Q4 2019 Earnings Call
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Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.
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Good afternoon, ladies and gentlemen, and welcome to the watching therapeutics fourth quarter and full year 2019 financial results Conference call. My name is Daniel and I will be your coordinator for today.
At this time all participants are in listen only mode. We will be facilitating a question answer session at the end of today's call. If it anytime during the call you require assistance. Please press star followed by zero coordinator, we'll be happy to assist you.
I'll now turn the call over to the company.
Thank you Dan Good afternoon. This is Scott Young Vice President for corporate Communications and.
Investor Relations.
Before we begin I would call your attention to the metric slide that we will discuss in today's presentation. Those slides can be viewed directly via the webcast in the 8-K, we issued this afternoon right to the investors tab on flexing Therapeutics dotcom.
In addition, our Q4 earnings press release and an archive of this conference call can also be found there.
Today's call will be led by plexus, Chief Executive Officer, Dr., Michael Clement He's joined by David Archuleta, flexible Chief Financial Officer, and Melissa Lemon Flexions newly appointed Chief Commercial officer.
On today's call will be making forward looking statements that include commercial financial clinical and regulatory projections statements relating to future financial or business performance conditions and strategies and other business matters, including expectations regarding that sales operating expenses cash utilization.
Clinical regulatory and commercial developments and anticipated milestones are forward looking statements within the meaning of the private Securities Litigation Reform Act.
Flexion cautions that these forward looking statements are subject to various assumptions.
Risks and uncertainties whats change overtime.
Additional information on factors and risks that could affect collections business financial conditions and results of operations are contained inflections form 10-K for the year ended December 31st 29 team, which was filed with the FCC today and other filings, which are available www dot FCC dot Gov as well as collections.
Website.
These forward looking statements speak only as of the date of this call inflection assumes no duty to update such statements.
I'll now turn the call over to flexion CEO My Clemens.
Thanks, Scott and thank you all for joining today ill recap our commercial progress in 2019 review, our lifecycle management activities provide an update on our pipeline and discuss our priorities for this year after that I'll turn it over to David for deeper review of our commercial metrics and.
A summary of our financial performance and then we will open the line and take questions.
To begin as we reported today, we recorded four years old read a net sales of.
$73 million for 2019, which is fully in line with a preliminary unaudited revenue estimate we provided in early January we're very pleased with our sales performance in 2019, which represents growth of more than 220% compared to our 2018.
Full year net sales of $22.5 million.
Those numbers tell a very compelling story and they speak to the outstanding work of our field based teams.
The excellent coverage, we have for Zilretta the impact from our judicious use of volume based rebates, but most importantly, our sales performance speaks to the remarkable experience that patients and clinicians are having would still reta.
As you will see in the commercial metrics that David will review by the end of 2019, our customers had purchased 175000 units of Zilretta.
While our data are limited to the account level that number provides a reasonable surrogate for the number of patients who had been treated was already.
Since it was introduced to the market in late 2017, and we know that many of those patients have received unprecedented pain relief from Zilretta.
I see it is based on real world feedback from the countless conversations I've had with grateful zilretta patients and their physicians feedback that as wholly consistent with our compelling clinical trial data.
In fact last year, we became aware of several professional athletes who receive zilretta, namely Rod what's in the NFL Hall of Fame defensive back it was named as one of the top 100 players of all time.
Michael Ruzziconi, the captain of the 1980 gold medal, winning U.S. Olympic Hockey team and the player who scored the game winning goal against the Russians during the Miracle on ice and Chris Dickerson, a former outfielder who play for the New York Yankees and other major League baseball teams.
Firms to know blowing a drive way to playing with their children and grandchildren jogging for the first time in years. They all have profoundly moving stories about how zilretta has helped each of them manage their neo a pain and thereby improve their ability to participate in regular everyday activities.
As part of our ongoing physician marketing initiatives, we brought all three athletes together at a major orthopedic conference last December where they and their treating physicians spoke to a standing room crowd of some of the country's leading sports medicine experts. They shared their stories of household read it has helped them.
And the best words, I can use to describe that session, our inspiring and humbling.
While all our elite athletes their zilretta stories Echo the scores of emails and letters I've received from patients who are so grateful to reengage in things they love doing with.
