TCDA (2019 - Q4)

Ladies and gentlemen, thank you for standing by, and welcome to the Tricida Fourth Quarter 2019 Financial Results Conference 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]I would now like to hand the conference over to Jackie Cossmon. Thank you. Please go ahead. Jackie C

Thank you, Kathy. Good afternoon, and thank you for joining the Tricida fourth quarter and year end 2019 financial results conference call. In today's' call, Gerrit Klaerner, our Founder, CEO and President will discuss our business progress and Geoff Parker, our CFO will then discuss our financial results for the fourth quarter and provide guidance for 2020.Please note, that in today's call, we will be making various statements that include forward-looking statements as defined under applicable securities laws. Forward-looking statements include statements regarding our future development and commercialization plans, our hiring plans, our medical affairs activities, the conduct of our VALOR-CKD confirmatory post-marketing trial, recruitment milestones, anticipated activities related to our NDA filing, including the PDUFA goal date, an advisory committee meeting, financial guidance and other statements that are not historic facts.Management's assumptions and expectations and opinions reflected in these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from any future results, performance or achievements discussed in or implied by such forward-looking statements. Tricida can give no assurance that these statements will prove to be correct and we do not intend and undertake no duty to update these statements.We also urge you to read the risks and uncertainties associated with our business that are described in our filings with the Securities and Exchange Commission. For a copy of our press release that was issued prior to this call, please go to www.tricida.com and follow the link to our Investor Relations page.At this time, I'd like to turn the call over to Gerrit.

