Q3 2019 Earnings Call
On me two pretty bad any background noise.
Speaker's remarks, there will be a question and answer session.
I'd like you ask a question during this time simply press Star then the number one on your telephone keypad. If he would like to withdraw your question press. The pound key it is now my pleasure to turn todays call over to Miss Linda Lennox Vice President Investor Relations you May begin your conference.
Thank you Regina good morning, and welcome to the Aonec Pharmaceuticals conference call to discuss our third quarter financial results and corporate update.
Earlier. This morning, we issued a press release for those of you don't have a copy you can access it in the Investor section of our web site at eight Maxpharma Dot com.
No.
Please be reminded that remarks made during this call may include forward looking statements pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act 1995.
We want to emphasize that these forward looking statements involve risks uncertainties that could cause actual results could differ materially from those discussed in such forward looking statements.
Please refer to our 2018 Form 10-K , and our 2019 Form 10-Q as well as those included in our presentation scenarios for a full review with the risks and uncertainties associated with our business.
On today's call, we will discuss certain non-GAAP financial measures, but with respect to are performing.
We use these non-GAAP measures for financial and operational decision, making and as a means to evaluate our performance because we believe they better represent the ongoing economics of our business.
The definitions of our non-GAAP measures are set forth in our earnings release.
It was filed with the FCC today.
Coffee me painted FCC dot dot and the Investor section of our website.
We are forward looking estimates of our long term outlook.
Your next growth trajectory and expectations for adjusted EBITDA on a multi year timeframe are based on a strategy of maximizing commercial product opportunities to fund investments in new products.
Aries assumptions, including certain assumptions about the progression and approval Hmm product candidate and the continued viability of amax commercialized products, including them Aquino subcutaneous auto injector. So please refer to these additional risk factors.
With me on today's call our bills fighting, our president and Chief Executive Officer.
Dr. Julie Krop or Chief Medical Officer, Tony Casiano, our Chief commercial officer, and 10 miles, our Chief Financial Officer.
Quickly run through the agenda for this morning's call Bill will briefly review a third quarter highlights Julie will discuss the recent Mckenna F.D.A. Advisory Committee meeting Tony will provide an overview of our recent lot to buy levy.
Our third quarter financial results and our updated 2019 financial guidance.
Julie will then come back to provide an update on our development program.
And Bill will provide some closing remarks, and then open up the call for Q1 night.
With that it's now my pleasure turn the call over to Bill Bill.
Thank you Linda good morning, and thanks for joining us on a quarterly update call.
Third quarter, we saw strong consistent execution from our commercial teams revenue has increased in each of the first three quarters for 29 team for all three of our commercial products Feraheme Makena subcutaneous auto injector and Intrarosa.
The growth is even more impressive on a year over year basis as lays out in our press release.
We're pleased with a continued strong performance Feraheme, which is shown here on the left which posted record record revenue of $44.2 million in the third quarter, a 5% increase over prior quarter.
Year over year bare I'm very revenues grew 20%.
Variance average market share grew to 17.5% in the quarter.
Shown in the center of the slide Makena subcutaneous auto injector revenues have stabilized around $40 million per quarter, which is roughly where we predicted they would be.
Before intramuscular generics in the market. We're pleased that we've been able to capture and maintain nearly two thirds of all at the APRU Hydroxyprogesterone caproate products.
I know you only have questions about the Makena franchise going forward. Following this week's Advisory Committee meeting and Julie will cover this in a moment, but it's important to remember that Mckenna remains on the market and available to eligible pregnant women.
And finally on the right into Roses, net revenues grew to $5.6 million in the third quarter and the average.
Your next market share growing to 4.8% for the quarter.
I'm going to turn the call over to Julie who can provide an update on Tuesdays FDA Advisory Committee meeting.
Thank you Bill since we first announced topline results from this study earlier this year, we've been an ongoing discussions with the FDA to identify the appropriate path forward.
On our Q2 calls we shared with you that APTQI a remote recommended an advisory committee meeting to better understand and interpret the results of the prolonged study.
Since that time, we've been working closely with our publications committee to celebrate the publication of the pull on data ahead of the Advisory Committee meeting as well as preparing for the meeting.
Just a week ago on Friday October 25th the prolonged study results were published in the American Journal, appearing they told me Dr., Sean Blackwell, a chair of the department of Obstetrics and Gynecology and reproductive Sciences, and Mcgovern Medical School Beauty health in Houston was a lead author on the publication.
And the publication lays out the offers perspective on the potential reasons behind Prolongs result.
After reviewing the publication the American College of Obstetrics and Gynecology and society for maternal fetal medicine updated their guideline reiterating their support for the use of Makena in this high risk patient population.
Earlier this week, the bone reproductive and your logic drugs Advisory Committee met to better understand and interpret the prolonged study result in the context of prior studies.
In the meeting there was a lot of questions regarding the need for additional data and how to balance that with how to successfully conduct the U.S. study in the face of widespread use of 17 peak.
Some members even felt the only way to get additional data was to remove the dropped from the market.
Importantly, five at the six a btwob hands and two additional members voted in favor of keeping the kina on the market with a new confirmatory trial.
Nine members voted to recommend that the F.D.A. pursue withdrawal from the market.
As we've shared publicly we're disappointed with the mix so, but it's important to remember that the advisory committees, though is not finding what the F.D.A., we'll have to consider it and making their decisions. We are committed to exploring options on how to gather additional data that will be most informative to physicians and the FDA.
And at the same time working to ensure that eligible patients continue to have Axa Mckenna I'll now turn it over to Tony to provide an update on the launch of lately.
