Welcome to Day Three of the Piper Sandler Healthcare Conference. This is David Amsellem from the Piper Welcome to Day Three of the Piper Sandler Healthcare Conference. This is David Amsellem from the Piper Biopharma Research Team. We're delighted to kick off today with Pelthos Therapeutics and CEO Scott Plesha. Thanks, Scott, for joining us. I'm going to dive right in. You had some favorable news on Zelsuvmi this morning on the payer front, so kind of hot off the presses. Maybe just give us a summary of the payer win and what should we know? Great. Yeah, thanks, David. Appreciate you having me today to share our story. So yeah, we're excited to announce this morning that we had a major payer win. Our strategy as we entered the market was to get into market. We're really early in our launch with the July launch, but overall the strategy was to get into market, understand where our friction was, and we kind of knew where we might have that friction, and now we've addressed it. To give you an idea, when we look at this commercial win of about 20 million lives, some of it became effective December 1, but the majority today. They were under indexing when we looked at their prescriptions. We were seeing about 5% of the scripts, of commercial scripts, going through their plan when they account for about 20% of the lives. It's meaningful to give access to more patients, and I think it also just helps the overall perception of the coverage when you're talking about physicians and calling on them. What are the implications for future contracting activity? And we'll get more into the payer landscape as we get more into the discussion. But now that we're on the topic, just how are you thinking about contracting with other big PBMs? Yeah, so today, again, we haven't contracted besides this one. Even on the Medicaid side, so about 30% of our business right now is Medicaid, but we have 70% of the lives covered within Medicaid without contracting. So we'll continue to monitor and decide if there's opportunistic plans that we should contract with. And there are a few that we still have an eye on, but for the most part, the PA process has been very manageable. And if we would have contracted, I don't know if it would have been that different besides this one plan. Okay. So I guess let's back up, and for those listening in and in the audience who are not as familiar with Pelthos, give us some background on the history with Ligand and also background on Zelsuvmi, particularly in terms of what you control regarding the asset and what Ligand currently controls. That would be helpful context as we learn more about Pelthos. Sure. Yeah. So Ligand had original royalty interest, had invested in the company, the predecessor company, Novan, back in before 2020. And the company, they then purchased it out of bankruptcy in September of 2023. I joined the company subsequently to that, after that, to lead the company as a wholly-owned subsidiary under Ligand. On July 1st, we actually announced a merger with Channel Therapeutics, became a publicly traded company at the time. At that time, we retained the rights to Zelsuvmi, which is our lead asset, which is a product indicated for molluscum contagiosum in patients one year of age and older, up to 12 weeks. And with that, we also maintained the right to develop the product for external genital warts. And Zelsuvmi and that asset, that indication are all based on the Nitricil platform. So that was all developed at Pelthos over time. The actual IPs now and all these other indications are sitting within Ligand. So we only have Zelsuvmi, and Zelsuvmi, we have worldwide rights to Zelsuvmi, and then the rights to develop it within external genital areas. Now, with that said, we also maintain and operate the API manufacturing for this platform, for the Nitricil platform. So we're going to evaluate and decide. There are many different indications that have phase II and phase III work already done using this nitric oxide releasing platform. We're digging into those and deciding if there's something we'd like to work with Ligand and in-license into Pelthos. Got it. And the last thing I'll add is owning the API side of things, if they were to partner with another company, the API would still have to come from us. So it could actually even be a revenue source if they do things outside of partnering with us. So let's dive into the underlying mechanism of Zelsuvmi or the generic name berdazimer. So, novel topical agent based on the nitric oxide releasing platform that Novan, the predecessor company, developed. I just want to get a better sense from you of how you think about the underlying mechanism for a range of skin conditions, whether they're infective conditions or non-infective. I know that there is a broad development program at one point. I think the original indication was acne, if I'm not mistaken. But just talk more about the nitric oxide releasing platform and why you think it's so attractive. Yeah, so it's a unique platform in that, and first off, the chief technology officer and a lot of the know-how sits within Pelthos, and she's worked on this program since 2006, back to the UNC labs. Nitric oxide is a really unique compound, but people haven't been able to harness it, and we're the first company, I think, to be able to take a gas, turn it into a topical gel, and apply it, so what's unique about the platform is we can increase the amount of nitric oxide, the release rate of nitric oxide, and also put it in different bases depending on the disease states, so nitric oxide itself, in Zelsuvmi and our label, it basically says we're nitric oxide releasing, but MOA within molluscum is unknown. The nitric oxide itself, though, is antiviral, antibacterial, antifungal, and anti-inflammatory. We do know in studying it in viruses that, in fact, it prevents viral replication. And in molluscum, the pox virus actually hides from the immune system. And nitric oxide is able to kind of unmask that and kind of allow the body's immune system to respond at that point in time. Got it. So let's talk about molluscum. Wanted to hear your thoughts on the nature of the underlying unmet need here. So my understanding with molluscum is some cases, maybe many of them, are self-limiting, but there are many others that are not. So can you talk to that? And in the cases that are not self-limiting, talk about the underlying symptoms, the challenges for patients and caregivers, and ultimately the underlying unmet need. Sure. So just backing up on molluscum, there's large prevalence. You see about six million new cases a year, predominantly in children. So about 80% of the cases are 10 and under. 