Q4 2019 Earnings Call
Please standby.
Welcome to the name calling corporation fourth quarter in here in 2019 earnings call.
As a reminder, this call is being recorded on February 20, 50020, and will be available for playback on the mankind Corporation website. Shortly after the conclusion of this call until March 10th 2020, all participants will be in listen only mode for duration of this conference if you'd like to ask a question at the end its.
Presentation. Please signal my pressing star one or your telephone keypad. If you are you say speakerphone. Please make sure you function is turned off to why your signal to reach our equipment.
This call will contain forward looking statements such forward looking statements are subject to risks and uncertainty, which could cause actual results to differ materially from fees stated expectations for further information on the Companys risk factors. We see there 10-K reports filed with the Securities Exchange Commission the earnings release.
Yeah, the slides prepared for this presentation.
Joining us today for mankind, our Chief Executive Officer, Michael It's Tania and Chief Financial Officer, Stephen Binder, I would now like turn the conference over to Mr. 'cause Tanya. Please go ahead Sir.
Thank you.
Good morning, everybody like you've done it's early.
Many of you may see we recently rebranded our company.
And our strategy and I'm here to share a few of those highlighted today.
One of these unique about our mission is our product technologies and our focus of our pipeline is really to get people control their health and the freedom to live in life, because one of the number one thing here around the president and we hear the early results coming out of the brief studies, which are possible.
He'd be excited about the feedback to hear directly from our patients are key stakeholders.
Well on the Dot com and your strategy.
Our strategy is as you'll hear today as well move to a therapeutic focus in two distinct disease areas endocrinology, which encompasses we are today with a frozen and continue to build the other areas could be metabolic diseases diabetes and any decisions around endocrinology disorders.
Lung diseases easier to two areas that we believe me there had existing infrastructure, what could build future infrastructure and make a difference in unmet needs.
It looks border curb Brightree technology, but will not be limited by then so we find outside innovation. That's okay, not everything would be on Technosphere as you look out there for BD opportunities.
Well I license or terminate pipeline products, which are not in either of our two focal areas as we talk about later today.
We will focus execute and deliver on these priorities as we go forward.
Before I begin our Q4 and 20 I can highlight I want to address serious threat. The mini company that people were dealing with when it comes the car buyers.
Looking at our current supply chain and given the majority of or manufacturers here in the U.S., we don't anticipate any impact or disruption for patients.
Third party suppliers of our products.
I want to put that question. The rest was I know, it's a lot of questions on earnings call. These days.
Let me jump back into 20 Nike's achievements.
Couple of key areas first when I like a frozen we recorded annual net revenue of 25.3 million in Q4 net revenue was 7.8 million, which was 22% group over Q3.
We're excited to finally get Brazil pricing in approval and launch here in Q1, we're only a few weeks and so not much the share. However, we have received the second order you can anticipate.
We'll ship in Q1 majority will ship in Q2.
The dark Knight Therapeutics line, we expect to recede received two milestones and $25 million in 2019, we expect an additional $25 million in twentytwenty.
We also completed building or high potency manufacturing suite as we will become the manufacturing manufacturer forger possible.
Version of been held when it launches.
We expect it falling within the next 12 months.
Many of you may have seen the results released yesterday by United Therapeutics around the increase trial.
We expect that the being the label as we get ready for launch and these results were will expand the potential population. If you look at what they said they expect us to go up to 30000 patients aren't whr groups three.
We're very excited you work with United Therapeutics to bring this incredible product market.
And our pipeline Neuberger two products through formulation M. PK studies, one of which I'll share with you today on the Cymetrix ended up.
In terms of cash flow as many of you realize we recapitalized the balance sheet and ended 2019 with $50 million.
Access the $60 million and 2020 between or milestones from UTI as well as our mid cap one.
Additionally, we're excited to have new research coverage going from one to five.
And we got good shareholder return a 22% much rank up in the top three amongst our peer group how do we compare ourselves.
What do you need things like about a presence you'll see here is as our Trx growth happens you can see a compound and revenue growth.
Back to Q1 of 17, we put our mankind commercial infrastructure in our prescriptions have grown three I've since our 2017 launch.
Additionally, we've had major changes in our packaging and a number of cartridges per prescription continues to go into right direction, which ultimately leads to retention of patient and build refills.
