Categories Earnings Call Transcripts, Health Care

Theratechnologies Inc (THTX) Q2 2023 Earnings Call Transcript

THTX Earnings Call - Final Transcript

Theratechnologies Inc (NASDAQ: THTX) Q2 2023 earnings call dated Jul. 12, 2023

Corporate Participants:

John Mullaly — Managing Director, LifeSci Advisors, LLC

Paul Levesque — President and Chief Executive Officer

Philippe Dubuc — Senior Vice President and Chief Financial Officer

John Leasure — Global Commercial Officer

Christian Marsolais — Senior Vice President and Chief Medical Officer

Analysts:

Louise Chen — Cantor Fitzgerald — Analyst

William Maughan — Canaccord Genuity — Analyst

Justin Walsh — JonesTrading Institutional Services LLC — Analyst

Andre Uddin — Research Capital — Analyst

Endri Leno — National Bank — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Theratechnologies’ Second Quarter and Half Year Fiscal 2023 Earnings Call. We would like to remind everyone that all figures on this call are quoted in US dollars. [Operator Instructions]

I will now turn the call over to Mr. John Mullaly of LifeSci Advisors. Mr. Mullaly, please go ahead.

John Mullaly — Managing Director, LifeSci Advisors, LLC

Thank you, operator, and good morning, everyone. On the call today will be Theratechnologies’ President and Chief Executive Officer, Mr. Paul Levesque; and Senior Vice President and Chief Financial Officer, Mr. Philippe Dubuc. During the Q&A session, we’ll be joined by Christian Marsolais, Senior Vice President and Chief Medical Officer; and Mr. John Leasure, the Company’s Global Commercial Officer.

Before we begin, I’d like to remind everyone that remarks today contain forward-looking statements regarding the Company’s current and future plans, expectations and intentions with respect to future events. Forward-looking statements are based on assumptions, and there are risks that results obtained by Theratechnologies may differ materially from those statements. As such, the Company cannot guarantee any forward-looking statements will materialize, and you are cautioned not to place undue reliance on them. The Company refers current and potential investors to the forward-looking information section of Theratechnologies’ Management Discussion and Analysis issued this morning and available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Forward-looking statements represent Theratechnologies’ expectations as of this morning, July 12, 2023.

Additionally, today, the Company is using the term adjusted EBITDA, which is not a financial measure under International Financial Reporting Standards, IFRS, or US Generally Accepted Accounting Principles, US GAAP. Adjusted EBITDA excludes the effects of items that primarily reflect the impact of long-term investments and financing decisions rather than the results of day-to-day operations. Theratechnologies believes that this measure can be a useful indicator of its operational performance and financial condition from one period to another. The Company uses this non-IFRS measure to make financial, strategic and operating decisions. Reconciliation of adjusted EBITDA to net loss is found in our MD&A issued this morning, available on SEDAR and EDGAR at the web addresses mentioned earlier.

With that, I would now like to turn the conference over to Theratechnologies’ President and CEO, Paul Levesque.

Paul Levesque — President and Chief Executive Officer

Thank you, John, and good morning to everyone on the call today. As we are well past the halfway mark of the calendar year, we remain prudent in managing our commercial goals and oncology pipeline to align with our fundamental objectives. Earlier this year, we committed to a recalibration of the business that would see us focus on the commercial enterprise and enable us to become adjusted EBITDA positive. Today, I will be sharing a number of key actions in support of this approach, which will propel us towards profitability, while advancing our promising oncology program.

I hope that everyone had the opportunity to join our oncology update call on our lead PDC candidate sudocetaxel zendusortide, which took place last month. The call followed two significant milestones in early June: a poster presentation at ASCO, showcasing new efficacy and safety data from our Phase I trial, as well as the FDA’s agreement to our amended protocol. Key opinion leaders, Dr. Funda Meric-Bernstam from MD Anderson Cancer Center, the study’s principal investigator; and co-investigator, Dr. Ira Winer from Karmanos Cancer Institute presented early Phase I trial results, provided insights on how this data informed the protocol amendment and shared several patient case studies about the real life impact of sudocetaxel zendusortide. If you missed this call, I encourage you to review the presentation and webcast replay on our website.

