Q4 2019 Earnings Call

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Ladies and gentlemen, thank you for standing by and welcome to the after he knows Q4 2019 earnings call.

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No not at the end the call over the Jonathan Neely. Please go ahead.

Good morning, Thank you for joining us today as we review opt to know this fourth quarter and full year 2019 performance and our plans for the year ahead I'm joined today by our CEO, Peter Millar, our President and Chief operating Officer, Rami on Who's our new Chief commercial officer, because valley and artsy abode keep going down the slides it will be presented on this call. It can be viewed on her way.

Upside often those dot com and the Investor section.

Before we start I would like to remind you that our discussions during this conference call will include forward looking statements. All statements that are not historical facts or nearby identified as forward looking statements.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated by such statements.

Additional information regarding these factors in forward looking statement as discussed under the cautionary note on forward looking statements section of the earnings release that we issued today as well as under the risk factor section elsewhere have often knows his most recent form 10-K that as filed with the FCC and available at their website FCC Dot Gov and on our website at up to knows Dot com.

You are cautioned not to place undue reliance on forward looking statement.

These statements during this conference call speak only as of the original date of this call or any earlier data indicated in such statement and we undertake no obligation to update or revise any of these statements.

We will now make prepared remarks, and then we will move to a question and answer session with that I'll now turn the call over to Peter Millar Theater.

Thanks, Jonathan it good morning, everybody.

We appreciate you joining us for our fourth quarter update.

We get started for business update I'd like to introduce our new Chief commercial officer, Dikla belly, and let you know how delighted we already have Dick joining David Fabry, John Peter cans in the rest of our talented and experienced commercial team.

Tickets over 20 years and great results as a commercial pharmaceutical leader with Pfizer, where he was most recently the president of the North American inflammation in immunology business.

While the Pfizer he grew several blockbuster brands, including Lipper tour by Agra, Chantix and most recently Xeljanz, which grew from approximately 250 million in 2014 total $1.5 billion between 1900 VIX leadership.

Thank you enjoyed getting to know Vic thing for yourself why we're so excited to have one the team.

Starting on slide three.

Well go in more detail in a moment, but I'd like to start by providing five key takeaways. We believe are supported by the details in todays presentation.

First.

As we close our first full year on the market. We feel our 2019 results indicate that we've adopted a successful commercial strategy that is driving strong expense growth.

As evidenced by six consecutive quarters of robust prescription and share trends.

Second there's a substantial opportunity ahead for expense despite a significant share gains over the past year, great deal of potential remains available for us to realized in the future.

Third our cash position is strong and $147 million as of December 31st 2019, and the Farmacon financing. We closed in September has the potential to provide incremental cash up to $70 million totaled 220, 21, including 30 million we added recently.

For a full year 2019 financial performance was aligned with our company guidance.

[noise] fit.

We are providing some additional company guidance related to first quarter and full year 2020 performance, we hope that our ability to deliver on our guidance in 2019, we see everybody on your valuation of our projections for the year ahead.

Turning to slide four.

Since the launch of expanse, we focused largely on how we have performed on a quarter over quarter basis with the end of 2019, our first full year on the market. We thought it would be useful to take a step back to evaluate our annual growth and provide a broader perspective on what our team achieved in 2019.

For the full year of 2019 expanse net revenues increased 330% to $30.4 million approximately 154000 exams prescriptions were filled an expense net revenue per prescription averaged $198.

Both the expanse net revenues and expenses net revenues per prescription we align with our guidance.

In addition, we were disciplined with respect to our expenses for full year 2019, we are $125 million of operating expenses, which was better than our guidance.

Today's launch update I'd like to dive a little deeper than we have in the past and the measures that we used to monitor performance and give us confidence in the growth potential of expense.

Turning to slide six.

I'm encouraged by the strong growth in total prescription volume we delivered for the last five quarters. However, knowing that we believe that underlying demand for a product underpins the mid to long term success of the product. We believe it's important to dive a bit deeper and understand the relative contributions of new prescription demand and we filled prescriptions to our overall prescription volumes.

Both new and refill prescriptions are important.

Both in new prescription suggest increasing customer interest in using the product and each new prescription Greece the potential for multiple future we fill prescriptions.

[noise] [noise] in fourth quarter 2019, there were more than 21000, new prescriptions of expense that was a 19% increase compared to third quarter 2019, and more than twice the number of new prescriptions in fourth quarter 2018.