What do you need to work through as you can see on the working inside your $18 million in gross sales for the quarter with a net of 7.8 million. Good reason for that gap as it relates to gross to net as was our free goods program and will continue to work on ways to change for our free goods into paid prescriptions.
As you look at a present that quarterly revenue. It's up success since Q1 of 17 and it's just goes to show you. The compound effect as I. Just described as we grow prescriptions you will see an exponential growth in revenue due to the unique feature of for Eaton Twelves been uniquely price sensitive for unit cartridge.
So would that mean business people talk about neat use double the revenue up before you cartridge any 12 this triple the revenue.
Going is unit based pricing.
No stop there in turn it over to Steve.
Thanks, Mike and good morning.
I used to review, our fourth quarter and full year 29 natural results show record revenues accelerating a for a gross margin improving cash burn.
Disgusting select financial highlights energy to read the consolidated financial statements and Mdna contained in our 10-K additional quarterly information contained in our press release, both of which were filed with the FTC. This morning.
Let's start out with looking at revenues for the fourth quarter, which appears in the middle box and the table.
Net revenue for the fourth quarter was a record of $7.8 million versus 5.7 million for the corresponding fourth quarter of 2018.
The increase was generated by volume growth from underlying to present prescriptions up 13%.
Having an extra week of shipment in the fourth quarter of 2019.
Half a million dollars in place.
There was no the international revenues in the fourth quarter.
Gross to nets were 44% for the quarter, reflecting a 1% uptick in the fourth quarter 2018, as well for third quarter 2019, mainly due to increased commercial and Medicaid rebates associated with the price increase taken off to the person 20 magazine.
The price protection from one of our two significant commercial contracts.
As of the for the year.
Which will deliver a lower rebate rate for 2020 versus the fourth quarter.
We expect gross to nets could be in the 40% to 44% range for 2020.
Dipping into middle box revenues from collaboration services was 8.2 million for the fourth quarter 2019 versus 10.3 million for the corresponding fourth quarter 2018.
Reduction in revenue was mainly due to the recognition of the $10 million United Therapeutics Research agreement over the period of fourth quarter 2018 through the second quarter 2019, underperformance obligations will substantially complete.
Moving to the box in the right for the full year 2019, fuzzy net revenue increased 46% versus 2018, which include point $7 million itself, but the Brazil market in the third quarter 2019.
That's enough to 29 seen came at 42% one person decrease in the prior year, but mainly to build <unk> sales for Brazil, which have no gross to net deductions.
Well aberrations in services revenues increased 257% to $37.7 million in 2019, mainly related to the United Therapeutics collaboration agreement, which started in the fourth quarter of 2018.
Inception to date, we've recognized $37.6 million them, United Therapeutics license agreement and $9.8 million from United Therapeutics Research.
Let's take a look at our favorable product mix supported our 2019 gross.
On the left hand side, the slide it shows our quarterly growth and mix favorability versus 2018.
The board folding cartons isn't the past the fastest way to 36% followed that you cartridges at 21%.
After recent growth in the 12, you need to have that people will impact on revenue growth due to the placing that mugs as mentioned the 12 you'd being three times before you you'd be placed two times the for you.
The waits out of this slide shows the same data.
Organic cartridge equivalent.
The growth work is still the same but it shouldn't visually haddonfield 12 years and they do cartridges are more impactful to our present revenue growth.
Moving to aside the gross margin in the Green box in the table, you'll see the gross margin for the fourth quarter 2019 was 40.3%, which has been accelerating throughout 2019, 20.8% in the first quarter.
Cost of goods has remained relatively flat in 2019 versus 20 <unk> due to production volumes remained lower than up production capacity, which results in a majority of manufacturing expenses being recognized as cost of goods sold as incurred.
As we increase the further revenue we anticipate growth in gross profit in gross margin as we expect sales increases to continue to outpace cost to goods increases in the near term.
The next slide shows how would you cash from operating activities in 2019.
The grey bars represent the non-GAAP net cash used in operating activities.
You can see a steady reduction in cash outflows quarter on quarter as we carefully matters to our cat spending well, we steadily increasing sales are present as illustrated in the magenta bars in the top of the graph.
Our employees understand the value of getting using our cash resources carefully which has resulted in improved cash flow. This past year I mean tend to continue its approach and spend their cash in a purposeful manner in 2020.