90% are 20 and under. So it's really the disease of those with weak immune systems. So if you see it in an adult, they're usually immunocompromised. So I think the important part about Zelsuvmi and our product is the first and only FDA-approved product for at-home treatment. So previously, especially in the derm space, they're more likely to use a destructive modality prior to our release. So they would do things like cryotherapy, curettage, or blistering agents. And then in the peds space, so about half our time is spent in derm, half is spent in peds. In the peds space, they're just not equipped to do that as readily. It's estimated about 73% of patients aren't even being treated that are 10 and under. I think one of the reasons it's not is, first off, there hasn't been anything at home. Number two, you're dealing with such young patients, and it's difficult if they present, a four-year-old presents with, say, 40 lesions. They're in their groin, behind their knees, under their arms, which are real common places. Those are very sensitive areas. So to treat with some of these destructive modalities is going to be a challenge. So instead, being able to apply just a topical medication once a day for up to 12 weeks is a nice advancement here. Yeah. Can you talk about just the body of data surrounding Zelsuvmi? And obviously, it's approved and it's been on the market, but just talk about the clinical outcomes that we've seen and how we should think about the overall benefit. Yeah. So a lot of data, a lot of study here, a lot of studies. As a matter of fact, our B-Simple4 trial, which was our final pivotal, is the largest study ever within molluscum patients, 891 patients. The disease state itself is difficult to treat. So you have a pox virus, but in the study, if you treat, say, 20 lesions, you may clear all 20 that you started with, but three or four could pop up. So kind of think of it almost like acne or psoriasis, where it's great to get complete clearance, but if you can get more than 50% reduction, it's really important. So in our study, about a little over 30% of the patients got complete clearance, but you see the median and mean reduction lesion amounts very quickly separate from the vehicle, and then long-term get well above that 50% reduction. When we surveyed the parents in the study that had children in the study, if they did not have complete clearance, about 77% said they still had a clinically meaningful impact on their child's lives based on just the reduction in lesions. Yeah. So you mentioned blistering agents. I believe there's one that is approved. So my understanding is it's really just right now a two-player market, your agent and a drug called YCANTH. So just wondering if you can talk about how YCANTH is used versus the way in which Zelsuvmi is used. And I realize that this is a big market and there's different kinds of modalities and different treatments can coexist, but they are very different products. I was wondering if you can compare and contrast. They are, and they've been in the market about two years, which has been good. Actually, they've done a nice job of raising awareness around molluscum. So that's a good thing. And just, I shared six million new patients. There's obviously more than enough patients for both of us to do well. Really, it's about the choice of being able to empower the parent and the child to treat at home. With their modality, you go into an office, you get diagnosed, and you may have to go into the office up to 4x to go through the procedure. That's what their label is, is up to four treatments. And we've even heard in some of the examples of HCPs and doctors using these products together, starting with our product and then maybe cleaning up with theirs or vice versa. So honestly, it's about, I think, again, looking at the market, 73% untreated. I think it's also about just providing an option to people that maybe didn't feel comfortable with the destructive modalities or just kind of taking a wait-and-see approach or physicians that weren't comfortable. So again, pediatricians probably only about 10% of the time actually treat with these modalities, these destructive modalities. So they're more likely to use an antibiotic or a triamcinolone, a weak steroid, because they're trying to treat the symptoms they're seeing, the irritation, redness, secondary skin infections. Yeah. Interesting. So it sounds like totally different mechanisms, complementary potentially, not at all a zero-sum game given the size of the market and the nature of the unmet need. Is that a fair characterization? Yeah, I think so. I mean, our vision is we're first-line therapy. I mean, to be clear, we feel we should be the first product used, but doctors are going to make different decisions based on different patient profiles. Sure. Okay. So let's talk about your commercial organization. So just give us the details on the size of the salesforce you're deploying, talk to the recent salesforce expansion, and also the call audience. Yeah. So again, early days, we launched in July. Our go-to-market strategy was 50 reps, calling about 8,000 different targets, half derm, half pede, a sprinkling of OB/GYNs, some FP. And within that, there are mid-levels, so the nurse practitioners and the PAs. So based on our early success and kind of getting into the