Q3 2017 Theratechnologies Inc Earnings Call
Oct 05, 2017 AM EDT
TH.TO - Theratechnologies Inc
Q3 2017 Theratechnologies Inc Earnings Call
Oct 05, 2017 / 12:30PM GMT
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Corporate Participants
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* Denis Boucher
* Luc Tanguay
Theratechnologies Inc. - President, CEO & Non-Independent Director
* Philippe Dubuc
Theratechnologies Inc. - Senior VP & CFO
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Conference Call Participants
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* Alan Grant Ridgeway
Scotiabank Global Banking and Markets, Research Division - Director of Specialty Pharmaceuticals and Healthcare
* Andre Uddin
Mackie Research Capital Corporation, Research Division - MD of Healthcare Research
* Douglas W. Loe
Echelon Wealth Partners Inc., Research Division - Healthcare and Biotechnology Analyst
* Endri Leno
National Bank Financial, Inc., Research Division - Associate
* Neil Maruoka
Canaccord Genuity Limited, Research Division - Analyst
* Prakash Gowd
CIBC World Markets Inc., Research Division - Executive Director of Institutional Equity Research
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Presentation
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Operator [1]
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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Theratechnologies' Earnings Conference Call for the Third Quarter of 2017. (Operator Instructions)
I would like to remind everyone that this conference call is being recorded today, Thursday, October 5, 2017, at 8:30 a.m. Eastern time.
I will now turn the conference over to Mr. Denis Boucher. Mr. Boucher, please go ahead.
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Denis Boucher, [2]
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Thank you, and welcome. Mr. Luc Tanguay, President and Chief Executive Officer of Theratechnologies; as well as Mr. Philippe Dubuc, Senior Vice President and Chief Financial Officer, will be the speakers on today's call. A Q&A period open exclusively to financial analysts will follow their presentation. Before Luc begins his remarks, I have been asked by Theratechnologies to read the following message regarding forward-looking statements. I would like to remind everyone that Theratechnologies' remarks today contain forward-looking statements about its current and future plans, expectations and intentions, results, levels of activity, performance, goals or achievements or other future events or developments. In preparing these forward-looking statements, several assumptions were made by Theratechnologies, and there are risks that results actually obtained by the company will differ materially from those statements. As a consequence, the company cannot guarantee that any forward-looking statement will materialize, and you are cautioned not to place undue reliance on them.
Theratechnologies refers current and potential investors to the forward-looking information section of its press release issued this morning and to its Annual Information Form dated February 7, 2017, and the Risk Factors section therein available at www.sedar.com, under Theratechnologies' public filings.
Forward-looking statements represent Theratechnologies' expectations as of October 5, 2017. Except as may be required by securities laws, Theratechnologies does not undertake any obligation to update any forward-looking statement whether as a result of new information, future events or otherwise.
I would now like to turn the conference over to Luc.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [3]
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Thank you, Lenny. Good morning, everyone, and thank you for being on the call today. Summer was definitely not a slow season for us as we got closer to a decision from the Food & Drug Administration on ibalizumab. Launch preparedness remain more than ever a key focus for us. Another key priority was to ensure that our expanded sales team was out in full force and delivered on expanding the EGRIFTA franchise in the U.S. while building their network in the anticipation of the launch of ibalizumab. I will come back to EGRIFTA in just a moment. But let me start by giving you an update on ibalizumab.
During the last quarter, our partner, TaiMed Biologics, received confirmation from the FDA that ibalizumab file has been accepted for filing and would be evaluated under priority review by the agency. The FDA gave a Prescription Drug User Fee Act, or PDUFA target action date of January 3, 2018. In other words, it means that we could expect the FDA decision by January 3, and that we are now closer and closer to a very significant milestone in the history of Thera. Furthermore, TaiMed has informed us at the FDA has completed the inspection of the facility where ibalizumab will be manufactured. According to TaiMed, the FDA has made no critical findings on the WuXi facilities. Following the inspection, the FDA made some observation, and TaiMed informed us that WuXi is committed to provide a complete response as soon as possible. On our side, we have worked diligently to ensure that we have all angles covered if and when the time comes to commercialize ibalizumab in the U.S. This includes several initiatives and tactics that must be developed in advance of obtaining the marketing authorization from the FDA. For example, we're working on our relationship with patient groups, developing branded and nonbranded product support initiative and continue devising our pricing and reimbursement strategies.