We believe the continued to generate strong new prescription growth at this point to launch is a very good sign of the health of the business it contributes to our confidence in strong long term future growth.

Turning to slide seven.

In fourth quarter 2019, there were approximately 33000 refill prescriptions have a chance to 31% increase compared to third quarter 2019, and more than six times the number of Reefal prescriptions in fourth quarter 2018.

In the refill area, we're very encouraged that through 2019, we've seen a substantial increase in the number of prescriptions per patient per year. In fact, we observed a generally increasing trend in 2019, and we are now approaching four prescriptions per patient per year through our preferred pharmacy network.

We believe this level of prescription refills is an indication in a real world practice patients are finding expense to be helpful. In treating their current condition.

Turning to slide eight.

Pulling the new and we filled prescriptions together the total number of expanse prescriptions in fourth quarter of 2019 was approximately 54000. This represents 26% growth over the third quarter 2019, and compared to the fourth quarter of 20 team an increased by nearly a factor for.

Turning to slide nine.

We believe there was a large market for a chance and therefore believed that there was tremendous upside the remains for the product in the current target audience that physicians.

Growth in its hands chair expressed as a proportion of all international Stewart prescriptions written by physicians and our target physician audience was rapid and steady in 2019.

Share increased from 0.9% in fourth quarter of 2018% to 3.5% in fourth quarter of 2019.

We believe it is more physicians continue to observe expanse treatment results in their own patients. They are likely to continue to increase their prescribing of expense, which will result, and continued strong growth.

When we asked these physicians why their prescribing expands at these levels. They typically respond they've found for themselves with the product really works for their patients and report that act expanse access and affordability has proven to be better than they originally expected.

We believe both of these factors may become increasingly apparent to positions in our target audience during 2020.

Overall, we are confident the continued execution against our current commercial model and increased share in 2020 and continue to convert positions from really experimenters to more substantial wires.

Our plan includes a continued focus on communicating expanse efficacy and differentiation.

Providing seven day samples and trial programs. So physicians can more easily see results in their own patients and communicating our support for patient access and affordability.

So the last point, we're providing our salesforce new tools to educate physicians on the actual access and affordability. We've achieved in today's environment, because we're finding that many physicians have a core belief that it is difficult for any recently launched branded product lucky chance to gain strong access and affordability.

I'm pleased to report that as we enter 2020, we continue to have expanse coverage approximately 75% commercially insured lives with the significant majority of all commercially insured patients paying between zero and $30 after application of our co pay savings.

This is a strong access and affordability message and our sales team will continue to educate physicians on our access and affordability.

I'd also like to note that in January we hired eight new territory managers for deployment into new geographic territories to further boost growth in 2020.

[noise], we treat a condition with easily recognizable symptoms and were market research suggests a substantial number of people have dropped out of regular care in frustration over available treatment options.

Because of this we continue to believe that in the long term direct to consumer advertising could play a stronghold in building the business.

In 2020, we're continuing to take a disciplined approach to experiment experimentation with DTC marketing.

I'm pleased to report that our single season multichannel test market pilot in Cleveland Charlotte in Hartford in 2019 produced encouraging results with regard to the ability to produce patient awareness of expanse and also driving 10 to act on that interest.

However, before jumping into a broader and more costly deployment. We would next like the test ways to increase the efficiency with which activated patients can be connected with the physician who is knowledgeable about expense.

We believe that increasing the rate, which patients are able to find physicians well informed on expense could increase the rate, which DTC activated patients ultimately receive treatment with expense.

The next step we will be extending the pilot in the same cities during the spring season of 2020.

Turning to slide 10.

Another measure of performance that we monitor is the number of physicians, who have patients filling a certain number of prescriptions per quarter.

What you can see is that both the both breadth and depth of prescribing has increased over the last five quarters, specifically, both the number of prescribers and proportion of prescribers, who write more prescriptions have been increasing.

Starting breath.

In fourth quarter 2019, more than 5800 physicians had a patient though at least one prescription of expanse, an increase of 15% compared to third quarter, 2019, and an increase of more than 90% compared to fourth quarter 2018.

Regarding debt.

The number of physicians, who had patients fell more than 15 prescriptions in the quarter has grown even faster with a number of physicians with patients filling greater than 15, increasing by 25% from third quarter to fourth quarter and by more than six fold over fourth quarter 2018.