Thank you and I'll turn it back over to Mike for additional comments.
Great.
Next I'll highlight a few other things that have happened either towards the end implementing early this year and where things are going up. The first is our new culinary data. We've just got in on this in the Triptan PK results showing an ultra fast onset using signature 10 on our platform.
The graph on the left highlights the PK curves as you look at different formulations available today between nasal sprays powder oral tablet and Subcu injection.
Thank you should note. The most is the delay in absorption of an oral tablet showed it was laying the peak versus the Subcu injection is it a current formulations of sumatriptan and on the market.
We weren't sure how this would look in a wrap PK study, but this is any indication of the human data. We expect you can see first on the skill. Please note. It goes from 100, the 700 versus zero to 120 on the left.
That was open to two times higher peak concentration just off the first replicate listen we see here relative to sub Q.
We think speed of one set of important migraine is it something we look forward to continue to explore as we progress this program forward.
And I do like response, just like we see in a president and the other products. He put on our platform. We're very excited about this preliminary data, albeit animal usually for US is indicative of the direction goes we've got the dosing and toxicity.
Ladies.
This program ultimately license out to a partner or spun out of the company and if we can't find a partner for some reason then at that point, you wouldn't and best anymore mankind resources in it. However, we think it's prudent to get this to a certain stage that a partner can see the data and understand the value that this will bring any unique market and many people say that sumatriptan is crowded with generics I'll just highlight.
The Lily and I believe L. again, just recently launched two new two new triptan and that in that marketplace. So a lot happening like green space in chronic prevention, we believe there's still a need for an acute treatment as we look forward.
Next I want to talk about six new scientific presentations.
As we look out we see a friend's it'll be just assets into the world. We're very excited as we look at nothing continue cheat and CGM as it took.
You know 10 years to go from zero to over $1 billion to change the standard.
Just scratching the surface is only 3% of our targets here in the U.S. have ever written there first prescription for president easier doctors, who write rapid acting prescriptions every single month only 3% in Britain. The first ones. We have a long ways to go get you to penetrate this market, but we believe we continue to see progress on new writers and got the prescribed in year over year.
I think about how we're going to get there number one is our safety and PK in pediatric patients.
Allows us to explore how they get the phase three at the pediatric market is about 10% of the rapid acting market represents over a billion dollar opportunity for afrezza.
I, just think about getting standards of care change and adoption that's around building prescriber confident and educator confidence and I'm, probably sitting next to bullets around a president Blue Hill, where datasets that demonstrated last year.
That using a training device like Google to show proper inhalation will build one confidence and reduced teaching time, what's ultimately reduces the administrative burden and these offices who were overwhelmed with the paperwork. These days.
Well they'll probably the name of our health care professionals mission that we will launch here in Q2.
Additionally, we were able to show with new data up in the Philippines study that we showed last year at 88 shown almost a 1.6% reduction by adding a president on top of Orals, regardless of the background therapy as long as you're well mealtime insulin. This is unbelievable results that we've seen with a very simple fixed dose titration.
We want to see continued progress in helping change type two diabetes, we realize it's a very crowded space, which is one of the reasons. We've refocused our energy this year into the play go market to drive faster adoption of a present.
After we do believe long term, we need to be here to help people living with type two as well said one.
No. It here was.
Called a pilot study done another deal showing reducing early.
Excursions during high because of treatment.
Explored use of low and I don't know Fred I think in study when you look at the results you can still see we've got to optimize health friends is used within these hybrid closed loop.
But it is an interesting phenomena as we go forward thinking about pumps and Hellmanns went together.
We're really excited that you get blew out the door, where pediatric forward and continues for new they'd opportunities like want to take to space.
And your talks about recently in our.
Three earnings call 2020 is really focused on placing keep best to drive wider adoption of Afrezza one of the areas. When I go here is really around the type one focus so you're thinking about this year our sales targeting our marketing efforts are added to see relations. Our data generation in publications are all going to be really focused around a T. One d. and just trying to build our.
Footprint into this market.
On the right side, we lost a specialty network in January that will help with reimbursement support pharmacy fulfillment and starting to be patient persistency tech tactics around Texas emails and increase in compliance.