Thank you Julie and good morning, everyone.
Wanted to start with a quick but important reminder, over market research, which indicates there are approximately 6 million pre menopausal women would acquire generalized HSDD.
Our team is proud to bring those when might we see the first on demand treatment option.
[noise] since launching nationally about a month ago for women's health sales force and digital outreach. The team has been focused on driving early awareness of RBC.
We've also prioritize early access through a co pay program, which makes the first for pack it might we see available to patients where he zero dollar co pay and the maximum of $99 on subsequent cells.
This co pay program is helping eligible women access why we see all or market access teamwork secure commercial coverage for patients.
While we're only about a month since the launch we know you probably eager to see some early indications of progress to date.
On the qualitative side, we're seeing our presence on social media is providing women with a chance to engage in discussions about HSDD illustrated by some of the post shown on the left hand side the slide.
In addition, our Salesforce is finding physician eager to engage in discussions about IVC.
These are consistent with the employees for you can see on the right and just the call. This out in case, you're not using the slides the quotes as I have had four different providers requesting to come by and detailed IVC. Those requests came from no access offices.
For now is not familiar with the town no accident offices. These are offices that historically will not allow sales representatives into the launch.
We're also happy to see early signs of earned media, which we believe we'll continue to amplify our efforts to drive HSDD and my VC awareness.
On the more quantitative side you can see on slide 11, some of them efforts were tracking to the first month of launch.
Our focus on digital has helped us reached more than 12, and a half million women and we've seen more than 120000 sent them checkers completed to date.
From a prescription perspective.
We're happy to share their specialty pharmacy partners have received more than 3000 prescriptions with more than 1300 health care professionals prescribing why we see today.
Again, it's early in the launch. So these are just a subset of the metrics will be sharing moving forward with you and you can see on bottom to slide the additional metrics. We plan on providing on subsequent calls the work to keep you informed on the progress of launch.
So early days, but so far so good with my we see and more to calm as we progressed further through the launch.
With that I'll turn it over to tends to walk through the financials and guidance.
Thanks, Tony Slide 13 shows our revenue by product <unk> third quarter of 2019, compared with the second quarter of 2019.
On a sequential basis, you can see the Mckenna some Q auto injector revenues for Q3, we're very consistent with our second quarter results.
We're pleased with the steady performance considering a number of generic competitors in the intramuscular market.
We believe this demonstrates the importance of the sub Q auto injector in a foothold that has been established in the market with continued great execution by our women's health maternal health commercial team.
The next line item shows that the negative intramuscular revenue that we recorded in the third quarter has declined as compared to the second quarter.
This negative revenue is primarily the result of our revisions to the estimated liability for Medicaid in commercial rebate obligations for Mckean I am from past periods.
It is common to revise the estimated liability based on new information as new invoices are received in many cases. These invoices arrive many months after the initial sale the product.
Feraheme continues to perform very well because posting another record quarter of $44 million.
This growth was all driven by volume in our MRM team continues to deliver strong results.
We believe Feraheme will continue to be a source of steady cash flow.
Slide 14 shows our revenue by product for the third quarter of 2019 compared to the same period last year.
Total revenues declined from $122 million in the third quarter of 2018 to 84 million in the third quarter of 2019.
The key takeaway is the decline in Mckenna intramuscular revenues your call that on our second quarter earnings call in August we announced that we were exiting the high end market, including the mutual termination of our contract with Prescott our authorized generic partner.
We made this decision due to increased generic competition as well as continued supply disruptions by our third party supplier of intramuscular product, which resulted in a significant loss of market share for both the item brand and our authorized generic.
This decline in Mckenna I am revenue was partially offset by growth in Feraheme Intrarosa and the Mckenna Subcu water injectors.
It's worth noting that by we see revenue doesn't appear in the financial statements consistent with our go to market strategy of ensuring unencumbered access for women, who are suffering from HSDD, we launched with the $0 co pay for the first scrip and $99 Max out of pocket for subsequent scripts.
In future quarters has been number of refill scripts grow and commercial coverage increases net price realized for by leasing will also increase.
Moving down the piano slide 15 represents operating expenses for the third quarter of 2019 compared to the same period in 2018.
We broke out a couple of line items to better illustrate the trends driving our results for the period.
Overall total cost and expenses for the third quarter were down nearly $40 million year over year.
In the third quarter of last year, we recognized approximately $30 million of amortization expense substantially all of this was related to machine I am product.
During the third quarter of 2019, we didnt recognize any.
Amortization.
R&D expenses in the third quarter increased approximately $5 million consistent with our plan primarily related to our development program for a Mac for 23, including additional clinical site initiations in Europe .
Also consistent with our plans SGN expenses in the third quarter of 2019 decreased year over year by nearly $7 million.
This decrease was primarily related to our combination of our maternal health and women's health sales forces in February of 2019.
The Street decrease was partially offset by increased direct to consumer marketing spend to support the launch of at least.
During the third quarter, we recorded negative EBITDA up $8.2 million compared with positive EBITDA of $30 million in the same period last year.
We continue to carefully manage our expenses, while still investing in our products in development programs.
As we approach the end of 2019, we are adjusting our full year financial guidance, we have lowered the midpoint of our expected revenue range to 325 million from 340 million driven primarily by lowered expectations of Intrarosa and the negative I am revenue that I discussed previously.
We continue to manage our expenses very carefully and this enables us to revise our expected EBITDA loss from a midpoint of $80 million to revise midpoint of 70 million for the full year.
