Q3 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby and thank you for your patience.
Good morning, Thank you for standing by welcome to rise in Therapeutics plc third quarter 2019 earnings Conference call.
Reminder, Chase conference is being recorded I would now like to introduce Mr. <unk> Senior Vice President of Investor Relations.
Thank you Catherine good morning, everyone and thank you for joining us.
On the call with me today, or Tim Walbert, Chairman, President and Chief Executive Officer, Jolly Lynn Executive Vice President head of research and development and Chief Scientific Officer, Paul Hoelscher, Executive Vice President Chief Financial Officer.
Become Carney executive Vice President Chief Commercial Officer, and Andy Pasternak, Executive Vice President Chief Business Officer.
Tim will provide a high level repeal of the third quarter and an update on her business. He will also discuss in greater detail or pre launch preparations for temperature. We met our first in class biologic under after I review for site Red eye disease or T D.
Shalini will provide a review of our R&D programs and Paul will discuss our financial performance.
And guidance followed by closing remarks from Tim will then take.
As a reminder, during today's call will be making certain forward looking statements concluding statements about financial projection or business strategy and the expected timing impact of future events.
These statements are subject to various risks that are described in our filings made with the securities and Exchange Commission.
Including our annual report on Form 10-K for the year ended December 31st 2018, subsequent quarterly reports on Form 10-Q , and our earnings press release, which we issued this morning, you are cautioned not to place undue reliance on these forward looking statements and horizon disclaims any obligation to update such statements.
In addition on today's conference call non-GAAP financial measures Bobby.
non-GAAP financial measures are reconciled the comparable GAAP financial measures in our earnings press release and other filings from today that are available on our investor website at Www Dot Horizon Therapeutics dotcom.
I will now turn the call Liberty Tim.
Okay and good morning, everyone.
We generated another strong quarter with her work or rheumatology segment up 14% driven by perspective growth 42%.
We increased the midpoint of our full year adjusted EBITDA guidance range as well.
Excluding her significant pepper tumor MEP launch investment year over year, Joseph EBITDA growth would be double digits.
This underscores a significant margin expansion, we're driving from our underlying business.
We reached several key milestones during the third quarter.
We submitted our be away for Tempur tumor map and receive purview designation with the March eight 2020 PDUFA date.
We also present additional phase three trial data at several medical meetings, well, making significant progress in our pre launch activities.
With respect to in addition to the quarter's strong commercial performance, we continue to enroll into a mirror placebo controlled registration trial and wants to protect trial to evaluate the use of crystex. It it could be transport patients with her control go.
We also expect up data from our mirror open label pilot trial in early 2020.
We reduced our gross debt and broader capital structure in line with her profitable bio pharma peers.
Never to 1.1 times, and a cash position of $884 million or balance sheet has never been stronger and provides us with the flexibility to continue to invest in the growth of the company.
Well, so we welcome simoni as a new direct and aboard as old having any passionate joined as chief business Officer.
I'm also pleased report findings of recent research based on analysis conducted on our behalf.
Horizon demonstrate gender and ethnic pay equity throughout the organization, which is critical in today's marketplace, where we're competing for the best talent.
In fact, we ranked in the top five of all companies and the studied in this regard.
This aligns with the barely replacement diversity and the quality of horizon.
We're also selected for the fourth consecutive year, but Fortunately is one of 2019 best medium workplace.
We rented dependable hundred older medium size companies, which underscores our commitment to employees and furthers helps us recruit top talent.
Oh, no recap, our third quarter financial results as rolls discuss a tougher to map pre launch activities.
We generated third quarter net sales of $335 million and adjusted EBITDA of $130 million.
Orphan rheumatology quarterly net sales of $250 million represent approximately 75% of our total net sales.
Demand for orphan medicines remain strong driven by both improved compliance and patient growth.
Average shipping patients increased mid single digits across Actimmune ravicti.
Presumes be combined for the quarter.
With the expanded indications for proceeds member affecting many new patients are younger starting treatment on lower doses, which will increase as they grow older.
Orphaned growth strategy is driven by patient identification diagnosis and ongoing support of patients throughout their treatment for.
As I said earlier Crystex, who they tend to major driver performance net sales, increasing 42% driven primarily by bile growth of more than 30%.
Based on strong performance throughout the third quarter, we now expect prospects a full year net sales growth of more than 25 cents.
We have opened a significant number of new accounts over the last 12 months, we're particularly excited to see a great deal growth coming from existing fields for bio growth is up 30% in the first nine months of this year.
Compared to last year was significant opportunity remaining.