The preliminary safety and efficacy data from the Phase I trial were extremely well received by the scientific community during ASCO, where visitors to our poster presentation expressed deep interest in our novel SORT1 receptor target. As a recap, key highlights from this study included preliminary signs of antitumor activity noted in 36% of heavily [Phonetic] pre-treated patients with two partial responses and seven patients with prolonged stable disease.

As previously communicated, sudocetaxel zendusortide is returning to the clinic with an updated protocol. The protocol amendment is designed to improve our therapeutic window of our novel PDC, extend its duration of therapy and ultimately maximize the probability of success for the trial. The updates include a change in the frequency of administration to weekly dosing and a narrowing of the patient population to focus on those with high-grade serous ovarian cancer, a population in which preliminary efficacy has been observed thus far. Patient selection has also been refined to focus on those who are less heavily pre-treated, with no more than one taxane failure and a maximum of eight prior cancer treatment regimens. We amended this study as a 6+6 design with two different dosing regimens that are within the efficacious range for sudocetaxel zendusortide. Based on our pharmacokinetic and pharmacodynamic analysis, we decided to switch from body surface area dosing to an equivalent weight-based dosing. Weight-based dosing should optimize efficacy and minimize toxicity for the 16 patients who will be enrolled in the next part of the Phase I study.

Furthermore, the funding for dosing of the 16 Phase I patients is firmly embedded in our ’23 and ’24 budgets. We’re now accelerating outreach to potential partners for the additional phases of development of sudocetaxel zendusortide, as well as capitalizing on the full potential of our SORT1 technology as a game changer in anticancer therapy. As I speak, the team is busy reactivating trial sites, and we expect to resume patient enrollment in the coming weeks. We plan to keep the market well informed of our activities and intend to announce trial recruitment updates throughout the remainder of the year. At the pace we’re going, we believe that by the end of the first half of fiscal ’24, we will be able to announce preliminary safety and efficacy data.

Moving on to the period’s results, we were disappointing to report a commercial quarter that was negatively impacted by several factors. First, starting at the end of ’22, specialty pharmacies built up larger-than-necessary inventories in anticipation of expected higher demand. Second, in an effort to improve our gross-to-net, we renegotiated the contract terms with a large specialty pharmacy, which resulted in a lowering of their overall inventory levels. Both of these onetime events impacted revenues through April of this year, at which time, the overstock of inventory levels was depleted. With May and June sales in, we are confident this is behind us now. On a positive note, based on the changes made to contract terms with the one specialty pharmacy, Theratechnologies will see significant annual savings in distribution costs moving forward.

We’re also happy to report that in the first two quarters of fiscal ’23, new prescription growth versus the same period last year grew 26% for EGRIFTA SV and 8% for Trogarzo despite new market entrants having made the competitive landscape even more dynamic than before. While anticipating a much stronger second half of ’23, the loss in sales during the first half of this year will not be recoverable in the current fiscal year. So, as a result, we are recasting top line guidance to $82 million to $87 million from $90 million to $95 million previously forecasted. This said, we will not let this unfortunate situation stand in the way of our strategic objective to become adjusted EBITDA-positive by year-end and beyond. This profitability target has been built into our operating plan since the beginning of the year and is an integral part of our strategic shift to stage gate R&D expenses and move towards a focus on our commercial business. As such, in addition to reducing R&D activities that were already planned for the latter part of ’23 and full year ’24, we are implementing an additional $5.5 million reduction in R&D annualized spending. This will mean more program reductions, as well as headcount reductions. While these measures will further pave the way towards profitability, this is certainly the most difficult part of today’s call and equally the most challenging news to share in my tenure as CEO of Theratechnologies.

The changes announced today will largely focus on right-sizing the R&D area of the Company, while customer-facing activity will be maintained to avoid any disruption to our commercial operation. We certainly recognize the impact that the reorganization will have on our employees, especially on those who are directly affected, and we have committed to approaching the changes in the most humanistic way. At this moment in Thera’s journey, it is a necessary thing to do for our business and our evolution as a commercially-focused biotech.

