Baudax Bio, Inc. (NASDAQ:BXRX) Q1 2022 Earnings Conference Call May 5, 2022 8:30 AM ET
Sam Martin - Investor Relations
Gerri Henwood - President and CEO
Conference Call Participants
Greg Aurand - Noble Capital
Good morning. And welcome to the Baudax Bio First Quarter 2022 Financial Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. As a reminder, this conference is being recorded at the company’s request.
I would now like to turn the call over to Sam Martin, Investor Relations. You may begin.
Thank you, Kim. Good morning. And thank you for joining us on today’s conference call to discuss Baudax Bio’s first quarter 2022 financial results. This is Sam Martin, and I am joined today by Gerri Henwood, President and Chief Executive Officer of Baudax Bio.
On today’s call, Gerri will discuss the continued progress around the commercialization of ANJESO, and will provide an overview of the financial highlights from the first quarter. We will then open the call up for questions.
Yesterday afternoon, we issued a press release detailing our financial results for the first quarter of 2022. The press release, along with the slide presentation that we will reference for today’s call is available on the Events page of the News and Investors section of our website at baudaxbio.com. Please note, the slides for today’s presentation are viewer controlled.
Before we begin our formal comments, I’ll remind you that various remarks we make today constitute forward-looking statements, pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our financial outlook as seen on slide two.
These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our expectations and forecasts, and can be identified by words such as anticipate, believe, could, estimate, target, expect, intend, may, plan, predict, project, will and other words of similar meaning. The following are some of the factors that could cause our actual results to differ materially from those expressed in/or underlying our forward-looking statements.
The ongoing economic and social consequences of the COVID-19 pandemic, including any adverse impact on the commercial launch of ANJESO or disruption in supply chain, our ability to maintain regulatory approval for ANJESO, our ability to successfully commercialize ANJESO. The acceptance of ANJESO by the medical community, including physicians, patients, healthcare providers and hospital formularies, our ability and that of our third-party manufacturers to successfully scale up our commercial manufacturing process for ANJESO, our ability to produce commercial supply and quantities and quality sufficient to satisfy market demand for ANJESO, and our ability to raise future financing for continued product development and ANJESO commercialization, our ability to pay our debt and satisfy conditions necessary to access future tranches of debt, our ability to comply with the financial and other covenants under our credit facility, our ability to manage costs and execute on operational and budget plans, the accuracy of our estimates of the potential market for ANJESO, our ability to achieve financial goals and our ability to obtain, maintain and successfully enforce adequate patent and other intellectual property protection. This list of important factors is not all inclusive.
Any such forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties. These risks are described in the Risk Factors and the Management’s Discussion and Analysis section of Baudax Bio’s annual report on Form 10-K for the fiscal year ended December 31, 2021, and any other quarterly reports on Form 10-Q, which are on file with the Securities and Exchange Commission, and available on the SEC’s website.
Any information we provide on this conference call is provided only as of the day of this call, May 5, 2022, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise.
During the course of today’s call, we’ll refer to a certain non-GAAP financial measure. A reconciliation between the GAAP and non-GAAP financial measure is included in our earnings release, which is available on our Investor Relations website at baudaxbio.com. I encourage you to visit our Investor Relations site to access our earnings release, periodic SEC reports and a replay of today’s call to learn more about Baudax.
With that, I’ll ask you to please turn to slide three and I will turn the call over to Gerri Henwood. Gerri?
Thank you, Sam, and good morning, everyone. If you’ll turn to slide three and then advance to slide four, just to reminder that ANJESO, our commercial product is the first and only once daily non-opioid IV analgesic, we provide up to 24 hour pain relief, the product continues to demonstrate good safety and tolerability as seen in the development studies, COX-2 preferential characteristics are attractive to many clinicians who prescribe the product and it’s a very easy to use once daily IV push.