It's important to note that the average number of prescriptions for the fourth quarter. Among the 828 physicians in the top group was approximately 40.

The us in fourth quarter 2019. These physicians were responsible for approximately 33000 prescriptions were 60% of our total prescriptions.

As described earlier, we believed that this growing subset of physicians have adopted expanse as part of the treatment paradigm due to results. They are seeing in their own patients and their experienced an access and affordability are not generally a barrier.

We believe this sustained trend is indicative of one key mechanism supporting continued growth of the product and of the future product potential as an increasing number of calling on physicians become full scale adopters.

With the expansion of the called on universe, such as additional new territories, we can reach for an additional growth level lever and with the third lever a future DTC to activate so called dissatisfied dropouts. We believe we have multiple avenues to future growth.

In a few moments I'll update you on a chronic sinusitis program and provide some closing remarks and now I'll turn the call over to our CFO Keith Goldan for comments regarding fourth quarter and full year 2019 results and perspectives regarding full year 2020, Keith.

Thank you Peter and thanks, everybody for joining today.

Turning to slide 12.

As we reported up to those recognized $11.1 million.

Expense net revenue in the fourth quarter and $30.4 million for the full year 2019.

This is consistent with previous full year guidance for 2019.

As noted on prior calls one of the metrics that we track.

Average.

Expanse net revenue per prescription, which is calculated by dividing net revenue for the quarter.

The estimated number of extends prescriptions dispensed during the quarter and we continue to believe this is a useful metric to evaluate the net revenue generated per prescription.

Based on available extends prescription data purchased from third parties.

And also on data we received directly from our preferred pharmacy network partners. Our average expense net revenue per prescription for the fourth quarter 2019 was $204, which was an increase over the third quarter average of $202.

The increase from third quarters, primarily result of our need to provide less co pay assistance is more patients out of pocket maximum as the year progressed.

Typically once a patient meets the puckett threshold for the year insurance benefits pick up more of the cost of the prescription drug which in turn reduces the amount of co pay assistance provided by affordability program.

As highlighted earlier, but full year 2019.

Projects hands net revenue per prescription was $198 also consistent with prior guidance.

Moving to slide 13.

This morning were discussing our initial first quarter and full year 2020 guidance.

Thoughts around guides.

First we expect full year 2020 expense net revenue to more than double on a year over year basis.

As part of that expectation, we anticipate first quarter 2020 expense net revenue to decrease.

Compared to fourth quarter, 2019 expense net revenue of $11.1 million.

I will discuss this in more detail, but the primary driver for the sequential decrease for revenue in the first quarter of 2020 is our expectation that Q1 2020 average expense net revenue per prescription will be between 120 in $140.

For the remainder of 2020, we expect expense net revenue prescription to improve substantially.

We are confident that expense net revenue per prescription will improve for the remainder of 2020, because the major factors that influence our gross to net deductions had not experienced structural changes relative to where they stood for then for the final nine months of 2019.

Overall market access, which drives rebates is generally consistent and the terms of our co pay assistance program are unchanged.

The expected decrease in expense net revenue and average expense net revenue per prescription from the fourth quarter 2019 is primarily driven by two effects that we believe our common for chronic treatments in the pharmaceutical industry.

First like last year, because because of patient insurance deductible resets that occurred in January we expect greater first quarter co pay support to be provided by us under our assistance programs, which blunt the out of pocket expense effects of deductible resets on patients.

The second factor contributed to this decrease is the delay or loss of refill prescriptions by patients.

Whose insurance coverage changed with the new year.

We feel prescriptions as Peter just discussed made up a luxury much larger proportion of our business in the fourth quarter 2019 than they did in the fourth quarter of 2018.

These prescriptions are relatively more profitable than a new prescription because a higher proportion of these patients have insurance that covers expanse.

Patients, whose insurance coverage changes with the new year for example to a different and sure can experience a delay in refilling the prescription if a new claim needs to be process before a refill can be provided.

Moreover, some proportion of the patients are lost.

We believe expanse refill prescriptions experienced some of this effect in early 2020, which will create downward pressure on both expense net revenue and expense net revenue per prescription in the first quarter of 2020.

Well, we believe is important for investors to here is that we remain confident in the prospects for growth in 2020 as new patient demand remains strong.