Thank you, Jackie, and thank you all for joining us today on the call. I'll move right into the key goal for Tricida in 2020, the planning and execution of the successful launch of the veverimer. Our PDUFA goal date is just six months away and we are engaged in multiple activities to ensure the successful launch of veverimer in the fourth quarter of this year and sales growth in 2021 and beyond.In the next six months, we will continue to support and expand our comprehensive metabolic acidosis disease awareness and education campaign to communicate the existing evidence, that increasing serum bicarbonate in patients with metabolic acidosis and CKD, slows the progression of CKD and can potentially improve our patient's feel and function.We believe the broad understanding of this evidence will help to establish and increase the urgency to treat patients with a serious condition. Our plans include extensive education actions with the nephrologists, as well as significant payer engagement. In 2019, we made key hires in both the commercial and medical sales functions, adding 27 executive and management positions.In the first two months of 2020, we have already added an additional 27 people to those teams, setting our key roles to expand our scientific exchange, enabled market access, built our branded marketing campaign, prepare for veverimer and ensure smooth logistics for the commercialization of veverimer.Let me now highlight three major initiatives in the coming months. First, peer-to-peer engagement with nephrologists by our medical affairs team; second, disease awareness and education by our marketing team and field-based strategic account managers; third, payer interactions by our market access team to ensure appropriate coverage of veverimer if approved.Our medical affairs team now includes 14 medical professionals to engage with nephrologists. Elizabeth Faust leads this team and has a long and successful career in medical affairs, where she led the teams at Kite and Pharmacyclics and has key medical affairs roles at Celgene and Amgen. She just joined us late last year and has already made a significant impact. The medical science liaison or MSL team is in place and will be deployed at the upcoming National Kidney Foundation Spring meeting at the end of March.By April, we expect to have nearly a dozen MSLs engaging with hundreds of key opinion leaders, community nephrologists and health care professionals, answering questions about the pathophysiology of metabolic acidosis and reviewing the growing body of peer-reviewed publications on the serious complications of metabolic acidosis and the evidence of the link to CKD progression.Our MSLs will also play an important role in furthering our understanding of why despite clinical practice guidelines, indicating treatment of metabolic acidosis necessary, the disease is currently so undertreated. Most nephrologists we talked to would probably say that they used sodium bicarbonate to manage metabolic acidosis in their non-sodium-sensitive CKD patients. But the evidence from multiple independent sources suggests that less than 15% of the patients with metabolic acidosis and CKD are actually treated with sodium bicarbonate. We, of course believe, that the primary impediment to treatment is the lack of an FDA-approved therapy and limitations of sodium bicarbonate to manage metabolic acidosis.Two recent multicenter placebo-controlled studies showed that the most common doses of sodium bicarbonate used today to manage the metabolic acidosis were ineffective. In these studies, sodium bicarbonate doses typically used in clinical practice, that is 0.5 to one grams, three times daily achieved very little difference in mean sodium bicarbonate levels between the active and placebo groups and showed no clinical benefits of sodium bicarbonate treatment.Another concern nephrologists have with recommending sodium bicarbonate to their patients is that, higher sodium intake has been associated with significant reductions in the effectiveness of rennin angiotensin aldosterone system inhibitor or RAAS inhibitors. The RAAS inhibitors are one of the only classes of agents that have been proven to slow CKD progression. A post-hoc analysis of combined data from the RENAAL and IDNT trials, evaluated the impact of low, medium and high levels of 24-hour sodium creatinine ratio in patients administered angiotensin II receptor blockers or ARBs versus non-RAAS inhibitor-treated patients.The authors concluded that and I quote directly from the publications, the RENAAL and cardiovascular protective effects of ARB therapy compared with non-RAAS inhibitor-based therapy attenuated in subjects with a larger consumption of sodium, certain subjects with the highest sodium intake the treatment effects on heart, renal and cardiovascular outcomes were completely annihilated.Approximately 70% of patients with CKD are treated with RAAS inhibitors to manage their hypertension, and therefore, these patients cannot afford an elevated level of sodium intake.Back to our MSLs. Another critical role of our MSLs will be recruiting nephologists to participate in our ULTIMA-CKD Patient Registry. This registry will advance the understanding of metabolic acidosis and CKD by enabling us to generate clinically important publications and giving us insight into the real-world effects of metabolic acidosis in patients with CKD.The medical affairs effort includes medical communications generated through publications, participation in national, regional and local congresses, work with efficacy groups and importantly bringing together leading experts in nephrology. We now have a growing number of key opinion leaders in nephrology that we are engaging with to identify key topics related to the complications of metabolic acidosis in patients with CKD.In 2019, we had 14 publications and we aim to double that this year. 14 abstracts have already been accepted for presentation at the NKF Spring meeting and the Southwest Nephrology Conference in Arizona, so we are well on our way.Tricida is also committed to general medical education and has sponsored three independent continuing medical education or CME courses covering CKD and metabolic acidosis. These programs are anticipated to reach over 2,000 nephrologists.Now turning to our commercial team led by Susannah Cantrell. As you know Susannah has significant commercial leadership experience from Gilead and Genentech. She has made significant progress on the disease awareness fronts with both nephrologists and peers and is preparing for our branded launch.Under Susannah's leadership, we expanded our marketing team, hired our entire market access and sales management teams and build the infrastructure to support sales operations and product distribution.Our disease awareness campaign has been expanded to include significant digital direct targeting to drive nephrologists to the metabolic acidosis inside website and to deliver key messages intended to raise awareness on metabolic acidosis. We'll grow our disease awareness on mid-June-May for the deployment of a field-based support team of 80 to 85 strategic account managers. This team will be initiating our in-person disease awareness campaign that enables us direct interactions with nephrologists and other healthcare professionals to share the most recent publications and data about metabolic acidosis and its complication. These visits will also enable the reps to gain familiarity with key stakeholders in their territories.Our third major initiative, educating payers and completing the necessary tasks to ensure appropriate coverage of veverimer if approved is well underway. Our work with payers has began very early into Tricida's history and this effort continues.Our market access team is led by Rocio Manghani, who has extensive experience in all aspects of payer engagement and distribution logistics from Kite, Celgene and Roche. Her team consists of 16 professionals covering all aspects of access to the veverimer from supply chain and logistics to engaging with payers and managing easier access to veverimer.Our corporate account team has already met the 51 payers representing approximately 230 million targeted insured lives. These engagements enable us to educate payers on the impact and consequences of metabolic acidosis to present veverimer as a potential first and only FDA-approved treatment for metabolic acidosis and to provide real-world data on the potential health and economic benefits of treating metabolic acidosis.Payers have shown keen interest in the significant health benefits for patients that translate to cost savings. These early engagements have also enabled us to understand the timing and requirements for coverage from these payers. Also on the market access front we are setting up our patient support hub, arranging for an open-access distribution channel, which will allow both retail and specialty pharmacies access to veverimer and settling up the -- and setting up the appropriate market access infrastructure to ensure broad access to veverimer at launch.Our goal in the market access front is to meet with 100 payers prior to our PDUFA date. Our post-meeting payer surveys will confirm our success in reaching these payers with the right message and also gauge the attitude about the need to include veverimer on their formulary.Beyond these significant medical affairs and commercial efforts, we continue to focus on VALOR-CKD recruitment. We have made good progress in enrolling patients in our VALOR-CKD post-marketing trial. This large outcome trial is being conducted in 33 countries with approximately 350 sights. Our target size has been opened and we anticipate randomizing -- subjects in the trial. We believe for complete enrollment this year.And finally, with respect to our NDA, we will not be providing updates on our discussions or interactions with the FDA during the review process other than to say that the routine matters around our submission are on the way and we'll continue to work with the FDA to enable them to complete the review in a timely manner. The FDA is planning to hold an advisory committee meeting or AdCom to accept the application.We're anticipating that the outcome would likely occur in the second quarter of 2020 and we'll know the topic of discussion closer to the meeting date. As we said previously, given that we are pursuing a potential disease-modifying indication in CKD, utilizing the accelerated approval program we welcome this opportunity and we will be prepared to present the underlying rationale and the considerable body of evidence supporting the treatment of metabolic acidosis closes the progression of kidney disease.Furthermore, we'll be ready to walk through all of our veverimer clinical data including results beyond the surrogate endpoint such as improvements in how the patients feel and functions and the impact on mortality and progression of CKD.I hope we provided you with a clear understanding of how focused we are on reaching our target audience to increase the understand that metabolic acidosis is linked to CKD progression, and that there simply are no safe and efficacious FDA-approved treatments for this serious condition. We believe this will lead to a successful launch of veverimer with early adoption and favorable payer coverage.I'll now turn the call over to Geoff for a review of our financial results.

