Q3 2019 Earnings Call
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Please note that the remarks today will include forward looking statements and the actual results could differ materially from those projected or implied in our forward looking statements.
For a description of important factors that could cause actual results to differ we refer you to the forward looking statements in today's press release and the note on forward looking statements in the company's FCC filings.
It is now my pleasure to turn the call over the Kindred bio CEO Richard Shannon Dr. Chan. Please proceed.
Thank you operator, good afternoon, and welcome to our third quarter 2019 financial results call.
Joining me today from the management team of Kindred bio right the need to divert our president and COO.
When do we our CFO .
And catch up your our VP of corporate development and Investor Relations.
As we stated in our press release, a revenue was $1.1 million into third quarter well. This is lower than we expected.
I should know that quarterly revenues reflect ongoing variability in the distributor ordering patterns.
Which are the norm in industry.
Sales from the distributors to clinics grew strongly meeting customer demand for merit has continued to grow.
Which is an important metric in that it more accurately reflects true demand.
Denise will outline other key metrics continue to look favorable premiered task.
We're very excited about the anticipated upcoming approval for it merits has indeed, you given the positive opinion from the CBS Pete.
Europe is the second largest market for veterinary therapeutic globally.
Premier attack.
We believe European sales may exceed sales and the U.S. and uptick could be swifter because in the EU veterinarians are usually prohibited from using human generic if there's an approved petteri drug but the thing active ingredient.
We're in active discussions with multiple partners about you rights to Maritech.
We also continued to be on track for Dimed approval in the U.S. by ended this month.
Regarding the out 31, we are in the process the scaling up the manufacturing process.
As you know up and you need to make changes to the process during scale up and this is taking a bit longer than we expected.
So that's going to push back the timeline for the initiation of the pivotal study into 2020.
The good news is that we have found some potential enhancements that we can make that may substantially lower the cost of goods and we're exploring those changes as well.
I should also note that we're in active negotiations with multiple companies for commercial rights to while 31 antibody and the interest Indiana that continues to be strong.
I think study in atopic dermatitis is also coming along well and we expect to read out.
That's study in the first quarter of next year.
We're making excellent progress on our problem virus antibody program and continue to expect approval by end of 2020 or 2021.
There are two segments of this market the treatment and the prophylactic market.
Based on Banfield published data there at least 250000 dogs infected with part of a virus each year.
We believe the actual number could be higher because the banfield data. It doesn't include shelters emergency rooms, and dogs that are not seen bypassed Marianne.
Also based on our market research about half the dogs that are infected by powerful virus expose other dogs, which means that the number of dogs that need prophylactic treatment propofol access is likely to be greater than the number of dogs that are infected.
Now we've had some investors ask us about the unmet medical need for this drug versus the vaccine. So I'd like to spend a few minutes going through the science.
While there are vaccines available for powerful they have to be administered multiple times and many people don't be seat the vaccine at all or don't get the complete series. Our market research suggests that only seven out of 10 puppies are fully vaccinated.
More importantly, what happens is that the puppy start off their lives with protective antibodies from their mothers that.
Maternal antibody levels slowly draw up until there are no longer protective.
But at that point, while the antibody level, it's not high enough to protect the puppies from part <unk> Earth, they're still enough maternal antibodies to block the vaccine.
You have to wait until the maternal antibody levels drop further before the vaccine will work so there's always a window or vulnerability.
Also purple virus is very hardy and infectious the virus can survive for a long time and surfaces and that's why when you go to a pet store you shouldn't put the puppy down on the ground less they catch purple from the floor.
At some shelters, they're forced to put down every dog into facility if even one comes down with the virus.
With success across multiple promising biologics, we're taking a leadership position in the sector.
In addition, as Denise will detail, we now have enviable manufacturing capacity.
Also be up in building, a very strong portfolio IP portfolio in biologics.
Most of what we're doing we do not disclose but let me give you a couple of examples.
We have for example developed ways of modifying the antibody that we believe will increase the half life of the molecule substantially.
Obviously this can have a profound effect on clinical profile and cost of goods.
As another example.
We have the fall we have found it difficult problem in manufacturing canine antibody.