And we believe the effects on average Ics hands net revenue per script and due to insurance changes should resolve within the first quarter of 2020.

Third our initial guidance for 2020 operating expenses includes increases associated with key commercial and development initiatives.

These include the Annualization of the early 2019 expansion of our Salesforce as was the recent addition of approximately 10, new field based commercial team members to fill new sales territories and engage with our key opinion leaders.

As was the conduct of our chronic sinusitis clinical trials and an increasing number of clinical sites.

For the full year 2020, we expect total operating expenses to be in the range of 148 million to $153 million of which approximately $12 million is expected to be stock based compensation.

Total operating expenses, excluding noncash stock based compensation are expected to be in the range of 136 million to $141 million.

I will now turn the call back over to Peter to give a brief pipeline update and closing remarks, Peter Thanks Keith.

Turning to slide 15.

Additionally, the launch of enhanced with the current indication we believe significant additional long term value can be created by achieving a first ever therapeutic indication for the treatment of chronic sinusitis.

This new indication may increase the effectiveness or promotional access in the significantly expanded target target audience of over 40000, physicians treating and incremental 7 million patients more than doubled the number of patients currently treated by the anti allergy specialty audience. We're currently calling on in effect. We believe this indication can help increase the leverage we can.

Obtained with the incremental growth levers are as referred to earlier.

Today, we announced that we expect topline results from the second of two pivotal CF trials in the second half of 2021, which lines up with our previously issued guidance for the first pivotal tribal first pivotal CS trial.

We look forward to providing future updates on the CS program, which we find particularly exciting.

This is because the EPS is an indication for which we believe its hands can be the first ever FDA approved drug treatment and because it is condition with very high prevalence, which is treated by substantially expanded universal physicians.

Turning to slide 17.

In closing what we hope you heard in our prepared remarks is that we're confident that our commercial strategy can continue to drive strong growth for chance in both prescriptions and net revenue in 2020 as it did in 2019.

Our growing yet still modest share penetration is indicative of a large market that offers great potential for not just 2020, but going into the future even within our current audience with our current indication.

In addition, we have a strong balance sheet bolstered by the recent addition of $30 million with future potential to access up to another $40 million in the year ahead.

Our cash position well, but stay heads down focused on execution of our commercial strategy.

We have delivered 2019 performance in line with our public guidance.

Our ability to deliver on our commitments to our stakeholders, including investors is important to us.

And finally, we provided initial corporate guidance for first quarter and full year 2020 to better informed this audience about our expectations for the year ahead.

Look forward to future updates. Thank you and now I'd like to open up the call for Q in it.

As a reminder to ask a question you need to press star one on your telephone.

So as draw your question that's account.

Please standby why we compile that you've been a roster.

Our first question comes from Gary Nachman of BMO capital markets. Your line is open.

Hi, good morning, guys to achieve a more than doubling of revenue for 2020. What are you assuming for net revenue per prescription compared to 2019 on a full year basis up down or flat and do you think repo rates will continue to increase as part of that from the level you saw.

For Q, then have a couple of follow ups.

Sure Gary This is Keith Thanks for the question and good morning, I'll take the first part of the question. So just to back up a moment in the past I'm going back to last year. We provided average net revenue per prescription guidance for expanse.

Beginning in the first quarter and waited until our second quarter call on August to provide full year.

Net revenue guidance.

And we did that because in January we weren't even four quarters until the launch and when we gave guidance. We wanted to make sure that we're confident that we could achieve.

The achieve the numbers that we were sharing with with the public.

Starting this year.

We're going to.

Change that and give as we did today.

Guidance on net revenue today, we set the floor for for 2020 at least to more than more than doubling our 20.

2019 numbers and we're going to pull back from given specific guidance on average net revenue per trx that being said.

I think it's reasonable for you to assume that the cadence follows relatively similar pattern to that that we saw in 2019 and Thats really for two main factors, which I commented on in my remarks.

Number, but and that's all around the fact that Theres no structural changes this year and the two biggest factors that are affecting our gross to net deductions the first speed.

Market access we expect to pay rebates that are similar to the rebates that we paid in 2019, and secondly, with co pay assistance there've been no changes to our co pay assistance affordability program.

And that gives us confidence that the pattern of increase that we see throughout the year in average net revenue per trx.

It should should follow similar pattern.

