantial progress over the past year in getting FDA authorization for our first product and making it commercially available.

We are confident we can obtain payer coverage, and we’re excited by the initial feedback from providers. And as we look ahead, we believe we will be able to demonstrate the commercial potential of AspyreRx over the next few quarters. There remains a huge unmet medical need in Type 2 diabetes. Our product has a broad label and has utility across the entire disease spectrum. It fits into the existing provider workflow. Our mode of action is already embedded in the Type 2 diabetes treatment guidelines. We have solid clinical evidence, and our HEOR model suggests that AspyreRx has the potential to demonstrate cost savings for payers and health systems. Our primary focus now is on successfully executing our commercial launch and getting our product to the millions of patients who can benefit from it.

I’m proud of our team and grateful for their dedication to our mission and persistence in pursuing it, which is what got us to this point in our evolution. And with that, we’re now ready to take your questions. Thank you.

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Q&A Session

Operator: [Operator Instructions] And for your first question, it comes from the line of Thomas Flaten from Lake Street Capital Markets. Your line is open. Please go ahead.

Thomas Flaten: Good morning, everyone. I appreciate you taking the questions. Diane, you mentioned that you’ve hired a new sale – Head of Sales and you’re placing field reps. Could you maybe quantify that in regards to your kind of goal and also maybe layer in the MSL coverage you have currently versus what your goals are?

Frank Karbe: Go ahead, Diane.

Diane Gomez-Thinnes: Okay. Hey, Thomas, good morning. Thank you for the question. Yes, we’re really pleased with where we are in placing our team, as you saw from our heat map there. And our plan is really to build teams as we build the momentum with our targeted providers, payers, and health systems. And we are strategically placing these first resources in priority geographies. And so when we look at this initial team this quarter, we are really looking at about 10 to start made up of sales, some seasoned health experience, some medical science liaison. And of course, as I referenced, we have also outsourced an additional payer resource group that will aid us in starting our efforts in the marketplace.

Thomas Flaten: And maybe on that strategic placement, how are you guys thinking about placing those post coverage in that territory? Or are you kind of assuming that those will align over the coming, I don’t know, six to 12 months?

Diane Gomez-Thinnes: Yes, great question. So, as we’ve been talking over the last year, our strategy has always been to be extremely focused, really carefully managing our resources. And so, the work that we’ve done has really been to identify where the highest concentration of high volume targeted providers are. We expect to be these early adopters of AspyreRx given all of the research and the segmentation work that we’ve done. So it was really important to start where we are utilizing our resources efficiently in these marketplaces, as you saw in the map. But I also want to clarify from a coverage perspective that our engagements have actually been across the country. We continue to be really encouraged by the number of conversations, the level of conversations we’ve had immediately post FDA authorization.

So those engagements are across the country and not limited to these geographies. And as we advance with our payer coverage efforts, you know, clearly that’s an opportunity for us to ensure that we are mapping our sales focus to those efforts as well.

Thomas Flaten: Got it. And a quick one from Mark Heinen. I believe payments against the Hercules loan were scheduled to start November 1. Could you just confirm that’s happening? Over what time period those repayments are being made?

Frank Karbe: Go ahead, Mark.

Mark Heinen: Yes, sure. Thomas, thanks. Thanks for the question. Yes, they restarted on November 1. Although, as we’ve mentioned in the past, Hercules has been a great partner to us and we continue to have discussions with them about potential future amendments to the agreement.

Thomas Flaten: Got it. Excellent. Appreciate you guys taking the question. Thank you.

Frank Karbe: Thank you, Thomas.

Operator: Thank you. And one moment for the next question. And for the next question, it comes from the line of Rahul Rakhit from LifeSci Capital. Your line is open, please ask your question.

Rahul Rakhit: Hey, guys, thanks for taking the questions. I was just wondering if maybe you guys give us an update on what you’re thinking or what is the set ASP and out-of-pocket costs for AspyreRx?

Frank Karbe: Hey, Rahul. Good morning. Thanks for your question. Yes, we absolutely can talk to this. Diane, do you want to take that?