scPharmaceuticals Inc. (NASDAQ:SCPH) Q4 2023 Earnings Call Transcript

scPharmaceuticals Inc. (NASDAQ:SCPH) Q4 2023 Earnings Call Transcript March 13, 2024

scPharmaceuticals Inc. beats earnings expectations. Reported EPS is $-0.35, expectations were $-0.48. SCPH isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to scPharmaceuticals Fourth Quarter and Full year 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce PJ Kelleher, with LifeSci Advisors. Thank you. You may begin.

PJ Kelleher: Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements on this conference call, other than historical facts, are forward-looking statements within the meeting of the Federal Securities Laws, including, but not limited to statements regarding ScPharmaceuticals expected future financial results and management’s expectations and plans for the business in FUROSCIX. The words anticipate, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions are typically used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to certain risks and uncertainties and other important factors that may affect ScPharmaceuticals’ business, financial condition, and other operating results.

These include, but are not limited to, the risk factors and other qualifications contained in ScPharmaceuticals Annual Report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed by the company with the SEC to which your attention is directed. Actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Any forward-looking statements made in this conference call, including responses to your questions, are based on current expectations as of today, and ScPharmaceuticals especially disclaim any intent or obligation to update these forward-looking statements, except as required by law. It is now my pleasure to turn the call over to Mr. John Tucker, Chief Executive Officer of ScPharmaceuticals.

John?

John Tucker: Thank you, PJ, and thanks to everyone listening to this afternoon’s call and webcast to review our fourth quarter and full year 2023 results. As has been our practice, I will begin with an operational update before turning the call over to Steve Parsons, our Senior Vice President of Commercial, for a more detailed update on the FUROSCIX launch; and then Rachael Nokes, our Chief Financial Officer for a review of our financials. We will then open the call for your questions. The fourth quarter of 2023 represents our third full quarter of FUROSCIX commercial availability, as we launched the product in late February of 2023. Demand has continued to grow reflected in our key indicators, including number of doses, number of total prescribers and doses filled per prescription.

We believe FUROSCIX is meeting the needs of heart failure patients suffering from fluid overload and the continued positive trend in these KPIs demonstrates that specialists continue to gain comfort prescribing it. For the fourth quarter of 2023, we reported net revenue of $6.1 million representing a sequential increase of 61% from $3.8 million for the third quarter of 2023 and at the upper end of the range that we provided in our pre-announcement press release on January 4th. This was driven predominantly by doses shipped to patients through our specialty pharmacy network. We also had direct sales of FUROSCIX integrated delivery networks. In fact, our fourth quarter net revenue included a sizable order by one of the largest closed IDNs in the country towards the end of Q4.

Going forward, while we expect to have sales to IDNs every quarter, including in Q1 of this year, the size of these orders can vary. We’ll cover this in more detail shortly. Before diving in further, I would like to note that in the Q4, we adjusted our KPIs from prescriptions to doses, as number of doses is the metric we use across our internal projections is more reflective of our current business, especially as the number of doses per prescriptions vary. Our gross-to-net discount from launch through the end of Q4 was running at approximately 18%, down from 21% through the end of Q3. We continue to expect the GTN discount to increase over time as contracting with payers and the marketplace evolves. We anticipate that the GTN discount Q1 of 2024 will increase relative to 2023 levels due to discounts we anticipate paying.

Inventory levels at the end of the fourth quarter at our specialty pharmacy partners were consistent with the inventory levels at the end of the third quarter. Shifting now to payers. We continue to have productive discussions with commercial, Medicare Part D and Medicaid payers in an ongoing effort to make FUROSCIX broadly available to patients at the most favorable terms possible. As mentioned earlier, in late October, we reached an agreement with one of the largest closed IDNs in the United States, providing unrestricted access to FUROSCIX without prior authorization over 8 million lives at a fixed co-pay ranging from $16 to $75. Also as of November 1st, 2023, FUROSCIX has been added on formulary as preferred brand, one of the largest government retired payer formulary, increasing the lives preferred access to FUROSCIX by an additional 1.1 million lives.

