Evoke Pharma, Inc. (NASDAQ:EVOK) is a specialty pharmaceutical company that has positioned itself as a leader in the treatment of gastrointestinal (GI) disorders, with a particular focus on diabetic gastroparesis. The company's flagship product, GIMOTI® (metoclopramide) nasal spray, has been making significant strides in the market, showcasing its potential to improve patient outcomes and reduce healthcare costs.
Business Overview and History
Evoke Pharma was incorporated under the laws of the state of Delaware in January 2007. Since its inception, the company has focused primarily on the development and commercialization of drugs to treat gastrointestinal (GI) disorders and diseases. Evoke Pharma has devoted its efforts to developing its sole product, GIMOTI (metoclopramide) nasal spray, which is the first and only nasally-administered product indicated for the relief of symptoms in adults with acute and recurrent diabetic gastroparesis.
To fund its operations, Evoke Pharma has primarily relied on the sale of convertible preferred stock prior to its initial public offering in September 2013, borrowings from loans, and the sale of shares of its common stock, warrants, and pre-funded warrants in public offerings. The company has incurred losses in each year since its inception, with these operating losses resulting from expenses incurred in connection with advancing GIMOTI through development activities, pre-commercial and commercialization activities, and other general and administrative costs.
In June 2020, the company received FDA approval for its 505(b)(2) New Drug Application (NDA) for GIMOTI. Evoke then launched commercial sales of GIMOTI in the United States in October 2020 through its commercial partner, EVERSANA Life Science Services, LLC (EVERSANA). Under the terms of the agreement, EVERSANA is responsible for the commercialization and distribution of GIMOTI in the U.S., while Evoke maintains ownership of the GIMOTI NDA and oversees regulatory, manufacturing, and other key functions.
In 2023, Evoke Pharma faced challenges with maintaining compliance with the minimum stockholders' equity requirement for continued listing on The Nasdaq Capital Market. After requesting a hearing before the Nasdaq Hearings Panel, the company was granted an exception to continue its listing on Nasdaq, subject to filing a Form 10-Q on or before May 15, 2024 demonstrating compliance with the minimum stockholders' equity requirement as of March 31, 2024. Evoke Pharma was able to regain compliance and continue its listing on Nasdaq.
Financial Performance and Ratios
Evoke Pharma's financial performance has shown promising signs of growth in recent years, despite the challenges faced by the company. In 2023, the company reported total revenue of $5.18 million, a significant increase from the $2.51 million generated in 2022. This revenue growth can be attributed to the increasing adoption of GIMOTI by healthcare providers and patients.
The company's gross profit margin has remained strong, reaching 96.55% in 2023, indicating the company's ability to effectively manage its cost of goods sold. However, Evoke Pharma has continued to experience net losses, with a net loss of $7.79 million in 2023 and $8.22 million in 2022. This is primarily due to the ongoing investments in commercialization activities, including marketing, manufacturing, and other general and administrative expenses.
The most recent quarter (Q3 2024) showed further improvement in financial performance. Net product sales for GIMOTI during this period were $2.65 million, representing a significant 70% increase compared to the same period in 2023. For the nine months ended September 30, 2024, net product sales for GIMOTI reached $6.94 million, a remarkable 98% increase compared to the same period in 2023. This substantial year-over-year growth was driven by increased product adoption, expanded commercial activities, and a greater number of physicians within larger gastroenterology teams prescribing GIMOTI after initial adoption.
Despite the growth in sales, Evoke Pharma still reported a net loss of $1.31 million for Q3 2024. The company's annual operating cash flow and free cash flow for the fiscal year 2023 were both negative at $4.98 million.
Liquidity
In terms of liquidity, Evoke Pharma had cash and cash equivalents of $11.34 million as of September 30, 2024, an improvement from $4.74 million at the end of 2023. The company's current ratio, a measure of its ability to meet short-term obligations, stood at 1.44 as of September 30, 2024, a significant improvement from 0.71 at the end of 2023. The quick ratio, which excludes inventory from current assets, was 1.39 as of September 30, 2024.
Evoke Pharma's debt-to-equity ratio was 1.14 as of September 30, 2024, indicating a balanced capital structure. The company has a $5 million revolving credit facility with Eversana, which was fully drawn as of September 30, 2024, providing additional financial flexibility.
Operational Highlights and Challenges
Evoke Pharma has made significant strides in the commercialization of GIMOTI, with the product gaining traction in the market. The company reported that GIMOTI prescriptions, prescribers, and other revenue metrics continued to increase, demonstrating the growing acceptance of the product by healthcare providers and patients.
