Memorandum

Valeritas 4Q17 – Record revenue of $5.8 million up 20% YOY; V-Go Link available in US by end of 2018; 2H18 Italy Launch Through Distributor – March 1, 2018

Valeritas reported its 4Q17 financial update in a call led by CEO Mr. John Timberlake earlier this week. The company saw record-high sales of $5.8 million, up 20% YOY on an easy comparison to 4% growth in 4Q16 – the largest YOY increase Valeritas has seen as a public company, and the second consecutive quarter with YOY growth. Sales increased 13% sequentially, the third straight quarter-to-quarter increase. Sales were higher than the preliminary 4Q17 revenue of $5.6 million announced in late January due to “a small increase” in the proportion of patients who purchased more than a one-month supply of V-Go at pharmacies in December. Over 14 million V-Go devices have been used by patients since launch.

Revenue for the full year 2017 totaled $20.2 million, up 4% from $19.6 million in 2016, driven by a slight increase in V-Go’s net price. Valeritas ended the year with $26 million in cash and cash equivalents, up 163% from the end of 2016 due to a public stock offering in 1Q17 that raised ~$49 million. Management optimistically guided for 2018 revenue of $26-$28 million, rising 29%-39% YOY, a significant acceleration from 2017.

Mr. Timberlake mentioned that Valeritas “continues to make great progress” on the development of V-Go Link, an accessory cover that snaps onto V-Go, pushing insulin dose information to users’ smartphones via Bluetooth. Mr. Timberlake expects V-Go Link to launch in the US by the end of 2018, with full availability anticipated for early 2019. We are excited that this product will come to market, as there are no type 2-focused insulin delivery patches/pumps with connectivity available – BD’s Swatch type 2 patch pump and Insulet/Lilly’s U500 Omnipod (both with connectivity) are expected to launch by “September 2019” (BD) and in “2019” (Insulet). Mr. Timberlake declined to comment on progress for the pre-filled V-Go, but noted that of Valeritas’ R&D efforts, V-Go Link will be first to market, meaning that we can’t expect a pre-filled V-Go launch until at least 2019. It will be key to see how much hassle V-Go link is to attach and pair– we had originally thought it would be integrated into the V-Go device, but the cover attachment makes more sense for cost and manufacturing simplicity. It does look quite slim, which is a major plus.

Management also highlighted Valeritas’ exclusive distribution agreement with Movi SpA for the commercialization of V-Go in Italy announced earlier this month. The agreement marks Valeritas’ first move into a broader international market (though the device is available in Puerto Rico as of January). Under the agreement, Movi has the rights to promote, market, and sell V-Go to diabetes clinics and patients in Italy, beginning after the summer or at the start of 4Q18. Valeritas remains in discussions with “multiple distributors” in “multiple [other] countries” where it’s seen “high interest.” We wonder why Italy was chosen first.

Mr. Timberlake emphasized that market expansion is a primary focus of the company and anticipates another international distribution agreement before the end of 2018. We are glad to see an Italy market entrance is on the horizon, as the EU has been long-discussed on quarterly calls and the type 2 device market is painfully underpenetrated globally.

  • Total and new prescriptions from targeted accounts rose 20% and 32% YOY in 4Q17 respectively – the highest quarterly growth rates observed this year. Sequential prescription growth was also strong, with total and new prescriptions increasing 9% and 10% respectively. Impressively, prescriptions from targeted accounts demonstrated YOY growth in every quarter of 2017. Non-targeted accounts unsurprisingly saw a decay of prescriptions in the first half of 2017, which has since stabilized. Mr. Timberlake reviewed the clinical trial data presented at DTM 2017 and ATTD 2018 showing V-Go combined with physician insulin titration to significantly reduce A1c and insulin requirements in type 2 patients. After four months, A1c fell 1.6% points (baseline: 8.7%) and totally daily dose decreased from 144 U/day to 60 U/day. Mr. Timberlake noted that data from new studies have been submitted to US conferences and will be shared in later quarters.

Valeritas Quarterly Revenue (2Q15-4Q17)

V-Go Link

-- by Maeve Serino, Brian Levine, Adam Brown, and Kelly Close