These favorable payer decisions, we’ve expanded the population of heart failure patients with access to FUROSCIX fixed co-pays of $100 or less to 70%, moving us closer to our previously stated goal of 75% or more over time. We are progressing with many other health plans and we hope to have more announcements like these in the months to come. At this point, I would like to provide an update on several long-term growth initiatives that we previewed last quarter that we view as critical for long-term growth strategy. In August, we announced favorable Type C meeting feedback from the FDA regarding the potential expansion for the FUROSCIX indication to allow for use in New York Heart Association Class IV heart failure patients. FUROSCIX has currently indicated for treatment of congestion due to fluid overload in adult patients with New York Heart Association Class II and Class III population.

We estimate that as many as 10% of all heart failure patients are Class IV and a meaningful percentage of these as many as 40% may benefit from FUROSCIX. Based upon the feedback that we received from the agency, we filed for the Class 4 indication early October of 2023. We’ve been assigned a PDUFA date for this audit. We are successful, we believe Class IV represent a meaningful expansion of our market opportunity to enable FUROSCIX to be prescribed to the most severe heart failure patients. Turning now to the 80mg/1mL auto injector that we are developing as an additional option in the on body infuser. We believe that an auto injector if approved will reduce manufacturing costs compared to the current on body infuser and confer environmental advantage.

We remain on-track to initiate a pivotal PK study in Q2 of this year and report results later this year. That, if successful, allow us to submit a supplemental new drug application to the FDA by the end of 2024. Finally, we announced feedback from the FDA pertaining to the potential expansion of the FUROSCIX indication include treatment of edema due to fluid overload in patients with chronic kidney disease or CKD. In its feedback, the FDA confirmed that, no additional clinical studies are needed to expand the indication, provided that we can demonstrate an adequate PK and pharmacodynamic bridge to the listed drug, which is furosemide injection. CKD is a progressive disease characterized by worsening renal function over time, resulting in frequent episodes of fluid overload that are treated with loop diuretic.

It is estimated that 12 to 15 Americans are aware that they have kidney disease and 50% of patients with CKD do not have a diagnosis of heart failure. The fluid overload being one of the most common complications in CKD, which worsens with disease progression. We believe FUROSCIX could be beneficial to patients with CKD, who have worsening symptoms through the fluid overload and are not responding to oral loop diuretics. To that end, we plan to submit a supplemental new drug application with the FDA for the CKD indication in the second quarter of 2024. Now turning to the first quarter of 2024. Despite the normal Q1 headwinds caused by patient out of pocket deductibles resetting, we saw our highest dose demand in shipment for the first half of the quarter.

This growth in demand has further accelerated in March. However, the impact of the cyber on tap unchanged healthcare began in the third week of February and is ongoing. This has caused the disruption in claims being processed resulting in delays in patients receiving shipments of FUROSCIX. With the unique position FUROSCIX has in the treatment of heart failure patients, we’re concerned that we will not see all of these units shipped. We’re actively working with our specialty pharmacy partners to ship as many of these units as possible. At this point, we do not know if and how much this will ultimately impact the quarter. We intend to provide a more detailed update when we report our first quarter results. At this point, I’ll turn the call over to Senior Vice President of Commercial, Steve Parsons for a deeper dive into our launch metrics.

Steve?

Steve Parsons: Thank you, John. As John indicated, the fourth quarter was our third full quarter of FUROSCIX commercial availability and we remain pleased with our progress. From launch through December 31st, we’ve had 1696 unique prescribers, up 52% from the 1119 unique prescribers from launch through September 30th. We’re extremely encouraged by this growth as it reflects our strategy in 2023 of establishing a broad prescriber base. Importantly, more than half of these prescribers had written multiple prescriptions by the end of the year. During the fourth quarter, we had 13,542 doses written and 7,016 of those doses have already been filled. There were another 4,592 doses that were still pending as Q4 ended. We continue to report doses written and doses filled, because of the unique nature of how physicians prescribe FUROSCIX.

