Clarus Therapeutics Holdings, Inc. (NASDAQ:CRXT) Q4 2021 Earnings Conference Call March 30, 2022 5:15 PM ET
Company Participants
Bob Dudley – President and Chief Executive Officer
Ric Peterson – Chief Financial Officer
Frank Jaeger – Chief Commercial Officer
Conference Call Participants
Operator
Ladies and gentlemen, thank you for joining in the Clarus Fourth Quarter and Full Year 2021 Financial Results Conference Call. Today’s call is being recorded and webcast live on the company’s website at www.clarustherapeutics.com in the Investor Relations section, and it will be available for replay for 10 business days following this live call.
Please note that discussions today may include forward-looking statements. Forward-looking statements may involve a number of risks and uncertainties. Some of which are beyond Clarus control and other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.
These risks and uncertainties include, but are not limited to, the risks associated with the Clarus financial position, risk inherited and pharmaceutical development, and those factors described under the heading Risk Factors in the prospectus filed with the Securities and Exchange Commission, the SEC, under Rule 424(b)(3) on December 23, 2021, and those that are included in any of Clarus future filings with the SEC, including its Annual Report on 10-K for the year ended December 31, 2021 when filed.
These forward-looking statements speaks only as of the date of this call and Clarus disclaims any intent or obligation to update these forward-looking statements to reflect events or circumstances after the date of such statements except as may be required by law. Following the prepared remarks, Clarus will not be taking questions.
At this time, I’d like to turn the call over to Dr. Bob Dudley, Founder, President and Chief Executive Officer of Clarus. Please go ahead, sir.
Bob Dudley
Thank you. Good afternoon, everyone, and thank you for joining us today. We appreciate your interest in Clarus. With me today is our Chief Financial Officer, Ric Peterson; and our Chief Commercial Officer, Frank Jaeger.
Let’s get started with our recent business highlights. We continued to see total prescription growth for JATENZO in the fourth quarter of 2021 with an increase of 11% sequentially and 81% year-over-year driven primarily by advertising and promotion and an increase in payer coverage across all channels.
Two new patents were issued for JATENZO in November 2021. These have been listed in FDA’s Orange Book, bringing a total number of patents protecting JATENZO to seven. We closed the 15 million private placement with a leading healthcare investor in December, 2021, the proceeds of which support the ongoing commercialization of JATENZO.
In January of this year, we appointed Zhanna Jumadilova as Chief Clinical Development Officer. She brings a depth of clinical development experience that will be important as we develop our pipeline products and explore potential new indications for JATENZO. And to this very point, we initiate the screening for the first patient in an investigator-initiated Phase 4 clinical study of JATENZO for the treatment of hypogonadal men with chronic kidney disease in March 2022. We expect to announce results from this trial in the first half of 2023.
On the commercial side of the ledger, we launched strategic partnerships with Vault Health and AssistRx in February to make patient access to JATENZO easier and enhance their overall prescription process, improved in this initiative as a telemedicine portal for patients who do not have access to a healthcare provider. Recently, we completed filming of a direct-to-consumer advertisement for JATENZO as part of a comprehensive plan to increase awareness among hypogonadal men, for whom JATENZO is medically appropriate. Assuming we are able to address our capital needs, our current plan is to air this piece later in the year and avail ourselves as a highly focused media technologies that are a far cry from buying expensive time in major network channels.
Finally, while we are excited that JATENZO continues to perform well in the market, the ability to raise capital support – to support the brand remains a challenge. And in light of our current cash position, we have initiated a process to explore strategic alternatives to maximize shareholder value.
Now, Ric Peterson, our Chief Financial Officer will discuss Clarus’ financial status. Ric?
Ric Peterson
Thanks, Bob and good afternoon, everyone. I will be going over the fourth quarter and full year 2021 financial results. To start with, fourth quarter revenue was $4.6 million compared to $2.4 million in the same period for last year. Full year revenue was $14 million compared to $6.4 million in 2020. This represents growth of a 119% attributed to the growth in JATENZO sales.
Gross margin for the quarter was 71.7% compared to 85.2% for the corresponding prior year period. Gross profit was 80.5% for the full year compared to negative margin in 2020. Cost of goods sold decreased 68.7% in 2021 compared to 2020 attributable to writeoffs in those years of $0.7 million and $7.8 million for inventory obsolescence reserves for the years ended December 31, 2021 and 2020 respectively.