Today, the majority of existing physician practices use perspective, with one or two patients.
Our goals helped many more patients uncontrolled gout benefit from perspective and transformed these warner to Pacer practices, what we term centers of excellence, where they are regularly treating their chronic gout patients with respect so.
We're doing this through continued education.
Positive clinical experience Crystex it provides the patients.
Oh sure. An example of a multi physician practice in Ohio, where last year. This practice had only one patient on crystex.
We hope positions at this practice better understand the systemic impact of your rate burden, therefore, enabling them to more effectively identify patients in need and elevate the urgency to treat.
Well educated them on the importance of monitoring uric acid levels to help predict response.
These efforts have turned out to be very successful so far.
This year 10 patients in this practice to be done treating their patients with Crystex huh.
One interesting note about as examples that first of these 10, new patients who suffered by Nephrologists.
Six years old the patient <unk> disease, so severe that its hands were to form to talk about associated with this chronic uncontrolled gout.
He was a complete responder to crystex and his success help lead to the identification or more patients within the practice.
We continue to see accelerating uptake from Nephrologist and expect the startup or protect trial demonstrate our commitment to further understand perspective, and then for all the two space.
With a nearly 100 million dollar crystex net sales quarter, driven by continued strong volume growth business fundamentals were well on track towards our peak U.S. annual Crystex and it feels target more than $750 million.
Our ability to change because Texas growth trajectory underscores the success of our commercial strategy, which was driven by three factors.
First deeply understanding the medicine the disease in the market dynamics.
Building to both the right team to execute positions in the park infrastructure and spend to support our patients.
And invest in clinical studies in clinical data analyses and improve the understanding of the disease and its treatment.
We're playing the same principles to temper tumor map in Paradise disease, which is a serious progressive inhibition threatening autoimmune disease.
Good day, there's no proof medicine for TV, and therefore, no defined treatment.
We've been learning a great deal from the many communities involved would you be patients, including advocacy groups patient groups and health care providers.
We are much deeper understanding of how we can serve their needs which includes support for patients over their entire journey.
Diagnosis treatment and beyond.
We are hopeful that a highly efficacious first in class biologic prescribed for relatively short six month course of therapy.
May represent a dramatic advanced materials of PD.
We're making significant investments to advance the standard of care, it's important community as well as prepare and educate the market.
And critical to our success with separate to my math is ensuring patients who need treatment will be able to access this medicine.
I'll now walk through some of our progress.
100% Tempur to MEMP team is now in place include sales representatives patient educators reimbursement specialists site of care specialists medical liaisons.
Our sales representatives have been meeting with our position targets. These are mainly ophthalmologist and their subspecialties, such as like to a plastic surgeons and mineral ophthalmologist as well as endocrinologists.
To date as part of a pre launch efforts. Our sales force is called on the majority of our 5000 physician targets, including the vast majority of our top tier targets, we're about which are about 1700 in total.
Turner outreach, we were gathering information on the number if you'd be patients that that they see.
As we previously discussed we estimate 15 to 20000 active TB patients are eligible for tougher to me, Matt each year and the initial feedback from physicians targeted has confirmed that these numbers.
Or similar.
In addition, given the temperature map is an infusion therapy, we've learned a significant a belt, but they're fusion capabilities for infusion referral network.
Well, many physicians know where they would have for their PV patients for infusion.
Many others need to be educator, how this process works.
This is important because ophthalmologist and endocrinologist have minimal experience with confusion.
This is why outreach to infusion centers is a critical part of our strategy.
Our goal is to ensure that theres a comprehensive infusion network. So that treating physicians will have a viable options to successful refer patients through an appropriate site of care for their treatment.
Over the last few months or sort of pure specials that met with nearly 200 of the major infusion service providers to understand their capabilities and standing operating procedures as well educate the infusion center staff about PDP.
We have received very positive feedback from many have told us home Crespo yard.
With the groundwork we're doing something they rarely see before launch.
The effective reimbursement strategy will also support access for PDP patients are managed care team has been in dialogue with payers to educate them on TV.
Back from these initial erections has also been positive.
When reviewing the data what is particularly compelling just not only tougher to Mips short curse of course of therapy, but the majority of patients for phase three clinical problem responded to therapy with 82.9% meeting the primary endpoint in our phase three program.
In addition, like all newly approved confused therapies that approval pepper tumor will receive temporary reimbursement codes or miscellaneous codes, which are needed to bill for drug usage.
The reimbursement process under temporary code is manual occurring a case by case review that can take between 60 and 90 days.