Before I finish, I’d like to turn back to our commercial enterprise and take a closer look at the forward progress being made to further differentiate our HIV brands and expand our product portfolio. Since Trogarzo IV Push was introduced, we have witnessed 80% Trogarzo users transition to this new faster and more convenient method of administration. You may recall that the initial FDA approval for the IV Push was for the maintenance dose only. We have now also submitted to the FDA an application for IV Push administration of the Trogarzo loading dose. And just last week, the FDA agreed to our Prior Approval labeling supplement, which is subject to a six-month review, instead of a Prior Approval efficacy supplement, which is subject to a 10-month review, thus assigning and PDUFA date of December 14, 2023.

As people with HIV continue to move away from oral pill regimens and there are limited options for those who are multi-drug resistant, we’re now seeing a very real and sustainable long-term niche for our franchise with the pairing of Trogarzo with long-acting injectables, and we have generated key data to support this shift in the treatment paradigm. At the 17th Annual American Conference for the Treatment of HIV, we shared results for a first-of-its-kind study in HIV, comparing the Trogarzo clinical trial experience to a matched [Phonetic] the real-world non-Trogarzo cohort. This is the largest dataset and longest follow-up for Trogarzo since our Phase III data. The data showed that the use of Trogarzo was associated with favorable virologic outcomes as compared to non -Trogarzo regimens used in the routine care in heavily treatment-experienced people with HIV. Ultimately, the potency and durability of Trogarzo, as observed in this analysis, bolstered the clinical rationale for its use in regimens for heavily treatment-experienced patients and could have important clinical benefits for these individuals.

And with EGRIFTA SV, we’re moving ahead with our line extension activities and will transition the marketplace to its new generation F8 formulation once approved. We firmly believe that the new formulation will improve patient experience and adherence and expect the supplemental Biologics License Application for F8 to be filed by the end of September of this year. With a review period of six months, approval can potentially happen by the end of the first quarter of ’24. I’d like to remind you that this will come with strengthened IP protection [Phonetic] for the F8 formulation and expected additional growth.

In addition to growing our two anchor assets, we are very active on the business development front. We have a very real opportunity to further accelerate our growth through bolt-on accretive acquisitions of existing brands, which can be quickly added into our commercial platform. As we move forward with the new streamlined organizational structure, the remainder of the year will be guided by our laser focus on our advancing — on advancing our commercial initiatives, including the search for new products and partners, as well as the rapid restart of our Phase I trial in oncology.

With this, I would like to turn the call over to Philippe to discuss our financials. Philippe?

Philippe Dubuc — Senior Vice President and Chief Financial Officer

Thank you, Paul. Good morning, everyone. Consolidated revenue for the three-month period ended May 31, 2023 was $17.5 million compared to to $19.3 million for the same year-ago period, representing a decrease of 8.9% year-over-year.

For the second quarter of fiscal 2023, net sales of EGRIFTA SV reached $10.9 million compared to $11.4 million in Q2 of last year, representing a decrease of roughly 5%. The decrease is mainly the result of a drawdown in inventories at one of our large specialty pharmacies. This pharmacy had built up larger-than-usual inventories in the fourth quarter of 2022 in anticipation of stronger demand and higher-than-usual price increases. Following discussions with this group, we have determined that the situation is largely resolved, and sales in the months of May and June 2023 are back to normal levels. Net sales of EGRIFTA SV were also impacted by larger-than-usual rebates to government payers. These situations also impacted net sales for the six-month period ended May 31, which amounted to $23.6 million, compared to $23.1 billion in the same period in 2022, representing growth of 1.9%.