Many of our physicians write prescriptions for patients in anticipation of future need due to worsening fluid overload. While these prescriptions might not be filled in the month or quarter they are written, they do get filled when the patient needs treatment and we report those doses, when the patient receives them. It is important to note that, approximately 14% of our prescriptions were canceled during the fourth quarter of 2023. Recall that, pending prescriptions are not canceled, rather they are still in process with the payers, some are approved and waiting in queue, while others are still in prior authorization. We filled a significant portion of these pending prescriptions in the first few weeks of 2024, and we continue to fill more pending prescriptions written in Q4 into the filled category every day.

Now the prescriptions that are canceled are for various reasons, including unreachable patients, who are hard to contact, have been hospitalized for a small number that are deceased. Of those that are reached to cancel a high co-pay is the main reason given. We anticipate the cancel rate will continue to decrease with FUROSCIX as is expected to become better positioned on more health plan formularies, lowering patients out-of-pocket costs and providing quicker coverage decisions. During the fourth quarter, the average number of doses per prescription filled was 5.9 doses, which remains higher than our long-term expectations. Our sales force has conducted 2,331 in services as of December 31st, which is up from 1,806 in services conducted as of September 30th.

In services provide important training to offices on the prescribing process for FUROSCIX and this ensures office readiness. As we open more new accounts, the execution of in services remains fundamental to FUROSCIX’s success and we regard the number of in services conducted each quarter, as an important leading indicator. We’ve said previously that, we stand ready to add additional territories as demand warrants. We plan on adding additional territories in advance of our Class 4 and chronic kidney disease initiatives. From a marketing perspective, we are engaged in a broad multi-channel marketing campaign to drive brand awareness adoption and commitment. This program encompasses many different activities, but some of the key ongoing activities include engagement and development of key opinion leaders, conference presence, print and electronic collateral and the development of both provider and patient websites among other critical tasks.

We’ve begun reaching out to heart failure patients and their caregivers with patient education materials for FUROSCIX. Overall, we’re pleased with our continued progress and the path we are on. That concludes my update. I like to turn the call over to our Chief Financial Officer, Rachael Nokes for a financial update. Racheal?

Rachael Nokes: Thank you, Steve. As of December 31, 2023, we held $76 million in cash, cash equivalents and investments, compared to $118.4 million as of December 31, 2022. Now I will cover a few income statement items. We reported a net loss of $13.8 million for the fourth quarter of 2023, compared to a net loss of $9.2 million for the fourth quarter of 2022. For the full year 2023, we reported a net loss of $54.8 million compared to a net loss of $36.8 million for the full year 2022. Product revenues were $6.1 million for the fourth quarter of 2023 and cost of product revenues were $1.8 million. For the full year ’23 product revenues were $13.6 million and cost of product revenues were $3.8 million. We did not generate revenue during the fourth quarter or full year 2022 as FUROSCIX was approved in October 2022 and commercially launched in February 2023.

Research and development expenses were $3.3 million for the fourth quarter of 2023 compared to $2.3 million for the comparable period in 2022. The increase in research and development expenses for the quarter ended December 31, 2023 was primarily due to an increase in device and pharmaceutical development cost. The increase was partially offset by a decrease in employee related costs. Research and development expenses were $11.8 million for the full year 2023, compared to $15.5 million for the full year 2022. Decrease in research and development expenses for the full year 2023 was primarily due to a decrease in clinical study and medical affairs costs, employee related costs and quality and regulatory consulting costs. The decrease was partially offset by an increase in pharmaceutical development costs.

Selling, general and administrative expenses were $16.2 million for the fourth quarter of 2023, compared to $7.2 million for the comparable period in 2022. The increase in selling, general and administrative expenses for the quarter ended December 31st, 2023 was primarily due to an increase in employee related costs and commercial costs. For the full year 2023, we reported selling, general and administrative expenses of $53.4 million, compared to $20.6 million for the full year 2022. The increase in selling, general and administrative expenses for the full year 2023 was primarily due to an increase in employee related costs and commercial costs following commercial launch of FUROSCIX in February 2023 as well as an increase in legal costs. The increase was partially offset by a decrease in insurance related costs.