Less pain from gardening, playing around of golf walking on the beach hiking. Each of these stories serves as a reminder to all of us that while we have impacted more than 175000 patients.
There are 15 million people use either dr. every year for owe a knee pain and 5 million of them receive an intra articular injection.
Opportunity for Zilretta inflection is truly massive which brings me back to our performance in 2019 and our goals for 2020.
Throughout the course of 2019, we saw existing practices increase their use of zilretta and more than 1600, new accounts start using the product.
Today with the benefit of two years in the market. We have actual claims data that shows some slight changes in the payer mix versus our assumptions prior to launch we now see that the actual payer mix is skewed slightly more toward Medicare, which accounts for roughly 55% of the market versus previous estimates of 50 per.
Percent.
40% is still commercial but Medicaid VA and 340 be plans are making up roughly 5% of the mix.
We view this modest increase in Medicare patients to be incrementally positive as Medicare patients can be injected the same day, they visit without any need for prior art.
Through position. In addition, it is important to point out their commercial coverage for Zilretta remains excellent.
As we discussed in December the recent approval of our Sndk, resulting in a significantly improved label.
Which most importantly removed the owner is not intended for repeated administration wording in the limitation of use statement within days of the approval, we developed material to help RMB EMS communicate the label update.
And we have anecdotal feedback from the feel that tells us that the changes have been very well received wildly clearly view the label update as a tailwind.
We have always said that we continue to believe that the meaningful impact will be seen over the following quarters in years.
From a commercial perspective, our progress in 2019 strengthens our belief that so read it can become the new standard of care for the intra articular treatment for OE knee pain in the years ahead.
While under normal circumstances. These factors would give us confidence that our 2020 zilretta net sales guidance.
120 million to $135 million is both credible and achievable like all businesses. We are acutely attuned to the potential impacts of the Corona virus global pandemic and we are monitoring this time I.
Dynamic situation very closely to date, we have not seen any material impacts on zilretta sales.
Our ability to access customers or to initiate our clinical trials.
However, it is impossible to predict how the outbreak could evolve in the months ahead or what impacts more aggressive social distancing or other containment efforts might have on patients or practices.
Regarding our supply chain. We believe we are in a very strong position, we do not source any of our key materials from China and we presently have approximately 10 months worth of finished product inventory in our warehouses in the U.S. Furthermore, we have an additional 12 months of EBI.
Triamcinolone Acetonide at our manufacturing facility in the UK.
Again, it is impossible to predict the long term impacts of the outbreak, but we feel very good about our ability to provide so reta to patients over the quarters ahead.
Shifting to our clinical development activities, our phase two trial to investigate the safety and efficacy of Zilretta in shoulder away entities of Capsulitis also known as frozen shoulder syndrome continues to advance and we anticipate data from that trial in 2021.
As we've previously discussed these two conditions combined account for roughly 800000 injections and they present an opportunity for us to expand the used to zilretta with a subset of Orthopedists, who primarily focus on sports medicine, and commonly treat these conditions with Steve.
Alright injections.
With respect to our pipeline, we've also been making progress with our two drug candidates FX to a one and FX threeo one.
FX to a one is our gene therapy, which holds the potential to provide oh, a pain relief for at least a year improve function and potentially modified disease.
As we announced last year, the R&D for FX to a one was accepted by the FDA and we recently treated the first two patients in our phase one dose ranging study.
We anticipate treating approximately 15 to 24 patients who will be followed for 104 weeks with initial readout in 2021.
Now, we'll move to FX thrilled one our NAV 1.7 inhibitor formulated with any thermo sensitive Hydra gel for administration as a peripheral nerve block for control of post operative pain.
We held our pre 90 meeting with FDA and we remain on track to initiate our first FX Threeo one clinical trial in 2021.
Unlike typical local anesthetics, we believe the selective pharmacology of FX Frio one.
As the potential to deliver at least three to five days of effective pain relief, while preserving motor function, which could enable ambulate ocean rapid discharged from the hospital.
And early rehabilitation following muscular skeletal surgery.
Finally regarding our search for Chief commercial officer.
We were very excited to announce the appointment of Melissa Lehmann earlier, this week and I'm delighted that she's able to join us for today's call.