market, seeing what the uptake was, uptake curve, and also what market access was going to look like, that's a critical part of this. We like to say we earned the right to expand. Prior to this opportunity, I led the Salix salesforce from inception until we got acquired by Valeant. And then I was at BioDelivery Sciences and deployed salesforces and grew them over time. We were able here to pay for our salesforce within nine weeks of launch. So we had a really quick return on the salesforce. We had areas of the country, large metropolitan areas like San Francisco, Seattle, St. Louis, Kansas City, Memphis, that weren't covered. We actually didn't even have a rep there. And we were seeing some business come through. So we looked at this as an opportunity to maintain and maybe gain momentum in our growth. So we'll be adding 14 reps, two managers, still a very reasonable size salesforce. We'll have every major metropolitan area covered after this. So 64 reps, eight managers throughout the United States. Do you find that pediatricians, when they see a molluscum case, are referring out kids to derms? Or because now there is an at-home treatment, they're just going to prescribe the product themselves. I mean, what has been the practice historically, and what do you think will happen going forward? Yeah. So a lot of them, as I mentioned, a lot of them aren't treated in the peds space. It's just like wait-and-see. They show up with 10 lesions. They watch, and then a month later, there's 20 or 30. So the data suggests when you look at the ICD-10 data and claims and the patient flow, about half the patients getting to derms are referrals from peds. So as we talk to the dermatology market and the ped derms, they're definitely wanting to advocate to the pediatricians to use Zelsuvmi prior to referring. And even if they're going to refer, so maybe they're cleared by the time they get in and maybe need the appointment. So the derms, in general, when you're talking to them, would rather be doing other things in their practice than treating young children with molluscum. It's kind of a difficult disease for them to treat. Yeah. No, makes sense. Can you talk about DTC and the role of DTC in the commercial support of Zelsuvmi? Yeah. So I would say that you're not likely to turn on the Super Bowl coming up or any playoffs and see any advertisement for Zelsuvmi there. So nothing of that level, but we recently started layering in a lot of digital work, paid search. This product fits very well in social media platforms. Disease of young children, young families that spend a lot of time on social media. Something like a YouTube commercial is something you might see in the near future here. So things like that that are very affordable, but ways to raise awareness within the patient population, as well as the treaters of it. Yeah. So not a particularly expensive DTC focus. No, very manageable. And yeah, we're not going to spend $50,000 on commercials or anything like that. Got it. Okay. Let's talk about volume trends. And we all see the third-party data, but love to get your take on volume growth. And I know these are early days, but you talk about volumes. Also talk to the number of prescribers and also the number of repeat writers. Yeah. So we shared in our Q3 earnings call, again, early days. We launched July 10th, first day in the field, but about 2,700 prescriptions, our first quarter out there. Just to give you an idea, October is the last full month we have, is about a 41% increase over September. And then when you look at just under 2,200 prescriptions, so 2,700 for all of Q3, 2,200 for October. And if you look at kind of the run rate there, it's probably about a $35 million October, $35 million net revenue run rate for a year, four months in. So really nice growth we have there. On the prescriber side, we exited Q3 with about 1,200 prescribers, unique prescribers. That's now after October, we added about 600 more. As we sit here today, we're almost 2,200 unique prescribers. And of that, a little bit less than half have written a prescription for more than one patient. And right now, I think we're with a lot of physicians, we're in that trial stage where they've written one or two, and they're trying to get some clinical feedback before they start writing more. So I want to come back to access. I know you had the payer win this morning, but I wanted to talk about the mix between commercially covered patients and Medicaid patients. What does that look like? Yeah, so early days, it was about 75% commercial, 25% Medicaid, and about 30%-35% of children are on Medicaid here in the United States, so that's actually indexed up in the recent month or two, and part of that is we've seen as states have reviewed the product, they've added to formulary and coverage, so now we're about 70% of lives covered, it goes up almost monthly here right now, and so we're about 30% Medicaid, and we've had some states that have added it without a prior authorization required on the Medicaid side, and again, one of the things I think that's really positive here is we haven't had to do any kind of supplemental rebating in this space, which for a new drug, branded drug in Medicaid, it's quite good to have this kind of coverage. So what does that mean in terms of what the steady-state gross-to-net would look like? Yeah. So we were excited about our gross-to-net in Q3 and that they were 25.3%. We've said this publicly, meaning that we're taking home about 75% of the gross. So 25.3%. We've looked at that kind of going up a little bit here in Q4. Part of that is we see the Medicaid business has trended up during the quarter. And the base rebates are 23.1%. And then we also knew that this contract we just did was going to come in play. So we're probably in the high 20s for Q4. I think more of the stable rate is going to be in the mid- to high 30s, at least in 2026. And we're still looking at some other plans that we may want to do some things with too. So I think that gives us