In the second quarter of fiscal 2023, Trogarzo net sales amounted to $6.7 million, as compared to $7.9 million for the same quarter of 2022, representing a decrease of 14.7%. Lower sales of Trogarzo were a result of the same inventory adjustments as above, and further inventory drawdowns at another specialty pharmacy with which we renegotiated contract terms, resulting in a lowering of their overall inventory levels. These new contract terms will be beneficial to Theratechnologies in the future, resulting in recurring annual savings. Net sales of Trogarzo were also impacted by greater-than-anticipated rebates to government payers. Finally, the Trogarzo net sales decrease is also attributable to a lesser degree on our decision to stop commercializing the product in Europe in 2022.

All in all, while sales in the first half of 2023 were below our expectations, it does not affect our goal to become adjusted EBITDA-positive by year-end, as we will implement additional cost-saving measures immediately, as discussed by Paul a few moments ago.

In the period, cost of sales decreased to $4.9 million from $7.8 million in the same quarter of fiscal 2022. The decrease in cost of good sold was mainly due to a charge last year of $2.3 million arising from the non-production of scheduled batches of EGRIFTA that were cancer due to the planned transition to the F8 formulation of tesamorelin. No such charge was recorded in 2023. Cost of sales is also lower than last year, when it included an amortization charge of $1.2 million in connection with the settlement of the repurchase of EGRIFTA rights from Serono in 2018. This asset was fully amortized during the first half of last year, and thus, this charge was zero in the second quarter of fiscal 2023.

R&D expenses amounted to $10.4 million in the three-month period ended May 31, compared to $11.1 million for the same year-ago period. R&D expenses this year include a provision of $3 million related to sudocetaxel zendusortide material, which could expire before we are able to use it in our clinical program. Excluding this provision, R&D expenses are down significantly in the second quarter of 2023 compared to last year, mostly as a result of lower spending on our oncology program.

Selling expenses decreased to $6.5 million for the second quarter of 2023, compared to $15.4 million for the same three-month period last year, or a decrease of close to $9 million. The decrease is due in large part to a charge of $6.4 million taken last year related to the accelerated amortization of the Trogarzo commercialization rights for the European territory, following our decision to cease commercialization activities in that territory during that quarter. This also led to a decreased overall spending in commercialization activities. Excluding this charge, selling expenses decreased from $9 million to $6.5 million this year, or a decrease of 28%.

G&A expenses in the second quarter of 2023 amounted to $3.7 million, as compared to $4.8 million for the second quarter of 2022, or a 23% decrease. The decrease in G&A is largely due to our decision to terminate the commercialization activities of Trogarzo in Europe during the second quarter of 2022.

Net finance costs increased to $2 million in Q2 2023, compared to $1.6 million in Q2 of last year. The increase is mostly related to interest on the Marathon Credit Facility.

Adjusted EBITDA for the second quarter of 2023 was negative $6.1 million versus negative $11.7 million in the same period last year. While this number is a significant improvement over last year, it’s important to note that adjusted EBITDA was affected by a $3 million charge related to sudocetaxel zendusortide as I just described. While sales were lower than anticipated in Q2, R&D, selling and G&A spending during the quarter were all significantly lower than last year. This is even before the additional spending cuts discussed by Paul, which is why we are confident in our ability to become adjusted EBITDA-positive by year-end. We will continue to monitor expenses closely, as we have done since the beginning of the year, and we’ll continue to adjust, while closely tracking revenues.

We ended the second quarter of fiscal 2023 with $25.4 million cash, bonds and money market funds. Operations used $3.6 million in cash in the second quarter, compared to $1 million in the second quarter of last year. And variations in operating assets and liabilities provided positive cash flow of $4.6 million, mostly due to decreases in inventories and prepaid expenses and an increase in accounts payable. This was offset by an increase in accounts receivable.

With that, we will be back for final comments, but first, we will now open the call to take your questions.

Questions and Answers:

Operator

[Operator Instructions] And today’s first question comes from Louise Chen with Cantor.

Louise Chen — Cantor Fitzgerald — Analyst

Thanks for taking my questions. We’re interested in learning more about your cost savings measures. Could you provide more color on your anticipated expense for R&D and SG&A for the rest of the year? Thank you.