As we've said repeatedly in our search for CCOH, we were looking for someone who had had success leading an entire commercial enterprise, who had deep experience and expertise in each of the key commercial functional domains, who added track record as a very strong leader and who would positively contribute to.
Our already strong culture.
Because Melissa fulfills all of these criteria and is simply a terrific person to interact with we could not be more pleased to have or takes the health of our commercial organization.
Before David summarizes our fourth quarter financials and walks through the commercial metrics I'd like to give Melissa the opportunity to make a few remarks Melissa.
Thank you, Mike and thank you for the kind words.
Got you pleasure to be here today in such an honor to join selection.
Barely been in my role for a day I can already see when an amazing people work here.
The team has been welcoming engaging and candid and that was consistent throughout the entire interview process from the executive Committee to the board members.
The commitment to patients and passion for winning has been universal and that was one of the many reasons I wanted to join.
Put simply I can't begin to convey how excited I am about the opportunity that's ahead of us.
The strong foundation, that's been laid by Mike David Steve Myers, and the rest of the commercial leadership team is truly impressive and I'm looking forward to working together to grow zilretta market share and help make it the leading I a treatment in this space.
Over the next few months I'll be working intensively with our commercial organization and I look forward to representing our commercial effort on future calls.
At this point I'll turn it over to David.
Thank you Melissa I'll start by walking through our commercial metrics, which as Scott mentioned can be found on our website K. we issued today.
If you look at slide two you can see thing we recorded to read a net sales of 23.7 million in the fourth quarter of 2019, bringing full year 2019, net sales to 73 million.
As Mike mentioned year over year growth topped 220%.
As in previous quarters, we expanded our list of target accounts in the fourth quarter to 4900 72 and by December 31, 2019, we called on almost all of them.
At the end of the fourth quarter 30, 488 accounts had purchased Zilretta, which is an increased nearly 360 purchasing accounts compared to the ended the third quarter.
As of the end of December.
We had 2600 42 accounts or 76% of all purchasing accounts place at least one reorder for Zilretta.
Secondly, we saw our reorder rate increase in each quarter throughout 2019, and this occurred on the successively growing customer base.
Slide three charts, our quarterly sales from launch through the fourth quarter of 2019, which provides a very compelling view as already as growth in the market, especially since the introduction of the permanent J code on January one 2019.
We do not provide quarterly guidance based on routine seasonality impacts directionally, we anticipate first quarter net sales to be roughly flat versus the fourth quarter of last year.
Moving.
Turning to slide for this slide in the remaining two slides reflect purchases of zilretta by accounts, which represent physician practices clinics and hospitals and various sizes and purchasing potential.
As we look at the distribution of accounts that have purchased theoretically since launch we stayed with the same groupings and weve used in previous quarters accounts that have purchased one to 10 units purchased 11 50 units are purchased more than 50 units.
We continue to see a significant number of accounts with purchases of one to 10 units and as of December 31 2019.
Roughly 1600 70 accounts had made purchases in this range, while approximately 1030 accounts and purchased 11 to 50 units.
In addition, 794 accounts had purchased more than 50 units, which represents growth of 150% as compared to Q1 2019. When 313 accounts had purchased in this category.
Looking at slide number five you can clearly see the distribution of purchases by accounts. Those 794 accounts that have each purchased more than 50 units are in total responsible for approximately 143000 units or roughly 81% of all units purchased since launch.
As we mentioned previously accounts generally move along at utilization continuum from one to 10 units to 11 to 50 units and then more than 50 units.
Importantly, none of our purchasing accounts has fully incorporate zilretta into their practice and this holds true for even the highest utilizers as a result, we believe there is tremendous opportunity for us to increase utilization across each of these groups.
Before I leave this slide I'd like to point out that total zilretta purchases by accounts in the fourth quarter were approximately 37500 units.
Which is lower than that 48600 units purchased in the third quarter.
We believe this quarter over quarter reduction was primarily the result of that broad based rebate program that we introduced in the third quarter.
There was a strong amount of enthusiasm and pent up demand for this program and we believe that some purchases that otherwise would have occurred in the fourth quarter instead occurred in the third quarter.
To a much lesser extent, we believe at the holidays in the fourth quarter.
At an impact.
On the sequential quarter reduction.
As well.
