Q3 2019 Earnings Call

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You're welcome leads and nothing the company's results for the quarter copies of news releases and that SEC filings can be found in investor section of our website.

Before we begin I'd like to remind you that during the course of this conference call, we'll be making certain forward looking statements about the Mira based on management's current expectations, including statements regarding Vermeers business plan development programs strategies prospects market opportunities and financial forecasts and guidance.

These statements are subject to numerous risks and uncertainties and actual results could vary materially from the results anticipated by these statements.

Investors should be the risk factors set forth in Vermeers Form 10-Q for the quarter ended September 32019 in any subsequent reports filed with the SEC with that said I'd like to turn the call over to Tom ligands, Tom. Thank you Andrew.

Good afternoon, everyone and thanks for joining us today.

Third quarter Dermira was marked by notable progress on key commercial clinical and regulatory initiatives as we continued our efforts to build a dynamic medical dermatology company.

Beginning of Q Brexit, we achieved 10.2 million in net sales up 27% over the second quarter.

As we hit the one year anniversary of our launch we have achieved the key objectives, we established at the outset.

First we secured broad quality coverage for patients while at the same time established an impressive gross to net margin.

Second we drove strong trial and adoption among prescribers, who continue to report that to Brexit has had a profound impact on the lives of their patient.

Third we activated actuary hyperhidrosis suffers to seek treatments of Q Brexit and saw a significant expansion of the market.

While the fundamentals of our launch had been strong in growth rates for two Brexit continued in the third quarter, we did observe trends, which were softer than expected in September .

We believe we understand the causes of these recent trends that have implemented measures to address them. So that we can continue to drive growth, which Lori will cover her cover in her remarks.

We continue to believe there was significant growth opportunity for Q Brexit.

Albeit at a reduced spend level, which I will address further in a few minutes.

Turning now to lever kitchen, Mab, our competence and Larry has only grown in the months since we first reported positive results from our phase Twob dose ranging study.

This year.

We have now initiated the phase three program enrolling our first patient in early October and we expect to deliver topline results in the first half of 2021.

As expected.

The interest in the space continues to grow.

During the last several weeks, we saw and her continued excitement from patients healthcare professionals and industry regarding the opportunity for innovation in 80 in view of the high unmet need.

During the medical and patient focused meetings weve attendance.

We also witness continued enthusiasm enthusiasm for anti IL 413.

There are happy as the potential new standard of care for moderate to severe patients delivering a broad efficacy spanning the signs and symptoms in a way that is safe and easy to use.

Obviously this is a profile that is already driven excitement among dermatologist, an incredibly robust adoption for this class.

Against the backdrop of this high bar for new therapies, we saw an enthusiastic reception to our presentation of detailed results from our phase Twob study that validate the opportunity for levered to deliver the broad efficacy and safety has been established for the idle for 13 class.

Together with further improvements in efficacy tolerability and potential flexibility in dosing.

Against the same backdrop, we saw our competitors continue to struggle to deliver the combination of safety efficacy and ease of use we believe will be required to support broad adoption in this market.

These challenges continue to serve as a reminder, that the aisle for 13 class will not be easily displaced as the standard of care and if we confirm our phase to be results in phase three it is likely the opportunity for leverage will be durable and significant.

Before I turn the call over to Laurie I wanted to spend a moment updating you on our plans to manage the business going forward.

As we passed the one year anniversary of Kubrick's as launch and head into 2020.

We have a number of attractive investment opportunities, including two programs have significant value in Q Brexit and leverage.

In the context of our business and what we expect will continue to be and evolving financial environment. We have been assessing our operating expenses to ensure we prudently allocate our resources in a way that maximizes value for shareholders.

And we've been evaluating a range of options that we believe will help us achieve our objectives going forward.

With regard to Brexit, we're assessing what we've learned over the past year.

As well as the strong foundation, we have established to inform our activities.

We intend to continue to support Q Brexit growth, while significantly reducing our overall commercial spend particularly for our direct to consumer activities. Lori will go into this in more detail.

With regard to lever development, we will focus on executing the phase three program in an efficient and timely manner.

And finally, we will continue to explore partnering options that may enhance the commercial opportunities for our products, while providing non diluted funding and strengthening our balance sheet.

We believe our commitment to and focused relationship with the medical Dermatology company community.

Our product portfolio focused on addressing unmet and underserved dermatologic conditions.

And our talented group of employees have positioned the company for near and longer term success.

It is my belief that this combination will enable us to drive continued and sustained growth for direct stuff and deliver on the promise of leverage which in turn will ultimately present us with the best opportunities to deliver value to our patient health care professionals and shareholders.

With that I'll turn the call over to Laurie.

Thanks, Tom.