On the bottom left is really around patient training, we did a patient training pilots that continues to go well will kill it up as we go across the country and finally launch a girl to help pro which will be training our sales reps at the end of March and this device and how to get itself the customers as quickly as possible.
We expect over the next 12 months I tried to break this out for you in four buckets number one afrezza.
The only thing stopping to present growth has continued to increase the salesforce and that the prescribing and breadth of prescribing. We expect the past ones LNG Arts as a week, it's been a long time coming we're ready to hit this milestone and continue to grow from here.
We're going to complete a deep dive on the pediatric landscape assessment before we initiate the phase three trial and be very confident in the opportunity that exists here as we think it's a large opportunity that will start to change the standard of care for the next 100 years.
On the pipeline side on the right, we will progress to pipeline compound and work in lung disease.
You can see on our website deeni delta as well cystic fibrosis with silver mines.
We plan to initiate new partnerships as we continue explore opportunities to use technosphere and our device platform with other molecules in the marketplace outside of mankind things we listed already.
In animal PK, we don't seem to chip can and at the doubtful that it just came in we've not seen it yet, but we'll share that and upcoming call.
We will spend out the nonstrategic assets in the pipeline, there's for them or terminate them. If we can't find a partner we believe each of these assets serves its unique marketplace and we'll solve them that need. However, we can't continue to build infrastructure dedicated resources beyond getting them to phase, one which are not very expensive and really leveraging the fixed cost that we already have.
Within the infrastructure and they've gone.
And our alliance partners like United Therapeutics. The today, so with interstitial lung disease expands our population that WH group, three which I'll remind you again, it's 30000 patients today current patients on all forms that are possible around 7500. This is a large expansion opportunity and we're very excited and happy for United Therapeutics that they would get this positive outcome.
And get this filed with the FDA.
We will complete or clinical trials will trend team, we're almost 50% complete and breeze and going forward as expected and very excited it's either a complete the program and file that within the next 12 months and we are on track to achieve our Q2 and Q4 12, another milestone 12, edmundo milestones perspective each quarter.
One of the questions. We get is around funding sources, we continue to reduce our cash burn as peafiel grew quarter over quarter Q1, generally is a little bit higher than Q4, but we continue to have enough cash on hand or reduce our cash burn when you look at United Therapeutics milestones. The wells makeup debt tranches, we feel very good about our current funding sources and you don't anticipate need do an equity raise.
[noise] continue to watch the marketplaces, we look at the elections, the political environment and a threat to the world economy around the corner virus, but at this point I mean, very excited enough cash and do we need to do and our main focus is wrong afrezza faster and continuing to manage our cash on the balance sheet.
With that I think we'll stop here and take questions. Thank you.
Thank you if you would like to signal what questions. Please press star one he's touchtone telephone if you're joining us today you see speakerphone. Please make sure mute function is turned off to why your signal to reach our equipment.
Good day Star one if you looked like ask questions.
I'd take the first question from Brandon Folkes with Cantor Fitzgerald.
Hi, Thanks, taking my question van Congratulations on all the progress this year and.
Firstly can you provide any detail on the consistency of patients on the phrase I.
Then secondly could you elaborate some feedback you're getting from physician in practice.
Regarding the dosing conversion, where if you took the since you've been and you know.
Just a tailwind in 29 King shouldn't think that has a tailwind for trying to drink. Thank you.
Great. Thank you for the two questions. The first one on persistency is we just finished up analysis as we prepare for the board meeting.
And that we can definitely see big difference in compliance and persistency through our co pay card program on patients who are tied to versus type one and prescribers for that matter that are tied to versus type. One. So the data has obviously did he gets to come along with it. However, there is a distant different than as we look forward to expanding into type one market expect that person.
Persistency the increase.
I want to your exact numbers, but I think in upcoming meeting once we go through the day, a little further or we can go through that but in general hamper our patients on the present today are tied to enhance for type one and then within the type one segment, they're generally fall into three buckets. They use it exclusively full time I called out a third of the market.
He was a third of the time on top of a pump and 31 time. They just use it in case of emergency for highs.
Probably we see when our resources there not always one the one in a month to month basis because of how people are using the president given the flexibility controller disease, obviously, we're moving towards more patients using full time and really thinking about pumps bearing opportunities.
Just in the market.
