Stemline Therapeutics, Inc. (STML) Q1 2019 Earnings Call Transcript

Stemline Therapeutics Inc. (STML)
Q1 2019 Earnings Call
May 10, 2019, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Stemline Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. Ken Hoberman. Please go ahead, Sir.

Ken Hoberman -- Chief Operating Officer

Thank you. Good morning and welcome to today's conference call to discuss our first quarter 2019 financial results. With me on today's call are members Stemline's executive management team including Ivan Bergstein, our Chief Executive Officer; David Gionco, our Chief Accounting Officer; and Robert Francomano, our Senior Vice President Global Head of Commercial. After our remarks, we'll open the call to take your questions.

As a reminder, we may be making forward-looking statements. Our forward-looking statements are subject to a number of risks and uncertainties that could cause our actual results to differ materially from our forecast. A detailed description of these risks can be found in the forward-looking statements and risk factors section of our annual report on form 10-K for the year ended December 31, 2018, and our other reports filed with the SEC.

With that, I will now turn over the call to Ivan Bergstein, our CEO. Ivan, the floor is yours.

Ivan Bergstein -- Chief Executive Officer

Thank you, Ken. Good morning to everyone. The past few months have been transformational for Stemline as ELZONRIS was approved by the FDA and launched in the US for the treatment of adult and pediatric patients 2 years and older with blastic plasmacytoid dendritic cell neoplasm or BPDCN. ELZONRIS is the first treatment ever approved for BPDCN and the first CD123 targeted agent ever approved.

Also, as many of you have seen, the New England Journal of Medicine published the ELZONRIS pivotal results in its April 25th issue highlighting the increase in global awareness and recognition of BPDCN across the entire medical community. We are extremely proud and gratified to bring the patients BPDCN a new and effective treatment and we are pleased with the strong initial uptake in adoption patterns we are seeing in the first quarter of launch.

Our Global Head of Commercial, Robert Francomano will now provide further details on our launch. Robert?

Robert Francomano -- Senior Vice President and Global Head of Commercial

Thank you, Ivan. I'm very pleased to announce that net sales of ELZONRIS were $5.05 million in our first quarter of launch. These encouraging results are the culmination of the concerted customer facing effort between our marketing, sales, access and reimbursement, and medical affairs teams. Our territory managers have had many impactful interactions with healthcare providers and institutions, ensuring that ELZONRIS and BPDCN are kept top of mind. These healthcare provider interactions involving product and disease education are broad, institutionwide calls targeting hematologist-oncologists, transplanters, dermoncs, as well as the hemopathy and dermopathy communities. The team is focused on demonstrating the clinical benefit and value proposition of ELZONRIS as the new standard of care for BPDCN to ensure its rightful place in the treatment paradigm.

Alongside the ELZONRIS directed product promotion, we continue to improve the accuracy and speed of diagnosis of patients with BPDCN by raising the awareness of the disease and highlighting the importance of testing for CD123.

Our first quarter sales indicate that the payer mix is consistent with our prelaunch expectations with about 75% of patients covered by Medicare. While private payers represent a smaller portion of our payer mix, we have several positive coverage determinations with published policies covering roughly 100 million lives from key national payers such as Aetna and Anthem just to name a few. These wins in the private payer segment are just the beginning as our access and reimbursement team continues to inform and cultivate policy decisions across the US. We are very pleased with the strong momentum demonstrated in the first few months of the launch, specifically the number of prescribing physicians, the types of centers ordering, and the total number of patients initiating therapy. The commercial and medical teams continue to work their launch plans and are poised for a successful 2019. We continue to keep a laser focus on the patients and understand we have much more work to do. The team will not relent in their will to sustain the positive momentum.

Our team is built on a strong foundation of talent armed with compelling clinical data and well-positioned to meet the demands of the US launch. Looking forward to potential commercialization in Europe, we continue to build the corporate infrastructure and attract and hire experienced top tier talent.

With that, I will turn the call over to David Gionco to review the first quarter financial results.

David Gionco -- Chief Accounting Officer

Thank you, Robert. As Robert highlighted, net sales of ELZONRIS were $5.05 million for the first quarter of 2019. Stemline ended the first quarter with $124.4 million in cash, cash equivalence, and investments reflecting $21.9 million of net cash expenditures during the quarter.

For the first quarter of 2019, we had a net loss of $27.4 million. Research and development expenses totaled $17 million during the quarter. Selling, general, and administrative expenses totaled $16 million for the quarter. The company ended the first quarter of 2019 with 43.6 million shares outstanding.