Based on our current operating plan, we expect our operating cost to increase in 2024, as we further support the launch of FUROSCIX and the development of the 80mg/1mL auto injector. As of December 31, 2023, we had 35,968,510 total shares outstanding. That concludes the financial update. John?

John Tucker: Thanks, Rachael. This concludes our prepared remarks. At this point, we will open the call for questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Roanna Ruiz with Leerink Partners.

Rosa Chen: Hi, everyone. Rosa Chen on for Roanna Ruiz at Leerink Partners. Thanks for taking our questions. First one from us, can you guys share some additional details on your efforts securing, more additional IDN agreements and how you expect that could impact some of the current trends that you’re seeing in the uptake of FUROSCIX by the individual prescribers?

John Tucker: Sure, Rosa. This is John, and I’ll have Steve jump in. The two largest IDNs in the country are Kaiser and the VA, the VA being the largest. We’re working with the VA. We’ve been selling into individual VAs. This year, a key initiative for us is to be national formulary for the IDN, I mean, for the VA. We think that will drive uptake. And then with Kaiser, more of a closed system where, we’ve already start the contract and we have sales in there. We think those two kind of are a little unique and that they’re really the closed integrated system. And you have Geisinger, who’s one of those as well. We’ll continue to sell into those really hard closed systems. But we really see a big expansion opportunity into what you would call IDNs that might not have the closed part of the pharmacy involved.

The docs might be employees, but they’re not in the pharmacy. They don’t have the pharmacy benefit. This is good for us because we can still talk about the FUROSCIX value message, but also be able to track the prescription. Those would go through our regular distribution network. But we anticipate that growing as a percentage of the business. There’s still a lot more patients outside of the IDN world than there are in it. But we’ve always thought that this would be a good market for us, as the value proposition is so well defined. I don’t know, Steve, if you want to add anything to that.

Steve Parsons: Yes. We get approached by integrated delivery network hospital systems quite regularly and they see an opportunity to shorten the length of stay in some cases by having the product available right there on campus, as well as preventing unnecessary readmissions, which they pay penalties for. They’d like to be involved in FUROSCIX distribution directly and have their doctors order it right through their EMR systems in the hospital. There’ll be more and more of that happening this year.

Rosa Chen: That’s helpful. Thanks. And second one from us on your CKD label expansion effort. Thinking of the potential launch there, if it’s approved and the nephrologist you may call on, what learnings from your current FUROSCIX launch would you apply there? And anything you would do differently specifically for that patient population and prescriber base?

John Tucker: When we look at nephrologists, they actually prescribe, they’re more productive in a way than the cardiologist around how many loop diuretics they use. I think, again, one learning we’ve had early on and I think this will apply to nephrologists as well, is really that, treating that patient as soon as that patient starts showing a reduced response to the oral diuretic is critical. Critical to get that patient feeling better, critical to keep that patient from being totally fluid overloaded. That message in our market research really plays well to the nephrologists. In fact, when we look at any of the market research with nephrologists, I think they understand the value prop, and I think they’re going to embrace it. We would think perhaps even earlier than cardiologists. I mean, Steve, I don’t know…

Steve Parsons: We’ve been calling on a small number of nephrologists already due to them having heart failure patients that are with fluid overload. Some of them are seeing cardiology patients that have been referred to them to deal with the fluid overload. We are calling on them already and they’re very anxious to have the broader indication to include CKD.

John Tucker: Yes, we’ve been very enthused and I’m not sure, John Mohr, if you want to add anything. He’s done most of the work on kidney. But we’ve been incredibly enthused with the response of the nephrologist to the product profile, the value prop. And there’s less of them, so we can cover more of them with our sales force. We’re anticipating really a quicker uptake in nephrology than we’ve even seen in cardiology. I’m not sure, John, if you have anything you’d like to add to that since you’ve done more.