I wanted to take to side, we see you know well over in general type two patients about 50% drop out by by month, one or two so that's a market that you see much higher dropouts in general just do the nature of the patient population.
The belief and treating the disease.
I thought that helps a little bit on persistence, even that explains why you see some chunkiness and we feel and all new prescriptions remember not every interacts with the new patients probably about 25% of that on a weekly basis. When you look at new member or access to the brand.
And I just that goes into less one we're getting and we're starting to not build enough patients week to week, where we'll start to look at longer to diluted basis and get better data here, but.
You know your go to the script for so frequently there's really hard to make any conclusions I think as we go forward, it's getting a little easier to start to look at the trends.
Feedback on clinical practice, and say what wise of friends and not grown faster. The number one thing we hear it just top of mind.
The second part of them on dosing in the third party whole managed care.
So so I'll break that out in the three buckets top of mind, we are reducing our our target.
Focus from over 100 doctors per territory to well below that in order to make sure the reps have higher reach and frequency amongst the key rapid acting insulin prescribers. That's number one and the continued to fine tune that was to do before.
On dosing I think when you look at the David Kindled presentation. This week 18, TD. That's why the number one topic, there, which is how do I dose of president and really trying to make it simple say, it's 1.5 to two WEX and we look at the Google market. For example, vaccine. These three milligrams any injection to one milligram. There's just no correlation between an unhealthy how proud.
I'd like to an injectable product really just try to called doctors do you need to treating with uniqueness with the seems to be lot of confusion on you know affording 12 versus fine tune when you increments and so I think as people get that clinical experience dosing question goes away, but it's the first apprehension aborting. The first description I think that's really focused on the on boarding.
Others physician the Philippines, a great example, where we just did a very simple seven day tried tradition to say take four units for three days eight units for three days in a 12 units antitrust from there. That's so easy we're trying to make the dosing with president Bill that essentially just coming out and starting to get published and that will help penetrate overcome the dosing objection.
The third one is payers and on the payer front you know I was looking to the day last night, we have almost 80% coverage on commercial that's our main focus that's a lot of words and type ones exist and we think about the type two market a lot more Medicare higher call share higher dropouts. So we feel a decent in about the managed care coverage.
Accused of our commercial strategy in type one.
Most of our plans or pay the label if there was a prior all I would continue to remove and reduce those restrictions and when several discussions with payers to continue to increase formulary access for 2020 beyond so we feel decent.
Really strong strong that the managed care situation will continue to improve and buyers will continue to be reduced for frozen and really that comes with time and experience and demand. So doctors continue to grow prescriptions.
Payers are more likely to be additive formulary and to move some of those those barriers. So those are the top three reasons for doctors and if you look at <unk>.
Clinically.
We beat the standard of care on 11 out of 13 drivers of.
Mealtime control and why they choose one rapid acting over another the two we fell short on or to the ones I just mentioned managed care coverage perception and dosing. So those are the two that were really working to clean up this year.
Great. Thank you very much.
Thank you.
And our next question will come from Oren Livnat with H.C. Wainwright.
Thanks, a couple of questions I'm really surprised me to the upside on the result for the quarter, which is great I just want to make sure I understand.
What's going on out of the underlying economics of Afrezza pardon box and pipeline stuff. So it.
It looks like sales were up net sales, excluding Brazil, almost 36, 37% quarter over quarter on like a 5% volume increase it taught them price I'm just wondering if you give us.
Not that sort of what the sort of I guess excuse me our symphony normalized value per script, we should pick up going forward, if you're capable of doing that because I don't want to.
Carry forward it that's value that gets priced the downside in Q1, so any help you can get a therapy grapes.
That's a possible question. Thanks.
Its policy.
Things to look at a war and in the fourth quarter, we did have an extra week of shipments.
Back to the third quarter is about a half a million dollars.
I don't want something as they can do formulation I don't have the average price per script within it as part of it can follow up on that.
I think you're ready to warn you didn't see 37% growth just on the net U.S. from Q3 Q4.
You know from our perspective, we continue to see volume mix look positive.
We're trying to reduce the number of free free scripts out there and trying to put programs in place to convert doesn't paid prescriptions and I think that this year, you'll see a big big push there because almost 20% of our revenue where 50% of our prescriptions fall into that free goods program and as we increase managed care coverage. There's no reason those don't turn the page scripts and so today they reduce.