Hey, guys anything I'd add to that this is Peter is just that obviously, we had a more pronounced effect of this turn of the calendar effect as we call. It. We are the same effect on the copay reset, but we did have a bigger effect. This year because of the refills that we talked about the owned keys remarks on but as Keith said, we feel we're already sort of seeing the effect.

Washing through so we're confident that as the year goes on will sort of normalize to sort of where there should be anything dramatically different from last year across the balance of the year on refill rates Gary.

I think you know approaching four in terms of the patient prescriptions per year is a very good number for a chronic med did say since a bit symptomatic.

So we think for is going to continue to be sort of a good number relative to think about the refi the number of prescriptions per patient per year.

But what's encouraging Gary you sit a see how are we even as our new prescriptions are growing because we're getting four prescriptions per patient per year. The refill percentage just continues to climb and we expect that to happen across this year as well.

Okay great.

And then just.

Well, we looked at I Q via acute confirm if that's the reflecting about 85% of the volume. So as you add more specialty pharmacies to the network does that percentage go down and maybe just give us the status of the specialty pharmacy network at this point.

Yes, again, and then just one last one.

I'll start and now just you know how have the additional reps been helping are they going after additional physicians are they helping the go deeper with existing riders. So are they moving or it's a plan for them to move stock more into the higher volume bucket. So just talk about how you expect progress on that.

Brian with the help of the new reps. Thank you.

Sure Gary. Thanks. This is Keith ill take the first part of that question and let Peter answer the second with respect to a Q via.

We understand this is important because a lot of view on the phone rely on the data.

To predict.

Total prescriptions.

Just doing the math for you in the fourth quarter. If you take the scripts that we reported as Trx and slick their key via numbers.

It would indicate that accuse caption about 84%.

Of the total scripts now looking forward over longer periods of time, we believe that 85% approximately 85 is a is a good.

Metric to use in terms of the capture rate for Acuvue. However, I can mention that in early 2020 that first quarter. Thus far we have seen or a decreased correlation between Q via estimate and the Trx is that our reported by our PPNR that report.

Directly to us.

All right that we have we have.

Perfect data from that perspective.

We you know I would I'll say hope and expect that that.

Oh decreased correlation would correct and as I just mentioned in the long term, we would expect that to returned back to the an 85% capture rate.

Hey, Gary on the network itself by the way is we're really pleased with the network we've built and.

Have a great team manages it.

Senior leadership from our company meets with senior leadership of many of the companies are working with so we really believe that we're building something that's really valuable to the business and as I look to the future of the company, which I'm not going to talk a lot about today, but as we think about new products eventual being brought in the company. We think the network we're building on the pharmacy.

Side is very interesting both in terms of getting higher percentage of patients when first Phil versus a retail channel also getting more refills than you typically get into retail channel. So we're feeling really good about the network overall on in terms of reps and the role they're playing I think you know relative to the roughly 28 rep.

Yes, we've added since the start of the.

Of our initiating in 2018, the huge majority of those reps or going into new territories with new doctors, so they're not necessarily increasing frequency on the current called on audience that really going after new targets largely in new geographies high value targets by the way I might add on we are.

We're seeing by the way that those reps are producing benefit reasonably comparable in terms of the ramp if you will than what we saw in the established territories in terms the ramp that we saw in those territories. This thing I'll add Gary in is that obviously, we're always evaluating the business in the responsiveness of sale of sales.

We just completed a pretty extensive promotion response analysis and the good news is we're seeing good response from detailing effort.

By our reps on doctors and all off say is we're evaluating ways to increase the frequency.

So we get on doctors.

As we find when we get more frequency, we get more business.

Okay, great. Thank you.

Our next question comes from Ken Cacciatore of Cowen and company. Your line is open.

Good morning, guys. Congrats on all the progress just wanted to get an update on do you think that managed care level that you're right should increase or is that what we're going to be working with and then.

You have about 5900, prescribers and I know you're doing this more focused DTC.

Experiments and.

And obviously, having the breadth of clinician basis is critical not just activating the patient. So just wondering in those targeted markets could you just.

Not half the clinician base to the point that should receive these patients just a little confused as to I would've thought you would have had both sides kind of a good managed care access in that region. Good clinician coverage. So just discuss a little bit of what went on there and what kind of level of clinician based do we need before we turn.