It's important points out the trend.
Adjusted EBITDA loss for the first half of the year was approximately $50 million.
Dropping to approximately $20 million in the second half of 2019.
As we consider our corporate planning for 2020, the Advisory Committee outcome on Tuesday is an important consideration.
We believe in Mckenna, we're committed to working with the FDA.
In the meantime, we recognize that the advisory committee vote heightens, the uncertainty around the durability of Makena revenue in this informs our corporate planning.
We're prepared for a variety of potential scenarios and continue to look for ways to optimize the value of our portfolio to maximize shareholder value.
As we get clarity on the path forward regarding Mckenna with will be in a better position to provide more formal revenue and earnings guidance for 2020.
Over the next several months, we expect to the full impact of the Advisory Committee will be more clear.
We look forward to providing financial guidance.
So the investment community.
January .
With that I'll turn it back to Julie for quick update on our development programs truly.
Thank you Todd as you know we have two development stage assets in our portfolio.
Fair apparent tag is a small molecule designed to reverse empty congratulation in patients who have an urgent are seriously will require emergency surgery, while taking anti cracking on therapy.
We're currently in the process of working with FDA to gain alignment on the design of the next clinical trial.
The proposed study will measure whole blood clotting time, using an automated phenomena developed by Paris Fair technologies.
For study initiation acquired Ulaanbaatar must be clear through an expectation all device exemption or I'd and as Harris fail technology will submit the idea once the design for the next study is finalized.
The extra time, we spend now will help ensure that the data we generate will allow us to have a successful end of phase two meeting, which we plan to schedule. After the study completion.
Regarding our other development program aim at four to three which is being developed to treat pregnant women with severe preeclampsia, an orphan condition with high unmet medical need.
Enrollment of the phase to be three efficacy and safety study is ongoing and we look forward to updating you on the enrollment is complete Phil.
Okay here in our final slide I, just want to wrap up with a summary of areas of focus for the company. As we look ahead for Makena is continuing to capture the majority of this market with the Subcu auto injector and also follow up with the FDA to agree on a path forward that will generate the requisite additional data and ensuring that physician.
Patients continue to have access to Mckenna.
As Tony covered we're encouraged by the early by at least the launch metrics and look forward to continuing to report the progress on this new product launch trajectory.
Feraheme performance has been strong quarter on quarter and the team is focused on continuing that growth.
We're opening new sites and working to continue to enroll patients with severe preeclampsia in the for 23 clinical trial.
We're also working closely with pair sphere technologies to submit the automated coagulation winner investigational device exemption and initiate the next year for INTECH clinical study in healthy volunteers as quickly as possible and finally, continuing to focus on optimizing the value of our portfolio to maximize shareholder value.
Example, exploring an ex us out licensing opportunity for Seer brand.
And so with that let me stop with our prepared remarks, we'll open the call for questions Regina.
Time, I would like to remind everyone in order to ask a question simply press star followed by the number one on your telephone keypad again that is star one for any questions. Our first question will come from the line of Ami Fadia with SVB Leerink.
Thank you good morning.
A couple of questions, but I limit them to three.
Firstly for Julie.
What type study do you think is feasible to help.
Provide the substantial evidence of efficacy from Mckenna.
If you could sort of provide us with.
Our in thinking could it be RCC study or some sort of the registry study.
If you could elaborate on that and also give us a sense of the cadence for discussing next steps with the F.D. and what could the timelines around that be.
Yes. Good question I mean, we obviously need to discuss it with the FDA as far as study design, we're proposing we're committed to proposing.
A variety of different types of studies I think the key is that we want to make sure. We are able to as you said fulfill substantially that but the need for substantial evidence I.
I think that can be done with a combination maybe.
A PK PD studies along with.
A perspective.
Cost of data from more observational type studies.
We're also prepared to do a randomized clinical control trial. If that is what is decided that this has to be.
Obviously in combination with FDA.
As far as next steps and timing.
As far too it's hard for me to answer the question, because we havent sat down yet and have the discussion with the FDA I think it's not going to be quick and it's not going to take forever. It sometimes it sometime in the I would say in the it's not going to be in the weeks, but more.
A few months some sometime in that timeframe, we'll have a much better idea I think of there.
The timing will be.
Okay. Okay.
Thank you maybe the next question is full bill.
Can you elaborate on some of the types of options or alternative courses youre exploring.
You know to maximize shareholder value, especially in the scenario where.
Mckenna may have to be taken off the market.
Yes. Thanks, Thanks for me.
We certainly don't believe that is.
That is going to be the scenario, but we are fully prepared for that and we thought through a variety of different different scenarios that weve. There are number of different ways that we can approaches, but I will tell you. Some of things we are actively working on today.
Which is ex us partnerships for some of our exciting development programs I mentioned seer for intact.
For 23, another good example, where there is interest.
To partner outside the U.S., and so I think thats, an opportunity to maximize the value of the products that we have in our portfolio in the near term.
And so thats something that we're focused on today.
Would you consider.
Something more.
Yes.
Different with regards to maybe exploring partnerships are monetizing some of the assets in the U.S.
Certainly we're open to a number of different options. I think you may have seen that we are currently working with Goldman Sachs and so certainly thinking about a variety of options. It's certainly on the table near term what what we are focused on is obviously working with you.
Good day to ensure that this important product makena remains on the market for the patients.
Needed.
Okay.
My question and the last one I keep it at that is just on the pipeline.
Maybe Judy if you could give us a update on.
It has.
What progress has been made on Cerro Pelon tag over the last couple of months since the analyst day and.