Unlike human antibodies, many dog antibodies can be purified using conventional methods by using something called protein aim and if you can't use protein air purification cog cost of goods become untenable.
We have discovered away appear probably be antibodies with conventional methods.
Which is very important that from a cost of goods standpoint, and we have filed for IP on that technology.
I won't go into other technologies that are scientists have created but we are on our way towards building a very strong IP portfolio.
Turning to our financial position, we continue to be judicious with our spending and we expect opex and cash burn to decrease in 2020 .
We anticipate a convergence of multiple key approvals and launches between 2020, and 2022, which will further transformed the company.
The recent debt facility gives us potential to extend our runway until we see that maturation of our pipeline.
We intend to supplement the financing with other sources of non dilutive capital.
We recently announced that M.T.I. has awarded awarded a contract for manufacturing human drugs and this is great validation of our capabilities.
We are also in discussions on partnering as I mentioned earlier.
The progress on our deep pipeline on our extended from a position.
A strongly for the future with that I will turn the call over to knees.
Thank you Richard on today's call I will detailed Maritimes quarterly performance and provide some key pipeline updates.
Our third quarter sales of marriage has to distributors or our move in reflects several factors, including ongoing fluctuations in distributor ordering patterns. Our revenues declined slightly on a sequential basis this quarter.
We would've liked to have seen more move ins in this quarter. We are encouraged by the 20% growth in sales from distributors to the clinic or move out over the same period, which underscores growing customer demand for marriage has.
Consistent with what we've shared in our prior quarters, our commercial strategies are having the desired effect of driving conversion from oral human generic mortaza pain pills.
Based on the data we track not only have we taken market share from the human generic pill used off label as you'd expect but we've also grown the category by expanding medication usage on cats that previously received nothing for their unintended weight loss.
Having said that the rate of change in practice behavior remains slower than we originally anticipated. This means that instead of an accelerated ramp to peak sales. What we've seen to date is consistent with a more normalized ramp for a few line product of five to six years.
I'm pleased to report that over half of all veterinary clinics in the U.S. have now ordered mirror a task and the rate of clinic growth continues to show positive momentum with around 100, new clinics being added each week. This metric alongside first year sales position marriage has ahead of other successful feline drugs at an equivalent stage of launch.
As we've noted in the press release, the reorder rate among participate in clinics grew to 68% in this quarter.
Given continued solid gains in market penetration this figure understates, the reorder rate among early adopters.
Average order size has also increased consistently quarter over quarter since marriage has became commercially available.
We have not received any returns to date and customer testimonials, which are a key driver for changing practice habits in animal health marketing have been exceptional.
Now turning to the European market Mirataz. He was on the cost of approval after European regulators adopted a positive opinion recommending marketing authorization. This is a major achievement for for our regulatory and clinical teams, who successfully negotiated for the products approval without the need to generate any additional data.
A marketing authorization decision from the European Commission as anticipated by mid December if approved marriage house would be the first medication in the EU for poor appetite and weight loss, resulting from chronic medical conditions. The authorization would be valid in all 20 member states of the European Union as well as.
Iceland, Liechtenstein and Norway.
We're also pleased to have filed for regulatory approval of marriage has in Canada validation of the Canadian submission will be complete in the coming days and once accepted for review the review timeline is approximately one year.
Alongside married has the we continue to expect eminent approval of die Perote I'd with a decision expected by the end of this month.
Equine is a very appealing market for us given the high unmet medical needs and willingness to pay a little ft approve competition and low commercial and marketing spend.
There are more than 8 million horses in the U.S. and over 1 million are seen by a veterinarian for fever annually diaper out I'd be would be the first and only F.D.A. prove medication for the control a fever in horses.
Existing off label treatments, not only don't target the fever, but they can have serious side effects.
Assuming approval later this month Diaper Road Ivy Hill had been developed for approximately $5 million in five years is consistent with our business model.
Operations for the commercial launch remain on track, we're ready to launch and take orders at the American Association of equine practitioners annual convention, which is the key yearly equine conference in early December shipments will then commenced by year end.