I will now turn the call back over to Ivan to wrap up.

Ivan Bergstein -- Chief Executive Officer

Thank you, David. Clearly, we are very excited about the BPDCN opportunity itself and we also believe BPDCN may represent just the tip of the iceberg with respect to the full market potential for ELZONRIS. The target of ELZONRIS CD123 has become increasingly cited across a wide range of indication and has been linked to poor prognosis in several diseases including AML. We are continuing to evaluate ELZONRIS and additional indications including chronic myelomonocytic leukemia (CMML), myelofibrosis (MF), and planning trials in subsets of AML patients enriched with CD123 expression.

Based on the clinical results observed thus far, we are evaluating potential registrational pathways and intend an update on next steps on CMML midyear and MF later this year. Beyond ELZONRIS, we are also working to advance our other pipeline candidates forward and expect further data updates on this as the year progresses. All in all, we are confident we have assembled the necessary parts to build a successful, commercially focused biopharmaceutical company with multiple growth opportunities now and in the future.

With that, I'd like to open the call to questions.

Questions and Answers:

Operator

Thank you. If you would like to ask a question, please signal by pressing * 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press * 1 to ask a question.

Our first question comes from Jessica Fye with JP Morgan.

Jessica Fye -- JP Morgan -- Analyst

A couple of questions for me. I think you mentioned in prepared remarks you were encouraged by the types of physicians and institutions where you are seeing orders for ELZONRIS. Can you talk about how many institutions have ordered and have there been any reorders? With respect to the type of institutions, are these all major centers or have you seen any in the community level hospitals?

Ivan Bergstein -- Chief Executive Officer

Thank you for the question. We are seeing what I would characterize as broad uptake and utilization across various range of institution types. What we're seeing is not only the major academic centers and sites of clinical trials, but also the community has been adopting the product as patients go from the academic centers to the outpatient setting.

Jessica Fye -- JP Morgan -- Analyst

Okay. Great. Is there any insight you can share in terms of how many patients were treated in the quarter?

Ivan Bergstein -- Chief Executive Officer

That's a level of detail that we're not going to be giving out on this call, but we can tell you that we're encouraged by the pattern of patient presentations.

Jessica Fye -- JP Morgan -- Analyst

Okay. Great. Maybe just one last one. Can you just elaborate a little bit more on your progress securing reimbursement? Are you targeting a certain level of Medicare coverage?

Ivan Bergstein -- Chief Executive Officer

The reimbursement continues to be something that is very promising for us. As I mentioned, we've got some very large national payers that have given policy determinations. Several regional payers have as well. Right now, CMS has been in our corner, if you will, when it comes to reimbursement for ELZONRIS. The patterns are everything we have been expecting and right now we see no hurdles that get in the way of us achieving our goals for patient starts.

Jessica Fye -- JP Morgan -- Analyst

Great. Sorry. I'll just get one more in. On net price, where is that shaking out?

David Gionco -- Chief Accounting Officer

Sure. Thank you for the question. You're speaking to growth to the net. We've estimated reserves for product returns, government rebates, distribution service fees, copay reimbursement programs. Our overall sales deduction and allowance rate is in line with peer company benchmarks.

Jessica Fye -- JP Morgan -- Analyst

Great. Thank you.

Operator

Our next question comes from Boris Peaker with Cowen.

Boris Peaker -- Cowen -- Analyst

Good morning. Congratulations on a great start here. Maybe just a further question on the practices using ELZONRIS. What fraction of the practices or large institutions that you're targeting, what fraction of those has actually at least treated one patient so far?

Ivan Bergstein -- Chief Executive Officer

I don't have those specific numbers at hand. I can tell you that, once again, the number of centers -- We bucketed our centers in high, elite, medium, and low tier centers given their size and structures and patient volumes. I can tell you that the patients are presenting at most of the tiers if not all of those tiers. I don't have that type of information, but I can tell you that the coverage, once again, of healthcare providers and institutions spans the entire range of customer base.

Boris Peaker -- Cowen -- Analyst

Great. Maybe a comment on the safety. What are you observing from the initially dosed patients? Are you getting any reports on how the drug is fairing from a safety perspective?

Ivan Bergstein -- Chief Executive Officer

Yes. To our knowledge, everything is consistent with what we've seen in prior experience. Nothing new on that front.

Boris Peaker -- Cowen -- Analyst

Great. Lastly, could you give us some comment on the timeline on the EU? What should we be expecting and when?