room to do that as well. Sure. So for a derm product, a topical derm product, that's not bad. No, it's actually, I think. Yeah. And in our market research, when we met with payers, they basically said we had some things going for us. It's predominantly pediatric, which higher rate of payment for pediatric drugs. It's acute medicine, so they know that they're not paying for this for the next five, 10 years. And it's the first and only at-home treatment. And it's hard to force a four-year-old to go through a procedure to get to a topical medication at home. Yeah. So I want to talk about copays, out-of-pocket costs, and the extent to which you're buying down copays. Yeah. So we have, I think, a very generous plan in that most patients can get. Commercially insured patients can get down to a zero out-of-pocket payment. So even that gross-to-net, we just shared that considers that. Now, we did launch at a time when a lot of deductibles have been met. So copays are usually a little bit lower this time of year for people. In my experience, in the first quarter of the year, it's usually the highest. So we'll probably see a bump up a little bit on the cost of our copay card. And the good thing about the copay card, though, is we can be strategic about it and decide if we want to back it down via support there a little bit. We can. You can't do that as easily on a rebate program with a PBM. Yeah. So we have a few minutes left. I want to spend much of the rest of our time talking about the recent acquisition of Xepi, or ozenoxacin. So another topical infectious disease product for impetigo. So just at a high level, what was attractive about the asset to you? And also just give us a bit of background on the history of the asset. I mean, my understanding is it was not commercially promoted. So I wanted to get a little bit of a history lesson on the asset and what you like about it. Yeah. So yeah, it was approved in the 2017, 2018 timeframe. Actually got up to a really nice launch in a company called Cutanea. They only had 30 reps, derm only, and very favorable. Then ended up in an acquisition where the asset got deprioritized, more of a device-type company. And so still had a decent amount of business, but it stopped growing at that point. And then what happened was during COVID, their manufacturer actually went bankrupt. Had nothing to do with the product. It was the manufacturing issue. So to the last three or four years, it really wasn't promoted. They really kind of dwindled down what they had as far as inventory on the active product. So it was sitting there. It was an opportunistic acquisition by us. The reason we like it is it's predominantly impetigo. There's about three million cases a year. It's primarily children. It's the exact same call audience that we're calling on. A lot of synergy. We leverage our commercial infrastructure. And when you look at the market, it's quite large. So in derms, the number one product used right now is mupirocin, so generic Bactroban. But we're hearing a lot of issues with resistance there, especially in the impetigo patients. But when you look at mupirocin prescriptions within dermatology, there's about 2 million a year and about 2.4 million prescriptions in pediatricians' offices. So a lot of opportunity there. And when you look at the. And just to be clear, that's mostly in impetigo or Intertrigo? I mean. Yeah. No, there is some stuff that's not on label for us right there. Yeah. So I'm saying there's about three million Impetigo cases a year. And you're right. Not all those are seen in peds. They're somewhere in FP offices as well. But we still think there's a large opportunity. And there's also synergy even with our KOLs. So our thought leaders that did the studies for Zelsuvmi did them for Xepi. And there's definitely a need for it. And the great thing about it is nobody else is promoting in the space, and we'll be able to control the share of voice there. Yeah. So you talked about Bactroban and resistance here. It is generic, though. So I guess with that in mind, what do you think payer access well, what has payer access looked like, and what are your thoughts on access now that you have control of the asset? Yeah. Because they're a generics market, we will probably have to contract here a little more aggressively. But what gave us confidence as we were doing our diligence on the asset, the company that had it prior had actually really good market access coverage in place at all the large PBMs you expect. And actually a very reasonable rebate level. So as we were looking at the financials here, it made sense. And yeah, so I think that gave us a great deal of confidence that there were already contracts in existence. Now, those are all terminated, and we'll go back and negotiate our own terms and whatnot. But it gave us confidence in that. Okay. What's the exclusivity runway for both Xepi and for Zelsuvmi? Yeah. So Xepi is a little shorter than Zelsuvmi. So Xepi is early 2032. And then with Zelsuvmi, it's currently 2035. But we have filed a patent term extension, and I think we're feeling very optimistic that that'll get approved, and that will take us to mid-2037. The other thing I'll just quickly add, I think we're out of time, but we think the manufacturing and the know-how there also is a barrier to entry because our purpose-built facility, there's equipment in there that is explicitly for making our product, our API, that doesn't exist in other manufacturing capacities. So somebody would have to really invest. They also have to be able to make. We actually have two ingredients that have to be mixed together, and then you apply it. And you have to get both those right, and then they have to interact right. So it's not easy. It's not pressing tablets. It's a little more complicated process here that we think could also be a barrier to entry. All right. Well, I wish we had more time, but thanks so much, Scott, and thanks to everyone in the audience. Great. Thanks again. Great. Thanks again.