Given that there are a little over 4000 equine only veterinarians in the U.S., we plan to commercialize with a specialized direct sales force in conjunction with distribution.
Looking to the rest of our pipeline. We are pleased to have initiated the pivotal efficacy study of our feline recombinant or reverse repo Eaton, having completed cgmp still in finish at our Kansas menu that factoring facility in the third quarter.
This program really highlights the talent, we have on our team. It is no simple tasks to get to the pivotal trial stage for a large molecule from cell line development process development through manufacturing and then quality release. This team has done an outstanding job.
And then of course, there as clinical development regulatory and our clinical operations team. All of these teams have worked seamlessly to bring this first in class protein to the print pivotal trial stage.
As Richard mentioned, the pivotal efficacy study for aisle 31 antibody is now expected to start in 2020, given the changes that enhancements to the manufacturing process during scale up.
With regard to our think program, we anticipate the study to be fully enrolled by year end with results expected in the first quarter of 2020. As a reminder, we are taking a multi pronged approach toward atopic dermatitis with a portfolio of promising biologics.
Completion of our pilot study of anti TNF for inflammatory bowel disease is now expected in the first half of 2020 due to competing priorities for drug supply manufacturing.
Pivotal field study for our kind zero one for for the treatment of gastric ulcers and horses is scheduled to start in the fourth quarter.
Finally, the advancement of our biologics pipeline times with the completion of construction of our Kansas Biologics manufacturing facility as of the third quarter. The buyer reactors are installed and the commissioning is being completed this marks the final step and will provide us with end to end capabilities and an enduring competitive advantage.
With that I will now turn the call over to Wendy for a review of our third quarter financial.
Thanks Denise.
I will begin with an overview about financial performance for the third quarter and the first nine months of 2019 before providing an update on our capital position than expectations moving forward.
For the quarter ended September Thirtyth, we reported a net loss of 15.3 million or 39 cents per share.
Pit to a net loss of 13 million or 39 cents per ship with the same quarter in 2018.
The first nine months of the year, the net loss was 45.7 million or one.
Dollar and 18 cents per share versus a net loss of 34.2 million or $1.14 per share for the year ago period.
As Denise mentioned, we recorded 1.1 million and net revenues for Mira tests, but third quarter.
From zero point Sixmillion in the year ago quarter.
Revenues totaled 2.9 million in the first nine months of 2019.
Turning to our expenses the cost of product sales totaled <unk> point 1 million in the third quarter and zero point ball mill in for the first nine months in 2019.
Resulting in the gross margin of 87% and 86% respectively.
Total research and development expenses increase year over year, primarily due to higher headcount and related expenses as we advance our biologics programs.
Well the three in nine months ended September Thirtyth.
R&D expenses totaled 7.3 million and 21.2 million, respectively compared to 7.5 million, an 18 point sixmillion for the same periods in 2018.
Stock based compensation expense included in R&D expense was zero point, Fivemillion and 1.4 million for the three in a nine month period.
Pat to zero point, Fourmillion, and 1.3 million for the corresponding period since 2018.
Hi, you're selling general and administrative expenses reflect the commercial launch of merit tests and commissioning of the Kansas Man effects factoring facility, which I'm pleased to say was completed on schedule and on budget.
SGN eight totaled nine point, Fourmillion and 28.3 million for the three and nine months ended September Thirtyth.
Compared to six point, Sixmillion and 17.3 million for the same periods in 2018.
In addition, higher corporate infrastructure costs and stock based compensation expense also contributed to the increase in expenses.
Stock based compensation expense included in S.G. and they expense was 1.4 million and 4.2 million for the three and nine month period.
As compared to 1.2 million and 3.3 million for the same periods in 2018.
As of September Thirtyth, we had 87.6 million in cash cash equivalents and investments compared with 753.9 million as of December 31st 2018.
Net cash used in operating activities for the first nine months of 2019 was approximately 42.6 million.
Oh set by 43.1 million of net cash proceeds from an underwritten public offering of common stock in the first quarter 2019.
And 19.2 million from a debt financing in the third quarter up 2019 net of closing fees and expenses.
We also invested approximately 7.3 million its capital expenditures for the remaining portion of the Buildout, Although Elwood, Kansas manufacturing facility.