John Mohr: Yes. I’ll just add that, when doing research and talking with nephrologists and you hear the story and you hear the description of the problem that they’re describing in their patients with chronic kidney disease. If you didn’t know that, they were nephrologists, you think that they were cardiologists. They’re describing the exact same problem. And so when a patient reaches out to their nephrologists for worsening signs and symptoms of fluid overload, the nephrologist is inclined to treat them. They don’t say, go to your cardiologist, elect your cardiologist do it and vice versa. It’s the exact same problem, just different individual being presented. Now that nephrologists will have that will the opportunity, they’ll use it just like the cardiologists do, just additional touch points.

Rosa Chen: I really appreciate the perspective. Last one, I’m going to squeeze one in. Can you just share the range in doses that you’re seeing right now for FUROSCIX? You mentioned the 5.5, average. What’s the range?

John Tucker: The range, we you’ll see every once in a while a script for one unit. I think usually that’s something weird going on. But typically it’s two or three. I think the maximum you’ll see is eight and that’s for a patient’s fairly volume overloaded, who is in a pre-admission, but I think you’re looking at two to eight is the range.

Operator: Our next question comes from the line of Stacy Ku with TD Cowen.

Stacy Ku: We had a few. First, Steve, understand you’re currently focused on establishing the infrastructure and driving uptake for prescribers, but just curious your views on expanding patient activation for DTC, especially as reimbursement continues to progress. And we have a few more questions, so we’ll just kind of lay them out first. As you also brought in out the prescriber base, are you helping these clinicians get a good sense of which patients will have reasonable co-pays just to help ease the prescribing for the clinicians as they think about appropriate patients and as we think about long-term improvement to fulfillment? And then just to follow-up, your comments around the change healthcare. Clearly, cyber-attack is pretty well understood issue at this point, but curious if you could provide any other additional details.

Is this just a delay in adjudication for co-pays from Q1 to Q2 as you implement kind of the temporary workarounds? Do you anticipate any prescriptions will be lost? And then last question, if we may, when do you think you might break out that IDN contribution? And what are your thoughts about types of disclosures? Thanks so much. I can repeat the questions, if needed.

John Tucker: We probably getting that wasn’t right fast, Stacy. Let me do the first one again. I think I’m going to take them the end. I’ll talk about change first. As I said, what’s happened since February 21st that, when the system went down is really the prescriptions coming in, being able to adjudicate them co-pays and ship them? We have, I think I said it in my prepared remarks, our demand, the number of prescriptions and units being written is way higher than at this time quarter-to-date last quarter, dramatically different. Obviously, our units filled is higher, but it’s lagging the prescriptions because of the delays we’re seeing. Your question is, is it just the delay? Do you lose some of them? I think that’s the big question is, yes, they’re delayed, but do you get them back?

We have a workaround with our specialty pharmacy partners. We are hoping change comes back up fully online here. They’ve said next week. The question is, can we ship everything that we should have shipped? And we’re just not sure of that right now. We don’t think unless something weird happens, it’s a long-term issue and we remain optimistic about making consensus for the year. But this is a disruption for us right now. Again, it started February 21st, it’s ongoing now. We have a workaround. We have been shipping units just not as many as we should be because of the slowness of the system. I’m going to talk a little bit, so that’s the first question. We talked a little bit about the reporting of the IDN. It will depend on the IDN, and in our contract with them of what metrics we can report.

We could break the sales out. I think we’ve said that, for Q4, we think it was in the 10% to 15% range for the IDN purchases that will vary. Again, we had a large purchase at the very end of the year from Kaiser. We don’t have visibility into what — Kaiser doesn’t let you see what doctor wrote. They don’t want you to detail on the doctors, which is crazy. But some of the IDNs that Steve mentioned, hospital-based ones will have more metrics to be able to share. But unfortunately with Kaiser, I think the metrics are going to be somewhat scarce. And then, Steve, do you want to — do you have the other questions?