It's tougher to map is approved by the end of March 2020.
We will be eligible for permanent J code in January of 2020, and that's when the reimbursement process will become more efficient for providers who care.
We're making great progress and developing a treatment path building the infrastructure, establishing referral networks to ensure patient access and success with treatment.
Equally important is our interaction with ophthalmologists and endocrinologists to build a greater understanding of TD and the urgency to identify in Threeq the disease.
We have invested significantly in these efforts presenting separate two MEP clinical data and have a significant presence at seven medical meeting. So far. This year response has been tremendous our October presentation with American Society of Foamix plastic and reconstructive surgery or a suffers was standing room only about a thousand people attending.
We're seeing very strong interest with the conferences, we attend more than 1200 positions between Europe .
Hey suffers.
I can kind of me about them only meeting and the American thought I would assume meeting.
350, plus physicians attending our TV symposium.
Furthermore, our data was selected for an oral presentation at the American College of Rheumatology meeting next week.
Given rheumatologist significant experience and comfort with infusion biologic medicines.
Maybe a tube referral option.
Treating physicians.
Oh this points the tremendous excitement took a tumor Matt is generating is a major reason, we're driving significant pre launch work now be prepared for successful launch.
We're excited for the possibility of truly change and lots of many people living with.
I'll now turn it over to show lead to provide an update on our development activities.
Thank you, Tim and good morning, everyone.
I'll begin kept bitumen that fully human monoclonal antibody insulin like goods sector, one receptor or.
After inhibitor.
As Tim discussed Septima Mab under priority review with the March eight 2020 produced.
In line with the agencies guidelines for new molecular entities, Yes, you will convene and advisory committees submission.
Our leadership team has extensive advisory committee experience and we are in process preparing for that.
The results from both the phase two trials and optic confirmatory phase three trial impressive.
Demonstrating statistically and clinically meaningful improvements across multiple facets of this debilitating vision threatening disfiguring disease.
Furthermore, couple of tumor that was generally well tolerated you treatment discontinuations and a consistent safety profile across both trials.
The primary endpoint of uptick was a clinically meaningful reduction in practice to millimeters.
Fructose is which is bulging LP is the primary driver for TD morbidity. It is painful and can be vision threatening.
So to me about patients in optic demonstrated after 24 weeks.
And 82.9% response rate versus 9.5% placebo is a P value of less than zero point.
This corresponded to a mean reduction in propped doses of 3.32 millimeters in the tip of complementary.
As compared to 0.5 millimeters or placebo.
The blow PEO or double vision can occur with TD.
Seriously impact patients' lives, making it difficult for them to perform everyday tasks and can provide some from working.
In addition, due to the changes.
To their appearance many patients feel socially isolated.
We will therefore pleased to present important phase three secondary endpoint data at Ace offers last month that showed the 68% to people that patients had an improvement of at least one grade double vision versus the placebo at 29%.
One grade of double vision can be the difference between experiencing double digit constantly versus into.
It's up to me up group.
Also saw significant improvements in quality of life, which was measured by the graves ophthalmology. All these like scales for which a change of six points is considered clinically significant.
Tip to move that patients had a mean change of 13.79 points compared with 4.43 points for placebo patients.
Weekly and statistically significant results, particularly impressive given how difficult. It is typically two achieved statistical significance with a quality of life.
The clinical activity score or Cas also showed significant improvement for the kept patients.
The cast is a measure of pain redness swelling as his characteristic for activities.
And 59% Septimus patients achieved the cast value of zero or one versus 21% for placebo patients.
Schools zero, representing no disease activity.
The totality of the primary and secondary endpoint data supports our conviction that kept bitumen that offers considerable patient potential benefit to patients with.
Well, we move toward approval. We were also pleased to be able to initiate or expanded access program for eligible after TD patients during third quarter. This program developed in partnership with the FDA is designed to provide patients access to bitumen that well be really is under review.
[laughter].
It was also quarters progress for Crystex.
We continue to advance our efforts to maximize the benefit six offers patients with uncontrolled gout. The work, we're doing with our to mirror trials.
Both are designed to determine if methotrexate animus immunomodulator use commonly by Rheumatologists can help dampened the immune response to KRYSTEXXA and thereby increase the response rate to pursue.
The first trial is an open label pilot study that began in the third quarter of last year, which 14 patients were treated with respect and with attractive.
We expect to release data from our open label study early next year.
The second is our double blind placebo controlled Registrational mirror trial that began in June and is also evaluating the co administration of KRYSTEXXA with metrics.
Positive results could mean multiple benefits to patients.