Ivan Bergstein -- Chief Executive Officer

Yeah. As we previously said, we filed the MAA in January and it was granted accelerated assessment. We've been kind of back and forth now with the EMA and we by all measures expect a decision sometime this year.

Boris Peaker -- Cowen -- Analyst

Would you be launching then by yourself? Is that what the plan is at this point at least?

Ivan Bergstein -- Chief Executive Officer

Yes.

Boris Peaker -- Cowen -- Analyst

Great. Congrats again and thank you for taking my questions.

Operator

Our next question comes from Matt Kaplan with Ladenburg Thalmann.

Matt Kaplan -- Ladenburg Thalmann -- Analyst

Hi. Good morning, guys. Congrats on the results in the quarter. Very nice. I wanted to follow up on Boris's question with respect to Europe. Can you give us a sense in terms of what that commercial infrastructure will look like in Europe and what you're planning to put on the ground there?

Robert Francomano -- Senior Vice President and Global Head of Commercial

The commercial infrastructure that we're going to be putting in place would be what we consider is a very efficient model, just as what we did in the United States. We will be very judicious with our build and very systematic. As you would expect, we will follow a fairly traditional launch sequence. So, the infrastructure will meet the needs of making sure that we get the number of patients starts we require. It will be a very judicious build over a period of many, many months.

Matt Kaplan -- Ladenburg Thalmann -- Analyst

Okay. Shifting back to the US, a good start in terms of coverage. Where do you think you will be at the end of the year roughly in terms of lives covered in the US on the commercial side?

Robert Francomano -- Senior Vice President and Global Head of Commercial

At this point, we really don't know. I'm sorry. Let me clarify your question. Covered lives?

Matt Kaplan -- Ladenburg Thalmann -- Analyst

Yeah. Covered lives.

Robert Francomano -- Senior Vice President and Global Head of Commercial

As far as payers?

Matt Kaplan -- Ladenburg Thalmann -- Analyst

Yeah. Exactly.

Robert Francomano -- Senior Vice President and Global Head of Commercial

Our anticipation would be to have as many patients covered as humanly possible. That's what we are driving toward. I don't know what that percentage will be but it's not something that I'm concerned with from a product uptake or payer situation.

Matt Kaplan -- Ladenburg Thalmann -- Analyst

Okay. Great. Just a pipeline question maybe for Ivan. In terms of CMML and myelofibrosis, what are your thoughts now in terms of the regulatory route there and starting a potentially pivotal study in CMML or myelofibrosis?

Ivan Bergstein -- Chief Executive Officer

Yeah. Our interactions with the FDA are ongoing on that front and we're pleased with where we are at the moment. We'll have further updates around that, as we've guided previously, midyear.

Matt Kaplan -- Ladenburg Thalmann -- Analyst

Great. Thank you for taking the questions, guys.

Operator

Our next question comes from Ram Selvaraju with Wainwright.

Ram Selvaraju -- Wainwright -- Analyst

Thanks very much for taking my questions. I wanted to know if you could draw a read at this juncture on the trajectory with which you expect the most low-hanging fruit type patients all on. Do you anticipate that could take the remainder of this year or into next year? Just give us a sense of how quickly you expect to be able to penetrate the lowest hanging fruit, the most accessible patients in the BPDCN population, please.

Ivan Bergstein -- Chief Executive Officer

I'm sorry. Can you restate the question, please?

Ram Selvaraju -- Wainwright -- Analyst

Yeah. What I was saying was, do you have a read at this juncture on how long it would take to get the lowest hanging fruit, the most easily accessible patients with BPDCN on ELZONRIS, how long that would take, approximately?

Robert Francomano -- Senior Vice President and Global Head of Commercial

Thank you for reclarifying. I think at this point it's too early for us to determine that.

Ram Selvaraju -- Wainwright -- Analyst

Okay. On the pipeline for ELZONRIS, I was wondering if you could provide additional clarity on AML indications? I think the press release referenced specific pockets of the AML population and I wanted to get the sense of what your most updated thinking was regarding that. What line of patients we're talking about? What kind of prior treatment would they have had? What's the sort of overall makeup of the AML patient who you folks consider to be the most likely candidates to obtain benefit from ELZONRIS treatment?

Ivan Bergstein -- Chief Executive Officer

Yeah. So, we're in the process of planning trials in that area. Typically, we'll be focusing on areas of unmet medical need or areas where we think we can maybe be able to improve existing therapy by combining ELZONRIS with others in certain settings. Potentially, signaling more likely combination and focusing on patients who are either enriched with CD123 expression or AML patients who are enriched with BPDCN like features.