If we go to slide five, you will see that we have a very cute little bottle, it’s not actual size, it’s really giant compared to the actual size, it’s a 2 ml bottle with a 1 ml dose in it. During the quarter, we achieved net product revenue of just under $425 million -- $0.425 million, up 112% year-over-year. This was our sixth consecutive quarter of demand growth, quarterly vials sold to end users increased dramatically, thankfully, and increased 20% quarter-over-quarter versus the fourth quarter.
Our top 15 accounts grew by 31% during the quarter and these accounts make up just over half of our known customer units in the first quarter. March was the largest month -- single month of ANJESO units sold launched to-date and we continue to have Orange Book Listed patents that run until 2030.
If we go to slide six, you’ll see that there’s continuing nice quarter-over-quarter growth. And I just would remind you that during the first quarter, we continue to have a reasonably impactful COVID outbreak during January and for part of February. But in spite of that, we still saw 20% growth in that quarter.
If we get to slide seven, the unit’s sales was, as mentioned before, a very big increase year-over-year and a 20% increase quarter-over-quarter. And again a 73% roughly attainment of forecast, really we think was very good considering the headwinds that we sustained in the marketplace associated with COVID reductions in surgeries during January and parts of February.
We also did the reduction in force in March, and during that month, we continue to have very good pull-through and sales. So we’re gratified by the team that remains on board and their diligence with which they’ve continued to work.
If you look at slide eight, you see that we do can -- there is a little bit of variability in the weekly growth. But the weekly growth in terms of units by months is trending up. April, this was not including some of the late data that comes in usually by this weekend. So we think that April will be a normal first month of the quarter, normally our first month of the quarter, a little bit lighter than the ending month of the prior quarter and because we had such a great quarter overall in the first quarter, we don’t have a reason right now to believe that we’re not going to see continued progress during this quarter.
If we’re going to slide nine, we -- because of the intermittence of COVID, because of the expense of the team that we were running, although they were working hard and growing in efficacy, we made the decision that we could not continue with the burn rate that we had. We had a lot of feedback from investors that we took very seriously during that time period and made a significant change in our commercial footprint to reduce that burn rate.
So during the first quarter, we reduced from our prior staffing levels down to a total, including in-house personnel of seven professionals associated with the commercialization of ANJESO. This is in spite of the fact that we’re making progress for ANJESO. But believe that we could not sustain the platform that we had going.
We also made some cuts in finance and medical and some other areas as well to align with this new footprint. We continue and we’ll talk a little bit more about that in a moment with a very efficient approach to development of our NMBs and after our reduction in force expenses, our burn rate is reduced by approximately 65% going forward. We’ll continue on the ANJESO front to focus on key accounts and contracts that we have in place or just getting to be put in place.
The key staff we have, as I said, continue to hustle, hustle, and are working with existing accounts, ordering accounts, as well as specific targeted new institutions. Obviously, we can’t cover the same ground that we were covering before, but highly selective approach to-date looks like it’s being fruitful for us.
We continue to evaluate possible partnering options for the ANJESO portfolio and you believe that it’s very possible for this product to attain terrific results, with perhaps a sponsorship from an organization with a larger balance sheet. But in the meantime, we’re going to continue to grow this product, although modestly, but we will be continuing to show progress with the product in the meantime.
So if we go ahead and test the cover slide on page 10 to slide 11, we’ll talk a little bit about where we are in terms of overall development. And of course, ANJESO is approved already. You know, that we’re doing the pediatric study that FDA had wanted us to do, but it also will open up new market opportunity in addition and we are making a planned progress on that pediatric trial and have enrolled the first cohort in it to-date.
The neuromuscular blocking agents, I’m going to talk about a little more detail in a moment. But we’re now entering Phase II for BX-1000, and towards the end of this quarter, or very early in the second quarter, excuse me, in the third quarter, we believe we’ll be getting enrollment into that Phase II for BX-1000.
And BX-2000, which is the ultra-short acting has just begun to enroll patients into its dose escalation study, excuse me, healthy volunteers to its dose escalation study and we continue to do the progressing work on BX-3000, the reversal agent to make the dosage form a little bit more efficient and then look at some preclinical studies. We’re doing all of this with a very tiny team inside and great efficiency. So being very conscious of how we spend our shareholders money.