And the purchase of associated lap and manufacturing equipment for the facility.
On October 2nd 2019, we announced the closing of a 50 million senior secured debt facility, but so let capital partners.
The non dilutive financing agreement provides us with up to 50 million of borrowing capacity available in three tranches.
Each bearing interest at a one month LIBOR plus 6.75% with the floor up two points 17%.
The entire debt facility will mature on September Thirtyth 2024.
Given the strong credit market in high demand among lenders. This was a great opportunity to bring in some non diligence finance financing at attractive terms.
Not that we are revenue generating and have assets up the plant. It makes sense to take on debt and extend our runway through 2021 at which point, we expect a number of approvals and launches under our belt.
We tend to supplement this financing, but other sources of non dilutive capital.
We recently announced the announced that the NCR awarded US a contract for manufacturing of human dropped from our blinking facility and this is an important valid validation.
So while we will prioritize I'll product line, we certainly have the ability to do contract manufacturing campaign.
Which could be an attractive source of revenue.
As Richard mentioned, we could also see some non dilutive capital from pondering Oh, a IL 31 asset.
With respect to spending in 2019, we continue to expect operating expenses up between 57 and 59 million.
Excluding the impact of stock based compensation expense and the impact of acquisitions if any.
In addition, we are on track with an eight to 10 million investment and capital expenditures for the year.
2019 has been a period of heighten clinical activity.
And with the capital expenditures of the Kansas plant largely behind us.
We plan to reduce both operating expenses and capital expenditures in 2020.
We believe our existing cash cash equivalents investments and additional drawdown of 30 million from a debt facility.
Engine upon the achievement of certain milestones.
We will be sufficient to fund our current operating plan through 2021.
We'll now turn the call back over to budget.
Thank you Wendy.
Operator, we're ready for questions.
Thank you.
Ladies and gentlemen, if you have a question at this time. Please press the star followed by the number one key on your Touchtone telephone. If your question has been answered or you wish or move yourself from the Q. Please press the pound.
Once again to ask a question. Please press star and then one now.
And our first question comes from branded phone from Cantor Fitzgerald. Your line is open.
Hi, Thanks for taking my questions and congratulations on the progress during the quarter. Christy can you provide some color on the growth that you saw in the quarter driven by you partnership with tree and he retailers.
And then secondly on the positive product and the data read out on the pivotal well we will just since you're optimistic heat treated dogs as well is treated off to contracting infection.
And if it doesn't.
Back to Petri should can you help us think how this becomes something that just given a.
Standard of care to a lot of dogs problematic. Thank you.
Sure I'll take the second question and then I'll turn it over to needs. So we do plan to run the studies for both prophylaxis and treatment and we're talking to the U.S.T.A. currently.
And if it works.
The way would play out is that typically when one dog and cat litter I'd say comes down with cargo virus than that puppy in fact, all their litter me.
So ideally what would happen is that.
Litter mates, who I've got all.
Our antibody before they come down with the infection. Similarly, if a dog in a shelter comes on with Pago virus, there's high likelihood that the other dogs in the shelter would have been exposed so.
Lot of those dogs, ideally would get our drug as well, Okay and then regarding two we and E retailers. I mean, we are seeing orders come in consistently and so I think similar to what we're seeing on the clinics I will start to see that growth really take hold but we are we are pleased with what we're seeing and you know where it's headed.
Great. Thank you very much.
Thanks Brendan.
Thank you. Our next question comes from Jon Block from Stifel. Your line is open.
Hi, This is Tom on for John Thanks for taking my questions.
Just a couple on mirror test to start off can you talk specifically about how are your initiatives are going and getting the hospitals off the generic and your child's Japan over to Mirataz.
And then Gino approximately what percentage of accounts that are using mirataz are still using the generic.
So yes, so we I mean, the initiatives are definitely work I mean part of the challenge for US is you know manpower womanpower quite frankly, so do you know the more we're able to get into a clinic touch a clinic you know the more change we see in them and more rapidly. So the initiatives are definitely working for the clinics that.