Ram Selvaraju -- Wainwright -- Analyst

Okay. With respect to the non-oncology related indications where CD123 expression appears to be involved or maybe therapeutically important, could you comment about whether you consider ELZONRIS itself to be potentially applicable in those contexts? Like for example in lupus scleroderma or are you still thinking about it more in the context of some other type of therapeutic intervention that's not ELZONRIS but that is CD123 targeted?

Ivan Bergstein -- Chief Executive Officer

You broke up a little bit. I think I got the gist of the question. We have conducted what we think is a very strong rationale for ELZONRIS and certain autoimmune diseases that we've mentioned before cutaneous lupus scleroderma with CD123 plasmacytoid dendritic cells which happen to be the cell of origin of BPDCN appear to be bad actors in some of these autoimmune diseases. There are others out there trying to target these cells. There is a lot of literature around the rationale for that. We've conducted pre-clinal experiments that we've presented at conferences that look very promising. We are evaluating now potential clinical options in some of these diseases.

Ram Selvaraju -- Wainwright -- Analyst

Okay. Just one last one on the pipeline that's not ELZONRIS. Could you tell us what the remaining IND-enabling XR leveraging for SL-1001 and if you have a sense of whether or not that candidate can progress into IND filling submission?

Ivan Bergstein -- Chief Executive Officer

Right now, we just got our hands around the compound. As we've said before, our goal is to get it into the clinic next year. We'll provide further detail as the year progresses with respect to the granularity around that. Right now, we're intending to get in the clinic next year.

Ram Selvaraju -- Wainwright -- Analyst

Great. Thank you very much for taking my questions.

Operator

Our next question comes from Joe Catanzaro with Piper Jaffray.

Joe Catanzaro -- Piper Jaffray -- Analyst

Hey, guys. Congrats on the nice quarter and thanks for taking the questions. Maybe first on the launch, I appreciate that you guys don't want to give out patient numbers. Maybe help us potentially back into it. Given the timing of the launch, is it safe to assume that the median duration of treatment in 1Q was a single cycle for patients?

Ivan Bergstein -- Chief Executive Officer

I appreciate the question. I still think given the early stage of the launch; we're not giving any level of detail.

Joe Catanzaro -- Piper Jaffray -- Analyst

Okay. Maybe just one follow up to that. I think at the time of approval you guys had said that you expected early use to be heavily weighted toward relapse refractory patients. Are you seeing that play out?

Ivan Bergstein -- Chief Executive Officer

Yeah. I think as we get further into the launch, we're still very early on, but we're seeing patient presentations both in treatment naïve and relapse refractory setting.

Joe Catanzaro -- Piper Jaffray -- Analyst

Okay. Maybe just a couple of questions on some modeling. Can we expect the costs of goods sold to remain consistent with what you guys reported in 1Q? The repayment of research funding around the commercial launch of ELZONRIS, is that a one-time charge that we won't see moving forward?

David Gionco -- Chief Accounting Officer

Thank you for the question. Regarding the costs of goods sold, the majority of our manufactured batches were produced in 2018 prior to receiving FDA approval. As such, the accounting rules dictate that we would expense those costs as research and development. Those costs were expensed in a prior period. So, to answer your question, we believe that the costs of goods sold will be at a similar level for the upcoming 18-24 months.

Regarding your question on R&D, this relates to an expense we recorded related to a milestone payment due to the Leukemia and Lymphoma Society resulting from the first commercial sale of ELZONRIS.

Joe Catanzaro -- Piper Jaffray -- Analyst

Okay. And that's just a onetime charge?

David Gionco -- Chief Accounting Officer

That is correct.

Joe Catanzaro -- Piper Jaffray -- Analyst

Okay. Thanks for taking the questions.

Operator

Our next question comes from Jotin Marango with Roth Capital.

Jotin Marango -- Roth Capital -- Managing Director

Hi. Good morning. Congrats on getting ELZONRIS through trial and the FDA in record time. I have a few questions about the sales organization. I understand that at this point you are not giving nominal guidance on sales for the year. But perhaps I can ask about expected trends. Can you discuss a little bit patient distribution or lumpiness geographically or temporally for the year, especially as it pertains to sales? So, based on the targeting plan that you have right now, is it a fairly attack? Do you expect patients to move on therapy relatively steadily through the year or do you expect lumpiness toward the end part of the year? Thank you.