I want to mention as I pointed out during our investor conference earlier this year that our current position on pricing remains to sell ibalizumab at a premium to what is currently on the market. We are also of the opinion that if -- that it should sell below the average orphan drug price, which is about USD 140,000. I'm referring here to the WAC or the wholesaler acquisition cost. And generally, the WAC is discounted by 25% to 35% to take rebates and distribution fees into account. And to end up with the net selling price or the price we will record. Also, our medical science liaison team has kept key opinion leaders well informed on clinical trial results through presentation at scientific meetings and publications in tri-media. As a matter of fact, the latest long-term safety and efficacy data were announced yesterday and will be presented Friday during an overall presentation at IDWeek. Results show that at week 48, the viral load in treated patients remained the same as at the end of the clinical trial or the week 24. In addition, no safety issue was observed in that period.
As the regulatory process progresses, we are also building the distribution network for ibalizumab. We are currently finalizing terms with our central distributor and major pharmacy change throughout the U.S. which will be in a position to offer patient home infusion service, distribute the product to infusion centers or ship the product to the prescribing physicians for infusion directly at the clinic. While we are performing all those tests in the U.S., we have also started turning our attention to the European market. In fact, in that territory, we are moving much faster than initially anticipated. Of course, this is a good news as we could be in a position to launch in Europe earlier than what we first expected.
Consultants have been hired and have started working on our regulatory strategy. In fact, we have already taken some actions in regard to the regulatory process, and we will keep you informed on future development in Europe as milestones are reached. As far as ibalizumab is concerned, I'm sure that you can appreciate just how much support is being given to ensure its successful launch. Of course, this does not mean that we have lost sight of just how important EGRIFTA is to us and the essential coverage it gives to implement our strategic plan. We said during our last conference call that the impact of our expanded sales force on EGRIFTA revenues will start being felt during the third quarter. Results being presented today show that this is indeed what happened. Either compared to the same quarter of last year or to the previous quarter of this year, EGRIFTA sales are up substantially. When looking at the third quarter of '16, sales were up by 26% in the third quarter of '17 while they were up by 12% when compared to the second quarter of 2017. Revenue growth in Q3 '17 versus Q3 '16 was a factor of both higher unit sales and higher selling price. During our last conference call, I mentioned that prescription were starting to go up at the end of Q2. There was the usual lag between scripts and sales. But those scripts most definitely translated into sales in Q3. I must say that I'm quite pleased to observe that prescription continue their upward trend in Q3, which should normally be reflected in our Q4 revenues. All of this to say that our expanded sales force is doing its job and is pushing EGRIFTA to new heights. Unfortunately, the exchange rate is not playing in our favor. The impact of the higher value of the Canadian currency compared to the U.S. dollar will mostly be felt on our annual projection in Canadian dollars. We originally base our guidance on an exchange rate of 1.32. As it turns out, the exchange rate has been fluctuating quite a bit and it could have an impact of about 10% on our Q4 result in Canadian dollar.
In addition, several weather, which recently hit Texas, Florida and Puerto Rico, could have an adverse impact on our results. It must be said that those 3 states are among the most important markets for us in the U.S. Understandably, when the activity in some part of those states almost go to stand still, we need to consider the potential impact of those events may have on growth. In addition, part of our patient growth is linked to our effort to provide patient greater access to EGRIFTA through new agreements with Medicaid among others. This has meant that the mix of patients who have private coverage versus public coverage has in part shift towards the latter. As you very well suspect, the big payers negotiate discount that affect our net sales and our profit margin. This means that increased unit volume does not have the same impact on our bottom line as it would if the patient mix include more private-insured patients. But at the end of the day, though, reaching new patients has a positive impact on our sales growth. Just taking into account consideration -- just taking into consideration the exchange rate and the potential impact of the hurricanes, we believe that it's appropriate to be conservative and review the guidance at this time.