If we look at slide 12. Again, a little more detail on the neuromuscular blocking agents, just framing this for you a little bit. Estimated 400 million people receive neuromuscular blocking agents annually and these agents are used to produce total paralysis. This allows for safe placement of a breathing tube, intubation and muscle relaxation during surgery or in-patients who need to be on a breathing machine or ventilator for other reasons, used either in the operating room or the ambulatory surgical center and it may be used in an ICU setting, it isn’t clear, yeah, what role will have in those cases, the surgical case usage seems more likely, assuming that we continue to fulfill the profile of the product and see the safety that we are believing we will see.
The number of these procedures is increasing because there are more and more surgeries that are being done through minimally invasive methods. And laparoscopic surgery often creates a crusher in the abdomen as they inflate it to do those surgeries and so many of those patients, if not, all of those patients are put on to ventilators and need to be intubated. So these kinds of agents have roles in those types of surgery.
Our two novel NMBs, as I said, our 1000, which is estimated to act for approximately 45 minutes with a natural decay after that appears to have rapid onset and we have completed the dose escalation trial for this agent and we’ll be looking to do a Phase II surgical trial that we think will begin, as I said, towards the end of June or early in July. And this trial we believe has a reasonable chance, COVID permitting, of enrolling and possibly completing enrollment in 2022.
BX-2000, our ultra-short acting, this is one that would have a natural decay curve of about 10 minutes to 15 minutes where it would wear off, if you will. Also we believe based on animal studies and we’re just now beginning the enrollment into human studies in this quarter.
Rapid onset, the preclinical development has been completed for this phase of development. The IND is filed and open and so we’re looking forward to seeing different dose cohorts as we move up the dosing curve in a safe and methodical manner for this trial progress during 2022 and it’s possible that we could complete it, but more likely that it will complete in the early part of the 2023 first quarter.
The novel reversal agents that’s specific to 1000 and 2000 and provides chemical reversal of a blockade in a rapid time period based on animal studies, monkeys, have been reasonably predictive of human effects in this therapeutic area. That’s why we think that it will be very quick as a reversal agent, we are right now trying to work with the dosage form a little bit more to make it a more efficiently administered dosage form and then to do some preclinical work on it in advance of human clinical trials, which could begin at the end of 2022 or early 2023, depending on the timing of dose and feedback from FDA.
So if we then move ahead to slide 13, I’ll briefly cover the financial highlights from the quarter. We put the press release out yesterday afternoon outlining our full financial results, so I’m not going to go into great depth.
But for the first quarter, we had cash and cash equivalents of $11.5 million at the end. Our net product revenue according to U.S. GAAP, for the quarter was $0.4 million, an increase of $0.2 million or 113% compared to 2021.
The cost of sales for the first quarter was $0.6 million, a decrease of $0.2 million compared to the same prior year period, primarily as a result of the reduction of inventory scrap expense recorded in the current year compared to 2021. We expect that over time, the product costs and cost of sales will increase -- a sales increase in inventory associated with the units manufactured have been sold.
Research and development expenses for the first quarter were $1.3 million, compared to $1.1 million for the first quarter last year and the increase was primarily due to the $0.2 million increase caused by the pediatric trial initiating in the quarter.
Selling, general and administrative expenses for the first quarter were $14.2 million, compared to $12.1 million for the same period in the prior year. The increase was primarily result of increased selling expenses, which were related to the $1.7 million and accrued severance costs associated with the reduction in force during the first quarter of 2022.
We reported a net loss including a non-cash benefit of $2.4 million, up $12.8 million or $3.17 per diluted share for the first quarter of 2021.
Before we open up the call for questions, I’d like to take a moment to recap some of the key takeaways today. ANJESO continues to show meaningful growth year-over-year and quarter-over-quarter, with revenues of 113% and 5%, respectively on the dollar side.
In terms of growth of the product in units, that growth continues to be good in spite of COVID impact in the first quarter and the number of elective surgeries being impacted in January and February, we saw 20% growth in vials to end users in that quarter.