First it will further increase the contracts that rheumatologist, having perspective, thereby enabling them to prescribe for six to more patients and their care.
Additionally, it will allow patients to stay on therapy longer that's driving the full benefit from the best.
We've been encouraged by the consistency of positive data, we've seen from investigator initiated trials administering crystex witnessed the trucks.
First is the positive data from a case series conducted by to external investigators, which resulted in 10 sequential uncontrolled gout patients completing the course of therapy and achieving a positive response, which was defined as more than 80% of serum uric acid levels being maintained at least at less than six milligrams per deciliter during the observation period.
Results of a new clinical case series conducted by another independent Rheumatologist will be presented next week at the NCR meat.
This clinical K series also evaluated the co administration of Crystex, so with methotrexate intent uncontrolled gout patients.
Well, let me patients were still actively on KRYSTEXXA and respond.
The time of the abstract submission.
On the seven remaining patients had completed the course of therapy and we'll complete response.
We look forward to seeing these full results next week.
We will present, our own data NCR, describing the inflammatory impact of uric acid on other organs, including liver and kidney inline with our efforts to reinforce the gout is a systemic disease, which your adjusted crystals can deposit throughout the entire body not just in the joints.
We also stressing the urgency of appropriate evaluation and treatment you effectively control all implications.
[noise] another crystex a milestone in the quarter with the initiation last month to protect trial.
20 patient open label study evaluating crystex kidney transplant patients with uncontrolled gout.
Kidney transplant patients have more than a tenfold increase in the prevalence of yes, when compared to the general population.
There are chronically elevated levels of serum uric acid or associated with organ transplant rejection.
This study as well as our participation. This week at the American Society of Nephrology meeting supports our strategy to expand the use of Crystex among neurologists by providing additional data about the effective the suppressed exa in treating uncontrolled gout, whose kidney friendly mechanism.
Finally in the coming weeks, we will be opening a new facility in south San Francisco, primarily for R&D and manufacturing organizations.
Date of the arc facility will have lab say lab space that will enable.
Formulation and process development for manufacturing as well as bio analytical method development and other R&D functions.
Even that south San Francisco is an R&D talent hub, our presence that will further enhance our ability to attract talent to support our expanding capability and pipeline.
In conclusion, we continue make significant progress on tepper tumor ma'am.
And our other development program.
We are closer than ever to make and typically on the map available to patients living with a debilitating effects I would I disease, and we continue to work to help more patients living with uncontrolled gout benefit from perspective.
We are rapidly advancing toward our goal of being a leading R&D organization crushing patient needs through the development of innovative therapies and I look forward to updating you on our continued progress next quarter.
With that I'll now turn the call over to Paul.
Thanks Shelly.
My comments. This morning will primarily focus that our non-GAAP results unless otherwise noted.
Third quarter net sales of $335.5 billion were driven by 14% growth ever orphaned and rheumatology segment.
Operating income for orphan rheumatology was $89.8 million, representing an operating margin of 36% in line with our expectations.
Merrily, reflecting our significant investment in both R&D and SGN, a separate two of them as well as our uncontrolled gout R&D programs.
Net sales for the inflammation segment were $85.1 million with segment operating income of $39.6 million.
We continue to reinvest the cash flow generated from this segment into the orphan in rheumatology business.
Our non-GAAP third quarter gross profit ratio was 90.7% about sales.
non-GAAP operating expenses were $174.7 million. This included non-GAAP R&D expense of $19.6 million and non-GAAP EPS DNA expense of $155.1 million.
Third quarter, adjusted EBITDA was $130.4 million.
The non-GAAP income tax rate.
The third quarter was negative 7.5% resulted in a tax benefit of $8.7 million.
non-GAAP net income and non-GAAP diluted earnings per share were $124.1 million.64, respectively.
The weighted average shares outstanding used to calculate third quarter 2019, non-GAAP diluted EPS were 194.2 million shares.
non-GAAP operating cash flow was $96.5 million in the third quarter.
Our cash balance at September Thirtyth was $884 million, which includes the net cash outflow of $66 million in July as part of our refinancing.
At that time, we issued $600 million of new 5.5% senior notes due 2027 and use the net proceeds along with cash on hand to repay $625 million of our outstanding debt.
As a result as of September Thirtyth, our net debt was $534 million with a net leverage ratio of 1.1 times down from 2.9 times a year ago.
Our refinancing and debt reduction initiatives have resulted in a capital structure more in line with our profitable Biopharma peers.
A year over year in decrease of our annualized cash interest expense of more than 40 percents.