Third quarter represented interesting paradox starts to backstop, we continue to see promising performance across key fundamentals of our launch enough importantly reported significant growth in both prescription and that play out quarter over quarter. However, we also saw a decline in prescription volume isolated to the mountain September which was uncharacteristic.

Our performance to date.

I'd like to take some time to review recent growth trends for key breaks that AMA hyperhidrosis market power addressing the September softness in demand, which we expect to be temporary and power considering future resourcing for the brand given everything we've learned in the first year launch.

Overall, we reported 14% prescription growth quarter over quarter, and 27% and net sales credit for Q3.

One year in alliance, we continue to successfully execute our strategy and as a result found very consistent growth across key metrics, including payer coverage physician adoption patient activation on net sales.

Additionally, we've navigated through the transition of auto pay high resulting in a more favorable gross to net discount and as customary for topical dermatology products, all while continuing to grow demand thinks about that.

Our growth in prescription volume has been consistent launch to date and continued in the first two months of Q3, let's prescription growth of 5% month over month in July and 10% month over month in August However in September our volume declined by 15% month over month.

In fact April in September when the only two months launch to date, where prescription volume has not grown.

The April decline with expected and forecasted based on our changes to the co pay card program.

We successfully navigated that transition growth resumed as expected in may.

In contrast to September to client was not forecasted and as such we have analyzed the business to better understand the factors that likely contributed to the decline observed at the end of the quarter.

We believe the factors that may be contributing to the decline our number one dry file restocking and number two potential changes in utilization management from some commercial payers.

As you may recall prior to launch we shared our view that given drive thousand low resell right. Its utilization was likely to be limited.

However, we did expect some payers to require a step three drops off prior to authorizing suboxone.

During Q3 after a temporary product shortage drives all became available again, and we thought surge and drive our prescription.

We believe our success in growing the hyperhidrosis market via our DTC campaign, coupled with the availability of dry thought after the temporary stockouts may have resulted in the increase in dry spell prescriptions observed in Q3.

We believe the surgeon drives our prescription could lead to an increase in key Brexit prescriptions in due course, however to ensure we capitalize on the new patients. We believe our campaign is driving into the market. We recently launched a program that target to drive our prescription Atlas pharmacy. We believe this type of targeted approach could be successful in converting patient.

Regarding utilization management in September we began to hear anecdotal feedback from dermatologists at some commercial payers, maybe becoming more stringent and how they manage to breakfast.

For much of the past year, most patients were able to access direct that with a simple attestation that they had tried topical aluminum chloride.

Based on insights from the field, we believe that some payers maybe more aggressively requiring documentation of prior trial and failure. We're working now to validate our hypothesis and if confirmed will approach the payers to ensure our contracts are being adjudicated as design.

Additionally, we have a broad program designed to improve our fulfillment rates defined as the percent of key Brexit claims that are ultimately converted into prescriptions leasing steady growth in this conversion through August and expect continued progress for the remainder of the year.

In my experience and as observe in Symphony data, many dermatology products experienced a temporary flattening around a one year mark of launch the causes are not always the same of course, but by working to understand the underlying dynamics of the qubec. The market. We expect the brand to start growing again as we've seen in historical dermatology launches.

With the same discipline, we demonstrated and building physician support activating patient establishing coverage and maintaining a healthy gross to net discount we will similarly focus our efforts on a return to prescription growth.

With respect to those key fundamentals of the launch across payer physician and patient metrics first we continue to make significant progress on the payer front finalizing an agreement with Cvs that will provide to breast the access without prior authorization for some patients.

We believe this presents a great opportunity for improved pull through in the months to cotton.

We continue to have broad payer coverage at approximately 85% of commercial lives and more patients now have access without prior authorization.

Secondly, physician adoption after Brexit has been a key priority for the company and I'm pleased that we continue to exceed our expectations.

During the third quarter this year more than 15000 prescriptions have prescribed kubrick, though.

As noted last year, we continue to focus last quarter excuse me, we continue to focus our physician outreach activities on prescriber productivity.

Finally, we've had a significant success and building a hyperhidrosis market, which is up 53% in dermatology since the launch of our unbranded campaign and thanks to our branded campaign for key breakfast approximately 80% of new prescriptions are coming from new patients to the market.

Given our success and building the market and with the benefit of the insights we gained over the past year. We now plan to transition to a digitally focused consumer campaign, which will enable us to substantially reduce our investment in direct to consumer activities for key breakfast.

Now that we've built broad awareness with the multimedia campaign driving more than 6 million unique visitors to our sites, we intend to target those consumers digitally, allowing us to continue growing to Brexit demand.

In summary.

Our progress to date on the launch continues to demonstrate the importance of people access at a large and underserved population of patients living with primary ancillary hyperhidrosis, we're laser focused on continuing to drive demand for key breakfast and have identified activities designed to do so including an increased focus on dry dock inversion, and ensuring payer and physician pull through.

Hello.