Probably averaged close but that's something we're team to focus on.
Okay into Q1 with normal seasonality should we expect or so be it conservatively assume.
You know that Oh, flog on that sort of realize value prescriptive early in the year.
[laughter].
I don't.
I don't see that I mean, we're looking at our Kobe data are out of pocket data coming in every week, our script trends are holding up decently our outflows in the wholesale the holding up pretty well. So you usually see big out of pocket cost the big slowdown prescriptions, but that the your started off pretty strong.
So I think we're just waiting for gross to nets make sure that looks good for the quarter. Although at this point, we're optimistic for 21.
Alright, great, Thanks, and I'm correct tea.
You know I look back at Martines commentary from.
From January JP Morgan any issue the Congress typically about finishing this study I think I, hopefully and I got my impression that maybe stability and the only gating factor I know, it's not really hear product to add a commentary on that she hasn't said, but can you just maybe.
Help us understand it it's hard you know would that be only gating factor its stability beyond the PK study and.
Do you see like any sort of risk around the PK study base what did they do seem to date or that's just a bio equivalence box like exercise or that's a higher dosing and switch studies stuff also important didnt any filing decision.
Yes.
I think as you know as time goes by the risk in its program dramatically decreases.
And that doesn't mainly due to the stability you know we believe the product works fine you've done. This had study we got some initial data out of the three study in terms of PK you know the patient.
Experience so far in the brief studies, we hear you know people rolling over into the extension phase there they were able to changes at a higher dosing.
So it's pretty straightforward program. We don't you know there's always risk in any development, but when you think about our technology is already approved possums already at the proof.
Already.
Confirmed the dosing.
And we don't works in being held routes so from a risk perspective relative to other programs, we would do like like I'll call them. One at the time, we believe this first because low in terms of anything going on from here to approval that said. It is is it all in programming, we always had to be cautious but in terms of rate women effects PK, we feel very good about that the rent.
And sample PK as we're getting into brief study to confirm before with the major PK study on the health with Dr. study, we feel very good we've done plenty of those we've learned the pros and cons on that one.
And then the a final adjustability not just takes time and so far that that continues to progress nicely the plant up and running we continue to make batches. So we don't anticipate and going wrong. When we feel pretty confident that we think about our cash on balance sheet cash expectations. We are betting $25 million on on two possible this year.
Good about that opportunity if anything you guys really think about.
Back to rebuild and with this new W. Joe class three is like you get the scale of even again.
And scale, we just building will continue to increase our conversations are UTI.
Then that quarterly and using lumpy we talk so.
Everything's on track their kids are working great.
We're just very excited I know, they're very excited and couldn't ask for a better partner.
All right.
And can can you comment on the competitive landscape there do you think.
You never before do you know about I think liquidity I had the filing there and then turn it just happened. It can you remind us of maybe the differentiation there.
Yeah, I think there's a couple of things number one you know their first time filing a drug device combo or in India for that matter.
That's a pretty huge task as you know many companies don't always getting to file accepted or get for approval.
You know I can't anticipate where they are they've not received FDA acceptance of their file yet when you think about the supply chain that comes along with such a complex from device combo.
Hard hurdle for that's easy to get through and so we feel good about our capabilities.
Our technology and our partner intends everything you're doing so I think that's just a big.
I think than you think about that clinical aspects of the product, they're very different when it comes in dosing and conversion of dosing. The those two attributes of the product a very different.
You think about that technology behind the product looks like they had a hiccup somewhere under development around consistency in inhalation, how they did we do some of their data if I recall in our particular case, we feel very good about the ease of our device that consistent dosing in another part of that gets into the lungs to deliver the therapeutic benefit we expect so so I think from the concern.
I didn't see in quality and scalability and feel very good about our platform and then finally I think you know because we've got a great partner. So when you think about you tease experienced at least 7500 patients in the marketplace.
And what's your type basis, some of the other two formulations. They have a working with a market leader in those relationships. You know, we think we're close enough and an approval sequence that you shouldn't be a big impact and I think there's some other things working on that we'll continue to differentiate themselves I don't want to go into for competitive reasons, but that we feel our overall strategy will be very strong.
The marketplace to help continue these patients they don't heavy so and expand the marketing for them.
Great I appreciate the color.
And our next question come from Thomas Smith with S. STP.