Paul Levesque — President and Chief Executive Officer

Thank you for your questions. So, Philippe, do you want to provide color on R&D spending for the rest of the year? As we said, we will be implementing cuts and expense reduction in R&D to right-size that function. It will have an immediate impact, and therefore, savings will be reported through the last part of this year. But more expense reduction will be implemented as per the plans we already have going for ’24. Philippe, do you want to provide additional color?

Philippe Dubuc — Senior Vice President and Chief Financial Officer

Yes. Well, on the selling and G&A, I think Q2 and Q1 are a good proxy for the remainder of the year. Through expense reductions for this year, mostly on the R&D side, we’ve always — we’ve been mentioning since the beginning of the year that we have a lot of projects that were in the earlier part of the year such as the bacteriostatic water that we were manufacturing, the intramuscular version of Trogarzo. So, these expenses should be behind us more and more over the year. So, look for further reductions in R&D in the latter part of this year and again into 2024 as well.

Paul Levesque — President and Chief Executive Officer

Thank you for the question.

Operator

Thank you. And the next question comes from William Maughan with Canaccord Genuity.

William Maughan — Canaccord Genuity — Analyst

Good morning, and thank you. So, can you quantify what was the impact on revenue in 2022 of the buildup in inventory? You also gave us some metrics on new prescription trends. Do you have the comparable metrics for total prescription growth? And then finally, towards the end, you mentioned characteristics — you mentioned potentially folding in other products into the commercial portfolio. So, what characteristics are you looking for in a potential bolt-on acquisition? And how would you think about financing that? Thank you.

Paul Levesque — President and Chief Executive Officer

Thank you for your question. So, I’m going to answer the latter part of your intervention, and John will focus on top line sales and prescription data as per your question. We firmly believe that we have built capabilities that can actually be very useful for ourselves if we were to identify a product that we can actually bolt on to our platform. And when I call — when I say platform, I mean all the infrastructure in sales that we currently have. So, as previously said, it could be in HIV. It could be in HIV adjacent. But it could also be in a different category, something small, something that could be in the field of metabolic disorder that would allow us to actually deploy resources in a similar way that we’re doing it currently for the HIV products we have. And we know, and we’re already in discussion with many companies, there are assets out there that are deprioritized by some companies, and I think that if we were to be able to make one of those acquisitions, it could be immediately accretive in our journey towards producing EBITDA-positive data.

So, John I will turn to you now for explaining a little bit the top line in last six months, but also the prescription data as you see it now.

John Leasure — Global Commercial Officer

Yes. We have very strong new prescription growth. As I think was highlighted, EGRIFTA growth was 28% in new prescriptions and that — both with Trogarzo and EGRIFTA, we’re exceeding our new prescription estimates that we set out at the beginning of the year. The challenges, as was highlighted, early — later last year, the second half of last year, we saw a little bit softer enrollments, and I think that’s translated into a little bit of buildup in inventory. And then on top of that, we were looking to improve our gross-to-net, as well as decrease returns, and we changed some of our contracts that resulted in about $0.75 million in annual savings but had the negative impact of some inventory drawdowns. So, those are the two key events for last year. And then, this year, again, very strong prescription growth.

William Maughan — Canaccord Genuity — Analyst

Thank you, John.

Paul Levesque — President and Chief Executive Officer

Thanks for your question.

William Maughan — Canaccord Genuity — Analyst

Thank you.

Operator

Thank you. And the next question comes from Justin Walsh with JonesTrading.

Justin Walsh — JonesTrading Institutional Services LLC — Analyst

Thank you for taking the question. I wanted to ask about the estimated size of the patient population as you’re narrowing development of sudocetaxel zendusortide. Approximately how many ovarian cancer patients do you think could benefit in the US and other major markets? And I just also want to clarify if patients with endometrial cancer will be included. Thank you.

Paul Levesque — President and Chief Executive Officer

Thanks, Justin, for your question. So I’ll turn to Christian first for what type of ovarian cancer and will we have endometrial cancer patients included. And John, you may speak to market size when it comes down to the indication that we can have at the end of this journey. Christian?