But we can go into multiple times and you know we've got a lot of really nice metrics on that as far as you know when sales rep has been able to be into a clinic multiple times, we see the average dollar per order, increasing and as well as the dollar for the whole clinic, increasing which you know I'm sure it's pretty obvious so.
We we haven't disclosed the exact percentage its hard to know how many clinics across the country are still stocking merits has the human genetic hasn't been rather the human generic off label, but we definitely believe we've made some significant strides in conversion.
Got it that's helpful. And then just a quick one on an IL 31 is there any more color you can provide around the timing of when you expect to initiate the pivotal study. Thanks.
Yeah, right now we are not providing that because processed about mentoring scale up can vary quite a bit.
Got it thanks.
Sure.
Thank you.
Next question comes from philosophy for thoughts from Barclays. Your line is open.
Hi.
Thanks for taking the cushions Oh I had a couple of questions. Both on the small money can side on the biologics on Meritized good to have a sense of the what the reordering grade was you on deal I agree showed her own color 46 supposed to whats last quarter and that number will speak to a 51 personnel. So he's is the kind of for I'm pleased that we should be.
Building into going into 2020.
Yes, I think that ramp is I mean, given the size of our Salesforce I think it's an appropriate ransom I mean, we're pleased you know we in the first for full quarters of selling Mirataz, we sold over $4 million mean that that positions us really nicely to you know pretension potentially surpassed any successful.
Feline a therapeutic that's on the market. So from a ramp perspective, you know, while we had hoped based on our market research and those even if some of our analysts to see a quicker ramp to peak sales I think what we're going to end up seeing is or traditional feline ramp of five to six years and.
As far as penetration and reorder rates I mean, we looked at a cohort you know intentionally some of our investors itself well what about the cohort of and of people who were early adopters you know what does that look like and so while we have a reorder rate of 68% across the board, it's closer to 75% in those two for.
First purchase the product in 2018, so that's telling us that those who are trying it early are still using it and so we're not just depended on new clinics to drive the moved out.
And it also shows us that we're developing users and moving them through the sales funnel into driving behavior change.
Thanks, that's helpful. Maybe one more quick cushman <unk> before treating subject.
So there are few moving parts now youre expecting it may approval and also traction Canada. So if I'm couple of different rates moving on Malone. So combining all of these on the new online campaigns, how should we think about matter das for next year, some numbers would help yet.
Oh.
So well, we're not we're not giving specific revenue guidance I think you know what what you typically see is somewhere around 10% of peak sales potential in the first year something more like 20% in the second year and so on and so on and as you've seen an animal health I mean, a lot of times the volume traction.
Filled in a little bit more of a hockey stick trajectory. So it might not be a straight ramp, but so I think at this point you know, we're pleased with kind of where we've been in the first year as it looks you know in.
Getting our trajectory moving forward. So I think that you can be pretty comfortable that will be in a very attractive range for a fee line product.
Okay. So moving on to the biologic side thinking about boss tall conversations we gathered the dog the it'll be don't tightest products is a false one but you're.
Like you to get on market.
Steve that's still the case now with the delayed to the five appeal to study.
You know even previously I think last last call, we talked about Pago virus, having a potentially path.
Approval path. So we now think cargo virus is likely to be the first biologic on the market. So we're talking probably end of 2020 already 2021, so regardless.
Yes, whether there's a delay to aisle 31 or not I think part really it's likely to be the first.
Okay. That's helpful next would be book that.
You know really depends on the enrollment rate. So right now I don't think we can say for sure which would be the second.
I think well would be fair to say, we'll have multiple approval between.
Let's end up 2020 had.
20.2, so lot of product.
Okay.
Well go to give them a few years.
Oh final quick question for me on them.
On the Biologics Wilson do you do I didn't know developments tours contracts don't when would you start reporting revenues from Dan <unk> contract.
Sure. So we have been just cutting different project with both anti as well as commercial partners.
And.
We hope to have some revenues for the next several months, but I think it's too early to tell for sure right now.
Okay, a dual eligibles regarding new contracts on regarding revenues from them said contract.
For both.
Okay. Thank you.
Huh.
Our next question comes from Nathan Weinstein from Aegis capital. Your line is open.