This more national and then also like to hear from Victor If you would comment on his thoughts on what do you want to do differently and what do you want to build upon there or any anything that they are you seeing that could have that could further help the great progress you guys have had thank you.

Yes, Ken Thanks for the question I'm excited to have Vic give his thoughts I really am thanks for asking.

Relative to market access can you, 75%, we'd been stable. There you know for a bunch of months now really across nine months 12 months or so.

We do think there is opportunity to improve.

When we get that Ken is hard to predict honestly, but we for sure believed there is another five points out there of improvement and market access, we're certainly working hard to get it.

And I'm not going to give any kind of guidance as to when we expect to get it but I think theres a reasonable likelihood over the next 12 to 18 months, we should be able to improve this.

As I as we said on past calls we have a good story in the market access front.

Relative to DTC I think your question was really about what's going on there indigo add a little bit in little bit of color.

We have a really good add that we know for sure is activating patients and we when we know for sure. We have patients who have an interest to being activated we measure that all sorts of ways by tracking in the market in terms of awareness as well as looking at our website activity in those regions. So we're confident at this point that we use.

Deliver a message even in a nasal polyp environment not in the broader indication and we get a fair amount of patients interested.

What we're working towards as you know we're currently in specialty audience.

And we're trying to do two things one is can we direct activated patients to our target audience by by tools on our website and other needs and can we provide patients with the right tools. So that if they go to a physician who may not be is aware of his hands on that we can converted if you will into a square.

Yes.

So and by the way one one season is frankly really not enough to evaluate a test if you will in my view that it really does take time traditionally in become public comment on he's got great experience in DTC one of the reasons, we brought them among many frankly on so hopefully that added a little bit of color can but here's what I know.

I know for sure DTC eventually will play a significant role in this business, whether or not we can do it in the it with a more concentrated physician audience is what we're sort of evaluating this point.

So vik I am delighted to have you make some comments, yes, thanks theater and Ken. Thanks for the question I mean, it's been a real pleasure to join this team and to see what they're doing to connect what I see is a really differentiated product with the with patients.

I'd start by saying I think it's I think team has been tremendous work to gain access to this product for patients I mean, the access metric that Peter shared are very strong and I think we'll continue to look at ways to want to make sure as many patients as possible access.

Two takes hands and what I mean by that is both improving the percent of patients who have coverage as well as making as you as possible for physicians to choose that product.

And secondly, Peter talked about the number of physicians were choosing at regularly within their patient population I think there's a tremendous opportunity to broaden the base and we're going to look at ways that we can get.

Even more physicians to make it a regular part of their practice, we track pretty closely the number of prescriptions be right in the marketplace and and Theres a lot opportunity to broaden that well.

You asked a question about direct to consumer advertising, we absolutely see that all those dissatisfied patients on new reason to step back into the market and we're going to look at ways that we can activate those patients and help them understand the.

<unk> expense could be could be a step forward for them.

I will give vik the benefit by I think is on day 12 on so but I'd say, we are just couldn't be more delighted how is fitting with the team and some of the fresh thinking in new ideas to build on what we think is a very successful commercial strategy.

Great. Thanks, so much.

Thanks, Ken.

Our next question comes from David Amsellem of Piper Sandler Your line is open.

Thanks, So I wanted to talk.

Yes, sorry about a.

All year long term plans for the sales organization into that extend thank you had favorable data and the non followed setting and you can get that differentiated data on until the label all Peter I wanted to get your thoughts.

You talked about this.

In the past as to what's the extent to which you would sandal sales organization.

How deep into the general practitioner community would you have to go and I think in the past but alluded to.

Central Copromotion so.

I just wanted to reprising that topic and yet your latest thoughts.

Now you're thinking about thank you.

Yeah and also the ticket in a couple places David Thanks for the question by the way.

We feel we're building a strong organization any anti allergy, we're very pleased with the sales team the penetration we're getting so within the anti allergy.

Thats going to be this company's focus and I was sort of alluded to this earlier and I don't want to get into too much because we're still in the evaluation phases, but we know we have a promotional expensive responsive product we know it.

And when we get more details we get more scripts so even in the anti allergy. In addition to getting to new doctors were evaluating ways that we can get increased frequency on those doctors efficiently and obviously, that's very very vital so within the empty out and I know you'd initially ask it but I wouldn't you asked about sales force generally.