Christian Marsolais — Senior Vice President and Chief Medical Officer

Yes. Hi Justin. Thank you for the questions. We’re focusing on the largest population of ovarian cancer, which is the high-grade serous ovarian cancer that’s will be enrolled in this study. And this is based on the data that we have seen in our earlier results showing efficacy in ovarian cancer patients. At the moment, we will be focusing on like a two-stage study, which will be a total of 16 ovarian cancer patients. But after that, if we see signs of efficacy, we can probably enroll additional patients in either endometrial cancer or TNBC. That’s the first step that worked [Phonetic].

Paul Levesque — President and Chief Executive Officer

John, anything to add?

John Leasure — Global Commercial Officer

Well, I think the market size that Christian outlined, the sales volume there really depends on what the — what we see in terms of efficacy, but we definitely — we’ve done some work there, and we think there’s a place for the drug clearly in later lines of therapy. As you know, there’s a lot of unmet need in ovarian cancer, so we think there’s substantial opportunity there for an early-stage indication.

Paul Levesque — President and Chief Executive Officer

Justin, thank you for your question. As you know, we decided to focus on one indication where we believe we have the highest probability of success in the short term. Now, the SORT1 receptor is highly expressed in many other solid tumors. So, we think that we have applications way beyond ovarian cancer, but in a way to actually win and win rapidly and in a way to manage cost the best possible way, we decided to take an approach that is different from the approach that we had taken the first time around and be extremely laser-focused on one cancer type where we know that we recorded already signals of efficacy. So, first, this one.

Then I believe that partnering with other companies that have aspiration in bringing new treatments to the marketplace will be something feasible as soon as we report back-to-back efficacy data in the first part of 2024. And I can say also that there’s a great deal of interest. We’re conjugating different technology that can actually be brought to the cancer cells through the SORT1 receptor as well. So, there’s many things going on. And again, ovarian cancer is the card that we’re playing at the moment. And we absolutely believe, based on what we have been told by the experts in the category, that we’ve got enough going on and going for us to win in the marketplace and get an approval with that indication and then get going with more. Thanks for your question, Justin.

Justin Walsh — JonesTrading Institutional Services LLC — Analyst

Got it. Thank you.

Operator

Thank you. And the next question comes from Andre Uddin with Research Capital.

Andre Uddin — Research Capital — Analyst

Thanks. Hi, Paul, Philippe, Christian and John. Just in terms of your business development activities for out-licensing, what does a potential NASH partner need to see? Is it the F8 formulation? Does that need to be approved? And can you just talk a little bit how discussions are going there? Thanks.

Paul Levesque — President and Chief Executive Officer

Well, thanks, Andre, for the question. We haven’t updated the — our shareholders this morning on this because there’s nothing new to say. But this is a very dynamic market. The NASH market is very dynamic. Some companies keep on failing. Some companies now see this as a true potential. I think that we have something to offer that is further down its development, based on the fact that the drug has shown its — a safety profile over the years. Having the F8 formulation obviously will be a big plus, but we always intended to start the Phase III clinical program with the F8 formulation anyway. So, whenever we’re approaching different companies, it is with the F8. It’s going to be coming with a much higher concentration, lower volume of administration with a potential to package this in a pen. So, what is missing is not much, quite frankly. It’s just to actually find companies that want to actually invest the type of money that is needed to team up with us. So, we keep on being active. We absolutely believe that Madrigal data and Aquros [Phonetic] data reading positive will be sparking additional interest for our program, and we will report back to our shareholders if there are any new developments coming up.

Christian, do you want to add anything to…

Christian Marsolais — Senior Vice President and Chief Medical Officer

Yes. The only thing I agree [Phonetic] based on your questions for the use of DSA, and as we have mentioned before, we already completed the bio-prevalence [Phonetic] study, showing bio-prevalence between the F8 and F1, the initial formulation that was on the market, and it is ready to use in the clinical trial, even if it’s not yet approved by the FDA. On the other hand, the F8 file is moving well, and we are on target, as this was mentioned by Paul, for submission in September this year.