It seems to be some sort of delay and if you did a clarify for us what has been.
The reason for the delay there and then on M&A for two three.
What percent of the trial has been enrolled so far and what's your best guess on when it would be completed thank you.
Thanks to me as far as the pipeline.
They are apparent tag there were.
Subsequent to I think we'll we have announced we were going to have a pre submission meeting.
For the flag on that or subsequent to that there were some additional analytics studies.
Parents that technology have to conduct and alongside that.
Yes, there's been discussions with the FDA that are continuing and hopefully we'll be resolved soon on just the final design.
To allow us to really set ourselves up for successful and the phase to me as we go into the patient study.
And then I'd say the.
As far as timing. Unfortunately, we really are not.
Updating enrollment as we've said before this is a highly unpredictable.
You know population in terms of when they will come into the study at the rare orphan condition.
So I think it's better that we update you when we know rather than try to.
Ill try to guests because it's a hard this is not easy to predict.
Addiction difficult I.
Let me one of the things. We mentioned this morning is we've recently opened some new sites in Europe and as we've modeled out the enrollment in this trial, we do believe that we'll get some significant enrollment from some of those European sites and so we're optimistic that those sites are going to open the the picture in terms of additional.
Patients coming into the for 23 trial and then just reiterate on this year brand tag on trial. This is the last trial.
We believe before we actually go into patients and so we want to ensure that.
This trial will give the agency exactly what they need as we go into the end of phase two meeting.
To initiate that really important phase three program.
Got it thank you.
Your next question comes from the line of Douglas Tsao with H.C. Wainwright.
Hi, good morning, Thanks for taking the questions just maybe Ted if you could just started for little bit about at the EBITDA trend. Obviously, we've seen some improvement from the first half of the you're already and we've seen some reflection the guidance just curious should we expect some further improvement in the fourth quarter.
And do you expect you know what we expect to see going forward is that can be more from some further rationalization of expense line or expectations around growth in the and from the revenues in the in the portfolio.
Yes.
Yes, so as I mentioned in my remarks for the first half of EBITDA negative 50 combined for the in aggregate for the first half and now with the revised guidance, implying are really speaking to a second half of the year at 28.
Eight in the third quarter, if we're being literal that would imply 12 for the fourth quarter, but we want to give ourselves a little bit of room. So I think the trend that you saw in the third quarter is going to be indicative of where we end up in the fourth quarter about.
The big wildcard is we expect.
That were finished with the negative revenue from I am.
And if you look at third quarter 7 million and make that zero in the fourth quarter Thats. All pickup. So remains received but we are in terms of expense management. We've we've been very diligent about how we're allocating capital.
We have shifted to emphasize by Lisi, obviously in a launch good early launch metrics I want to keep supporting that the budget through 2019 accounts for that and.
We're looking at how we continue to support that in 2020.
And instead as a follow up on that and then in terms of.
R&D send you saw a little bit of a step up just given the ongoing activity is that something that you know will continue to trend up a little bit and then in terms of the spend four or five risi is that at the rate.
Now or asset products would have moved into other stages of commercialization could we see some increase in the spending there.
So I'll start with by lease by lease see that the die is sort of cash through the end of the year and as we get closer to ended the year, we'll start to cast the high for Q1 in Q2 based on what we see and the launch metrics as Tony mentioned launch metrics are favorable we've got a very interactive dashboard here. So we're managing the spend to revenue and trying.
Aligns very carefully.
In terms of R&D.
Aggressively pursuing enrollment of new sites as I mentioned in Europe , that's expensive, but thats what were we will help to enroll the patients and get this trial completed.
And obviously Serra Grande Tag is continues to be very big priority.
Part of this is in 2020, there might be additional spend for makena, which would be.
Pretty good up.
Okay.
And then just on that no energy or that sort of a sense of the timeline that we should be following in terms of when we might see a final decision on this.
With respect to Mckenna.
Yeah.
That's Julie mentioned that earner team are focused on that and kind of hard to predict. This is this news is three days old.
We're active were Julie energy, we are actively engaged but no news at this point, it's hard to predict timeline, but as Julie said I think Doug. This this plays out. This is bill is plays out over the number of months, it's not not weeks.
You'll be ongoing discussions with with the agency as Julie said our goal is to begin interacting with the HCM on.
The study or studies.
That could be pursued in order to meet their desire for additional data. So I think this is going to take some time and in the meantime, Mckenna remains available on our team.
Is committed to ensuring that all patients who are at risk for free timber.
When you have access to Mccain and especially the sub Q auto injector.
Okay, great. Thank you.
Thank you. Thank you.
Your next question comes from the line of velocity per side with Barclays.
Hi, good morning, everyone and thanks for taking the questions. So I know you address Mccain out on the potential outcomes from now but tools sorry to belabor the point, but.
If we gave you can give you do get tab.
Good question, where the product to the market is anything that you can do to delay the processes our to our too.
So did.
So.
As you mentioned.
It's as if the FDA were to pursue something like this there would probably initially be a request for them to the company.
We are committed to Mckenna, we believe in the efficacy and safety as to.
The majority of of the guidance in United States.
If the FDA would then.
To pursue a path there would be a public hearing and so theres. Some time involved in preparing for that and then ultimately if the decision.
Went nuts, we would like because there is no safety issue here. This again plays out over a fairly lengthily lengthy period.
Of time, because the question that's been raised.
Is this is a second confirmatory trial nothing about safety was was raised and so it's really honing in on how do we confirm the efficacy of Makena for report the FDA.