And then extend the maturity of our term loans and senior notes by two to four years.
S&P recently recognized our efforts upgrading our senior unsecured notes from single B, plus the double B minus.
Moving to our outlook for 2019, we continue to expect full year 2019 that sales to range between 1.28 and $1.3 billion.
And we expect full year net sales growth for pristiq, so to be more than 25%.
We continue to expect the full year net sales for the inflammation operating segment to be roughly similar to 2018.
Full year adjusted EBITDA is now expected to be in the range of $465 million to $475 million versus the previous range of 460, the $475 billion.
We continue to project, our non-GAAP gross profit ratio to be approximately 90%.
For operating expenses, we continue to expect non-GAAP R&D expense as a percentage of net sales to be in the mid to high single digits for the full year.
I'd expect both R&D and SGN expense to step up in the fourth quarter compared to the third quarter, primarily as a result of our investment in separate to a map launch preparations and their crystex Amir and protect programs.
As we look to next year.
And our expected first quarter tougher so that launch we anticipate 2020 operating expenses to be somewhat higher than the annualized fourth quarter 2019 operating expenses.
We continue to expect a full year non-GAAP tax rate in the low to mid teens with a higher non-GAAP tax rate in the fourth quarter to bring the full year right inline with our expectation.
As we have said and consistent with prior years, we anticipate quarterly variability our non-GAAP tax rate.
And as always this production could change significantly as a result of any acquisitions or divestitures or any changes in tax laws.
We expect full year non-GAAP net interest expense to be approximately $65 billion considerably lower than our initial guidance of $90 million to $95 million as a result of our capital structure improvements.
We continue to expect our full year 2019 weighted average diluted share count to be approximately 190 million shares.
With that I'll turn the call over to Tim for concluding remarks. Thank you Paul we delivered strong third quarter performance and achieved important milestones.
We've transformed for rides moved into a fast growing profitable Biopharma company.
We're advancing separate tumor map our first in class biologic candidate for the treatment I wrote eye disease with the March eight 2020 PDUFA date.
We are aggressively preparing for the potential us launch with our Tempur to map commercial and medical teams fully in place. We continue to estimate corporate to hit peak and will you with net sales of more than $750 million.
We continue to deliver on the promise of Crystex, we're now working to maximize this potential through our mirror immunomodulation trials as well as with protect our recently initiated trial for kidney transplant patients with uncontrolled gout.
Weve substantially improved our capital structure to align with our profitable biopharma peers.
Our balance sheet has never been stronger stronger given some flexibility to invest in our growing pipeline.
We continue to expand our leadership worldcolor welcoming duct assume only to the board and bringing in the pessimistic on as our Chief business Officer.
Finally, we have demonstrated that were company that drive strong ongoing performance will be recognized as a great place to work one that bellies diversity with gender and ethic pay equity.
With strong business fundamentals and financial position, we believe we're very well positioned for continued future growth that we represent one of the best long term growth opportunities in our space.
We continue to execute our strategy, which we believe will not only provides significant value the many patients who benefit from.
From our medicines, but also to you our shareholders.
With that we'll open it up for questions. Kathryn go ahead.
Thank you to ask a question you will need to press star one on your telephone.
Charlie Your question press the pound key again that star one to ask a question.
And our first question comes from David Amsellem with Piper Jaffray. Your line is open.
Thanks, So wanted to ask a couple of questions on on KRYSTEXXA seems like your navigating the 340 be impact quite well. So wondering if you could talk to what's happening there is the outperformance strictly a function of volume or is it is it also.
Mix in other words, non 340 be versus 340 business. So help us understand that and then secondly.
In talking about the latest say CR abstract in the retrospective chart review in particular, which I thought it was quite interesting I'm just wondering if with the growing body of data on them MTX Crystex a combo. If other centers are being emboldened to use the combo.
Maybe talk to what you're seeing in the field about methotrexate crystex, they use or how common it is and also should we see more these kinds of posters.
I had other meetings in 2020, thanks again.
So David it's Tim the answer is yes, two I think it all of your question is an OLED vikram.
[laughter].
Yes, Thanks, David for the question.
Yes.
As it relates to the Q3 performance with the state. So it's though it's driven by both strong demand growth as you said earlier more than 30% growth in bio's alone.
Signals strong demand.
Also seen continued improvement in our me and that is the that is driven by growth from community Rheumatology codes.
A significant amount of of business.
From.
Both those factors are driving growth in.
Q3, net sales for perspective.
Your second question around the use of methotrexate or for that matter immunomodulators what'd be hitting in the field.