<unk>.
Hi, This is doing with we've seen for Tom.
At least another strong quarter guys.
Just couple of questions first Tom how are you guys thinking about expanding the number of reps and expanding territories and you know how this might impact youre ramping as gene a.
And I know another question after that.
Sure, Brian and I don't.
I wouldn't expect a major impact on her as she may we've been able to manage our overall headcount in the company you continue to reduce our expense base through other cost savings. So when we look at the net net reps increase you'll probably see surely will be taken down.
Five or 10 of the positions we've already filled a couple of some of them. We just haven't seen the right talent join us and apply so we're not going to continue to be distracted by those particular markets and some of them you'll see some new ones pop up targets that were looking to increase our penetration. So net net you know you can anticipate a five to 10 ft increase maybe thinking about.
The next three quarters, you're talking roughly 9 million have dollars.
I don't think that's a significant amount and given our current structure and my guess is we can all said that through continued sales growth or reduction on spending basically need to so we don't anticipate a major material impact on US you know.
Great. Thank you and then you know kind of a broader question. When you guys were initially describing the plans to develop the phase three trial in India, you talked about how do you want to design. The trial those will be differentiated and give you guys a new in starting to affect whether you had a little bit done before just wanted to see if you guys had any color there could you give us at this time a party.
How the trial might be decided what is your you're looking for them I think now [noise].
[noise] yeah. So the Philippines, just got presented this week I'm sure you're just roughly the full cohort of patients.
And that dosing regimen that we're using in the Indian trial.
It is based on the Philippine data. So so we're excited to see no trial that goes from I'll call 25 patients in type two to now over 100 patients picking them exact number sorry, but it'll be a phase three trial head to head a placebo controlled so so we're very excited about having a data in a different it'll be a safety trial.
With an efficacy assessment that trial kicks off and April may timeframe, and it's a three month primary end point, if I recall part and so that's probably going forward and we're excited to kind of good boson data in it and it had been a placebo.
As we go for it. So we just finished up filling the placebos there will be shipped over to India, very shortly and that kick off for the trial nothing is roughly the first because equal if I recall us any is progressing as expected and you know just takes a little longer to get through all the regulatory hurdles, there, but but otherwise everything's on track and little affords that they'd have said I'm just probably.
Some minor.
Things like would beating yeah, blueberry or not and I think we're not going to get there because it's not approve in India to time.
We're looking to finalize the protocol, so but it will show us.
Pretty good data and type twos in a market that has a very high unmet need what's really high agencies. So so we're excited as we saw 1.6, they won't see drop melamine study hopefully, we'll see a comparable or more.
Good or drop of the trial goes beyond the 12 would concur.
Great. Thank you very much.
And next will be Bert Hazlett with beach I changed.
Great I got for questions.
Well, please let us know specific deliverables for trade T com to get that product to a Uh huh.
Okay.
Sure.
We haven't disclosed exactly what they're tied to in the milestones, but they are things in our control and we've stated publicly in the past its around this ability it's around making sure we put up the files because they have the right a lot of the San Diego.
As well as United So anything at all and manufacturing all the CMC the supply chain. That's all on mankind. So these are the types of things that are in the in our control that are our responsibility as part of that filings so hopefully that answers.
Hi level with what you're looking for.
Okay and that's within the next 12 months correct.
Yes, it will be within the next 12 months.
Okay. Second question, then is the scale or manufacturing that you've contemplated with United Therapeutics.
That includes at this point the increase study results.
And if not or is there an option to potentially include that in your manufacturing effort.
You factory scalability of Bill was was primarily focused on existing market upside based so.
With some additional capacity I, even when the plant nonstop for 24 hours a day, but but I think if we are looking at an expansion of unit double or triple the turn time based revenue obviously would have to expand the infrastructure. We built around the factory today than we had that space in December so.
Not something that keeps us up weve built the factory as it exists very quickly and if we had a bit of another felt pesqueria enough time to to do that appropriately with UTI.
Okay, and just remind us how the.
And he is going to progress assuming expansion or assuming and inclusion of the increased data.
Four times, they so how would that progress with regard to any filings with Tracy.
I don't know what you do you want to say publicly on that first so I'm going to not answer that one yet because I don't want to us so from that they're not they're not supportive of I've done. This in the past with what types of products and the type of I'd be strategy. So so Meanwhile, one I can talk lie, but but I don't want to.