Andre Uddin — Research Capital — Analyst

That’s useful. And just looking at Canada, is there an opportunity to out-license Trogarzo and EGRIFTA?

Paul Levesque — President and Chief Executive Officer

It’s a good question, Andre. And I looked into it before myself upon arrival. I think that there could be an interest. But quite frankly, a bit like Europe, it could become a distraction. Getting reimbursement in Canada province-by-province is very, very tedious. And although there would be certainly some potential for these two medicines, by focusing our activities the way we have done it in the US, I think this is where our time and attention and spending is best deployed trying to foster additional growth in the US market. And having our own capabilities now, we’ve got to be more ambitious. And that is why we’ve been on the outlook for accretive deals, and we’re not going to rest before we basically find opportunities done and completed.

Andre Uddin — Research Capital — Analyst

Okay, that’s great. And just — could you also just discuss the Trogarzo rebate situation in a little bit more detail, what happened there?

Paul Levesque — President and Chief Executive Officer

Sure. Philippe, do you want to provide more insights on the different rebates in the front part or maybe the gross-to-net factor?

Philippe Dubuc — Senior Vice President and Chief Financial Officer

Yes. There’s a few factors that we don’t really control is the patient mix, Andre. So, I think in the Q2, the patient mix was not as favorable. So, we give rebates to Medicaid. We don’t give rebates to Medicare and commercial payers. So, if the patient mix changes more towards Medicaid, that affects our rebates. We also — some of the government payers aren’t really good at providing us with invoicing, and sometimes we’ll get a bunch of invoices from previous quarters. So, that doesn’t really help us. We try to have as much provisions as we can. But in this quarter, we got more than we expected. So, that should be a onetime event. And going forward, we expect that to come back to accounts [Phonetic].

Andre Uddin — Research Capital — Analyst

Thanks. And just one last question. If you could just provide a little bit of an update on the IM formulation of Trogarzo, that would be great.

Paul Levesque — President and Chief Executive Officer

The IM formulation, Christian?

Christian Marsolais — Senior Vice President and Chief Medical Officer

Yes, Andre, the IM formulation, the analysis are ongoing at the moment and for a submission before the end of the year.

Andre Uddin — Research Capital — Analyst

Okay, that’s great. Thank you.

Paul Levesque — President and Chief Executive Officer

Thanks, Andre.

Operator

[Operator Instructions] And the next question comes from Endri Leno with National Bank.

Endri Leno — National Bank — Analyst

Hi, good morning. Thanks for taking my questions. The first one is a bit of a follow-up on the question that was asked priorly. But when you’re looking at adding new assets, can you talk a little bit on how do you plan to fund these new assets, especially in the context of the liquidity breach or the liquidity covenant breach on the net line? Thanks.

Paul Levesque — President and Chief Executive Officer

Thank you. Yes, let me say it again, we would not actually take on an opportunity if the product is not approved yet with uncertainty when it comes down to a product being approved. We’re looking for something that can be accretive, and we will deploy resources in a way that we’re not making our EBITDA story going backward. So, I just want to say it again, it has to be accretive or rapidly accretive.

So, Philippe, do you want to provide color on the funding of these sort of opportunities?

Philippe Dubuc — Senior Vice President and Chief Financial Officer

Yes. So, just maybe a comment on the relationship with Marathon. So, we’ve obviously had very close discussions with them. They’re very open to helping us. So, these are productive discussions going on. They’ve always said that they would support us in expanding the business. So, they’re still interested in that. We’re also talking to some investors who are looking to deploy capital if we have some accretive opportunities. Now, you know that in the past, we’ve always been pretty creative in kind of minimizing the outflows that we make in these deals. So obviously, we are looking at ways to finance these deals that are creative and different.

Endri Leno — National Bank — Analyst

Thank you. That’s good color. Thank you. And then, if I can just follow up a little bit more on that Marathon loan, the liquidity that you need to sort of beef up by the end of the quarter, are you looking at something like you did before, perhaps more warrants? Or what’s kind of like the thinking to get back to the liquidity that you need on that covenant?