We do here, especially after the SCR abstract from last year.
To sponsor than Peterson showed the abstract nine out of nine response responders.
We have heard anecdotally from a lot of physicians of accounts that they are considering it. We have tried that I think we still estimate that the overall uses the though in the in the into single digits. If you will.
But that actually these would give us confidence to go ahead and initiate community trials.
We hope will give us enough.
<unk>.
Good.
Okay.
And maybe so he can add to that.
Thanks for that new problems, so I think that.
I think that sequence is exactly right. We had started our mirror open label study exactly to evaluate whether or not adding methotrexate dampened the immune response to crystex.
As we were initiating that trial had the.
Good fortune of seeing lots and Peterson data come out last October at HCR, It's really interesting.
That the Albert's abstract so at this HCR is coming out with.
Let me so far what appears to be very consistent data will obviously see the rest of that datasets.
The full Temptations next week at HCR, but I think if that continues to play out and we will have no sort of to external datasets that.
They end up quite consistent with one another.
And potentially our own open label data that we hope to be able to provide some insight into early 2020. So.
Really shaping up and that this may be.
Way to modulator in response to Crystex in a way that ultimately will provide patients with the opportunity.
Stay on the drug longer and in a way that.
Modify some potential for.
Great. Thanks, David Katherine next question. Please.
Our next question comes from Annabel Samimy with Stifel. Your line is open.
Hi, guys. Thanks for taking my question Great progress.
Uh huh.
Yes.
Yes, it should guidance on Crystex assuming.
One that there'd be a competitor in 2022 that theres, a three month treatment duration three that.
There's no patient expansion.
100.
Thank you identify between kidney hematology in all of those assumptions change so.
What do you need to see.
For increased comforting thing that peak sales.
And then the second really quick one off.
Chuck.
When you're given your produce.
The next regulatory catalysts would be a preview of the label or label discussion.
Okay and has.
Before they gave a very explicit dates for that.
And what have you seen on why why would they do that thanks.
So I'll take the first one no typically you would get.
Initial label to begin negotiations for the six.
Weeks before your action date, as we indicated in our press release, when we announced part or view for Tempur tumor map.
That would be fine ended the year, which.
Gives us.
Makes us feel very happy that Oh, those timelines or accelerated to begin labor negotiations.
So that's all we know at this point and from our perspective, we continue to.
Prepare for the Advisory Committee meeting and receipt of a label and we've also made good progress and all the pre approval inspection, so whether that be manufacturing or.
Yes, the Gators and other so everything's on track to meet our expectations. There with the first question are you pointed out quite well.
We've had continued progress in the underlying growth of Crystex, along with the Immunomodulation strategy, which we've seen from several datasets.
A strong incremental responses as much has almost doubled what we saw the original clinical program. So we continue to feel very confident that we can grow substantially with crystex. So.
As we continue to grow will continue to look at our long term guidance, but it's well said by you.
Great. Thanks, Annabel Katherine next question please.
Our next question is Dana Flanders with Guggenheim Your line is open.
Great. Thank you for the questions and congrats on all the progress.
My first one here, it's just on margin expansion it seems like you're making nice progress with the orphaned and room business, although arguably still just have heavily under earning your peers. So can you just speak to how you expect.
The orphan and room business to evolve as you get into 2021, and TEP ROE and Crystex a topline growth just continues to ramp and you're able to just better leverage the investments you're making today.
And my second question is just on Biz Dev I know you have some new leadership there I'm. So maybe just speak.
To the philosophy, if that's changed at all and I know you have a lot on your play but with net leverage only one times, maybe just speak to just how you're viewing the landscape and opportunity set into next year. Thank you.
Thanks, Dan as I said in my remarks, XR tepper to map.
Spend.
This year, we see double digit accretion from our base business.
And.
Paul maybe speak to how you see going long term.
Yeah. So you know as as Tim noted the last couple of years had been heavy investment years, both in the expansion of Crystex, a commercial efforts and heavy spend on temperature met both from the R&D side and from the.
For a potential launch next year as we look at 2020, we'll continue to have heavy investment behind separatism hub and we will not have a full year of sales of sales will ramp through the year and so we do not expect any significant margin expansion next year, but as we move into 2021 as we have a hell of a full year of growing separate tuned up sale.
Continued growth in Crystex, we expect significant margin expansion driving from that.
Orphan room segment.
And any wanted.
About.
BB strategy sure. Good morning. Thanks for the question Dana first let me just say that I'm thrilled to be here in part of this team and while this is technically my first week at horizon.