Thank you, Gerrit, and thank you all for joining us today on the call. I will now provide a brief overview of our financials. Additional detail regarding our fourth quarter and year-end financial results can be found in our press release issued earlier today.Our financial position remained strong. As of December 31, 2019, Tricida had cash and investments of $355 million. In the fourth quarter our R&D expense was $40.7 million. G&A expense was $17.5 million. Our net loss for the fourth quarter was $58.2 million or $1.17 per share including noncash stock-based compensation expense of $9.4 million.And now turning to our financial guidance for 2020. As Gerrit has indicated we are building out our commercial and medical affairs teams and conducting numerous other activities in preparation for a successful launch of veverimer.For the first half of 2020, we expect that R&D expense will average approximately $40 million per quarter with the first quarter expected to be slightly higher than the second quarter.In the second half of 2020, we forecast that R&D expense will decline to an average of approximately $25 million per quarter. R&D expense is forecasted to be higher in the first half versus the second half given the timing of certain expenses related to the timing of drug substance delivery and plant optimization at our CMO Patheon.For the first half of 2020, we forecast the G&A expense will average approximately $30 million per quarter with the second quarter expected to be slightly higher than the first quarter. In the second half of 2020, we forecast that G&A expense will increase to an average of approximately $40 million per quarter as we complete the build-out of our commercial organization. We estimate total cash expenditures of $250 million to $260 million in 2020.Based on our current operating plan and excluding any potential revenue from veverimer, if approved, Tricida expects that its cash, cash equivalents and investments as of December 31 2019 and its anticipated additional borrowing capacity of $90 million under its Hercules debt facility, will enable the company to fund its operations at least into the second half of 2021. Assuming we meet our internal commercial forecast for veverimer, our cash runway could be extended through to profitability.With that, I'll open the call to questions. Operator?

[Operator Instructions] First question is from Phil Nadeau of Cowen and Company.

Good afternoon. Congrats on the progress and thanks for taking my questions. First Gerrit one for you. A follow-up comment to what you just said on the AdCom. So you'll know the topics for sure as you get closer to the meeting. One, do you have any sense of what the topics could be today? And then two, how will you communicate the topics once you are aware of them? Is that something that you'll disclose? Or will we have to wait until the briefing documents are posted on the website to know for sure?

Yeah. Phil, we don't really speculate about the potential topics that might be asked. And that typically happens quite late in the game. So we don't expect any communication before the actual AdCom. And it's a very discrete and very clean and clear development program. So, we're preparing to present the three studies, really the TRCA-101 study; the pivotal trial TRCA-301; and then of course the extension trial TRCA-301E. So that's at the heart of everything we are preparing, and it's very straightforward.

Got it. Fair enough. And second on your payer engagement. I think at your analyst meeting, you mentioned that you were continuing to work on pharmacoeconomic data to communicate to the payers, the benefits of veverimer. Can you give us maybe an update on what data you have today? And what the payers are finding most compelling?

Yeah, I think we've moved on from generating more data and more to really communicating the overwhelming existing data, and we've shared that with you before in terms of the annual cost savings. And more importantly, I think how Rocio explains it is that each month that payers don't increase, have patients don't increase their serum bicarbonate by one milliequivalents, they have 7% higher all cause cost that month. And so that's really the core message that resonates, because it's not a long-term cost savings. It's really a short-term game where really each milliequivalent of serum bicarbonate increase matters.

Got it. Okay. And then last question for me. What's your most recent thinking on Europe? When will -- when could we have some clarity on your European filing plans?

So Phil, it's Geoff. Our plans continue to be that we will have substantive engagement with European regulatory authorities starting just after our expected approval in the U.S. So that would be post the August 22nd, PDUFA date.

Perfect. Thanks for taking my questions and congrats on the progress.