Hi, guys. Thanks for taking my question.
If I could just start with asking about.
Sales through the retailers that distribution channel versus going.
Through that and there is there a margin differential between those channels from your perspective.
The margins to E retailers will be slightly higher than margins to distributors.
Okay. Thanks, and then go to answer your <unk> yeah.
Yeah, Yeah, I understand and that is helpful. And then just my second question I'm on the LPG enough. If you body for I'd be D. Canines, Oh, just the competing priorities for drug supply manufacturing can you just give a little color and off you mentioned that certainly but what are those computing drugs that are taking priority.
Sure. The two main draw et cetera, our top priority, our pago virus and I'll 31.
And because we're a small company we have to allocate resources among different project. So that's what we've done with that program.
Oh, Okay banks actually just have one more question and I'm there were some moving pieces around the timelines in the pipeline.
And then what the Maritimes ramp I'm, taking a bit of time just curious if we think about peak sales for a number of these indication for many of these prime learn shifts change your perspective about what the peak could be for each of these indications.
I don't think the peak sales have materially change for our products.
Okay. Thanks, a lot.
Sure.
Thank you. Our next question comes from RK from H.C. Wainwright. Your line is open.
Thank you thanks for taking my question.
So.
The 32%.
Oh.
That's a sort of <unk> not I'm not done reorders for two pools. So what do you think is they.
I'm, sorry for that going into portion of them.
Looking at it clinics that are not for placing that he orders.
What do you think or other factors there.
I'm just trying to understand.
Well well walk additional things would you need to be doing so that you can make sure that.
Nearly all of the kinetic lenexa.
Kicking in in order or no.
Localism and beyond that as well.
Sure Yeah. That's a good question. So really it's it's a rolling you know clinics are coming on we're bringing on 100, new clinics a day. So some of that is just based on a.
A week, rather a day.
[laughter] I, just got flags from across the real I wish it were hydroponic today 100, a week, which is still impressive see I know hundred new clinics, a week or you know, we've got folks who haven't had an opportunity to reorder yet and as I mentioned early to some of it is you know really just getting it in the veterinarians hands, because we've had zero return.
The testimonials have been really truly exceptional and one of the other things that we did that I didn't mention is at the American Academy of Feline practitioners last week, we did a sampling program. So we find that you know once we sampled them on a two when they get it in their hands and they try it as opposed to using you know the here.
And generic pill off label, we often see adoption. So the way I look at this and as I said earlier I mean, there is a lot of upside opportunity still for this product we had really unexpected the ramp to be faster than it is however, I think if you look at us a map us out on a traditional five to six your animal health.
Rapid still a very attractive product.
Okay.
So [noise].
And then is that person in season multiple drugs.
Yes in core and that's something that looks encouraging what's walking what's making them and when I said then see this year, there's not a full and more draconian <unk> they are actually.
Hello.
Clinics.
Sure. So some of it is dependent upon you know we've seen a little bit of Lumpiness based on year end. So for example, one of our largest distributors. This quarter was their fiscal yearend and so they ran inventory quite low. So we will see I mean based on distributor ordering patterns, there will be some up and down.
I think as we look at it on a yearly basis, we're starting to see some trends across an entire year, but quarter to quarter. There is still some lumpiness based on distribution and it really just depends some of them have minimums that they keep on the shelves you know and that varies from distributors to distributor, but move outs, which again is.
On the distributor to the clinic is really the metric that we look at internally because to US that says you know veterinarians are still either adopting additional product or they're trying it as a first time minimum we see those numbers grow that makes US you know encouraged about the future upside opportunity for the brand.
Yeah, but what you're comping numbers basically work.
Yes.
Absolutely that's how we book our revenue that's correct. So you will see some lumpiness I think quarter over quarter ideally, we'd like to get on a normalized a ramp that would be the ideal. So we can very easily with very simple math, you know track trajectory.
But I think what we're seeing in this industry is you know some some again some lumpiness.
Okay.
<unk>.
In general.
Walked is it that dawn.
The commercial structure on the list.
Almost a year now, especially when you start thinking about how to have a composition with it you.