One of the key highlights for Evoke Pharma was the presentation of real-world data at the 2024 American College of Gastroenterology (ACG) Annual Meeting. The study showed that diabetic gastroparesis patients taking GIMOTI experienced significantly fewer physician office visits, emergency department visits, and inpatient hospitalizations compared to patients taking oral metoclopramide. This data reinforces the potential benefits of GIMOTI in improving patient outcomes and reducing healthcare costs.
However, the company has also faced some challenges, including the potential early termination of its commercial agreement with EVERSANA. The agreement includes a Net Profit Quarterly Termination Right (NPQTR), which allows either party to terminate the agreement if net profits are negative for two consecutive quarters. As of September 30, 2024, Evoke Pharma's net profits were negative for the two preceding quarters, raising the possibility of an early termination. The company has stated that it has no intent to terminate the agreement, but there can be no assurance that EVERSANA will not exercise its right under the NPQTR.
Another challenge for Evoke Pharma is managing its operating expenses while scaling up commercial activities. Selling, general and administrative expenses, which include costs associated with the commercialization of GIMOTI, were $3.82 million and $10.70 million for the three and nine months ended September 30, 2024, respectively. These figures represent increases of 22% compared to the same periods in 2023, driven by higher costs for marketing, Eversana profit sharing, and public company-related expenses.
Regulatory Developments and Intellectual Property
Evoke Pharma has been proactive in strengthening its intellectual property portfolio for GIMOTI. In December 2024, the company announced that it had received notices of allowance for two additional U.S. patent applications, further expanding its patent protection for the intranasal administration of metoclopramide for the treatment of gastroparesis.
Additionally, the company has been actively engaged with the FDA regarding the design and execution of a post-marketing commitment single-dose pharmacokinetics (PK) clinical trial of GIMOTI to characterize dose proportionality of a lower dose strength of the product. The successful completion of this trial could potentially lead to the development of additional dosage options for patients.
Competitive Landscape and Industry Trends
The gastroparesis treatment market is characterized by the presence of well-established products, such as oral and intravenous forms of metoclopramide, the same active ingredient in GIMOTI. However, Evoke Pharma has positioned GIMOTI as a unique and innovative solution, offering a nasally-administered formulation that can provide an alternative for patients who may not tolerate or respond well to the oral or intravenous versions.
Furthermore, the company has highlighted the potential benefits of GIMOTI in managing gastroparesis symptoms in patients who are also taking glucagon-like peptide-1 (GLP-1) receptor agonists, a class of drugs commonly prescribed for type 2 diabetes. Real-world data presented at the 2024 ACG Annual Meeting demonstrated that GIMOTI was associated with significantly reduced healthcare resource utilization, such as fewer physician office visits, emergency department visits, and inpatient hospitalizations, compared to oral metoclopramide in this patient population.
The gastroparesis market is expected to grow at a compound annual growth rate (CAGR) of approximately 5-6% over the next 5 years. This growth is primarily driven by the increasing prevalence of diabetes and growing awareness of the condition, presenting opportunities for Evoke Pharma to expand its market share with GIMOTI.
Outlook and Future Prospects
Evoke Pharma's future prospects are closely tied to the continued growth and market acceptance of GIMOTI. The company's ability to effectively market the product, expand its customer base, and secure reimbursement coverage will be critical to its long-term success.
The significant year-over-year growth in net product sales, with a 70% increase in Q3 2024 compared to Q3 2023, demonstrates the growing adoption of GIMOTI. This trend, if sustained, could pave the way for Evoke Pharma to achieve profitability in the future.
Additionally, the successful completion of the post-marketing commitment PK trial and the potential development of additional dosage options for GIMOTI could further strengthen the company's competitive position and broaden the patient population that can benefit from the product.
However, the company's reliance on a single product and the potential early termination of the EVERSANA agreement present significant risks that Evoke Pharma will need to navigate carefully. The company's ability to manage its operating expenses while scaling up commercial activities will be crucial in its path towards profitability.
Conclusion
Evoke Pharma's GIMOTI has demonstrated its potential to improve patient outcomes and reduce healthcare costs in the treatment of diabetic gastroparesis. The company's focus on strengthening its intellectual property, expanding the product's applications, and partnering with a reputable commercial organization have all contributed to its progress. The substantial growth in net product sales and improved liquidity position are encouraging signs for the company's future.
However, Evoke Pharma still faces challenges, including ongoing net losses and the need to carefully manage its operating expenses. The company's ability to execute its commercial strategy, address regulatory requirements, and leverage the growing gastroparesis market will be crucial in determining its long-term success. Investors should closely monitor Evoke Pharma's sales growth, expense management, and progress towards profitability as key indicators of the company's potential in the specialty pharmaceutical market.