Unless we saw total zilretta purchases by accounts increased by more than 70% in the second half of 2019.
Versus the first half of 2019.
Moving to slide six.
We breakout so rather purchases by new and existing accounts.
In the fourth quarter, we added about 350, new purchasing accounts.
While we expect that eventually see a slowing in the number of new accounts coming onboard each quarter. We continue to be pleased with the progress, we're making with new accounts as a typically work their way through this already utilization continuum.
So at this point I will briefly walk through the fourth quarter in full year 2019 financial results, which we included in the press release issued this.
And in our 10-K.
We reported a net loss of 149.8 million for full year 2019, as compared to a net of 169.7 million for full year 2018, net sales of Zilretta were 23.7 million for the fourth quarter of 2019 and totaled 73 million for full year two.
2019.
The cost of sales for full year 2019 was $10 million.
The fourth quarter 2019, net sales reflect that gross to net reduction of 11%.
The gross to net reduction is primarily comprised the distributor in service fees return reserve.
Sure healthcare provider rebate and mandatory government discounts and rebates such as Medicaid 340 be institutions and Veterans Administration Department of defense as we previously mentioned.
In the third quarter, we started offering rebates to eligible healthcare providers that are variable based on the volume of product purchase. These provider rebates contributed 4% of the fourth quarter total gross to net reduction of 11%.
Research and development expenses were 69.6 million and 53.1 million for the years ended December 31, 2019 in 2018, respectively.
The increase in research and development expenses year over year of 16.5 million was primarily due to an increase in salary and other related costs for additional headcount and stock based compensation expense and increase in expenses related to portfolio expansion and other program costs, including an upfront payment xenon pharmaceuticals.
Related to FX three Irwin.
And an increase in development expenses for Zilretta.
Selling general and administrative expenses were 129.7 million and 121.3 million for the years ended December 31, 2019 in 2018, respectively.
Selling expenses were 96.3 million and 87.3 million for the years ended December 31, 2019, and 2018, respectively. The year over year increase in selling expenses of $9 million was primarily due to salary and other employee related costs and external costs related to marketing.
And reimbursement support activity with all due respect.
General and administrative expenses were 33.4 million and 34 million for the years ended December 31, 2019 in 2018, respectively, which represents a decrease of point 6 million.
Year over year.
Interest expense was 17.1 million and 15.7 million for the years ended December 31, 2019 in 2018, respectively.
We expect that while our operating expenses will continue to increase in the near term.
Primarily driven by commercial activities and supportive Zilretta line extension clinical trials for Zilretta continued development of FX to a one in FX Threeo line and development activities associated with future additions to the pipeline.
We believe we will be able to increasingly leverage our infrastructure in support of these efforts.
As of December 31, 2019, we had approximately 136.7 billion and cash cash equivalents and marketable securities compared with 258.8 million as of December 31, 2018.
In addition earlier this quarter, we fully drew down $20 million from our revolving credit facility, which is secured by our accounts receivables.
We believe that our current cash balance with expected future sales of Zilretta and the ongoing prudent management of our expenses will enable us to reach profitability. However, our projections are based on certain market assumptions, which may or may not be affected by the corona virus pandemic as a result, we will.
Continue to review and reassess our assumptions in light of those factors. In addition, we will remain opportunistic as it relates to potential funding decisions, but we will do what we believe is in the best long term interest deflection and our shareholders.
At this point I would ask the operator, please open the line for questions.
Thank you that concludes our prepared remarks, we will now open the call for questions, ladies and gentleman to ask a question you will need a press star one on your telephone to withdraw your question press the pound key please standby and while we compile the Q on a roster.
Our first question comes from Randall Stanicky with RBC capital markets. Your line is now open.
Hey, Good evening this is Tim buzby on for Randall.
Couple of questions first among the highest described.
Well accounts in particular can you give us a sense of how much more room barriers to grow within those practices that have you mentioned that you havent fully penetrated any of those accounts.
And the other physicians in those accounts aren't using it looks a perspective again.
Hey, Dan This is David so.
As we shared on the on in our prepared remarks and in the deck. We've got almost 800 accounts that have purchased 50 units more than 50 units as iretta launch to date.
The vast vast majority of those accounts.