I just feel really good about our ability to build a really good business any anti allergy and our view is that's going to be what opt in those is going to do really well and we I alluded to earlier the expanded indication.

Potentially unlocks a significant opportunity in roughly 40000 primary care doctors treating 7 million patients and we think theres two ways to do that.

You know candidly the preferred way to do it David would be through partnering and find a partner who has broad deployment in primary care with other products, because obviously a lot more efficient to multiple products, calling on an audience and that is a you'll candidates our preferred way, we've been very sort of public about that on but.

It unlocks as you can imagine enormous potential on in lieu of partnering or I should say in a parallel evaluation. We can expand on in primary care, we're already calling on approximately 2000 primary care doctors today, we could increase.

The reach to those doctors.

I don't think we'd ever get to the full audience frankly, because it's very hard without the efficiency of other products in the bag.

So that answers your question because if you have anything to add to that no I think that sums it up.

We're excited about so very very excited about the potential the product and with the indication.

Thats helpful color.

I guess as a related question well with new our sales organization Leverageable assets.

Active are you looking at assets.

Going into the company and.

In Mad men are you willing to take on in all R&D as far development stage assets help us understand your thought process there.

We're friends getting pretty active David in evaluation. So we really clear we're in an evaluation stage right now job one is to build expanse and our view is we just can't take our eye off that ball in the near term and we don't want to distract the sales team as we know we have approached promotion responsive product and so our.

Our focus right now on our effort is how can we really build expanse into the business that it can be having said that.

We're on our way to building a really successful product we do have.

Capabilities as you said that are absolutely leverageable.

So we're in discussions David and I I think it's fair to say that in the near term ill defined as you know certainly the next quarter to three to six months, we're focused on expanse, but.

Beyond that timeframe are we considering opportunities we are on and our real focus David is on near term opportunities I mean, we we understand with our current cash position, even though we feel really good about cash we're going to be really careful about using cash. So we're going to look for later stage assets frankly.

And those are the kind of discussions we're having currently that won't require significant use of cash but can produce benefit commercially and as we continue to build the business. You know wolves, we'll think about going in earlier stage develop development of products, but for now the focus is large and later stage.

Okay, great. Thank you.

Our next question comes from Brandon Folkes of Cantor Fitzgerald. Your line is open.

Hi, Thanks for taking my questions and congratulations on the progress and soon to see just switching back upon the full prescriptions per patient per year.

Do you have any color you can add as to whether these are deferring between patients hey, using enhanced product.

Yes, and then secondly, you talked about getting more frequency with docs. What do you think gets these prescribers into that high prescribing category is familiar today to patient experience. We're just perception of reimbursement. Thank you.

Relative to first question. Thanks brand for the question led the way relative to the use of the product in polyps versus non polyps. We obviously don't have a lot of good data on that crane and so it's hard for me to comment on it.

I think you know we have a fair amount of the use outside of the polyp indication. So it would suggest that.

We have to be getting reasonably good frequency if you will.

Of the use of the product outside of nasal polyps and going back to the core disease and it was spent too much time on sprint, but you know the diseases chronic rhinosinusitis. Some people have polyp. Some don't the symptom symptomatic nature of the product is reasonably the same whether you have polyps or not politicians are little bit more severe the tape.

People tend to suffer but reasonably the same throughout the year because the disease is reasonably the same and people suffer four to six months of the year, whether you have polyps or not so I.

I would expect you wouldnt honestly see much difference, but we don't have data to support it.

[noise] relative to.

What converts a doctor what makes one of those 820 doctors, who really have adopted the product.

I'd like to use the simplistic term brand in the dock believes it's worth it and worth it's comprised in my view of their convinced that the product is differentiate on efficacy and we have enormous benefit here I've talked about this a lot we really do work and we have two ways doctors get feedback by the way the first is.

From patients because its symptomatic so unlike asymptomatic conditions the patients a dock I'm feeling a lot better so that builds confidence in the product as I've talked on prior calls, especially any in T.. We also have the benefit the doctors can observe objectively whether inflammation is being reduced in the knows the endoscopic.

And or scans, so doctors, who get converted they first and foremost have to believe that the product really does work and it's where we feel so good about the long term prospects of this business because we do we know that in a real world setting. In addition in the clinical trials. The second piece of is it.