Steve Parsons: I think you asked about helping doctors identify patients, who are going to have — what the co-pay is going to be for those patients so they can have success. Yes, we can do that. We’re pretty confident like 70% of our patients are able to access FUROSCIX co-pay of $100 or less. Some of them much less, like, the average co-pay for the patients with a with a with a $100 left is in the $20 range. You can imagine anything $0 co-pay, $10 and $50. A lot of the doctors are now, they’re submitting prescriptions in advance of meeting the product, anticipating that they’re going to need FUROSCIX for a specific patient who’s going towards them, it’s just a matter of time and they get a cost and coverage feedback. They get an answer and they get an approval on the product, they know the non co-pay is good.

And then when the patient does get sick and does need it, that’s when they call it down and it’s ready to go very, very quickly. They’ll tell the patients who have the really good co-pays, no hesitation at all. And some people who have higher co-pay, they may not talk about the product to them until there’s foundational charitable funding support for those. I don’t know if that answers the question, but they are able to get pre-clearance on a lot of these patients, and know who has the really good co-pay.

Stacy Ku: That’s really helpful. And then the first question we asked was really curious your thoughts around activating patients, by DTC. I know you’re focused on the prescribers right now, but as you progress your reimbursement, as you get the auto injector, what are your thoughts there long-term?

Steve Parsons: Yes. We have a plan. We have a strategy to reach directly out to patients and their caregivers. We did an awful lot of market research to be ready so that we know how they like to be communicated to? How to reach them? Where to reach them? We’ve begun in office, direct to patient with brochures and the brochures and the doctors giving them out things and we’re building a website just for patients. We have advocacy groups, Mended Hearts and HeartBrothers that are connecting us with patients through their networks of people, who have opted in signing up. The patient is a big focus for us this year more than it was in year one.

John Tucker: We spent the first 12 months as our plan was educating cardiologists before we educated patients. This year, there’ll be a lot more targeted outreach to patients and to caregivers. We are going to be doing a giant DTC campaign on survivor or something, probably not, you won’t see that. But I think you’ll see some targeted things to patients including potentially media as well.

Operator: Our next question comes from the line of Douglas Tsao with H. C. Wainwright.

Douglas Tsao: Hi, good afternoon. Thanks for taking the questions and congrats for the progress. John, I’m just curious in terms of the change health, I mean, what percent of your business has been affected by this? Because it was really just united in that one pair?

John Tucker: No. Doug, it’s really — you think of United, United owns or often owns, United owns change. But our specialty — most of all of the specialty pharmacies and of the payers use Change Healthcare. The adjudication of the scripts go through change. You could say all of our scripts for that period of time and ongoing are impacted. Now that said, it was really slow for a couple of days, because what happened was everything had to be called in manually and everyone was doing the same thing. It was incredibly slow. We have managed workarounds. There is another system in place called Relay that one of our other specialty pharmacies utilizes. We were able to move business there. That’s slow as well. But I think the work around has started to work and really what we need to do and what we’re focused on is making sure, we ship all of those scripts that were caught up, when it was totally down and we didn’t have a workaround.

I’m not saying you’re saying it’s working smoothly now. It’s obviously with the workaround working better. I think the specialty pharmacies are getting better at working through the limitations in the system. We’ve heard that, it will be coming back online, here next week. We are going to continue to work. We have asked especially pharmacies to put more people on, to man the phones, to ship the drug. If you ask what percentage of our business got impacted, the question would be what percentage of the business, what percentage of units prescribed aren’t going to ship that should have shipped? That’s the question. It’s relevant. It’s impossible for us to give you that final answer right now. We have recovered a good portion of it. Have we recovered all of it so far?

No. The good thing is we’re still seeing the demand come in very robustly. The docks are still riding and they’re riding more than they’ve ever written. We just need to be able to keep up, shift what’s coming in now and then deal with those that are still sitting in the system.

Douglas Tsao: Okay. That’s helpful. And then also just, in terms of nephrology, are you starting to see any off-label scripts being written? I mean, I know it’s challenged in terms of getting paid for, but I’m just curious, some plans or some outlook.