Credit has not been fully adopted incorporated into their practices and even theres a subset even within those accounts of almost 50 accounts that are purchased more than five hundreds of units of Zilretta launch to date. So there's there's room to run.
With those almost 800 accounts as well as the other accounts that are less than 50 units of Zilretta purchased launch to date.
And in terms of and in terms of the other part of your question in terms of why have they not fully incorporated zilretta. This at this juncture.
The way this will typically work is take a practice with.
Five or six physicians, one or two of those physicians have started to use zilretta and are using enter using zilretta for their patient pop the appropriate patient population, but they're just hasn't been awareness.
And experience with the red afford the other three or four the auction that practice. So it's a process. It's a process for the docks at are treating the existing patients to talk to their colleagues for our our representatives to be.
Making those physicians that are not using zilretta aware of Zilretta getting then comfortable with reimbursement.
So thats really what is going up.
Okay. That's helpful and I guess as a follow up to that.
One practice, if one or two physicians within a practice.
Secured reimbursement as it typically the case that other doctors, who aren't using it may in the future.
They would have reimbursement set up already or is that more of kind of dr. by dr.
No. It's typically at the office level at the clinic level, but it's an issue of just getting familiar and comfortable with reimbursement experiencing reimbursement and that takes those docs that have not achieve that to just go through the process.
Got it understood. Thank you.
Thanks, Sean.
Thank you. Our next question comes from Elliot Wilbur with Raymond James Your line is now.
Thanks, Good afternoon couple of questions.
First Mike I believe you mentioned your commentary that you expect.
One Q2 thousand 20, you read a sales to be essentially flat nurses for Q 19, just want to get maybe a little bit more color behind that how much of that you think is attributable to.
High deductible plans, perhaps influencing utilization versus other factors such as.
Seasonality or just Shortish overall company conservatism in kind of in light of.
Potentially increased macro uncertainty here in the short term.
Yes, so I think there there are few things Elliot so it's a good an important question first just just to recognize historically.
In this space the hyaluronic acid is are typically down 10% in the first quarter with the driver.
Being as you pointed out deductible that is a key driver I think that you also have to look at an older population may be less active in the winter months.
And as a result have less need to go to their physicians are there a couple of reasons why.
There is a basis for.
Relatively speaking the first quarter.
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Other quarters, and why we have guided to flat in the first quarter.
Okay, and then with respect your commentary around.
Some of the data point should emerge from the claims data that you're referring to in terms of the payer mix with Medicare representing now a higher proportion.
How should we think about the relative opportunity with respect to.
Additional growth levers such as repeat administration.
Bilateral administration within the context of a greater Medicare book of business versus commercial.
Yes, it's a good question, we as you know the Medicare population has the opportunity benefit most directly in a sense from zilretta in that physicians can use same day without any hesitancy.
And proceed with confidence that they will be reimbursed they can repeat dose without.
Any concern about reimbursement they can do bilateral injections et cetera.
So we like the Medicare population, we also like the commercial populations very straightforward with Medicare and I would say directionally.
As a modest bump up in the representation of Medicare is.
His wind in our sales and will improve our circumstances.
As we often say does not a light switch, but it is directionally encouraging.
Okay, and then just a couple of financial questions for David is as well.
With respect to SGN, a trench they've held relatively flat in the $30 million to $33 million range over the last four quarters.
Not sure kind of.
Directionally would expected to increase but obviously you've been able to get a lot more leverage out of that line than probably what we would have expected it to beginning of year show how should we think about progression of that number over the course at 2020.
Yes Elliott Great question, so to your point it has been relatively flat quarter over quarter in 2019.
The DNA component of that so if you just look at.
Quarterly EPS DNA for fourth quarter about 20 about excuse me about $32 million about eight of it is DNA that will that will stay flat.
The ensuing quarters.
24 million of its commercial.
And as we've talked about before.
Slightly more than half of that is related to headcount and supportive spend and we are right sized from head count standpoint, so increases in that portion.
Will be minimal, where we're going to see some increases over time, our external marketing activities in support of.
Increasing zilretta sales, but because thats only less than half of the.
Selling and marketing spend you're not going to CSG may go up by meaningful amounts quarter over quarter and on top of all that as you might imagine we're very focused on leveraging as best we can our SGN ace our ESG infrastructure that we built up over the past.