Fourth quarter operating expenses were $10.5 million compared to $10.2 million in the same period last year and for the full year operating expenses were $51 million compared to $44.9 million for 2020, this represents an increase in operating expenses that were driven mostly by head count and professional fees associated with financing activities and operating as a public company.
Fourth quarter sales and marketing expenses were $5.7 million compared to $6.0 million in the same period last year. Full year sales and marketing expenses were $30.7 million compared to $30.5 million for 2020. This represents a 0.5% increase primarily due to JATENZO and commercial analytics, marketing research costs and additional sales and marketing expenses associated with the brand.
Fourth quarter general and administrative expenses were $4.3 million compared to $3.7 million in the same period last year. Full year general and administrative expenses were $16.7 million compared to $11.9 million for 2020. This represents an increase of $39.6 million attributed to higher personnel costs due to an increase in head count and consulting costs and an increase in public company expenses.
For R&D, R&D increased were $0.5 million compared to $0.6 million in the same period in the previous year. And then looking at the full year for research and development expenses were $3.6 million compared to $2.4 million in 2020. This represents a 51.4% increase, primarily attributable to clinical costs associated with our lead commercial asset JATENZO and licensing fees related to the HavaH and McGill in licensing agreements.
Our cash and cash equivalents as of December 31, 2021 will fund our current operations plan into April, 2022. As Bob noted, we continue to explore strategic alternatives for the purpose of maximizing stockholder value. And while we expect to devote significant efforts to raise capital, restructure or indebtedness and identify, and evaluate potential strategic alternatives, we may not be successful, which could force us to delay, limit or terminate our operations, including workforce reductions, pursuant to asset sales or other alternatives, including seeking protections under the provisions of the U.S. bankruptcy code. Notwithstanding our challenges JATENZO has continued to perform well in the marketplace.
Now, Frank Jaeger, our Chief Commercial Officer will discuss some of these important highlights. Frank?
Frank Jaeger
Thanks, Rick. Thank you, Rick. I’m proud to announce that JATENZO has experienced several notable milestones in the fourth quarter and full year as the brand continues to grow. Total prescription growth for JATENZO in the fourth quarter, increased 11% sequentially and 81% year-over-year driven primarily by advertising and promotion and increase in payer coverage across all payer channels.
Specifically our prescription growth has been driven by the following. First and foremost, we continue to receive positive feedback from providers and patients regarding their experience with JATENZO. Second, we made changes to our sales force by increasing the number of sales representatives from 55 to 60 and optimizing the sales territories to ensure we have a national footprint. These have resulted in sales territories increasing their overall testosterone replacement therapy, prescription coverage volume from 59% to 80% of all prescriptions written in the marketplace in the United States.
Next we are seeing increased access with waning COVID concerns to physicians. Despite Omicron’s presence in the fourth quarter specifically, we have been able to increase sales rep access to providers’ offices in fact, nearly 90% of all of our healthcare provider calls are live calls. Additionally, we are seeing patient visits for hypogonadism return back to normal levels, which means more patients returning to healthcare provider offices and we expect to see this trend continue throughout the year.
And finally, we have increased patient to JATENZO. As for payer coverage at the end of 2021, JATENZO had access to 70% of the overall lives that are – that were patients have coverage in the United States, those plans coverage JATENZO. And when you look specifically at the commercial channel where the bulk of the prescriptions are written in this class, 77% of all commercial plans now cover JATENZO. These are significant changes over the course of the year. And now JATENZO is one of the best in the class. And as for patient assistance, we are seeing continued success and growth in our JATENZO co-pay assistance program. We believe JATENZO is poised to for accelerated growth throughout this year.
In fact, the TRT market is large at approximately 8 million prescriptions written in this market each year. And it’s growing with an over a 6% compounded annual growth rate in 2021 over the past seven years, again, despite COVID. This is a large number considering that there are 2.2 million patients who are currently being treated and greater than 4 million patients who have either been diagnosed or stop treatment. These patients represent our opportunity because we know based on an independent survey in over 400 hypogonadal men that nearly eight out of 10 patients are not satisfied with their current non-oral option.
Additionally, we know that as an oral, JATENZO overcomes the significant administration issues associated with the injections and the gels where a majority of the prescriptions are written today. JATENZO was the only oral that’s approved that has multiple doses. So a prescriber can individualize treatment to each patient.
And finally, we know through our market research that physicians universally report that they nearly always switch a patient to JATENZO if the patient requested the switch, even if the patient was therapeutic on their current product and was not experiencing any side effects. Bottom line is that if patients ask for JATENZO, they’re very likely to get prescribed JATENZO.