While we were expecting sales to be in the range of $44 million to $46 million, we now estimate that the annual sales will be closer to $42 million to $44 million. Those external factors do not affect at all our strategy with EGRIFTA and the potential we see towards this product given the significant growth in units sold to our pharmacy network in Q3. Of course, lowering our sales expectation has a direct impact on our bottom line. And in addition, the fact that we are moving faster than anticipated in Europe means that our level of investment is above what we first projected. As such, we now estimate that we will end the year with a negative EBITDA of between $5 million to $5.5 million instead of the previously established target of minus $2 million to minus $3 million. As Phillipe will discuss later, this does not create an issue on our liquidities. Indeed, we are still in a very good position in terms of cash. In brief, I believe that we should keep in mind that our last quarter was our best ever in terms of sales and units sold. Never before did we sell more EGRIFTA units and generate so much revenue. With prescription going the way they are now, we believe that EGRIFTA will continue to grow and to support our strategic plan.
With the decision of ibalizumab just around the corner, the whole team at Thera is really feeling excited and is completely committed to creating the conditions for a successful launch. On that note, I will now turn to Philippe to give you a detailed financial results. Philippe?
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [4]
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Thank you, Luc, and good morning, everyone. As Luc just mentioned, our third quarter set a new high in terms of revenues and unit sales. Not only was it our best third quarter ever, it was our best quarter, period. More precisely, our third quarter revenues reached $11,217,000 compared to $8.9 million in Q3 2016, representing an increase of close to 26%. Many factors contributed to higher Q3 revenues compared to the same quarter last year. The first one was a 23% increase in unit sales. The selling price compared to Q3 of last year, was also a factor. But this was somewhat counterbalanced by a higher number of patients having access to public reimbursement.
Nonetheless, despite recording our best-ever sales results, other elements contributed negatively, to negatively affect our EBITDA compared to last year. Our increased investments in our U.S. operations as well as the investments made sooner than expected in Europe to start the development of our regulatory approach for ibalizumab were the many factors affecting our operating profitability. As a result, we recorded negative EBITDA of $2.05 million on sales of $11.2 million compared to a positive EBITDA of $1.3 million on sales of $8.9 million in Q3 of last year. In the 9-month period ended August 31, 2017, adjusted EBITDA was negative $5.1 million on sales of $30.3 million compared to positive $3.8 million on sales of $26.7 million for the same period last year. Looking at our financial results in detail, cost of sales in Q3 amounted to $2.7 million compared to $1.7 million for the same period last year. Including the cost of sales or royalties paid to EMD Serono, which came to $1.1 million compared to $659,000 for the same period last year.
I want to remind you that royalties are paid based on sales levels. For 2017, we have applied a blended rate based on expected sales for the year, which is higher than the rate used in 2016. In terms of cost of goods, they amounted to approximately $1.3 million compared to $1 million for the comparable period last year. Cost of goods sold represented 11.9% of sales, which is in line with previous quarters.
R&D expenses rose to $3.1 million in Q3 2017 compared to $1.8 million for the same period last year. As was the case in the first 2 quarters of 2017, most of the increase in R&D can be attributed to higher medical affairs spending required to prepare for the launch of ibalizumab, and further raise awareness of multi-drug-resistant HIV and lipodystrophy within the medical community.
The same situation happened with selling and market development expenses, which were up compared to the same quarter last year. Increased spending in selling and market development is mostly attributable to the expansion of the sales force, which grew to 36 people from 11. We now reach approximately 4,500 key positions in the U.S., which is 4x as many as we used to in the past. Our sales have started to reflect this intensified presence in the field. We expect that it will continue to have a positive impact on EGRIFTA in the future.