Going forward, we intend to leverage what we've learned during the first year of launch to target our investments to the most promising and efficient opportunities, allowing us to significantly reduce our commercial expenses, particularly in the area of DTC promotion.

As Tom indicated given the external environment and the insights we have clean at this one year Mark of launch. We believe this strategy will best position us to drive sustained growth for the brand and value for our stakeholders moving forward.

Before I turn it over to Lewis I wanted to reflect on some recent commentary in the financial market focused on select physician feedback.

Some surprising conclusion for drawn from those discussions.

Bear the dressings as these data completely contradict what we've learned from our clinical trials independent market research post approval experience, what we hear from our field time of course fibers and also what analysts and investors many of whom are on the call today have reported back to us after speaking with physicians directly.

To summarize what we hear consistently is number one physician deserve to Brexit working well consistent with our clinical data where three quarters of patients reported a reduction in flooding market research shows that eight out of 10 users are very are extremely satisfied with the efficacy of keybanc Sir.

Number two patients and physicians report that Q Brexit worked quickly patients report benefit within the first few days, which is validated by research we presented at major medical meetings, where patients reported benefit as early as day too.

Number three physicians report that it's not botox patient, they're targeting with key Brexit, but the much larger group of patients who are not using botox.

Only 12 months into launch to Brexit Symphony data compared to publicly stated botox hyperhidrosis sales figures suggest that we have likely reached a similar number of unique patient in year, one that are treated with botox in year 15.

Having worked directly on botox for hyperhidrosis, if anyone appreciates the nuances of this market I do.

Our strategy is to target a much larger patient population and we succeeded in doing so with more than 50000 unique patients just 12 months into launch.

While we certainly have identified areas that require our focus as expected in any launch it's safe to say that the clinical performance a few Brexit is not an area of concern.

While there may be people, who have his perspective it is not in any way representative of what we reported in our clinical data what we've learned in robust market research, nor what we hear very consistently from our frequent and recent interactions with prescribers and with that I'll now turn the call over to Louis Louis Thank you Laurie.

Before I provide an update on the progress we've made on the Levy program I wanted to provide a quick update on the two breakfast study, we announced in February and Palmer hyperhidrosis or excessive sweating of a hands.

We initiated an exploratory two week study earlier this year with the goal of assessing the safety Tolerability and effectiveness of congrats and Palmer hyperhidrosis.

In the study we observe that application of congrats to the problem with or without occlusion or covering of the hands was safe and well tolerated.

In addition, and while we observed improvements in Palmer sledding from baseline a consistent and significant treatment effect was not observed.

Given that we continue to hear from patients that there is a need for Palmer height, hyperhidrosis treatment and for physicians, who are enthusiastic to treat them. We intend to continue efforts in this area by supporting investigator initiated studies to further evaluate corrections potential and Palmer hyperhidrosis.

Pending the outcome of these studies, we will determine the appropriate next steps.

Now turning to leverage.

Last month, we presented detailed phase to be results during the fall clinical dermatology conferences.

At the conference we hosted a webcast during which Dr. Viewable Armstrong an investigator in November phase Twob study reviews, the detailed safety and efficacy results.

These data demonstrated that consistent with our objectives for a best in class I O 13 inhibitor leveraged delivered rapid robust brought efficacy across endpoints spanning the range of 80 signs and symptoms, including skin lesions and edge when administered once every two or four weeks.

Additional outcomes included low rates have been during provide us that were similar to those in patients receiving placebo and a safety profile consistent with that established for the Io for 13 class.

Of note, particularly compelling where the effects on edge, which we know is often the chief complaint of 80 patients and can have a significant impact on sleep productivity and quality of life for both patients and caregivers.

And our phase Twob study improvements in edge were observed as early as day, two and a response rate of 70% was observed that week 16.

As Tom mentioned these results, which we will look to duplicate in phase three would support a best in disease profile well suited for first line use.

Based on the positive phase to the results last month, we also announced initiation or our phase three program and adult an adolescent patients ages 12 and older with moderate to severe atopic dermatitis.

The program is currently enrolling two identical monotherapy studies.

One results from the 16 week induction periods of these studies are expected in the first half of 2021.

The phase three program will also include a study of lever in combination with topical corticosteroids, which we plan to initiate and the first quarter of next year.

Before closing I like to discuss our perspective on the competitive landscape in 80 product development.

As we know moderate to severe I'd is prevalent debilitating condition with limited treatment options and thus represents a significant unmet need that has attracted the attention and enthusiasm of many industry participants as well as the FDA.

As we've said we believe the arrival of diplomat is established in establishing the I'll Fourthirteen class as a new standard of care by delivering brought efficacy in a way that a safe and tolerable setting the stage for leverage as a potential best in class 13 inhibitor to further advance the benefits already.

With the current.