Robert Francomano -- Senior Vice President and Global Head of Commercial

Thank you. Once again, it's still early to understand what trends we're going to see throughout the remainder of the year, but all indications point to patients presenting fairly regularly. Still, the performance of perhaps about 500 if not more patients in the United States. Where they present and how they present is really out of our control, of course. But what we would expect is a steady rate of presentation, performance of at least 500 patients in the United States and then having those patients started on ELZONRIS continue to grow as the word gets out.

Jotin Marango -- Roth Capital -- Managing Director

Thank you. The patients on treatment so far, those producing the $5 million in sales that we saw in 1Q and the new ones since 1Q since we are almost in June, do they all fall under the BPDCN label or has there been anything creative that has caught your eye? Maybe someone taking maintenance or something different?

Ivan Bergstein -- Chief Executive Officer

We're not tracking any type of off label use at this point.

Jotin Marango -- Roth Capital -- Managing Director

Okay. Lastly, a question for Ken and Robert perhaps. At this point, is the sales organization and effort complete and fully activated or is it going to continue being built through the year? I guess a roundabout way of asking how should we think about sales costs through 2019? Thank you.

Robert Francomano -- Senior Vice President and Global Head of Commercial

From where I sit, the sales organization is complete. We'll continue to monitor the landscape but right now it seems to be complete and meeting the needs of the organization.

Jotin Marango -- Roth Capital -- Managing Director

Okay. Great. Thank you.

Operator

Our next question comes from Nathan Weinstein with Aegis Capital.

Nathan Weinstein -- Aegis Capital -- Managing Director

Hey, guys, and congrats on what looks like a very nice quarter. Thank you for taking my questions. I just have a couple of ones. In general, would we look at some of the first quarter sales as having some stocking component or would it be really reflective of consumption of the drug in the market?

David Gionco -- Chief Accounting Officer

There was minimal stocking during the first quarter.

Nathan Weinstein -- Aegis Capital -- Managing Director

Okay. Thanks. The second one is a little philosophical, but you guys shepherded the organization through to commercial stage very quickly and really impressively. I guess sitting at the top of the organization, Dr. Bergstein, do you feel like you're happy with the way that it's been performing?

Ivan Bergstein -- Chief Executive Officer

Absolutely. I'm extremely proud of the team.

Nathan Weinstein -- Aegis Capital -- Managing Director

Okay. Thanks. When you look through your pipeline maybe a little bit deeper into the pipeline for some of these other types of therapeutics, do any of those drugs make you think if you get this to the commercial level it's going to require some greater investment or training in the sales force?

Ivan Bergstein -- Chief Executive Officer

The near-term would be the ELZONRIS initial indications which are HemOnc focused and largely a lot of overlap with physicians who treat patients with BPDCN. So, it is a very synergistic opportunity there that we can build on with the infrastructure in place now. The other assets, we'll see. Hopefully, we'll be in the good fortune of building out additional sales folks in solid tumors etcetera as we move forward.

Nathan Weinstein -- Aegis Capital -- Managing Director

Thank you. Just one final one from me. When you guys think about the population of potential BPDCN patients outside the US in the EU, have you given any thought to rest of the world and what that could look like?

Robert Francomano -- Senior Vice President and Global Head of Commercial

Right now, as we've stated in the past, we feel the opportunity in the EU is similar to what it is in the United States. If you extrapolate that to other populations around the globe, I think there is probably a consistent message.

Nathan Weinstein -- Aegis Capital -- Managing Director

Thank you. That was helpful.

Operator

Thank you, everyone. This concludes today's question and answers session. I will now turn it back over to today's speakers for closing remarks.

Ivan Bergstein -- Chief Executive Officer

Thank you. We appreciate the call.

Operator

Thank you, everyone. This concludes today's teleconference. You may now disconnect.

Duration: 27 minutes

Call participants:

Ken Hoberman -- Chief Operating Officer

Ivan Bergstein -- Chief Executive Officer

Robert Francomano -- Senior Vice President and Global Head of Commercial

David Gionco -- Chief Accounting Officer

Jessica Fye -- JP Morgan -- Analyst

Boris Peaker -- Cowen -- Analyst

Matt Kaplan -- Ladenburg Thalmann -- Analyst

Ram Selvaraju -- Wainwright -- Analyst

Joe Catanzaro -- Piper Jaffray -- Analyst

Jotin Marango -- Roth Capital -- Managing Director

Nathan Weinstein -- Aegis Capital -- Managing Director

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