As we move forward into the second quarter of 2022 and beyond, we are excited about the impact we are seeing and the initiatives that we have put in place and are on the horizon. We expect that our recent salesforce national footprint expansion will continue to reach and educate more healthcare providers at a time when COVID is becoming less of a concern. Additionally, we recently held a live national sales meeting where we focused on raising the bar on what good messaging and good selling looks like.
We expect that our overall payer coverage will continue to grow throughout the year and already in Q1 of this year, we have already seen our overall payer coverage increase now to 72%.
Also in the first quarter, we launched two new strategic partnerships with Vault Health and AssistRx, leaders in providing healthcare services to patients, both of which underscore our continued commitment to providing solutions for patients. Our partnership with Vault Health enables patients who may be suffering from hypogonadism to get clinical care from the comfort of their own home via a telemedicine approach. And our partnership with AssistRx, who is the leader in providing prescription initiation and patients support solutions, allow patients to streamline the process in JATENZO prescriptions fulfilled and sent directly to them via mail order.
These two partnerships work together synergistically in an end-to-end solution from diagnosis to product fulfillment, helping to eliminate barriers through a streamlined single portal experience. What this means is that through our partnerships, we can help patients determine if they’re hypogonadal, ship JATENZO directly to their homes and importantly refill prescriptions automatically at a cost savings. Bottom line we believe these customized patient support offerings will result in better treatment and ultimately better adherence to therapy.
And finally, as Bob mentioned – briefly mentioned just a few minutes ago on the near term horizon, we are excited as we finalize our new integrated healthcare provider and consumer promotional campaign and with additional outcome we – our additional capital we expect to launch that in the coming months. As part of that new campaign, we’ll be launching a direct to consumer television component that will target the appropriate hypogonadal diagnosed and currently or previously treated patient. This is really exciting for the business, and we expect that this will be a significant driver of JATENZO growth in the future as we move forward.
And now Bob will provide recent pipeline and other updates. Bob?
Bob Dudley
Thank you, Frank. Regarding JATENZO, we announced the initiation of screening for the first patient in an investigator initiated Phase 4 clinical trial of JATENZO for the treatment of hypogonadal men with chronic kidney disease. And we expected the results from that to read out in the first half of 2023. We continue to work on several label expansion, life cycle management projects for JATENZO and pending availability of funds, these are in all – these are all in large markets, including testosterone therapy from female to male transgender visuals, another label expansion with Phase 4 initiation anticipated in the second half of 2022, again subject to availability of funding. And once daily oral to you for the Phase 2 – initiation Phase 2 study initiation, excuse me, anticipated in the second half of 2022 as well again subject to our ability to fund these studies.
Next subject to availability of capital. We continue to advance our pipeline candidates, including CLAR-121, the combination of testosterone and anastrozol. This is a product in licensed in May 2021 from Havah Therapeutics in Australia for the treatment of certain inflammatory breast diseases in particular periductal mastitis and as adjunctive therapy and estrogen positive, androgen positive breast cancer. Project initiation of Phase 2 for these, for PDM would be in the second half of 2022. For CLAR-222, which is the combination of Coenzyme Q10 + caspofungin this is technology and licensed from McGill University in September of 2021 with projected initiation of Phase 1 for the treatment of primary and secondary forms of CoQ10 deficiency and related mitochondrial dysfunction in the second half of 2022.
Regarding intellectual property highlights, as noted earlier in the fourth quarter, we now have a total of seven Orange Book listed patents for JATENZO, providing coverage to 2030. Finally two upcoming medical conferences offer along the waited opportunity for us to showcase JATENZO. For the first time since COVID, altered the medical – medical meeting Landscape Institute, we are extremely excited to have the, a significant presence at two important medical meetings in May and in June, both of these will be live.
These represent the first opportunity since JATENZO was launched, just three weeks before COVID, that endocrinologists and urologists can interact with Clarus commercial and medical affairs personnel in what was a common annual gathering. So these two meetings are the Androgens excuse me, the AUA, meeting in New Orleans and the Endocrine Society meeting in Atlanta. And I should mention, we will have at least one abstract presented at the Androgen Society meeting in April 21 to the 23rd in Orlando.
So as we close my sincere thanks to team Clarus and all of our external partners for their hard work on our behalf. Thanks all, thanks also to our stockholders and to our directors for their support. I’ll now turn the call back to our operator to wonder.
Operator
Thank you, ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
Question-and-Answer Session
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