Well, if anything relating on it that they're not comfortable sharing.
Okay, and then last I think you mentioned something early in the call about a second to water from Brazil is that accurate and did you say Q1 shipment there'll be some revenue in Q1 and some revenue in Q2 or did I hear something else. Thanks.
You heard correctly, we received the second order for Brazil, just given the long lead times and adverse initial shipment shipped back in September if you recall.
So so we anticipate shipping a part of that out in Q1, but the rest of it in Q2. So so we haven't yet given a value or a breakdown, but didnt just wanna get people end up that we expect.
Another order and you'll see some of the in Cuba.
Right. Thanks.
Thank you bye.
And our next question will come from Stephen Wichmann with Oppenheimer.
Thank you Hi, guys, Mike I can you talk a little bit more about how you're evaluating the pediatric opportunity. As you mentioned you just curious on how your areas of focus and and the milestones ahead on that.
Okay.
So on the pediatric alone there are very excited too.
Get aligning with the FDA directionally on Finalization of the.
One of the of the two parts for for approval.
Part one was just confirming that our PK results meet the criteria for that'd be a before they need to 17 year old.
In the second part of that alignment with ft. It was that we're going to forego afford a seven year old label indication and they've align directly to those to request. The next part is getting.
You mean getting the phase three study protocol group that will happen over the next three to six months and then a in that timeframe will be meeting with many of the thought leaders within the put into space.
Confirming the endpoints that we're looking to as well is starting to build the poly relationship, but also really confirming that we believe them on the medical need, especially as it pertains to hypoglycemia nocturnal hypoglycemia.
In the range all the things that parents are looking for in their kids. We think we'll provide you benefit for afrezza.
We're also getting some quality likes data later this year out of our kicking the studies I think will be important everything about Q O Q auto claims done impedes will be an area that obviously, we think we can make a difference.
It will be important and then the final is just the whole market assessment need to be really believe that Oh my personal bias is that the way you change as standard of care for the next hundred years is really through pediatrics and type one and getting these patients started in early age getting them get great outcomes proper dosing will go up on the product will transition to a.
Hold on those and as teenagers into college.
Horse kids going up the minarets experience injectable mealtime insulin or pump for that matter.
So we think that's the big opportunity to start to lay out that foundation.
And we'll convert from that to our market assessment that we're doing.
I'm going to conduct as we speak looking to hire a dedicated marketer to lead that up as well as a pediatric endocrinologist I'm. So we're really going to start to focus our efforts to make sure we do a great job.
Tricks and you think it's a big opportunity, but we'll confirm that through additional research.
Got it thanks, and then just secondly, Steve me a product gross margin was ahead of our thinking it up again sequentially. I know you don't provide guidance, but but can you talk qualitatively about you know what could drive product gross margin or further looking power.
Sure our cost of goods sold.
Because we've got a view of the capacity is going to remain fairly flat on the near term. So as we drive our topline sales that'll drive both gross profit in gross margin near term. So yeah, we see that increasing we're not going to give specific guidance on it but I think you can do a pretty good job modeling that out.
Great. Thanks, guys.
Welcome.
And that does conclude the question answer session I now turn the conference back over to you for any additional for closing remarks.
No I want to thank everybody all our employees our stakeholders. Our investors are 20 and team has a great transition here for the company we were happy to finish up the recapitalization, we began over two years ago.
Finally have the right balance sheet, we have the right team you have the right mentality in order to take this company forward very excited and optimistic about 2020. This is really our pivotal year as we think about threats. He progressing to filing haven't got approval will bring in additional revenue into the company as we get double digit royalties today I made some does almost 500 million with the state.
I've read out yesterday, we're very excited about that all the team reduce hopefully the cash burn quarter over quarter as we go forward and really just our focus right now is helping as many patients as we can you getting as many of the new prescribers in boys, who can 2020 and launching some of the UK initiatives. We have we think that really start to build confidence and increase prescriptions for friends of beyond the trends we've had this.
<unk>.
Thank you everybody for your time and patients before to talking to you seen <unk>, who will be at investor compensated This week kits and muscles and then thank you.
Well. Thank you that does conclude today's conference where do you think you for your participation have a wonderful day.