Yes, actually worked pretty closely with the team in recent years. So lets say this is an informed move.
So just to put your question in the context I think that this team has made great progress in transforming horizon into a profitable Biopharma company.
And I think we're going to accelerate continue and accelerate that journey, which means deepening our presence in rare diseases as well as attractive areas in rheumatology nephrology ophthalmology, endocrinology, which are all areas, where we have increasingly strong capabilities.
And what that means for BD perspective is we're focused on building a clinical stage pipeline are continuing to build enhancing a pipeline against those areas I think I don't think thats a significant change in philosophy.
We are we are seeing attractive opportunities and you're absolutely right that we're in a position of strength in terms of strong cash position. The limited leverage and then just the strong ongoing cash flow the business.
Thanks, Thanks, Dana Katherine next question please.
Our next question comes from Jason Gerberry with Bank of America. Your line is open.
Hi, good morning, and thanks for taking my questions just a few on cap growth. So.
Tim maybe can you talk is the uptick long term follow up data what you get in first half 20 is there any interplay with those data and how you approach pricing decision on Teflaro. My second question is just if we don't get an update on AD com and the next week or so is it safe to assume there won't be an AD com for four cap.
Well, just given the timing dynamics, there and the notice period provisions and then lastly, just any update on the European orphan drug designation for TEP borrow as it pertains to treatment of thyroid disease. Thanks.
Sure.
I think decks is the rollover.
Studies from our phase three program, where.
Patients can rollover from placebo to did a full treatment for two minutes or any patients that didn't respond which was a small number given the 83% response rate.
Would be eligible for re treatment.
We don't see.
That study, having any impact in or pricing decision, we're finalizing our work.
Looking at to.
Areas.
Specs of value the number needed to treat.
Here is extremely low which indicates strong value. So we continue our work and then we'll communicate our pricing right. After we are approved.
With the AD Com as you noted the register is publishing dates up to December 10th at this point in time based on early this morning.
There will be an outcome, we don't see any likelihood for that to not occur.
We would expect dates we announced shortly.
Finally on European orphan drug designation.
Our strategy is to secure U.S. approval, and then continue that dialogue so more updates to follow post approval. There. Thanks, Jay Thanks, Katherine next question. Please.
Our next question is can catch time.
Alan Your line is open.
Great. Thanks, all just wondering on the temporal early access program or we actually getting patients on U.S. So you do have IB.
Some of the IB logistics squared away and then maybe to that point as we start thinking about next year and you're talking about tuck in a 200 major centers can you kind of set expectations for us about how long it will take you to start getting those centers up and running and feel that the logistics are working so that patients start flowing through the system as we start thinking about modeling.
Out into next year, and then lastly on Crystex.
Just wondering where we are in terms of accumulating new accounts. So it sounds as if and you gave great anecdotal feedback on how broadening some of these accounts, but are there still are we still penetrating new accounts can you give us a sense of where we are on that are we getting to the and stages of that and then maybe just going back and now focusing on broadening used within accounts just.
Any perspective on that would be great. Thank you.
And on the EAP program.
As we've said in the past there has been strong interest and we have a number of.
Patients in the queue to be introduced shortly we expect that interest to continue to grow and.
And all the patients that to put on the EAP, we will provide full cost for the.
The course of treatment regardless of when were approved.
From the major centers.
And that I referenced our site of care specialists are calling on allow that is building those networks, but building of the network. So we don't see is the rate limit or the real look break limit or as you model uptake and look at this and part B medicines.
Spectrum and I have discussed.
Many occasions as we will have initial temporary J codes tempered see codes on the commercial side, where each patient is managed on a case management fees by case basis and that process takes upwards of 60 90 days plus in that initial phase until we would get a permanent J code.
Which.
Based on a March 30, Onest submission would occur January onest. So as you look at park the launches its that patient by patient.
Approval process on a case by case basis, which drives that slower uptake initially the infusion centers inside of care. We think we'll be in a good place as we've done well with that with Crystex to.
And they come I think you were going to talk about Yep Yep Yep. Yeah. I think your last question was about the new accounts and.
The growth is coming from the sector as you would imagine at this stage of the relaunch having now gone through several years of adding.
New accounts and Debbie you physicians on we're starting to see.
A transition where a lot of growth from new coming from existing account growth.
That.
And this quarter loan, we've seen almost 30% above growth coming from existing accounts, where which speaks to the level of confidence that physicians.
Have you done in leasing basis in the medicine as they see modem that patients benefit.
Also on the new account, where we should see growth and we anticipate that of the future business apology.