Four quarters.
Fair enough. One last question for you, David just doing Nash and simple back of the envelope math here.
Okay yields a much higher.
Net price per unit in the fourth quarter.
This is what we've seen during the course of the year wondering how much of that may be attributable to simply payer mix or is there some sort of.
Medicare.
True up or or other.
Reserve adjustments that may have led to that.
Yes, so elie the gross to net reductions in the third quarter.
That was that was 14% that would have generated.
Price per unit of about $490 in in the fourth quarter, our gross to net as I talked about earlier was 11% and that generates a net price per year at about $507 per unit.
And knowing that different between Q4 and Q3 why the gross to net reduction is a bit less relates to the that provider rebates.
Those were obviously less in the fourth quarter than they were in the third quarter on a per unit basis.
Alright, thank you.
Thank you.
Thank you. Our next question comes from Gary Bachman with BMO capital markets. Your line is now open.
Hi, good afternoon.
Mike first I just want to confirm if not for all the Corona vying to run a virus uncertainty would you be reiterating the guidance of 120 235 million that you provided in January.
Based on everything that you had been seeing thus far and David how much flexibility do you have with expenses if revenue ends up trailing your guidance, what's sort of levers do you have.
Yes, so both today and are there.
Yes, good questions and Gary Let me say that we do reiterate guidance in the script we do.
Indicate our confidence in achieving full year revenue 120 to 35, what we do is qualify that by the unknowns associated with.
Cobiz 19, and an inability to predict with.
Any sense of reality, what what the situation will be in the coming weeks and months.
So I think it won't be imprudent for us to guide to 120 to 135 without that qualifier goes are just too. Many unknowns bottom line is take hold it off the table and our confidence in the guidance continues.
The highest level.
Thank you Gary this is there so.
Operating expenses on a quarterly basis.
Around $50 million.
We do have a certain amount of operational flexibility.
To dial expenses up and dial them down.
Obviously, we want to ensure that were appropriately resourcing.
Already from a commercialization standpoint from a line extension standpoint, and that were appropriately resourcing FX to a one and 301 in their respective development.
But with all that said.
We are sitting here in Burlington mass in rented space Thats, not all that expensive and we don't have a whole lot of fixed costs. So we have a certain amount of flexibility, but we're obviously going to do what makes the most thanks for the business.
Okay great.
And then Mike just a little bit more and what sort of impact have you been seeing or hearing so far in the label update.
Have you changed your promotional materials and messaging since that label update I know that it's pretty early but it takes some time fee to really see the impact there but any.
Color on the anecdotal feedback that you've been getting on that.
And then just yes go ahead.
Have a follow up after.
Okay I just say, it's a good questions, we're very happy with our ability and the ability of our sale.
Perhaps RMB EMS to share.
Reprint and reprint cover that includes.
Information about the trial data from the trial and to be able to do that profile.
Ladies and gentlemen, please standby your conference will resume momentarily once again, thanks for your patience and please continue to standby.
So.
Sorry.
Yes, Okay line [laughter] apologies, we had a technical snafu.
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So what we're hearing anecdotally is very positive, but it's too early to quantify the effect, but directionally. It is we're absolutely confident we will be positive.
Okay.
And then the last question is just you know what's sort of initiative might you have in place to try and shift an acceleration with the targeted physicians to the higher utilization buckets in Melissa welcome to you maybe it's a chance for you to comment just a little bit based on your prior experience.
Where do you see the greatest opportunity to accelerate Zilretta and then at what point do you think the salesforce might be ready to take on some new products in the bag and then leverage that infrastructure a little bit better. Thanks.
Hello.
Ladies and gentlemen, please standby your conference will resume momentarily once again, thank you for your patience.
Yes.
Sorry about that guys were back for Gary you're right it.
If you really don't want to answer my question just tell me.
[laughter].
Sorry thrown us affecting everything here [laughter].
Did I hear that last question. So please ask of again.
Okay. So.
What's sort of initiatives you have in place to try and shifting acceleration with the targeted physicians to the higher utilization buckets and then I was just asking Melissa maybe you could comment welcome to you, but maybe you could comment.
Where you see the greatest opportunity to accelerate Zilretta based on your prior experience and at what point do you think the salesforce might be ready to take on some new products and the bag to leverage the infrastructure better. Thanks.