While we certainly expect that market as large and their versus this will support multiple additional therapies and mechanisms. We also believe it will be likely exceedingly difficult to deliver the combination of brought efficacy safety and ease of use and thus widespread utility available via aisle 13 and.

Vision.

Outside the Io for 13 class there have been limitations observed with other targets either with safety issues limited efficacy and or Tolerability.

In this context, while we certainly look forward to learning the results of the numerous other programs currently in development as Tom mentioned, we believe the opportunity for leverage will be durable significant.

I will close by saying that we are incredibly pleased with the progress we have made it and we have confidence on leverage has a ma'am and our opportunity to advance a standard of care for patients with moderate to severe atopic dermatitis, improving their treatment in the areas most meaningful to them.

We believe that memory has the potential to be a best in disease therapy, delivering the trusted safety of IR for 13 class together with improvements in efficacy tolerability and flexibility in dosing and one of the largest fastest growing and most significant markets in dermatology.

I will now turn the call call over to Andrew Andrew.

Great. Thanks Louis.

I will be addressing in my remarks today, the PML highlights the balance sheet in cash runway and then our thoughts as to guidance as we close out 2018.

First with respect to the piano highlights for the third quarter 2019 revenue totaled 11.5 million comprised of 10.2 million in Q Brexit product sales and 1.3 million in collaboration and license revenue.

The 10.2 million and congrats to product sales represented a 27% increase over the 8.1 million recognized in the second quarter of this year. This increase was driven by 17% growth gross sales and an approximately five percentage point improvement in the GTN discount to approximately 34%.

The primary reason for the quarter to quarter improvements in the GTN discount with due to the elimination of the grandfathering provision of the $70 co pay program effective July one.

The collaboration and license revenue for the third quarter 2019 of 1.3 million is entirely related to our partnership with all my role as we outlined on our August call. Each quarter, we will recognize a portion of the transaction price that was allocated to the R&D services, we're obligated to provide to on roll over the course of celebrity phase three program in.

Manner, and now we get to the percentage of completion method.

Total cost in operating expenses for Q3, 2019 were 66.7 million effectively flat compared to the 66.0 million in the same period to the prior year year over year increases in R&D expenses of 2.1 million in cost of sales of 1.7 million were partially offset by a decrease in a few new expenses.

3.2 million.

With respect to Essien expenses as we indicated on prior calls we expected the second quarter of 2019 could be the high watermark and indeed, we saw substantial decrease in FCD expenses of 17 million from the second quarter to this most recent third quarter.

Turning now to the balance sheet in cash runway.

We ended the third quarter with 360.2 million in cash and investment.

During the third quarter, you received 50 million from Amaro in connection with their option exercise and net proceeds of approximately 39 million related to the draw the second tranche under our structured financing facility.

The cash and investments balance excludes the 30 million in total milestone payments. We stand received from armor, all and 20 million due to Roche in connection with the initiation of the leverage phase III program.

With respect to our cash runway, we remain in a position to fund our operations into the first half a 2021 and through the expected topline data readout from a leverage phase three program.

Finally, as we close out 2019, a few key points regarding financial guidance for Q, Brexit, we maintain or full year 2019, net product sales guidance in the low $30 million range for the GTN discount based on the further improvement we saw in the third quarter and our outlook for the year, we now expect to be in the high Thirtys for the fourth.

Quarter of this year the expected increase over the third quarter is due primarily to the full quarter impact of the CBS agreement Lori mentioned in her remarks that became effective during the third quarter.

As we look beyond 2019, we maintain our guidance of approximately 40% based on the impact of additional agreements, we expect to enter into the payers in pbms.

As we've previously mentioned the actual number each quarter like we will fluctuate within the narrow range depending on a few factors.

For the armor all related collaboration and license revenue, we maintained our prior guidance of approximately 2 million in the fourth quarter.

With respect to operating expenses, which as a reminder, excludes cost of sales we are updating our prior guidance for total R&D and SGT expenses and now expect total full year 2019, R&D and SDN expenses between 275, and 285 million lower by 20 to 30 million than our previous range.

Of 295 to 315 million. This updated guidance includes approximately 30 million an estimated stock based compensation.

In addition, we will recognize a $20 million acquired in process research and development expense in the fourth quarter of 2019 related to the milestone payment due to Roche in connection with the initiation of the Liberty Phase three trials in October .

We'll now open up the call for Q in a after which Tom will make some closing remarks operator.

Thank you as a reminder, if you would like to ask a question. Please press star followed by the number one on your telephone keypad, we'll pause for just a moment to compiled it today roster.

Your first question comes from Louise Chen from Cantor Fitzgerald. Your line is open.

Yes. Thank you this is Sudan Logan Ethan in for Luis have a few questions here. So.