As we've talked about before you have now been increasing focus on.
No would the course of the last few.
It's almost a year now and that interest continues to grow and will comment on that.
Business continues to evolve, but we should expect a lot of growth continued to transition into existing accounts and thats what were.
Happen as we speak.
Thanks, and wouldn't just clarification, a permanent J code to be Jered. One of 2021 at that can may of 2020.
Next question.
Thank you.
Next question comes from David Risinger with Morgan Stanley . Your line is open.
Hi, This is Charlie for David Thank you for taking my question.
Just two things one is I know you've mentioned above that that business development.
Now I will focus already but I just want to see if you have any additional comments on nine tenths of a near term prospect and number two is Cal what product sales are expected to be lower income 2019 since.
Your guidance have maintained a total revenue and based a christa.
Your next so thank you.
So for 2019 on a year over year basis, we expect strong growth across our room orphan business and similar year over year.
Sales from our information business relative to near term BP prospects.
We're not going to get into.
What we may or may not be looking at this point in time, we are aggressively.
Pursuing and evaluating a number of different opportunities and.
We feel confident that.
We've got the flexibility in our balance sheet and.
We will be very selective and disciplined as we have over the last year. So thanks, Charlie Katherine next question. Please.
Our next question comes from Gary Nachman with BMO capital markets. Your line is open.
Okay. Thanks, Good morning, first on temporary regarding the AD com what do you anticipate the focus of the panel will be the data seem really clean, but any possible safety concerns even if from though that you think GSK will want to get comfortable with are you anticipating a rents potentially with this product.
And then on Crystex regarding the protect trial and kidney transplant. What are you looking for before you would be able to progress into a bigger phase three we look at a different dosing regimen and what about a combo arm with methotrexate. Thanks.
So with on the second.
We don't anticipate doing a phase three program. It's hard included within our current label.
And we wouldn't be using methotrexate in the petrology population they use other immune modulators.
Relative to the AD com, though we see this as this statutorily required reading for new chemical entity with a new mechanism abaxis.
Mechanism of action.
We expect it to be a general efficacy and safety review and we have very well characterized safety across both of our studies. Both pivotal studies that have been conducted as far as Rems. A there is not something that jumps out to us, but that also as part of the label negotiation.
We'll see how that plays out but nothing of major concern going into the outcome for us it's a matter of opportunity present, the compelling efficacy and.
Generally well understood safety profile and.
We look forward to the meeting.
Thanks, Gary Okay. Thanks.
Catherine I think we have time for one more question.
Our last question comes from David Steinberg with Jefferies. Your line is open.
Yes, thanks, very much I, just want to revisit your peak sales.
Mr for sex again, I think you said 750 million, but do you.
100 million this quarter, so you're already over halfway there pretty short order and so.
I know you haven't talked about methotrexate. These are the those peak estimate so it's just assuming the merits while successful you know any thoughts on what the potential new peak sales estimates would be adding methotrexate and then.
I know Tim you said, you've had increased payer discussions regarding tephra thinks the rate it's pretty broad range.
The company's showed out of 100 300000 per course of therapy any further assignment of that range and then finally just had BD.
The company hasn't made any.
Any acquisitions awhile and versus in the past the company is pretty much a serial acquirer is this because valuations are too high or just that realistically you don't need to do anything. So next couple of years to.
Enhance your growth outlook. Thanks.
Well first on BP.
We look at our business with Crystex interpret too.
And the peak sales expectations is more than doubling our current sales. So we're very well positioned with our base business and our existing pipeline.
We have been very disciplined over the last year, so to get our capital structure in line with a strong.
Strong balance sheet strong cash position low leverage.
We think we now have the flexibility to be very discipline as we looked at deals and that mid to late 2020 timeframe relative to pricing, we have not put any one of the 300 or any numbers out there.
Cell site commentary on price. Thus, we have not indicated any price range at this point in time, we continue to do our work there.
I think when you your commentary around Crystex in peak sales. It's it's heard and then we are increasingly confident in our current expectations and and as you said the data with methotrexate, we've seen from both the.
Button Peterson data lesser DCR, the Albert standard, we're going to see that's public now, but we'll see if this is a CR another data that's being generated.
We see a significant opportunity with Chris Sextuplets Methotrexate and at this point in time, we're highly confident and.
Our trajectory and then as we continue to see that will reconsider when we put out.
Incremental.
Peak sales.
Thanks, David.
Catherine that that wraps up.
And that concludes our call. This morning, a replay of this call and webcast will be available and approximately two hours. Thanks for joining us.
Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.