This budget item also includes investments made to support our preparation for the launch of ibalizumab such as the development of branded and nonbranded campaigns and an intensification of our work on the private -- on the pricing strategy.
General and administrative expenses were stable compared to last year at $1.3 million. I'm pleased to report that R&D and SG&A expenses in Q3 are down from Q2 of this year. As mentioned during our last conference call, Q2 expenses included some nonrecurring expenses related to the expansion of our activities in the U.S. In Q3, finance costs were negative $80,000 as a result of a net foreign currency gain of $1.1 million, mostly offset by a loss on the revaluation of our warrants outstanding during the quarter. I'm pleased to report that these warrants expired on August 8 of this year and then virtually all of them were exercised, resulting in proceeds of $7.1 million over the last 2 quarters.
Our financial results going forward will no longer be impacted by this noncash charge. Consequently, we recorded a net loss of $2.9 million or $0.04 per share in Q3 2017 compared to a net profit of $888,000 or $0.01 per share in Q3 of last year.
As I mentioned before, we expected that our earnings would be impacted by the investments required for ibalizumab. However, our financial positions remain strong with close to $30 million in cash and bonds at the end of the third quarter, virtually unchanged from the end of Q2 2017. As such, we feel we are in an excellent position to support a successful launch for ibalizumab. On that note, let me turn it back over to Luc who has some closing remarks.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [5]
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Thank you, Philippe. We are more and more excited with the upcoming decision from the FDA on ibalizumab. Clinical results are strong. Our market research shows a great interest in ibalizumab from both patients and physicians, and we have a full contingent of sales representatives in place, which has started to build its network while supporting EGRIFTA. We are also putting our strategic approach together for Europe. All of this is to see that we are nearing a new era for our company. During the last quarter, we continued our preparation for the launch of ibalizumab. Our key focus is to ensure the highest level of preparedness to hit the ground running as soon as we receive a response from the FDA on ibalizumab marketing authorization. I'm satisfied with where we are to date, with the response potentially expected from the FDA within the next 12 weeks, the entire team is working hard to ensure the successful launch of ibalizumab. At the same time, we maintain a solid cash position while having a record quarter with 26% increase in sales, and moreover, Q4 is off to a good start. I want to thank you all for being on the call today, and we will now take questions from financial analysts.
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Questions and Answers
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Operator [1]
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(Operator Instructions) Your first question comes the line of Neil Maruoka from Canaccord Genuity.
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Neil Maruoka, Canaccord Genuity Limited, Research Division - Analyst [2]
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First question is on EGRIFTA. You had mentioned that your sales force increased -- or the increase in your infrastructure in the U.S. will have a positive impact on EGRIFTA. Can you give us some commentary around what you're seeing, is that -- had a significant impact in Q3? And maybe what do you expect to see in Q4 and then into 2018?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [3]
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Okay. I won't comment 2018 for now. Let's talk about Q4 and Q3. In fact, what we have seen since, I would say may, May, where the full force sales force were in place is a significant impact in the first, in the script or referral in what we're seeing in our hub and that translated into a significant increase in weekly sales since then. And what we're continuing to see since the end of Q3 is the same thing on both sides. If you look month per month, you see an increased -- significant increase. Philippe was talking about 23% increase in unit sales. So we're seeing that kind of increase compared to the previous year. And also, as I said, we're seeing an increase in the script, which showed -- has a kind of compounded effect at some point. And in fact, today, what we have done today in regards of the guidance has no link to less growth, if you will, or so. It's really linked to the Canadian dollar versus the U.S. dollar. That's why we're more conservative on that side. But in terms of what we were seeing, a few months ago, or at the beginning, when we implement that strategy, we're still very much on track on that, Neil. It's looking pretty good. Yes?