Thanks Phil.

Thanks Phil.

Next question is from Jessica Fye of JPMorgan.

Hey, guys. Good afternoon. Thanks for taking my question and thanks for providing that detailed operating expense outlook. When I add up what sounds like $130 million of R&D spend and $140 million of G&A or SG&A spend, I get around $270 million for the year. So I want to make sure those figures are GAAP and include non-cash expenses since it came out a little higher, I think than the $250 million to $260 million range you're talking about for cash spend in 2020.

Yeah. Those expenditures do include non-cash stock-based compensation.

Okay, great. And then, when we think about the $40 million per quarter-ish SG&A rate you'll exit the year with. Is that a good run rate to think about for 2021 and beyond? Is that kind of a fully loaded SG&A rate?

So on -- first let me comment on the R&D side. I think this will be likely our highest R&D year. And so I do think the exit rate for R&D of $25 million should be applicable for at least the 2021, 2022 time frame. And then as we begin to wind down VALOR, in the 2023 time frame, we expect R&D to continue to decline.As far as SG&A, we would expect the overall expense ratio of the company to stay about static to where it will be in 2020. And so as R&D goes down SG&A would step-up, so as far as ending the year at $40 million on SG&A, I think that that is pretty close to what the annual run rate will be, but it could step up 10% or 15% from there.

Awesome. Thank you.

Your next question is from Graig Suvannavejh of Goldman Sachs.

Hey, good afternoon. Thanks for taking my questions. Congrats on the progress. Two questions from me. One, how should we think about the real-world experience with veverimer and how that might contrast with the clinical trial experience? And if some drugs perform very well in the clinical trials and in the world – real world they but don't perform the same. So any kind of color around your expectations around, how you think veverimer will do once approved would be helpful? And then along the same vein, how should we be thinking about perhaps your expectations on the slope of uptake for this product? Is it long lead times? Do you expect this to be hockey stick? There's really not much out there, so it would seem to suggest to me that this could be relatively quick. But I just want to make sure our expectations are set appropriately? Thank you.

Graig, this is Gerrit. So I think that's a good question. And small molecules that get metabolized in different ways or biologics. I agree with you the controlled setting of a clinical trial versus real world there's a risk. We don't believe that that's the case for a nonabsorbed polymer GI-based polymer where we effectively are doing what the kidney naturally does, right? The kidney – how the kidney can naturally excrete acid it loses that ability. And then effectively, the veverimer the binding hydrochloric acid in the GI tract is making up for what the kidney can no longer do. So both from a compound perspective as a non-absorbed polymer and from a disease perspective in terms of CKD and metabolic acidosis we don't expect a difference between what we've seen in the clinical trials and what we hope to see in the real world.

And then in terms of just how we should be thinking about the slope of market uptake?

Yeah. We think that when you compare it – again in a data-driven manner when you compare it to other launches where there were incumbent FDA-approved products like in hyperkalemia and fast followers. This is different, right? We are building the market for metabolic acidosis. And we hope to be once if approved that we have to be the first and only and we believe that the pent-up unmet medical need really is going to outpace the market building component of this. So we think there's a good chance for fast uptick.

Okay. Thank you very much.

Thanks, Graig.

Thank you.

Your next question is from Alan Carr of Needham.

Hi. Thanks for taking my questions. Can you give us an update on VALOR-CKD? You mentioned you expect to finish enrollment at some point this year. I'm wondering, if it's – if you're still thinking middle of this year. And can you go over your latest thoughts and intentions around the interim analysis? And then second, what about – what's beyond veverimer any long-term thoughts on what else you might have in the lab or thoughts on business development? Thanks.

Thanks Alan. VALOR-CKD is the recruitment is going well. It's really as expected. All the assumptions that we've gone into are intact. And we – I think in terms of finishing recruitment here I think this is clearly something that never happened this year. The exact time we'll communicate at a later time point. The – in terms of the pipeline, I think we are really laser-focused on launch. And that's really something that we as an organization need to focus on and we need to execute against. And however, there's a lot of excitement. We've – many of us who work together here for – this is the third company. We've done this before. And you can anticipate that, we're not going to stop doing what we've done before. So stay tuned, I think towards the end of the year, we'll communicate on the potential pipeline.

Great. Thanks for taking my questions.

And there are no other questions in queue.

Thank you, and thank you all for joining us on the call today. If you plan to be at the Cowen 40th Annual Healthcare Conference in Boston next week, we'll see you there. Our presentation will be webcast and available live on our website at 2:10 p.m. Eastern Time on Monday. As always, if you have additional questions, please don't hesitate to contact us via e-mail at ir@tricida.com. Thank you and goodbye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.