Do you expect to be additional data from the polymer high brightness indication will will significantly grow the market for Qubec said in the near term pride to adding 10 label if approved going forward and then what are the other near term or long term catalyst for Q Brexit now expect contribute to the growth of the high brightness market and then secondly on labrie.

With a complete days than for the phase two program.

How are the partnership opportunities in the all U.S. market shaping up now that you can take a mature data set to prove the value of library and then what any reservations that people are having on library or the high IL 13 mechanisms mechanism of action.

In regards to.

Treating AG and then lastly can you talk more specifically in the pitch in a topic dermatitis and how big is this unmet need and how does this how does your drug compare on the edge versus approved products in this development.

Well.

Let's let's start with Lori on the first on we'll try to go from there. Thanks to answer the questions as much appreciated.

I think the way, we think about the Palmer opportunity is that any gross you know assumed far apama indication would not be a near term event. So as Louis mentioned in his prepared remarks, we have just some initial findings from that very small study and we do expect to continue to support development as that.

On the from Investor.

Nothing either initiated work, but all of those things I think would only have an impact in a market you know as a longer term is that not as a near term event.

If we went to get an approval and then on the near term catalyze I mean, I think we just really are in a position where we can capitalize on this strong foundation, we sat over the first year of lifestyle. We now have more than 15000 prescribers, who we can go to and work to make more productive in terms of how many to Brexit prescriptions that are writing we can focus on the pull through of our.

Really broad coverage of 85% them off commercial lives and really from specific wins that we've gotten more recently like to see the athletic and I mentioned in my prepared remarks, it really allows us to focus our pull through efforts, where we had really strong access and then finally I think just a targeted effort with the 6 million consumers, who weve activated to really grow this market and we're re.

Really starting to see that impact with more than 50% year over year market growth and the dermatology space, specifically and so as our opportunity I think to continue to capitalize on those things as the near term catalysts for key Braxton growth and with that I'll, maybe turn it over to Lewis for someone to elaborate question.

Yeah. So.

First of all I think the question about what reservations.

We heard actually I would say none is more on the enthusiasm side, then and I think what is driving that and spin specifically investigators wanting to participate in phase III. So I think what is driving that is that it's hard to find a molecule with a broad profile that this one does so not only did we see a really good efficacy.

See across the skin manifestations of the topic dermatitis, but specifically also we saw itch and it's a positive effect on sleep loss.

With good outcomes and then you know that came along with.

Long safety.

Profile that we've seen with these patients with this molecule now treating in over 4000 patients and a great tolerability profile with which included a low conjunctivitis rates.

Specifically as as you mentioned edge, we've done studies now that our proven that elevated levels of I'll 13 can hyper sensitized sensory neurons and that in addition, a vial 13 levels.

Specifically can bring those sensory neurons back down to a normal activations state and we actually think that this carried over into the positive clinical manifestations that we saw in the leverage phase two program and we'd expect that to carry on into phase three and beyond and then finally I will turn it over.

In terms of discussing the partnership opportunities. Thanks Louis.

Well, we don't commit comment specifically on specific discussions.

We do continue to evaluate a number of partnering options whether to regionally or broader than that and we will keep you updated as those discussions progress.

Great. Thank you guys.

Thank you.

Please.

Your next question comes from Seamus Fernandez from Guggenheim. Your line is open.

Thanks for the question. So just my first question.

Specifically is on.

The.

Off label use in polymer hyperhidrosis so.

When will you guys present, the Palmer data.

You know at a medical meeting just wondering if there is off label use and Palmer hyperhidrosis or or Palmer planter currently or if the majority or if if if in fact, all all of the doses are used for.

Axillary hyperhidrosis the second question.

It is frankly, you guys I think it would be a little bit more helpful to investors to understand the direction of the absolute spend as we head into 2020 am I don't think were necessarily asking about guidance, but I.

I think the hope was is that there would be a little bit more runway.

Heading into the.

Heading into the data.

For labor kids in that given the disclosure today.

With regard to.

That the updated guidance so.

If you could just give us a little bit more color or clarity on the direction of spending that would be extremely helpful. Thanks. So much.

Yeah, Hi shipments of Louis So we you know we I'm always good to hear your voice that we haven't.

Quite given any guidance here in terms of what we would discuss data because we're continuously.

Ongoing with evaluation.

After we do then we'll give guidance on that.

In terms of those yeah, it's at the between that so on the hands really the mechanism is the same which is you are a inhibiting that the action of asked until calling on the sweat glands enhance versus the accella. The the squarely on the palms is slightly quicker and so we're evaluating.

And time course of of delivery in the hands versus the solar and likely that will be successful without having to change the dose.

In terms of the I guess the as to the question about.

Well, maybe in first in terms of the off label.

You look for hearing instances of usage off label all that one like he asked about that I'm I'm happy to take that part so Seamus we do anecdotally here from some physicians that their trialing the product off label on of course, our efforts are focused completely on promotion for after Larry Hyperhidrosis.