Fair enough, so I didn't start into that.
So if it comes to 2020 on the way, we how to think about it now than it is.
It's a then you will see you'll see the market being on the product or if it goes all the product yield cost will go up.
You'll have to be off to do some additional complementary trials is it all we need to think of two brought scenarios.
Yes, I think the the do additional work on on Makena.
Again, thats likely not not rapid I think you know the most recent clinical trial on on Makena took about 10 years to enroll so it's a lengthy process smaller things like a PK study could be done relatively quickly those and relatively inexpensive and then some type of registry initiative, which which we've talked.
About which could be interesting.
Where we track the utilization of the subcutaneous auto injector I think could be could be helpful. In terms of generating and data and could be also helpful. In terms of supporting this up Q auto injector.
One final question on the cost side I believe that last quarter your professional and consulting costs went about on 58% I'm not sure I could get out in this quarter waterflood.
Professional consulting increased biology is asking about professional consulting so that falls in the bucket of Orange were in that bucket is.
External spend in terms of marketing.
Sure. So I'll leave the number was $45 million last quarter, what was the local and you can feel free.
As long as papers.
Since the second realizing.
Okay.
So what number you're referring to margin.
The professional and consulting charges.
So that.
It's a number that's broken out of Q.
Yes, which will file at the end of the day all right. So I was kind of assuming it was impressive exclude thats a very detailed numbers. It's in the queue. Okay. Why don't we will get the Q filed shortly and we can have a call to discussion funds with that thank you.
Thanks philosophy.
Your next question comes from the line of Gregg Gilbert with Suntrust.
Thanks, Good morning, I have a few first for Ted if your prior outlook for 2020 still on the table or should we consider that suspended pending FDA update and some of the other dynamics.
No it's still on the table.
If you are you referring to EBITDA neutral, yes is that yes. So.
Our operating plan before Tuesday that we were developing internally and you can see the trend in the 2019 financials is getting us to EBITDA neutral.
As we talked about we don't see a.
Rapid.
Disappearance of Makena in 2020, so Brian in the base case, we still expect substantial revenues from Mckenna.
Obviously, we are preparing for all cases, because tuesday heightened the risk profile of the durability of the revenues.
And that could be some impact in 2020. So we're prepared for all these cases, we've looked at all the scenarios. This is why I really want to preserve comments for specific guidance when we learn a little bit more as Julie and her team engage with the FDA to figure out what path, we're wrong, but as we sit here today that EBITDA neutral is still up.
Finally on the table.
Okay.
Moving to file easy when you say that the metrics are favorable and thanks for sharing those because we don't really have much to go on what do you mean by favorable.
Yes that relative to is that your internal expectations. On these very specific metrics are you benchmark and then compared to other launches really looking for how those metrics how company our that those metrics are going to tied to you, saying later that net revenue generation is actually favorable as well.
Sure, Yes, generally things to collect.
Absolutely I think that this is Tony catch up so yes, yes, all those things right. So we have our internal assumptions based on what we expect this product to be long term certainly not going to show those projections today.
But where we are at four weeks is aligned with where we would hope to be at this point again four weeks does not make a launch but based on where we're at this mile marker, it's where we want to be.
Internally externally, it's more challenging there aren't a ton of good analogs, but as you stack them up and look at recent launches through four weeks, we stack up quite well I would argue and you can do that math.
Specifically, if there's one analog and again, it's not a great one but as the most recent for HSDD is adding and if you looked at where they were at this kind of mile marker we are multiples higher.
That again, we aspire to a difference long term projection.
Based on what were often four weeks internally and externally I would say by all marks were encouraged.
Okay. Thank you and Julie just to go back to the feasibility of another study yet.
Maybe to start with a general question. It seems like the company's dialogue is that or assertion is that.
Caregivers believe the product works and want to keep having access to it if one were to just listening to the panel they would've heard I think.
The opposite these Pamela we're highly questioning whether the drug works or not.
There seems to be agreement around that being safe the seems to be some concern by some panel members that what if we remove it what will people do and will that be safe that there seem to be some pretty good agreement.
Around the questioning of the efficacy in that there aren't even any obvious sub groups, where it clearly works such that if every labeling were to occur we know what subset would actually benefit so do I have it right that the panel does not believe the product works on the efficacy front, but that you believe many clinicians do believe it works I just want to understand that at a high.
Level before asking my more specific question.
Yeah, I think I think it's really complicated and nuanced because the nice trial studied a very different patient population of high risk women and it was substantially positive and I think that most people would agree that that trial was very well definitely demonstrated efficacy and I think this this last trial, while being larger.
With also not representative of the U.S. population. It was as many of the panel said the event rates were very very low and it was healthy patient population. So I think that the community is very supportive in general of the product I think there was a lot of voice at the statisticians as you look at the numbers.
Clearly the prolonged study was negative but it's all in how do you interpret that and what's relevant to people patients here today in the United States and I think if you talked to most of the Giants I'd say the patients or more like the MS. Trial, then they are like the prolonged study.
So it's I.
I think that Theres still in that you saw the reiteration in the guidance is that Oh, I'm a bit of both ECOG as well that's enough and I think those are strong endorsement that theres still a belief that theres efficacy.
Strong safety and the Kenai and they want it to remain on the market as an option for patients. Greg. This is bill I would also just add my impression.
Of the Advisory Committee was that the clinicians the Ob gyn on that panel.
We're very supportive of the efficacy of Makena and as Julie said. This advisory committee was kind of overpopulated with statisticians, who are not clinicians and were purely looking at statistics and as you point out struggled a little bit to say why can't figure out which patients benefited statistically.