John Tucker: We have it. When we mentioned that we go to some nephrologists. You’ll see a lot of times even the cardiologists will say, boy, they have heart failure and CKD, I just let the nephrologists take care of it. That’s on label for us. That’s part of our heart failure TAM is those patients, even if they’re cared for by a nephrologist. That would be on label. Now if it’s Class IV, it wouldn’t be, but if it’s two and three and it’s in nephrologist and they have heart failure, then that’s all labeled and will get filled. If they wrote it and it was CKD, first off, we wouldn’t be promoting that at all. Second off, it probably will not be filled.

Operator: Our next question comes from the line of Chase Knickerbocker with Craig-Hallum.

Chase Knickerbocker: Good afternoon, guys. I’ll share my congrats on the progress as well. Maybe to start, where are we at from an average time for adjudication of the PAs perspective? And give me the average time, I guess, before the change health care disruption? And then since then, should we just think of it as those a lot of those adjudications have just been almost completely paused and that’s what’s causing this underlying disruption that you’re talking about that again everybody is experiencing?

John Tucker: Yes. We couldn’t tell you what the average time is, since change went down. I mean it’s variable and we’ve got workarounds now. We still have our primary specialty pharmacy that goes through change that is adjudicating claims for change and then they get triage to relay, if there’s an issue. That is an impossible question for us to answer due to — now again, the thing here is the data itself is very hard, to even get your hands on. We know the scripts coming in that we can see clearly. It’s what’s going out, when they went out. And again, we’ve got a workaround that involves a couple of other specialty pharmacies. The data is kind of some report, it differently. After change, there’s just no way this soon we can tell what that is. I don’t know, Steve, if you want to talk about that before the change.

Steve Parsons: Not ever trying to be evasive, but it’s really multifactor question on how fast prescriptions get filled. It depends on what the doctor wants. We have two ways for the doctor to order the product. They can check expediting 24-hour review, meaning they wanted as quickly as possible or they can check coverage and cost determination. That one that’s more of the layaway and that could sit there after it’s approved very, very quickly with a known co-pay that could sit there for weeks until the doctor wants to call it down. Now let’s just focus on the ones where they say, “I want it as fast as possible.” Our brand promises will get them something the very next day. Let me get a quick answer from the payer. And we reached the patient, we are able to ship it for next-day delivery.

If we don’t get a quick answer from the payer, we’ll still ship them one dose overnight for free so that they have something the very next day and then it buys us another 24 hours to get through to the payer, get the answers and then ship it out for the following day. So that’s been working very well to the satisfaction of our prescribers, but to do an average, when you add in all these ones that purposely can be there for weeks or even months, we’re filling prescriptions this quarter where people wrote them in October or November, and they’re finally calling it down. We’re very happy to have them. We do not discourage the doctors from ordering in advance and getting it preapproved. They like to do that. We like to see them doing that, but it does impact both our fill rate as well as our speed to dispensing.

Chase Knickerbocker: Yes, it makes sense. I certainly appreciate the complexities there with that answer. Maybe some color just based on some of the color you’ve given around gross to net and where you expect it to end the year, that indicates that you expect to contract with some of these large Medicare Advantage payers at some point, call it, earlier midyear this year in 2024. Just kind of speak to some of that activity and the conversations that are happening in the background that kind of give you the confidence to kind of assume that those contracts are going to get done.

John Tucker: Yes. So we’ve had ongoing negotiations with — there’s 4 big payers here in Medicare. And we’ve talked about it that when we first went out, they didn’t agree with what we offered them. We didn’t agree with what they offered to us. We’ve done a couple of iterations of that. These aren’t quick iterations. You don’t pick up the phone call, pick up the phone and call on Tuesday and then give you an answer on Wednesday. It takes some time, but we’re making progress. We think it’s key. If you look at especially next year that we’re on formulary here because of how the Part D is going to reset. But we have to get these done for this year, too. So we’re pretty confident that it’s going to happen this year, and that’s why we keep messaging that the GTN is going to go.