Philippe Dubuc — Senior Vice President and Chief Financial Officer

Well, we’re still — right now, they just lowered the liquidity covenant. And so, we’re looking to continue discussions with them before the end of this month to kind of finalize where we’ll be. It’s a little bit early to determine exactly how it’s going to play out. But right now, they just provided us a lower liquidity amount and without anything extra.

Endri Leno — National Bank — Analyst

Thank you. And one last one for me is that on the new guidance, is the delta between the old and the new more related to the gross-to-net that you got in Q2, since you know already how much you had in inventory? Or can you — is it possible to break down the delta between how much was inventory and how much was gross-to-net?

Philippe Dubuc — Senior Vice President and Chief Financial Officer

Yes, some of that is obviously the inventories. Like I said, we follow inventories at the specialty pharmacy level closely. Since we internalized the sales force, we developed a very good tracking system. So, we have a much better outlook on that. But the sales that we’ve lost we’re not regaining. The gross-to-net issues are mostly behind us as well. So — and that’s kind of what we’re seeing. We’re bringing maybe a little bit more conservative, but we’re confident with these numbers until the end of the year.

Endri Leno — National Bank — Analyst

Okay. Thank you very much.

Operator

Thank you. This concludes the question-and-answer session. I would now like to turn the call over to Paul Levesque for any closing comments.

Philippe Dubuc — Senior Vice President and Chief Financial Officer

First of all, there’s a few questions that came on the webcast. So, the first one is around the timing for the cancer trial, when we’re expecting to get back in the clinic if we’re expecting to keep the market up to rest as to where we are.

Paul Levesque — President and Chief Executive Officer

The answer is, yes. I think, Christian, you can speak to that. But as we speak, the new protocol is being analyzed and approved by the different hospitals from an ethics point of view is in that the situation. And I think what is very important to know this time around is that we do not have to dose one patient at a time, correct? We can actually dose the patients in parallel. So, Christian, do you want to provide additional…

Christian Marsolais — Senior Vice President and Chief Medical Officer

Absolutely, Paul. And we are expecting — some sites are working with private IRBs that are usually a bit faster. And we’re expecting their response — the final response from one of the private IRB. Some of the sites will be activated and be ready to start screening patients in July. As Paul has mentioned, the six patients for the first cohort, the first dose could be recruited at the same time, and we don’t expect a long period of time to recruit those patients. We will need to wait three months from the last patient enrollment to look at the adverse events. And after that, we’ll be able to enroll an additional six patients. Therefore, we think that by mid-next year, we should have some signs of efficacy and the data on safety as well.

Paul Levesque — President and Chief Executive Officer

And we intend — yes, we intend to actually update the market when we have — when we are making progress. We are very, very keen to actually get going with the first six. We know that we have something that can actually win. So, we will report back as soon as possible.

Philippe Dubuc — Senior Vice President and Chief Financial Officer

And there are a few questions on the competitive dynamics around Trogarzo, mostly for John, the switch to non-pill regimens and what we’re seeing with RUKOBIA and SUNLENCA.

Paul Levesque — President and Chief Executive Officer

Yes. Well, there continues to be a lot of interest in the non-pill regimens. SUNLENCA’s recent launch has generated a lot of interest. We’re seeing a lot of interest in combination utilization and are tracking a number of patients that are using both SUNLENCA and Trogarzo. We still track RUKOBIA relatively closely in this space. As you know, patients are on multiple different agents. So, it’s not about just choosing one versus another. And we continue to see a trend towards more and more non-pill regimens.

Philippe Dubuc — Senior Vice President and Chief Financial Officer

All the other questions have been answered, Paul.

Paul Levesque — President and Chief Executive Officer

Okay. Well, thank you for attending the call today. I hope that you will agree that despite having faced some unexpected headwinds in the front part of ’23, we are taking the necessary measures to ensure delivery on our commitments. As such, we are very close to producing adjusted EBITDA-positive quarters. And I can assure you, we won’t rest until we deliver this to our shareholders.

Thank you for attending, and have a great day.

Operator

[Operator Closing Remarks]

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