As I look across these studies and of course, the clinicians were saying that's common with with drugs and in fact, most drugs don't.
100% of patients benefit, but we still use these therapies because we know there are patients that.
Benefit.
So my impression was the clinicians specifically the will be guidelines on the Advisory Committee, we're very supportive, but there were some other constituents on that advisory committee that I think had a harder time really understanding the nuances of maternal health care and I think the other part was the clinicians who were very supportive. Unfortunately didnt.
Pick up enough during the meeting you heard the support that they they rendered at the end after the vote.
Which was probably too late but all those comments are in the record that they may even after the vote on the FDA, obviously consider those very seriously.
Especially since those are the people who are taking care of these patients. So even though they didnt voice that is out loudly during the meeting I think that's all in the record.
Yes, that's our support us.
Okay, I think several of them quoted no on efficacy, but that's a separate I guess, that's a separate issue you're sort of characterize from their overall support but the votes, where the votes right.
Hi, clinicians again five out of six of the will be guns supported mcenery. Many on the market, it's hard to vote positive for the prolonged study because I.
I think we keep that they all did vote negative on that and that would be I think the questions were set up in a way that you sort of had to pay no right right. Great. Lastly, so the economy society for maternal fetal medicine.
Those sort of update you alluded to do you think they will.
The permanent or are they willing to flex those kind of real time, if the FDA updates what it wants to do.
I think the committee is I'm not going to make their decisions based on an FDA, they're going to make their decisions based on data and as if new data comes out.
That will affect their decisions I don't think they're going to.
The effective necessarily just by what the FDA that they typically are data driven organizations that are focused on what is best for their patients and their care patient population.
Hey, I can't speak.
Okay, Lastly, bell you'd mentioned that process processes are process being run by an investment bank can you give us a little more flavor for what's being looked at what's not being looked at and maybe a general timeframe should we have some sort of update by the time you guide in January or is this more of a.
Longer term sort of process. Thanks.
Sure Greg.
The.
We.
Periodically our board is constantly reviewing strategic options. So this isn't a special process.
I've worked with external advisors in the past to review options and.
As part of this most recent.
Public [laughter] thing that that played out.
We did announce that we're working with Goldman Sachs. So that we don't normally don't do that but in this case, we did announce that we're working with with Goldman Sachs.
And.
Those advisors will work with management and the board over the coming weeks and even months.
Because again this is not a onetime process. This is really a continual process where were challenging ourselves how can we best to maximize shareholder value.
Seeking external advice as well as.
Obviously working with with our board so no definitive timeline on this as I mentioned some of the things that were also actively pursuing our partnerships ex us and while there is no from timeline on those those are those are actively in process. So I anticipate that as those come.
Depreciation will be able to buy the updates there.
Thanks, guys.
Thanks, Greg Thank you Greg.
Your next question comes from the line of Jessica Fye with JP Morgan.
Hey, guys. Good morning, thank so much for taking my questions.
Hey.
You talked about kind of scenario planning in light of the Mckenna uncertainty.
I know it's early can you said any adjusted EBITDA floor for worst case scenario. This mckenna must be withdrawn and then second kind of second part to that given that there could be months before you get clarity here. When you guide in January if there is not clarity yet can you give us a framework about high.
You might do that would you give kind of two scenarios how to how would that luck.
Hey, guys, it's Ted.
As I mentioned is really early I think.
As I mentioned as we mentioned in May at our analyst day again in August committed to be EBITDA neutral.
As we continue to invest in our portfolio, obviously, a key dependency are our current commercial products.
The 50 million in the first half in the 20 million loss in the second half trend points to EBITDA neutrality next year, that's our internal operating plan base case, but we have to incorporate the facts as they reveal themselves over the next couple of months.
Obviously your conferences the the moment to really give formal guidance and at that time would will keep will provide the best information. We have at that time I can't Handicap went all know what all know it's just too early and one of the things. We can do justice will as Ted mentioned will provide formal guidance and also provide some of the underlying assumptions.
In that guidance I understand on the basis on which were providing that guidance.
Okay got it yeah, I feel like at some point in the past you might have given like kind of two different version I kind of like an if then version of guidance I was kind of wondering if it could look similar if we haven't like kind of hurt us a final call yet it might it might and I think we were talking about this over the past couple of days of course.
It reminded bill in the of as we were going into 2018. There was also a period of wide range of potential outcomes. We didn't know what the generics we're going to do we didn't know if the auto injector would be approved and we were forced to provide guidance and I think we navigated that pretty well.
Things broke our way in a lot of ways and we were able to increase guidance several times throughout that year.
This is another range of a wide range or potential outcomes. So we'll be well equipped to navigate but I want to reiterate that because there have been no safety.
Turns raised I don't anticipate that this plays out.
Quickly I think this plays out over a fairly lengthy.
Period of time, which may make it a little easier for us to navigate guidance.
Okay.
And then I think following up on a prior question.
What the Opex reductions are clearly realizing in the second half of this year can you talk about where you're finding that savings is it on marketing spend and then in order to get to that EBITDA neutral next year clearly sounds like you anticipate some further opex.
Rationalization.
So can you help us understand where where that would come from.
Why don't I answer the first one and then tie the second answer back to the answer to that earlier question.
So as you know we consolidated the Salesforce in January of 2019, and that yielded that took a significant amount of cost several of the organization.
Ben allocate a lot of that cost to external costs, we were supporting into Roes are pretty aggressively in the first half.