When those reports come up or when questions arise we refer those over to our medical affairs colleagues and I think anecdotally. They are starting to report some of the ways in which they are using the product and you know seen some resolved and I think we expect as we get the I teach potential protocol then for those to be reflect.

Jade in what we received so as we continue to get more information on that through our medical affairs colleagues, obviously, we'll be happy to provide an update at a later point.

Jamie This is Andrew I'll take the question in terms of kind of color in clarity you clearly we're not in a position today to provide specific guidance, we working quickly to do that we understand the importance of that.

As we hit the one year market, the Brexit really understanding how to best target and leverage our investment there as you heard Lori say, we expect a significant reduction in our commercial spend with a particular focus on DTC. We're looking at all aspects of our business across the business to be as efficient and targeted with how we spend their money. That's our job. We are finalizing the remaining aspects of the leverage.

Three program. So we are working.

Quickly to do that but not in a position today to provide that specific guidance, but rest assured I think we have the same objective is you which is to extend the runway as much as possible through these.

Efficiency and cost effectiveness measures.

Thank you guys.

Thank you.

Your next question comes from Douglas Tsao from each C. Wainwright Your line is open.

Hi, good afternoon, thanks for taking the questions just.

I understand as you think about what you've seen with Kubrick said does it change youre sort of long term expectation in terms of the opportunity or what you're able to achieve or.

Is it just kind of sort of take a different path or maybe a bit look a bit longer to get there than than you initially expected.

Yeah. Thanks for the question Bob This is Larry I think really the market has not changed in our view obviously what portion of it we capture on will depend on the strategy that we undertake and so as a as we go through these next.

In a few weeks and months of preparation on that we want to make sure that.

Provide any update in terms of how we see the opportunity specific for key braca that'll obviously be tied to.

Our approach in the marketplace I think what we believe is that if we look at the one year Mark of the launch and we say what did we say we needed to accomplish to put ourselves on the right trajectory for a successful launch you know a cost payers and physicians and patients we've really hit that metrics that put us in place to achieve the long term Pete.

Your sales opportunity.

And that that comes from the 15000 prescribers that comes from the broad coverage that comes from the taken activation to the tune of 6 million patients and so we're in a position where we can leverage that momentum that we gained but certainly the peak year sales will be dependent upon what decisions. We make about the next strategy. We employ a for this next phase of.

Yes.

Yeah, and I would just to add to that kind of re reemphasizing, what Lori said and we really appreciate the question.

The fundamental things that we set out to accomplish and the platform that we set out to build upon I think the team has done a great job of that as Lori just alluded to.

One year end to launch we can look at the things that have been the most productive and less than the most productive in terms of our spend hence the opportunity to reduce spending but I think in terms of understanding the market seeing where it could go and building a platform to get there. The team has done a good job on that.

Yeah, I mean, and Tom just to add a quick follow up because I guess, what I think would be helpful. For us to just understand is except that you should see this is as a change in the landscape for says.

Initiative reacting to one month of sort of disappointing data from a from a script standpoint.

Yeah because.

Because to your point <unk> you should have accomplished so much.

And sort of accomplish everything that you kind of.

Wanted you to set yourself up for victory so to speak.

No I, we appreciate that and we couldn't agree more on the other hand, yes, a year into the launch it.

You would expect this too and we had been assessing what is working better than what is not working best within the context of it is important for us to reduce overall spending we get that.

And we believe we can deliver on that that is in no way.

Intended to suggest that we don't have a commitment to this product and believe in it. We think we can continue to grow it with a significantly reduce spending level based upon what we've learned over the last year and as I said before the platform that the teams constructed. So appreciate the question appreciate the observation.

Well, we still believe in the product we have identified ways, we can believe in it and grow it more efficiently.

Okay, great. Thank you so much thanks for that clarification, Tom and Laura.

Thank God.

Your next question comes from Silver Rafat from Evercore. Your line is open.

Hi, Thanks, so much for taking my questions I lose I want to go back to the placebo Discontinuations celebrity phase two and.

I recall, when we first noticed that placebo discontinuation rate was north of 50% one of the issues. We had discussed was the availability of dupi impacting placebo continuity in the trial, which made a lot of sense until I saw recent Pfizer eight topic dermatitis phase three Jade model, one where placebo only discontinued around 20%.

So I'm trying to reconcile those two and and I don't seem to have a clear explanation and considering how critical this issue is to the broader company I, just I would love to get better.

Clarity on what exactly happened then why is it so different and do you expect an app. This phase three phase II to also have.

50% plus placebo discontinuation rate. Thank you very much.

Yes, thank you or yeah, I mean I think.