Worth it is really about access and affordability and I mentioned is on the call doctors today come in with a perception that any new product is going to have bad access and affordability based on the recent experience, especially in our category by the way because were several products launched across the last three to five years that did not achieve good at.

Access and affordability. So we have to should a battle through the perception that you're not going to have good access and affordability.

And that is why we talked about some of the things we're doing the arm our reps because we really do as Vic commented we have good access we have good affordability.

And then candidly we do have some prior prior authorizations associated with the product that our sales team has to make sure. They work with the physicians on to really limited.

The actual not just the perceived on is it worth it for the dock in the staff. So that was somewhat of a long winded answer, but it's where our focus is on them. We we feel really good about the data we have one physician perception of efficacy the area Vic is coming in and we've been really folks.

On even prior to Vic is giving the salesforce tools to help the dock really understand our access and affordability.

Great. Thank you very much.

Our next question comes from David Steinberg of Jefferies. Your line is open.

Okay, great. Thank you as a strict listings.

First one is.

Related to to pillow, Matt I know, it's been on the market a little while and it's it's a different approach to treating nasal polyps is for refractory patients and add on therapy, but are you seeing any impact either positive or negative mix has thus far.

Secondly, with regard to DTC I think you made a comment either that you're encouraged by the three cities you have a pilot program it but you're not going to expand any further you're going to do some more work. There. So does that does that imply that.

This for 2020, youre not going to expand DTC to additional cities or even do national ads.

And then thirdly I just wanted to check on your supply chain implicitly do you have a more complex because it's not just to drag its drug plus the device Thanksgiving going given what's going on nonaccrual loans are you seeing any disruptions or do you see any potential disruptions in any part of your supply chain kloeppel effects.

Thanks, David Thanks for getting up early by the way.

It's early out there on relative to picks and.

They are taking a different approach I think you know David they were studied in in a really pretty severe now population and.

What the doctors and it's really intended to be used after sort of everything else has failed. If you will in terms of how the product was studied and how it some and frankly priced that its such that thats really where it sort of fits in treatment.

I think you also know by the way that.

Dupixent was studied on top of an international spray so that all of the studies in and the way docs.

Our our using it is on top of an entry list price I set that up sort of his background on we've not seen a dramatic impact David on Dupixent candidly they are growing their business if you listen to.

Commentary.

From Regeneron and Sanofi, but in terms of this number of patients. It they're building a lot of revenue because of cost per patients very high but the number of patients has not been dramatically impactful on our business on and as I said, we think theres an opportunity to be complementary with Dupixent is we think about you know a co positioning.

And talking to the Doctor about how you can think about both therapies.

Relative to DTC.

That answer your question Rami I don't have anything to add on Dupixent.

I think that was clear thanks.

Relative to DTC candidly, David it's too early to tell on expansion in 2020.

We just have a lot we're still learning we're going to be very careful in measured I think it's.

Probably less likely than more likely to be significantly expanded in 2020, but.

It's all about what we can learn about on how you get patients to the right doctors or frankly, how you can get more doctors aware of the product and efficient means.

And to be clear because patients a lot of patients go to primary care. If we don't have coverage on those doctors.

You may not end up and with an activated patient ending up with a prescription. So that's the area that we're focused on.

[noise] supply chain David I.

I feel great about our supply chain.

It's it's not as complex as you think you know because we're making placid plastic injection molded parts, we really have our arms around that business have lots of capacity in the molds that we build lots of sites to doing assembly and we've got a great team that works on that by the way on and relative to making the drug substance, we understand that very well.

Now so relative to current situation.

We're very confident in supply chain relative to potential future impact of Corona virus and things of that nature on we don't have a lot of.

The huge majority of our parts in our facilities are in areas that are not currently significantly impacted by Corona virus, and we sort of remain confident in our ability to continue to supply.

And David just to this is Keith just to.

Add to Peters comments about TGC, which as you know we're extremely mindful cash and from a from a budget perspective, we have not allocated beyond the beyond the.

The testing Thats continuing in the three markets as Peter mentioned, we have not.

Allocated for an expansion of GTC. This year in 2020, yes. It will you guys know as they were only and expand if we have clear ROI, yes.

Okay. Thanks.

There are no further questions thought to turn call back over to Peter Miller for any further remarks.

Well, we appreciate you joining us and I look forward to our next update.

Thanks very much.

Ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.

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