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Neil Maruoka, Canaccord Genuity Limited, Research Division - Analyst [4]
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Great. And maybe just on Europe. Can you -- launching ibalizumab in Europe would clearly be a significant task. Can you give us some thoughts about how you might approach that commercialization strategy?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [5]
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As far as commercialization and also regulatory, I would prefer to keep it for now. I will tell you why. It's very simple that we are implementing and moving on a strategy on the regulatory side. And we would like to reach a milestone before to confirm what will be the effect on that -- on the time lines exactly how we will try to reach approval in Europe. And of course, that will link eventually to the way we will commercialize. So it's a little bit early. But what we haven't then [tried] with our regulatory consultant in Europe, at this point, it's very interesting. And we have find a way to probably accelerate quite a lot the approval process over there so. But we need to confirm with the agency some of those part and that should be done in the next couple of months. So by the end of the year, you should have more news on that. And definitely, it will be my pleasure to say exactly what it is at that time when I -- as I say when we reach a milestone.
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Neil Maruoka, Canaccord Genuity Limited, Research Division - Analyst [6]
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Okay, great. I'll save it for the next call then. And...
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [7]
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I hope I'm going to have news by that time. That's our target. Yes?
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Neil Maruoka, Canaccord Genuity Limited, Research Division - Analyst [8]
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Okay. And just finally, on the currency impact. You said a 10% impact on revenue. What's your -- what is your -- the proportion of your spend in the U.S.? And so how much of a natural hedge do you have there?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [9]
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Philippe, what is the...
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [10]
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Most of our expenses are in US dollars. So the only expenses that we have in Canadian dollars are cost of goods, which is about 8%. The portion of cost of goods that is U.S. is probably 8%. And then there's head office expenses. So I would say that 80% of our expenses are in U.S. dollars.
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Operator [11]
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Your next question comes from the line of Alan Ridgeway from Scotiabank.
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Alan Grant Ridgeway, Scotiabank Global Banking and Markets, Research Division - Director of Specialty Pharmaceuticals and Healthcare [12]
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Just a question on the EGRIFTA volumes. When you guys speak about the volume increase your seeing particularly, I think, Luc, you just mentioned, the 23% increase. Can you just clarify exactly -- are those x factory volumes that you guys are seeing being shipped into the channel? Because the numbers we're tracking, which are not -- admittedly not necessarily always as accurate as what you guys can see, just aren't showing that kind of growth. And I just want to make sure that we're not missing something here.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [13]
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And Phillipe?
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [14]
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Yes. Actually, the numbers that we're seeing are numbers that we're reporting are numbers that we -- the number of units that we ship to our pharmacy network. However, we're really confident that, that's really the number of prescriptions that are filled because specialty pharmacies don't really hold inventory of EGRIFTA. It's a very specialized product. And it's rather expensive. And we have overnight shipping. So we're pretty confident these are all prescriptions that are filled.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [15]
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And maybe I should add. I think the numbers -- we have to be careful with the number we're seeing on Bloomberg, for example. On our side, we have 3 reference, if you will, we have what we are sending to our distributor. We have, the, exactly what the pharmacies are buying from the distributors. And we have the referral. So when you look at all those 3 parameters, they're all going in the same direction compared to last year. So we're pretty much confident, as Philippe mentioned, with the kind of increase we mentioned.
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Alan Grant Ridgeway, Scotiabank Global Banking and Markets, Research Division - Director of Specialty Pharmaceuticals and Healthcare [16]
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Okay, good. That's good to know on our end because we can adjust accordingly and that's excellent. Thanks for the color. As far as the new sales force and the added promotion, or the new sales force numbers and the added promotion, are you guys seeing new doctors starting to prescribe EGRIFTA? Or what can you comment on the sort of the effectiveness of bringing in new prescribers and expanding the overall market?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [17]
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It's difficult for us to track exactly the specific physician. But what we can say, we see definitely we should and we have new physicians because there are some territory that we've had at this point, very good sales increase. Or even new sales in territory that were not covered before. So definitely, those are new physician. So I suppose the same in territory that we are covering before when you see this kind of increase, you need to think that you have new physician prescribing EGRIFTA.