For sure there's a difference between phase two in phase three and I think there are two key components that were different one is the investigators did not know the profile liberalism at the time that weren't comfortable with it and so you know given that there are other options, whether its deployment or other phase three study certainly they solve ethically that it would be ups.

Corporate to move those patients if they didnt see efficacy in the phase three study as much different because.

Not only do you know the profile of the drug and as Mark level, All said and I wondered when he was revealing leverage as a matter Wow. This is really exciting you. The physicians are going to be very enthusiastic about being in your phase three program in phase three they know that profile. They know that it works also you.

Have an escape arm, which patients are guaranteed to have an active arm long term and that is very important for these patients who are really suffering who have a high degree of edge and so we believe that's going to have a significant impact in terms of helping their retention and also you know given.

The way we've set up the program in the protocol.

We think it's going to be better than 20%, frankly, and I am I just add who made this is Andrew I think if you look at the data from the Jack trial in phase two and a point to address it specifically you saw a 50% discontinuation rate in the placebo arm, which again I think it's just a reflection as Louis pointed out of.

[noise] structure of phase two these to be phase three.

[noise] as a reminder, if he would like to ask a question. Please press star followed by the number one on your telephone keypad.

Your next question comes from surgical RJ from Needham and company. Your line is open.

Hey, guys. Thanks for the question. This is 10 actually on for search I just had a few for Qubec celebrity.

First on two Bucks, a could you give us a little bit more detail on the marketing approach to your.

Hi, utilizing.

Two best that's a target against.

Toward trifle.

And then in terms of seasonality have you seen any impacts in the third quarter and as we transition from Threeq versus Fourq you did you see anything there.

And then lastly, we've noticed that Q via into Symphony numbers, a little bit off when we do that weekly scripts. So do you have any ideas to.

Perhaps why Q via numbers, a little bit lower thank you.

Sure I'm happy to take those key Brexit questions first MTN and then if you have some leverage once we can come back that as well though.

Your first question on our approach for targeting dry saw prescription. So again, we believe that phenomenon is likely temporary with the restocking that we are seeing currently in Q3. The approach. We're taking is that when someone sales that drive our prescription at the pharmacy uneven actually provide Q Brexit Brandon.

Material there to show that there is a new option in the marketplace and given the super low adherence rate for dry saw and you know the data suggests that in months to 80% of all people who started trying I saw in month, one are no longer taking the drugs, we think that that presents a great opportunity say hey, there's another option.

And here's a little bit of information about keep process. So we have that program in place and just started that recently and again believe that well have an opportunity to convert some of those patients over ticket braca two bucks a prescription in terms of seasonality I'll answer that a couple of ways I would say historically, we have not seen seasonality in the high.

For hydrous as Mark answer that's going back for many many years, while some people might think that you will see a surge in the summer months, you don't tend to see that in the prescription data.

As as it pertains to the recent quarters of activity frankly, I think it's a little bit hard to say because the dry saw stock out and now the restocking as confounding the data in ways, where you wouldn't really knows there is seasonality I think it's really much more likely due to both our market growth from our direct to consumer campaign as well as the in and.

Now a dry saw that kind of making the market to you a little bit more complex.

Overtime as we get more data under our belt for key back that we'll be able to say are we like other products not seeing a seasonality, but right now we're just seeing market growth of course, and then finally on the I Qbs Symphony data sources.

You're right that those two data sources tend to be slightly different and what they report on some observations that we've had is that sense any tends to report higher and then I caveat some of that likely due to their capture rate with some of the derms specialty pharmacies, what I would note is that while they are a little bit disconnected in terms of their volley.

I am they do tend to move in the same direction in most cases and what we have said publicly is that if you want to take an average of the sense any and I can be a data generally speaking that would be aligned to our outs data, which is the volume that we're seeing pulled from the wholesalers into the retail and dermatology farm.

So hopefully that answers that question as well.

Yeah. Those those helpful. Thank you.

Then on celebrity given that the let me read out isn't until one is 21, so should we.

Expect some type of interim data to be released along the way.

Hi, Tim. This is there are no. We you know we wouldn't do that in phase three you have to be very careful about that because he wanted to preserve your power as it relates to your the law and filings.

We will present on the 16 week data or we will disclose the 60 month data in the first half and then continue on our trials into the 52 weeks and then and if you poised for four be alliance as soon as possible after that.

Sure. Thanks, Louis and then the last one is.

For the milestones.

So can you tell us what the I guess, what milestones are coming up for next.

I think there was about 40 million tied to the regulatory certain regulatory events and then for the milestones for Roche I think there was a 20 million due in the fourth quarter is there any additional portion is due and then further down the line is there anything else in 2020 and 2021. Thank you.

Yes, Jim This is Andrew I covered and happy to follow up with the disclosures we've made but the you know that the nearest term milestones are as mentioned on the call in connection with the initiation of the phase three program. We are owed an aggregate of 30 million from all Merle as we noted when we announced the initiation of the first monotherapy trial.