You are talking or I'm, assuming that they Doug gets commercialized.
It's the same them then you Lewis.
I'm not sure there and then.
Anything.
Different there, but there's been a month.
One other things like lung, but do you want to make sure.
Youre Youre, calling her park on the other side.
There was a nice job.
That's an interesting question so for US I mean, as we look at a partner.
Obviously, we look at the footprint [laughter] nail in their ability to sell into the various regions.
There are some advantages to Europe . Once the product is approved you know you can no longer use that active ingredient in a an off label sense. So that I think helps as far as.
Immediate uptake of the product, which is attractive for Europe . There's no question about that.
Okay.
[noise] <unk>.
Regarding the ball laws.
<unk>.
Sure.
Is there anything.
More color can give us.
When you were no.
Let's see.
That's true.
I'll get a clarity on HM.
Just trying to understand you know grade you on and that's also something soon.
Thanks, good stuff.
Sure so you're hoping to get our first work order. The next few months worth discussing the work order with anti but at this point, it's too early to tell because until the decision comes out we don't know.
Okay.
Thank you all much books from for picking all Nicholas.
Okay.
Thank you. Our next question comes from Brooks Oneil from Lake Street Capital. Your line is open.
Hi, good afternoon.
Two.
I guess it started with.
Sounded like.
10%.
Oh peak sales in year, one from there it is.
Since we go into 20%.
The next year.
I assume that means you think the product could conceivably grow 100% year over year 20 Twond.
My thinking about that's the way you guys are thinking about that.
I think that's a possibility I mean again, we're not giving any guidance, but if you you know if you look at successful products and kind of how they've ramped across animal health. Yeah. That's a general obviously they can go in a lot of different directions, but just you know to I just wanted to provide some context of kind of where we worry after four full quarters.
You know for feline product and again I mean, we're pleased and we believed that the peak sales potential for this product is still very attractive.
Right.
So second question my head as you mentioned.
Potential partnerships both ways.
You.
31.
Give us the sense for what you would look for in terms of <unk>.
The Trent partnership proposal for each of those.
Oh.
Sure. So for Meritized, we're looking at a fairly simple structure, some sort of an upfront and royalties.
It's a drug that.
Almost approved and we have data in United States in terms of sales. So I think that'll be a fairly straightforward discussion for a while 31. There are several different options that were looking at but most likely it will consist of some upfront and milestone payment along with.
Royalties along the way there are few.
Things that we're negotiating on such as.
Copromotion right and few other things have.
Ultimately for both of these what's kind of drive.
The decision is really the value that the economics.
So.
Those two structures that outlined is the most likely scenario but.
Yes, if something else makes more sense economically that has it certainly consider it.
Sure all that makes sense.
I know, it's probably a very.
Up in that situation, but any sense of timelines you think.
Pending approval in the you that might be something we'd see either late this year early next or.
What do you think you know.
I think for both at the products.
That timeline is.
Very feasible, but once again not the.
Negotiations can sometimes take.
While longer for a lot shorter than you expect so I don't want to put a definite timeline out there.
Suddenly so.
Richard Burton after Denise could you talk just a little bit about this seasonality you expect for as a matter.
I'm excited that brought its about the get approved.
What would you anticipate I would you think the sales in that product might.
Progress throughout the year.
Sure. So I think one thing that we can expect I mean, we're anticipating approval at the end of this year, we know that with a p. The American Association of equine practitioners coming up that is probably via the <unk> certainly the biggest conference in the U.S. and quite frankly, a worldwide conference.
And a lot of ordering is done at that and even more so than what we see in small animal on oftentimes they'll order you know for six months and but from a fever perspective, I mean, there will be you know different fluctuations depending upon the time of year, whether its seasonal fever, or you know shipping fever based on I'm sort of circuit trying.
I'm line. So there will be some and you know as we launch will try to give some color around that and certainly obviously, if we you know learn anything or anticipate anything we'll try to guide toward that seasonality.
Makes sense and I think if I recall correctly, you were thinking that sales force in the 567.
Got it shows range. That's still would you think will be optimal for maximizing revenue from that product.