Yes, so Gary there are multiple levers that are meaningful increase penetration in accounts as well I would interpret your your question.
It starts with ensuring that physicians have adequate exposure to the product in their patients have adequate experience with the product because that feedback loop is kind of like a flywheel.
Once it gets going against so.
Pelling overtime, but importantly, we're also we have to it.
Cite the rebate program continually refine rebate program.
Improved marketing materials for healthcare practitioners and for patients and an increasingly effective salesforce, we put all that together and our confidence and enhance penetration over time is very high.
Okay.
Okay, and Melissa I don't know if you wanted to have a quick comment on where you see some of the opportunities.
Gary I would just to reiterate what Mike just said I think that.
Obviously very early hours for may not even early days at this point, but from my experience and from what I've observed thus far it suggests continued blocking and tackling.
Fair, Dan and day out with the Salesforce continuing to penetrate the targets with the revised marketing materials and messaging.
It's a et cetera.
It's a sensitive market and it is something that will take a lot of timing repetition.
To be able to realize it's true potential but all the elements are definitely there.
Okay. Thank you.
Thank you and our next question comes from Patrick True, Joe with Bamberg Capital Management. Your line is now open.
Thanks. Good afternoon, just just a few for me first just regarding Zilretta is the plan.
To run an updated DTC campaign with the new materials from supplemental NDA and if so what what's the status of that campaign and how much.
What it cost and then secondly, I appreciate the details regarding covert 19, particularly regarding that supply chain I'm wondering if you can tell us what if any impact depend damage has had on your enrollment in clinical trials, Brazil, Russia, and always shouldering frozen shoulder or FX your one and.
Terms of patients willingness to visit centers are ability for centers to continue conducting clinical trials the understanding that FX chew on only just began enrolling patients and that the situation over 19 is changing all the time.
Sure. So in terms of direct to consumer campaign related to the repeat dose and the supplemental NDA approval I'd simply say.
Pat that we're very pleased with the materials that we now have RMBS claims handling and interacting with physicians over and stay tuned on direct to consumer plans, we're always evaluating its way premature for us to guide one way or the other on that as it relates to.
Coded and its potential negative impact on enrollment in this case, specifically FX to a one single ascending dose study.
Our shoulder studies at this moment in time, we do not see any negative impact of coded, but we could not be in a more dynamic circumstance and this is something that we're following very closely.
That's helpful. Thank you.
Sure.
Thank you. Our next question comes from France, while respond with Craig Hallum.
Your line is now.
Hi, Thanks for taking the questions.
I'm just wondering just to hit on that not know listening on the spot I know, it's just in a couple hours, but I was just wondering.
And your past experiences here have you had experience with the DTC campaigns.
I have had experience with it.
DTC campaigns and fairly large ones.
Is that the extent of the question.
And based on previous experience alone as to whether or not.
This is a market opportunity that would be really responsive to direct to consumer advertising, but stay tuned more to come.
Excellent. Okay. Thank you and then Mike I don't think it's been hit on it a lot of things have been hit on here on the call, but in terms of the phase three d. that shows the greater than 50% decrease in snowmobile tissue on the pain and function side is that versus baseline. Its open label right. So but in terms of stats figures.
Any details can you just talk a little bit more about that phase three yeah. It is versus baseline, we do see clearly statistically improve statistically significant and clinically meaningful improvements versus baseline.
In pain and function.
Okay, Great and then R&D.
You'll do you have to re orders again is there any way I forget is there any way to ever see based off the I will you and developments on the clarity of as any way ever see the not reorders, but the re administration numbers or is that always going to be in Bolivia.
No. It's a great question and.
All I can tell you is that our outstanding Chief Medical Officer, Scott Kelly.
Working with our healthy con and outcomes research people.
As identified databases that have the potential to shed light on exactly that question do early to commit to that but it's an area of interest for us and it's something that we're actively pursuing.
Okay, Great and then lastly here.
David I guess this might be or last time, commenting on the commercial metrics.
Just a chance here is this the over 50 plus account units purchased at accounts year, you're kind of early adopters, but your fast growers.