While we now earned 7.5 million of about 30 in total the rest are attached to other phase three trial starts.

Similarly in connection with the initiation of the Phase three program, we owe Roche and outbound 20 million as mentioned on the call that was triggered with the same initiation of the program in terms of the ongoing.

In outbound milestones I can follow up you Chen with the specifics of that but I will say that overall.

The amounts that we.

Received from armor, all are at or above the amounts we would all rose with respect to particular territories in terms of overall, we're entitled to an additional upto, an additional 40 million.

Based on the achievement of certain regulatory milestones.

And then 45 million in connection with the first commercial sale and then there are up to 1.25 billion in sales based thresholds and then royalties owed to us as well you can follow with the of the specifics of that but they started in the low double digits range up to the to the low twentys.

With respect to Roche.

Terms of outbound there was an aggregate of 20 million and I will confirm that 20 million.

In connection with the submission of a regulatory.

Filings and territories, excluding the United States.

And then we then we have up to 160 million in connection with first commercial sales in various territories around the world, including the United States. None we have downstream first sales milestones as well royalties that are that threshold to start in the high teens high single digit.

On for commercial sales and top out at the high teens when sales exceed the top tier 3 billion annual sales.

Great. Thank you Andrew that was very helpful. Thank you.

[noise]. Your next question comes from Pasha Serrano from SVB Leerink. Your line is open.

Yes, hi, everyone. This is Mike Ashley Thanks for taking your questions. So first with respect to the dry saw restocking that seems to be something that presented an unexpected headwinds earlier in the quarter, but it sounds like supply issues for them might not necessarily be a onetime thing. So do you think that could potentially start to be an issue again, it could potentially boosted Q Baxter sales.

Yeah. This is Lori thanks for that question. Mike. This is now the second time in our one year of launch for key Brexit that we've seen some pretty significant stock out issues for dry fall. So you know in history is an indicator certainly it could become an issue again and obviously both in terms of how we.

And capitalize on the conversion of valid, but I think frankly, how we can focus on growing the market and making sure that more people are actually activated to seek treatment definitely opportunity for us really lies so you know for contact there's about 400000 prescriptions annually from dry soft and we see our opportunity for key Brexit.

As being much more significant than that based on the profile the product.

Congrats it tends to work well intensity, while on tolerate it is not irritating like dry fall can be and they get almost no resells because of that product profile. So there's an opportunity for us to capitalize whether it's in activating the markets or converting guys all patients or and retaining our patients once they start Ricky Brac, though we have I think a lot away.

The one versus dry hole.

Got it that makes a lot of sense and then just one other one on Larry.

First of all have you provided any color on the timing its combination study and then separately. It seems like each has been increasingly more important for dermatology community in terms of.

Machine introduction as an endpoint. So just curious if you have any plans in terms of highlighting that within the phase three studies given what we've seen in the seems to be studies for leverage.

Great. Mike This is Andrew I'll take a first from the question turnover Lewis for the second part with respect to the to the combo study. The Tcs study, we expect to start that study in the first quarter of next year that is not the a on the critical path.

That study will be completed within.

The timeline monotherapy studies.

Yeah, Hi, Mike Good fluids, yes, so we will definitely continue to evaluate its in the phase three program extensively and so we will not only look at that you know the percent of patients overall better responder analysis in terms of.

Those patients and achieve that leads to four point drop in the interest scale, which is important will also take a look at sleep loss and and and various several PR out of the manifestation of this and you're absolutely right. If there was recently a patient focused drug development seminar run by the FDA.

And that the number one complaint by those patients was a rich in terms of.

Really.

Really impacting the quality of their lives. So we're excited about the prospect of Levy with us as I mentioned earlier with our work in Suriname, but also the onset of activity as it was you know we observe.

The early as two days, we had a significant impact on edge with leverage we expect that to be the case in phase three and really an important advance for these patients who are looking for as immediate relief as possible in edge.

Understood. Thanks again.

Thanks, Mike.

Thanks, Mike.

We have no further questions I'd like to turn the call over to Mr., Tom I guess for closing remarks.

Thank you very much operator, and thanks to all of you who joined US This afternoon.

In closing let.

Let me simply say that we have a plan in place to ensure that we continue to drive sustained demand for director in the weeks months in years ahead.

We will be working diligently to ensure that we enroll every phase III program rapidly and efficiently and we will be diligent in our ongoing analysis of the business and ensuring that we utilize our resources in the most efficient way possible in particular as we've said throughout this call reducing our operating expenses in conjunction with Q Brexit.

Primarily.

In the direct to consumer ground.

While we continue to support the growth of the brand and with that I will thank you all for joining in have a great risk to your day.

This concludes today's conference call. Thank you for your participation you may now disconnect.