And we shifted those resources and really reduce the injuries have spent in favor of by lisi in the second half.
So on.
Apples to apples basis as you roll into 2020, we're really only supporting one product launch.
So that's.
Lions share of the savings.
Okay great.
And then maybe just the last one following up on I think it was the very first question on share price tag can you elaborate on some of the aspects of the healthy volunteer study, you're describing that you're working through with the FDA.
Justin we get very clear is this trial akin to the phase three a you previously described or is this a new phase two I'm trying to understand because now you're talking about an end of phase two meeting happening. After those results I think but at the analyst day, you were talking about an under phase two meeting this fall before a phase III and then in response.
Charlie <unk> earlier question, you also talked about going into patients right. After this trial. So just trying to understand kind of what's happening there.
Yeah, So the which I think this is one of symantec. So if the to be is really a three a if you could call. It either one this is a healthy we're still working on a healthy volunteer study prior to going into a patient study the patient study would be the definitive.
Phase three study this is more of a confirmation with the new automated AG.
Automated quite go on that are that we have the right dose that we looked at in the in the to be study with the.
With the manual above body time, and so confirming that and then moving forward. After we have that data into the end of phase two meeting we feel the end of phase two meeting will be stronger if we go in with that data.
Okay, and what are what are the aspects that you're still kind of hammering out with the agency about that trial.
So yes, some of the things and Julie mentioned this already that the agency had asked for some additional analytics on the coagulation Butters appears for technologies has been pursuing that so that we ensure ourselves that we.
At the I'd in that it gets approved rapidly and then you can imagine part of that as we get information on on.
Data points for example on blood draws and when.
Data points that are better desired and healthy volunteer study that we use them back into the healthy volunteer study and so there's been some discussion with the agency on exactly the details of the design of this trial in as Julie mentioned, it's really important that we get.
Alignment with the agency so that we would we go into this end of phase two meeting we've got everything we need to get started on this phase three program.
Okay and the when you talk about analytics on the quagga woman or to support the I'd is the I'd gating first starting this.
Healthy volunteer study or do you generate some of that data in this healthy volunteer study.
So the idea is dating so you have we have to have all that data in order for us to new supply gamut or in the study and the reason for that really is because it would be a decision making.
Study, it's not because the flag on itself is in any way given to US is more that the data that is generated from it is used to make decision making on dosing.
And so thats why it needs to be analytics have to be sort of all buttoned up and put through the idea prior to the start of the study.
It's interesting jets in.
In preparing the idea you do gather data from healthy volunteers using a regular manner. So that data submitted and once its approved then we go into the study where we are setting.
No acts.
And Seer brand tag in healthy volunteers.
Okay got it and that healthy volunteer study that looking like Oh like mid 2020 study start or can you put it.
The band around one that could kick off.
I think as soon as we get agreement with the agency we're prepared to start that this I believe the 30 day review timeline on the I'd to Lisa.
Yes so.
Assuming that goes well then after 30 days you can.
Go forward with initiation.
The healthy volunteer study.
Okay awesome. Thanks, guys.
Okay. Thank you.
Your next question will come from the line of Serge Belanger with Needham and company.
Hi, good morning.
Most of my questions have been answered here. So just a couple.
First on Feraheme, obviously, we've seen continued strong growth. There can you maybe talk about additional opportunities going forward I'm isn't going to come from grows in the third market or.
Additional.
Contracting.
Yes. So this is this is calling so our anticipation has that continued growth will come from two things. So the market continues to grow.
So the market itself is growing and as Bill mentioned that as you saw the press release, we continue to pick up share gains over time not through both contracting, but most importantly clinical selling a differentiation.
Against our competitors.
Okay.
And then on the Woman's Health franchise, obviously focused now turns to the point Lisi launch what does that mean for ensures that does it take kind of.
Secondary.
Focus in terms of promotion is DTC a promotion so long going there.
Yes. Good question. So there there is DTC in the marketplace today, just as there is sales professionals promoting the product.
Today as well I think as Ted mentioned as we start to move through the back half of this year into next year.
The efforts going to shift.
More towards my VC.
However, I think at the point to point out we are still actively promoting into Rosa. So this is not a walk away scenario would be clear about that.
This is essentially a shifting of effort to make sure that were appropriately promoting all three of our products would that salesforce, So mckenna, which as you know so on the market helping people.
By VC and into Rosen.
Thank you.
Thanks surge.
Your next question comes from the line of Chris Raymond with Piper Jaffray.
Hey, Thanks for taking the questions just.
A couple.
Bill I I know some folks have touched on this and the in the past and maybe Julie but.
The plan to conduct studies you guys are outlining I think I heard the FDA say it several times during the the AD com that it would be.
Nearly impossible to conduct conduct additional studies with the drug on the market and actually even some of the docs who voted to keep the keen on the market acknowledge that so I guess when I hear you guys talk about conducting additional studies I think I hear you talking about doing that with the drug remaining on the market. So could you first of all maybe square that.
What's the scenario that that you're able to do that.
So hi, Chris This is Julie.
There are several scenarios, where we can still study the drug with that on the market I think that.
Some of the things we talked about registry some of the.
PK PD looking at pre term birth rates by exposure to the drawback could certainly be done does not need to be randomized placebo trial, but we could also go outside of the U.S. and do a randomized control trial.
Roughly being very cautious about where we go and making sure that we are going to a place that's more similar to the U.S., but there are places that we could do that I think.