I can't tell am I, where did you did you mention something slowed down versus third quarter is that there relative growth, it's or can you just repeat what actually slowed down it.
No they.
Were about 800 of them in the fourth quarter was about 670 in this third quarter. So what I did talk about slowing down was the addition of new account in the quarter that was about 350 new.
New purchasing counts in Q4, if you look at all the prior quarters, it's been between four to 500, new purchasing accounts per quarter, but but the those accounts that are 50 units or more than 50 units of the rather purchased launch today they continue to increase.
Yes.
Both in the number and in the number of Zilretta units they have purchased.
Okay that makes sense and then is it 50, plus like on edge or there's some that are way above I think in the past you might have mentioned some that are now and the hundred's kind of level as yet or are these metrics going to stay the way they are.
Yes, so that set of metrics is something that is.
Ripe for refreshing looking at what the break points are what the pockets are and undoubtedly that will change in the future whether that's next quarters have some quarters.
That's in front of us, but what I would also say is of those almost 800 accounts that have purchased more than 50 units launch to date.
There is almost 50 accounts that have purchased more than 500 units of Zilretta launch to date. So there's a there's a higher grouping within there as you might imagine.
Okay, alright, thank you that differently.
Thank you.
Thank you. Our next question comes on search the laundry with Needham and company. Your line is now open.
Hey, guys good afternoon.
Most of my question is are asked a couple of fall couple of follow ups on.
Prior questions here.
In terms of the new label.
Do you notice any changes to commercial payers and your policies related silver zilretta with the seeing label.
I'm working progress surge so stay tuned on that is something that we're actively working on recall that the vast majority first of all that Medicare has no policy that region.
Britain repeated situation the vast majority of commercial payers. Similarly, do not restrict repeated administration for those handful of policies that do it becomes a work in progress for us to be sharing the data and working through.
Change and from our perspective intend to change in policy.
Okay.
And then on phase three be signal deal study that you reported today.
You just frame for us here what.
This means for the Zilretta market opportunity I think in the past few talk.
Your plans or not to have this data as part of the so readily able so.
I guess what are the longer term plans for once you have the full data set.
Yeah, well realized.
Search two things one is.
These data would be considered on label so they're available to incorporate into our materials.
Promotional materials and as a result concept of label expansion is rendered.
So we we like that and also realize that many of these prescribing physicians. These orthopedics.
Most of whom do arthroscopy, you're very familiar with what sign invite is looks like arthroscopy. So it's not a new concept to them. When you. When you do in arthroscopy Arthroscopy, you see it very red and inflamed widening of the joint that signed devices. So the idea that you'd have a picture that shows.
Evidenced a sign of ideas and then with treatment of Zilretta substantial suppression of that sign invited to us is a very appealing.
Line of.
Consideration for prescribing physicians.
Okay. Thank you.
Thank you as a reminder, ladies and gentlemen that Star then once ask a question.
Next question comes from Carl Burns with Northland Capital. Your line is now.
Thanks, and congratulations on the progress I think most my questions have been answered, but kind of backing into the numbers. David that you mentioned earlier is it safe to assume that R&D on a quarterly basis would lie in the 18 to 20 million range does that sound reasonable. Thanks.
So Carl.
R&D for Q4 was about 17 million, we haven't given specific guidance on what it's going to be going forward. It will grow as we as we advance FX to align and FX Threeo one in the clinic and also as we continue our activities as it relates to.
Rather line extension.
Program, So it will increase.
Obviously, it's not going to double in a short period of time.
Great. Thank you.
Thank you. Our next question comes from Bruce Jackson with the Benchmark Company. Your line is now.
Hi, Thank you for taking my question I know, it's still early days on the new labeling, but I wonder if you have just any anecdotal stories about going back to accounts that may have.
Push back on the repeat administration with doubling in are you getting any our receptivity or or conversion as a result of the new label.
What I can say is at a high level Bruce.
That anecdotally, we are hearing receptivity to the story.
And that there are examples of practices growing comfortable.
With repeated administration as a result.
All right that was my only question. Thank you.
Thank you.
Hi, I'm not showing any further questions at this time I would now like to turn the call back over to Mike Glenn for any closing remarks.
Just say thank you for everybody's attention and seem exciting time here collection and we're looking forward to updating you at our next earnings call take care be well.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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