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Alan Grant Ridgeway, Scotiabank Global Banking and Markets, Research Division - Director of Specialty Pharmaceuticals and Healthcare [18]
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Okay, that's great. I was going to ask a little bit about Europe, but after your answer to Neil, I think, I'll leave it because we can wait until the next call. Just final one for me then. Can you just give us an update on the F4 formulation? And, where you stand with that? And I'll jump off then.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [19]
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Okay. On the F4, we have completed the test with the patient. And we should finalize the data analysis in the coming weeks or months. So by the end of the year or early next year, we should have the full results of the F4.
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Operator [20]
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Your next question comes from the line of Endri Leno from National bank.
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Endri Leno, National Bank Financial, Inc., Research Division - Associate [21]
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I just have a couple of -- actually, a quick question on the -- you mentioned disruption in Texas, Florida and Puerto Rico. I was wondering what, on a normalized basis, what percentage of EGRIFTA sales would they be?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [22]
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Yes. I would say it's between 25% and 50% of the sales are coming from those territory. I have to say that it's not all the territory that was affected by the weather there. Some part of those states were seeing for example in Florida that referral are still very active, growing and so on. On other parts, it's slower. So I don't think it's going to affect the sales in those territory. We won't see a decrease in sales. But what I mentioned is we'll probably affect partially the growth of the script that we could have seen in that territory. So it's more on the growth than it is on the sale directly, if you will.
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Endri Leno, National Bank Financial, Inc., Research Division - Associate [23]
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Okay. And can we expect the same patient distribution for ibalizumab? And what would be the other major markets?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [24]
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I think it's going to be a little bit different in terms of distribution. If you remember, before we increased our sales force, we had 11 sales rep in the U.S. And because why we had that distribution is because we are covering most of the territory with half EGRIFTA patients could be. So why we increase and we go now in territory or state that were not covered for EGRIFTA is because we think that those territory have a significant number of patients or MDR patients. So the distribution will be different and that's why we have modified the sales rep structure, if you will.
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Operator [25]
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Your next question comes from the line of Andre Uddin from Mackie Research Capital.
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Andre Uddin, Mackie Research Capital Corporation, Research Division - MD of Healthcare Research [26]
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Just had a couple of questions. The first is looking really at EGRIFTA. And I just wanted to see are there any price increases that are being made and if so, what is the current WAC, and when did that price increase take effect?
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [27]
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We took a price increase on September 1 of this year, Andre. It was 8.2% price increase.
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Andre Uddin, Mackie Research Capital Corporation, Research Division - MD of Healthcare Research [28]
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A 2%? Okay.
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [29]
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8.2%.
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Andre Uddin, Mackie Research Capital Corporation, Research Division - MD of Healthcare Research [30]
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8.2%, okay. And also, just looking at TaiMed, had they built up sufficient ibalizumab supply for launch?
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [31]
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Yes. We actually had a meeting with them earlier this week, and they are currently, while they're still building their inventory but they did have 3 lots manufactured when the FDA was there earlier this summer. And so they will have plenty of product for at least the first year. And they've secured a number of manufacturing slots at WuXi for next year so we're confident that the supply will be enough.
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Andre Uddin, Mackie Research Capital Corporation, Research Division - MD of Healthcare Research [32]
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Okay. And what about adding another manufacturer? Is that something TaiMed is going to look after or you're looking after to ensure you have another manufacturer in place?
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [33]
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Well, manufacturing is 100% TaiMed's responsibility. So they are responsible for finding a second manufacturer. And in fact, they're building their own plant. And we saw pictures this week. So the plant is going up. It should be online in 2020. But until then, WuXi has one additional facility that is going up. And they -- so WuXi next year will have 2 facilities producing ibalizumab. And then in 2020, TaiMed's facility is coming up online, so we'll have 3 sites in 2020.