The discount is going to go up because we’re going to be paying these rebates. And again, we’re not paying them unless we think it makes sense for the brand. But we do think being able to lower co-pays for that 30% of the patients, to get them to $100 or less and also to speed adjudication time is important to the brand to go where it’s going. So they’re progressing. We’ve said it, once we sign them, we’ll announce them. And we still plan on doing that. And yes, that’s the plan.

Operator: Our next question comes from the line of Naz Rahman with Maxim Group.

Naz Rahman: Congrats on the progress. So just a couple of questions from me on your CKD indication. So the first one is, what kind of review cycle do you expect? Do you expect a 6-month review or 1-year review for the product, or from an indication label? And two, how do you think the reimbursement conversations in reverse and paradigm — sorry, evolved for this indication? Like, are you already having discussions with payers regarding this potential label expansion so you might see that benefit upon approval? Or do you have to kind of go back and have additional discussions and we might see the benefit of those discussions and reimbursement sometime later in ’25? Like, how do you think about PDUFA date?

John Tucker: Yes, I’ll take the first one. Steve, you can take the next one. We anticipate a 10-month review, it’s not a newer entity, which would be a 12 months. But we anticipate, and again, we’ve said we’re filing next month and we will file in April, will receive our PDUFA date, but we anticipate that will be 10 months. Is there a chance it could be 6 months? There’s always a chance, but I think, to be conservative, we’d say, 10 months, but there wouldn’t be a way that it could be 12 months. There’s not really a path that way. We expect a pretty straightforward review. The ID has CKD in their label or matching the label of the IV. We did a PK study that matches the label of the IV — the PK of the IV. So we think it’s a pretty straightforward review. And as I said before, we’re excited. Steve, do you want to talk about…

Steve Parsons: Yes. Yes. Well, we’re not negotiating for CKD hit at this stage. Payers don’t really want to do that. But we do know, we have pretty good assurance that cirrhosis will be covered the same way it is for heart failure with CKD. It will be a simple prior authorization to label. And that prior auth means they have to be trying generic oral diuretics, and that’s just not working, before FUROSCIX would be approved for an acute intervention. So it will be essentially the same, PA to label, our label will have CKD, and it won’t be any more complicated than that.

John Tucker: There’s exceptions where the plans will start a review prior to approval. It’s pretty rare. It’s pretty rare, though, that they spend the time to really start reviewing a product or an indication prior to approval. Again, they do it with…

Steve Parsons: Those things are under review at the FDA, they’re more likely to — you have to final first.

John Tucker: Yes, exactly.

Naz Rahman: That was helpful. And just one last question. So I think you — in your prepared remarks, you said you plan on expanding the commercial force for FUROSCIX. Could you comment on what the magnitude of that expansion would be? And does — the impact of change impact your timing decision making there?

John Tucker: There’ll be no impact unless change went for months here, right, which we don’t anticipate. I think anyone anticipates that, there’s no impact on how we’re looking at expanding the sales force at all. So I think what our thinking has been is that to expand it to 90 here midyear in front of the Class IV approval and then to 125 very early next year in front of the CKD expansion. That’s the thinking right now, but there will be no impact from Change Healthcare on that.

Naz Rahman: Once again, congrats on the progress.

John Tucker: Thanks, Naz. Appreciate it.

Operator: There are no further questions in the queue. I’d like to hand it back to management for closing remarks.

John Tucker: Great. Thank you very much. That concludes our call this afternoon. We remain pleased with the trajectory of our FUROSCIX launch, and we expect that the meaningful progress that we’re making with payers will add to our momentum. Its heart failure patients gain affordable access to FUROSCIX. We are excited about our life cycle initiatives after having directive discussions with the FDA and look forward to providing some updates as we progress through 2024. Overall, I’m pleased with our progress and believe that we can build on our current momentum and look forward towards a successful year. Thank you again, and have a great evening.

Operator: Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.