We do we yeah, we had said three to five folks and obviously they are supported by the commercial infrastructure, we had in place so.
We have some folks on board, who have become incredible feline product sales folks in the interim but really you know for equine, it's it's exciting to us because.
The staff, we have we have a lot of top notch equine industry folks on our team and I'm not exaggerating when I say, we really know the field and obviously with the manufacturing timeline for diaper around the approval timeline, we've had time to really engage these folks. So this will be a launch.
That we can do judiciously from a spend perspective with a small number of of resources and then of course, our distributors also some of whom have discrete equine sales forces will support the launch as well.
Sure.
Okay last question for me I think would you talked a little bit about using the kids is manufacturing.
The first human biologics.
Do you see any different requirements for the human side than you would anticipate as you shift utilization of that facility more to.
That's right.
No the kinds of facility was built to meet the requirements of you Sta FDA and May So it's fully compliant for all three.
[noise] regulatory agencies and fully compliant with all human regulation.
Great. Thank you very much.
Sure.
Thank you and again, ladies and gentlemen to ask a question. Please press star and then one now.
And our next question comes from Ben Haynor from Alliance Global Partners. Your line is open.
Good morning, guys. Thanks for taking my questions I just wanted to follow up on a couple of questions were asked earlier first off regarding the out licensing negotiations for the atopic dermatitis compound or compounds and whether you're going to join you don't piecemeal or also to one.
Potential partner.
Seems obviously was laid us.
Reporting some pretty impressive numbers every time the report on their dermatology franchise as it does that.
Have you seen that generate more urgency from the potential partners in the end do you gain anything by waiting and seeing the market get bigger and bigger as time goes on.
Yeah, that's an excellent question Ben yes as the.
Revenues for site appoint continues to grow we have seen increasing the interest on the part of.
Our potential partners.
So.
This is a sort of a judgment call rights do we take what's available now or do we wait.
Take potentially.
More of the economics later, so that's that's something that we're discussing internally.
Yes.
Okay that makes sense and then just thinking about the is the the cohort so ordering whose reordered and who hasn't have university commonalities between the ones that have not reordered I mean as that you know older vats versus younger that's one of them reorders more as a larger initial.
Orders smaller initial orders that guys homeland and Gal, So only used human <unk> as a peeling off label were ones. They use maybe that in some of the other drugs that they sometimes use off label for for inappetence or any.
Anything common that you've seen there [laughter] I was just gonna say, yes, [laughter] to all of your [laughter].
[laughter] five times now one of the I mean, one of the things that stands out is a lot of times for first order the order the product and then.
They seem to wait for the perfect candidate to walk through the door you know so sometimes it sits on the shelf for a little bit longer than we would expect and then once they start using it then we see the reorder and it does tie back to again, having you know the resources to be in the clinic and thing you know Dr. Smith, you know I noticed that you.
Ordered a month ago have you tried the product how's it going let's see some of your cases, you know that sort of thing so probably predominantly its ordering and then you know waiting for the perfect case, we haven't had to my knowledge any sites, who have said you know we've ordered your product we don't like it or the owner doesn't like it so.
You know, we do think Reorders will continue to grow and as I said in that early cohort were really pleased to see that the early adopters are still using it which I think is encouraging.
Okay. That's helpful. And then lastly from me just yes, sure sounds like what the powerful.
That the safety the size you know the trial for safety is going to need to be larger than for efficacy based upon the early results are you had.
Can you talk a little bit about what the travels I'm on that might look like.
So.
The.
Thank you cord is going to be locked or mostly because we can show efficacy with such small number.
I don't think we've disclosed the design of the study at this point.
We will probably weighed on disclosing that until we have the final agreement from the U.S. Yeah. The protocol is being reviewed by the U.S. here right now so I think we should we just a little bit longer.
Okay. That's fair enough. Thanks for taking my questions guys.
You bet.
Thank you and I am showing no further questions from our phone line and I'd like to turn the conference back over to Dr., Richard Chen CEO for any closing remarks.
Thank you operator, I'd like to thank our listeners for your support as we continue to advance our product and our promising pipeline.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program you may all disconnect everyone have a wonderful day.