With respect to the neuromuscular blocking agents, we look forward to beginning enrollment in the upcoming Phase II study in BX-1000, the intermediate duration agent and surgical patients this summer and to continuing to execute on the dose escalation study, which just began enrollment, evaluating BX-2000, our ultra-short acting NMB in healthy volunteers this year.
In closing, we continue to receive positive feedback from those already using ANJESO and are looking forward to keeping you updated on our progress as we continue to educate physicians and healthcare professionals on the overall benefits of ANJESO in the acute care setting and to the further development of our NMB products.
I’ll now turn the call over to the Operator for any questions.
That concludes our prepared remarks. [Operator Instructions] We have a question from Greg Aurand from Noble Capital. Your line is now open.
Good morning, Gerri and Sam. This is Greg. Thanks for having the call. A question regarding the revenue levels in the quarter, minutes that I calculate, vials were up about 20%, revenues increased about 11%. Is there a disconnect that I’m missing relative to the wholesale costs versus direct sales level, the revenue for vials, for instance, has changed, is there something that I’m missing there, you can elaborate on?
So there are slight timing differences between the units that are passing through and then the reconciliation of those costs. But there is not an overall impact of the volume related discounts that we’re doing. The -- our senior financial people have taken a look at what is the net impact to us on the revenue side of that discounting program and it is in single digits. So that is not the impact in that quarter, but there are some of the changes in the inventory could have had some impact on that growth.
Okay. Thank you. And follow-up, in terms of the gross margin overall, was that related to that, you mentioned, scrap costs are lower this quarter. But I noticed that gross margin was a little bit larger relative to the fourth quarter, there’s something there that you can elaborate on?
We’re still not at, what we would consider full cost absorption and we’re certainly striving to do that and part of the way to -- that we’re doing that is by lowering some of the costs associated with our commercialization of the brand.
We do think that at -- and full commercialization level, at some point in time, this product continues to have the ability to generate more typical gross margins for parenteral products in more in the 70s. But right now we’re not at that full and absorption level.
Okay. And then thoroughly if you don’t mind me going on here, approvals in formulary, did you -- how many-- did you want to specify the number I didn’t hear anything in the presentation that you might have received in the quarter?
No. We did not specify that. And part of that is going back through and looking at as we did the reduction in force, there were some formularies that were in progress. And as you may know, it -- you need fair access in terms of relationships to get the word quickly, because otherwise it can take you a month or more to get the full determination of what was it approved, was it approved for a limited service line, was it approved for broad service lines.
So there were approvals in the quarter. But I haven’t put the number down yet, because we are still finalizing that for that quarter, but we did see a pretty dramatic jump in the early part of the quarter as we got an agreement with a particular large ASC chain, again, one of the top five in the U.S. in terms of size and that includes a total of close to 200 units.
So nominally we are approved there and that came through in the first quarter incrementally. But not every one of those institutions, by far is set up for pull-through yet. So I would say we were probably more like another 20 to 40 in the quarter.
If we look at pull-through on that, pull-through on the previous large surgical ASC group that we had and the number of hospitals. So it’s a number that is, I think, still quite respectable. But I don’t want to put a point on it right now. So I have it. But I think as we go through this next quarter, we’ll be in a better position to create that baseline for Q1 and into Q2 with a little more precision.
Great. Thank you. That’s very helpful. I’ll get back in the queue. Thanks for taking my call.
Thanks very much, Greg.
And we are showing no further questions. I will now turn the call back to Gerri for closing remarks.
Thank you very much for your time today, for your support of the company. We continue to look at ways of helping ANJESO in our hands and to consider options that could provide for an even broader commercialization of the product it with the potential partner or otherwise, but continue to believe it is a strong contributor to the management of patients in this non-opioid perioperative care arena for pain management and are very encouraged that with modest spend, we’re making good progress on the NMBs, which we think are also potentially very economically important for our shareholders. Thank you, Operator. Thanks, everyone, for joining us. Hope you have a great rest of your day.