Hard to get ahead of ourselves, we really need to sit down with the FDA and have these discussions before we speculate and Oh, we have ideas, but ultimately what matters as we make sure that were working on getting aligned with the FDA on now on the study design.
Yes, I mean, but just prolong was conduct from early outside the United States right. So.
I guess im curious how that changes.
Yes, so when we had to so we inherited the drug when it was already 50% enrolled in a lot of the effort had been in eastern Europe , which as you know Ukraine and Russia Ideally a this time, we would go to healthcare systems that would be closer to the United States, So spend more time and effort on.
On Europe , potentially South America places, where there would be.
More consistent standard of care about there probably isn't eastern Europe .
Okay, Great and then you know and maybe I'll ask a question that you may not be prepared to answer no, but I guess as you guys look at this market.
Yeah, so as I understand actually through the years about a third of the market you know even before prolong.
Was published has sort of stayed stubbornly non 17 P.
And there is obviously also a significant Medicaid component to them payer mix. So just maybe talk about.
Even under this scenario were.
The drugs allowed us to remain on the market.
As you've done your market research do you think that dynamic stays the same or do you do you believe that that that that one third number stays the same or is there a chance you know with a relatively definitive study though.
That that that one third number grows just kind of curious how you see that playing out.
Sure. So maybe I'll take that this is Tony cash out. So good question I think a lot in that question. So let me start with.
The payer question on how Mckenna is reimbursed today.
Again, our assumption is that is a change we predicated on guideline changes.
That's not an absolute the thought 100%, but in most cases payers will follow.
The guidelines.
But again prolong has been out permit it was out before the outcome of thanks.
Guidelines were restated in association with monetization, but in reflection upon prolong so I.
I wouldn't expect much payer action outside of any guideline changes that you've got to first Q for us to look for payer challenges.
Look forward from an overall market perspective, again I think.
This information some element of it has been out there for some time and physician feedback to date as they've reaffirms our confidence in the product again, where a couple of days outside of the AD com.
So it's premature to say how their positioning or other interpreting that but we'll continue to watch and we've been encouraged so far.
With physician response and have not seen payer action in response to prolong today. So again I just to restate I think it comes down from hair perspective will be watching carefully the guidelines and.
We are encouraged by the guidelines so far in light of a new data that was released.
Okay, and then maybe one final question and this is on but we see so.
Just trying to understand what what if you could maybe put some brackets around what you think appropriate refill rates might be I know you guys talked.
Before the label was published about 80%.
Women completed the trials like to stay on.
The open label extension study, but when we look at the actually in the details of the label it looks like around 40% actually of page, but the patients who are actually on drug completed.
Discontinued before completing the trial so.
You know how should we think about it.
A good refill rate is it is 60% or is it some other number.
Thanks.
Yes, so I would I'm not going to throw a model assumption out that you guys. I think it's super early we certainly have one models. We've got a lot of things models I think it that's probably early to throw in a much number that you guys. Other than the 3000 prescriptions that we're seeing covenants for the Fccs.
And the 1300 physicians that have that I've written them and we are seeing some small level of refills already and that just four weeks certainly not going to report, but thats assisting is because I don't know if thats going to hold I certainly hope at gross but we're encouraged by seeing some some element of retail already just four weeks at.
I would probably leave it at that.
Yes. Thank you.
Your final question will come from the line of Union with Jefferies.
Thank you still feel intrarosa about two years into the market annualize the sales run rate look over 20 million. So it's a fair to say that you said they've been a disappointment. So now we need to violate see I understand the Daddy piston variable only and the launch.
Cycle, what's your expectations do you expect this would it be significantly better and second question.
The how important the vialli CE in your expectations for reaching breakeven next year. Thank you.
Sure. So maybe I'll take the first two and let Ted handle the last one about how our by these expectations fit into our expectations for next year.
So the entering the launch I think it is obviously the sales that we generated to date or south of what our expectations had been and have been.
How that relates to VC, yes, easy to say, we expect by lisi to be a more successful launch.
Obviously, we'd be upset if it was not.
But they differ in a lot of ways right. So I would hesitate to put those two products against each other and using our rose as an analog.
Different product different patient type of different different different right. So.
Again, I think we'll do our best to keep you up to date on the metrics that we're seeing because we understand you're not seeing a lot out there to available sources and again I always remind everybody that I just four weeks does not make a launch but at this point through four weeks. We're encouraged by what we're seeing in those facts are 3000 prescriptions received by the specialty pharmacies with 1300 fuzzy.
This is right now so.
Again, I think so far so good at four weeks and we'll look forward to share more on the next call.
Yes, and even in terms of how it drives the 2020 numbers I mean, obviously, we're expecting revenue I talked about.
As we sit here today and probably for the next couple of quarters early access program zero dollar co pay $99 Max and before we have a whole lot of commercial coverage net price will be pretty low for this product, but the key theme in the key launch metric is breadth of prescriptions a number of prescriptions.
So what that tells you as you get into 2020 is we're not counting on a lot of revenue, but we'll be monitoring the other metrics to continue to justify investment entered form investment strategies around the product.
Thank you.
I'll now turn the conference back over to Bill Heiden for any closing remarks.
Well I want to thank you all for joining us here on todays call before close I do want to thank my colleagues here at aiming for all their hard work over the last quarter, which has been a busy one and we're going to continue to work hard for our shareholders and in support of the hundreds of thousands of patients.
That we serve.
The forward to continuing to provide updates across performance of our commercial products and progress on our development programs and with that will conclude today's call.
Ladies and gentlemen, this concludes today's call. Thank you all for joining and you may now disconnect.