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Andre Uddin, Mackie Research Capital Corporation, Research Division - MD of Healthcare Research [34]
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Okay. And then, Luc, you mentioned right at the end of the call about market research. And so I'm just wondering if you've recently conducted any additional market research on ibalizumab? If you can just comment on that?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [35]
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Not market research specifically on the number of patients though, but we have, of course, working on the pricing. So we have done some work on that side with an external consultant. But not on the market, it's the number of patients. I think our number are pretty strong and what we have seen in the study, we previously done on a number of patients confirm what we were seeing in the general literatures. So we are confident with that.
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Andre Uddin, Mackie Research Capital Corporation, Research Division - MD of Healthcare Research [36]
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Okay. And is there any outstanding issues that the FDA asked for the BLA in terms of their review?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [37]
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The BLA is going pretty well. It's following its normal course. They have question and the time and answer directly to them. So things are going pretty well on that side.
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Operator [38]
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Your next question comes the line of Prakash Gowd from CIBC.
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Prakash Gowd, CIBC World Markets Inc., Research Division - Executive Director of Institutional Equity Research [39]
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A few small questions. First of all, on -- you mentioned the 8.2% price increase. Can you just remind us what the growth to that is on EGRIFTA? And can we assume the same split on that 8.2% price increase?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [40]
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The gross-to-net is around 81%. .
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [41]
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80%.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [42]
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Let's say, 80% for the usual size here. And with the price increase, of course, you still have to provide rebates, distribution costs is following. So we should be in the same, let's say, ballpark in terms of gross-to-net with EGRIFTA. Yes.
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Prakash Gowd, CIBC World Markets Inc., Research Division - Executive Director of Institutional Equity Research [43]
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Okay, great. Second question is, just trying to get a little bit more understanding about the hurricane impact. Was the issue more around supply chain disruption? Was it a patient access issue? Obviously, the product needs to be refrigerated. Can you speak a little bit more about that? And just what sort of [read] through it might have to your fiscal Q4 numbers?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [44]
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The last, when you talk about supply chain, were minimal. I think we had a few boxes that were lost. Anyway, that's covered by insurance. That's not an issue. Not even a -- it's marginal effect. Now, when I was talking about the effect of the hurricane is really on the patient growth, if you will. I'm quite sure that the patient that is already on EGRIFTA will find a way to get his medication. It's more that if you -- some offices, for example, physician offices are down or stuff like that, it's difficult to believe that in some part of those states that we'll still see a growth in scripts. So that's why I'm saying, I want to be conservative on that side. And we adjusted for that. But really, I think the adjustment in the guidance is a big part linked to the currency not on that. Maybe small part but major part is on currency.
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Prakash Gowd, CIBC World Markets Inc., Research Division - Executive Director of Institutional Equity Research [45]
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Okay. That's fine. And then last thing is on EGRIFTA reimbursements. First of all, on the new patients that you're seeing as a result of the increased sales presence. Do you have a feeling for the split of private and public pay of those new patients that are coming onboard?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [46]
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I don't have the final number. We used to have approximately 60% private, approximately 35% Medicare and 5% Medicaid. The push we have tried to do in the last, let's say, quarters is we have now people in our managed market [thing] that are trying to sign agreement with some Medicaid organization, and it's working. So I think today, we're probably close to 8% -- 8% to 10% of people in our patient group that are covered by Medicaid. So it's a small increase. That's why the gross net have not declined that much. But it still have an impact.
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Prakash Gowd, CIBC World Markets Inc., Research Division - Executive Director of Institutional Equity Research [47]
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Okay. And have you seen any impact from the higher deductible private plans on EGRIFTA?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [48]
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Not really. We have in place a copay program and it's quite stable in the last -- for many quarters, it's quite stable. So it doesn't really be affected.
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Operator [49]
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Your next question comes from the line of Doug Loe from Echelon Wealth Partners.
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Douglas W. Loe, Echelon Wealth Partners Inc., Research Division - Healthcare and Biotechnology Analyst [50]
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And you sort of addressed the few of the things I was going to bring up here with me here, I'll just ask them in my own way. So just on your revised guidance, the EGRIFTA guidance for this year, $42 million to $44 million. And it implies, based on your trailing 9-month revenue that at the top end of guidance, you could possibly do $14 million in the quarter. And it looks as though, I mean, your price increase and currency exchange into the quarter essentially offsetting each other. So are there any specific elements in EGRIFTA marketing initiatives in your current call volumes? Anything else that you'd want to address that would make the top end of your guidance a reasonable expectation? Because it means this looks more to us like the low end seems more like reasonable expectations. Could you just walk me through that a bit, that would be helpful.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [51]
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Philippe?
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Philippe Dubuc, Theratechnologies Inc. - Senior VP & CFO [52]
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Yes. Well, we've taken a few initiatives, and I think the -- well there's a few that will help. There's the prescription growth that has been going on for 3, 4, 5 months now. And at some point, that's sort of compounding. Second, we're looking at some strategies to increase adherence to the product. So just having patients 1, 2, 6 months longer on the drug is also a compounding factor. And then price increase and so -- there's a number of initiatives that are ongoing.
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Douglas W. Loe, Echelon Wealth Partners Inc., Research Division - Healthcare and Biotechnology Analyst [53]
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Okay, that's great. Those specifics are helpful. Second of all, I don't want you to speak for partner TaiMed too much here. But you are undoubtedly aware that their own slide deck, they talk about ibalizumab approval in calendar Q4 as being a reasonable expectation. Anything you would be prepared to say there on whether or not a potential approval before PDUFA date which sort of conform with your own notions on what we could reasonably expect there?
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [54]
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Listen, I said in my speech that within the next 12 weeks. So is it possible? Yes. Can we say it will? I'm not in the room with the FDA, so I don't know. But January 3 is pretty much at the beginning of the year, I doubt though if the FDA will send a letter on January 1 or 2. So it's possible that it's before. But what is our degree of confidence on that, I cannot say at this point, everything is at the end of the FDA. The only thing I can say is that the FDA is following reduced, is following its time line and TaiMed on its side is following as well so everything is going according to plan. So is it possible? Yes. Can I confirm? I don't know, Doug. It's a question that should be asked to the FDA. And they won't (inaudible) not even TaiMed.
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Douglas W. Loe, Echelon Wealth Partners Inc., Research Division - Healthcare and Biotechnology Analyst [55]
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Of course. No. I understood. I thought I'd ask anyway though. And I guess I should tread carefully into a ibalizumab Europe question given your prior comment. But I'll ask anyway. What the heck. I just want -- if discussions you've had to this point sort of give any comfort that your existing 40-patient pivotal study in the U.S. would actually be accepted as pivotal in Europe? Or whether discussions are contemplating that additional regional clinical studies might be required before approval could be granted? Maybe just some color on what clinical initiatives might have to be undertaken or not that would support a European filing. I'll leave it there.
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Luc Tanguay, Theratechnologies Inc. - President, CEO & Non-Independent Director [56]
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Okay. Doug, I think I cannot say if it's acceptable by the authorities. What we know at this point is that our consultant are strongly suggested to propose that to the authorities. So they think that we might have a good chance. But we need to talk to them, definitely. But at least our European consultant think that it's a reasonable proposition, if you will.
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Operator [57]
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There are no further questions at this time. I'd turn the call back over to Mr. Boucher.
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Denis Boucher, [58]
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Well thank you very much. If there are no additional questions at this time, we will conclude today's conference call. I would like to thank everyone on behalf of Theratechnologies for taking part on today's call. Have a great day. Thank you.
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Operator [59]
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This concludes today's conference call. You may now disconnect.
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