Q1 2020 Earnings Call
[music].
At this time, all participants are in listen only mode.
Later, we'll conduct a question and answer session and instructions will follow at that time.
Today's conference call is being recorded.
It's now my pleasure to turn the floor over <unk> director of Investor Relations Ami buggy.
Please go ahead.
Thank you Chris Good afternoon. Thank you for joining us with US today, our Vince Anido Hayes, Chairman and Chief Executive Officer, Tom My job Ace President Chief Operating Officer make sure you know as Chief financial Officer and down there.
Well take calls also being webcast live on our website investors that every pharma dot com and it will be available for replay sneak it in our press right now for forward looking statements in non-GAAP financial measures on this call we will make certain forward looking statements, including statements forecast and I've declarations regarding our future financial and operating performance potential impact of the cover 90 pent up.
And our observations regarding ongoing operating expenses net revenue per bottle. These statements will include <unk> observations associated with our commercialization of are pressing rock tenn, Andy I State. They will also include plans and expectations regarding the success timing and cost of our clinical trial.
Additionally, we will discuss progress regarding maintaining requesting our pending approval.
I guess, where agencies of our products and product candidates, including our strategies and plans with respect to international expansion.
Finally, we will address in manufacturing activities and capabilities, our financial liquidity and other statements related to future events. These statements are based on the belief and expectations of management as of today. Our actual results may differ materially from our expectation investor should be carefully the risks and uncertainties described in today's press release as well as the risk factors included in our filings with the BP.
We assume no obligation to revise or update forward looking statements, whether as a result of new information future events or otherwise they know that we have to file our 10-Q Tomorrow. In addition, during this call we'll be discussing parents adjusted or non-GAAP financial measures for additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures.
Please see todays press release, which is posted on the Investor Relations section of our website with that ill turn the call over to them.
Hi, Thanks Ali and good afternoon, everybody. Thanks for joining us today and I Hope you and your families are staying safe in the world surely is quite different than it was when we did our your earnings call back in February. So today, we'll start look back at the first quarter 2020, which is largely unaffected by the cobot 19 pandemic and then obviously focus on what we're seeing in there.
Current environment.
In short our first quarter performance was ahead of our internal expectations in terms of volumes slightly below our expectations in terms of net revenue per bottle. The revenues for Q1 of 2020 totaled just over $20 million.
I'd like to first quarter of 2019, where we experienced a 4% a sequential decline in wholesale unit shipment volumes versus the fourth quarter of 28 games.
This year in the first quarter of 2020, we generated a sequential increase of over 13% versus a Q4.
The first quarter performance started 2020 off very very strongly in spite despite that we decided withdraw our previous full year 2020 guidance, where the Coca 19 impact broad script volumes down as we exited the first quarter after year uncertainty in the marketplace. It with a governmental responses pandemic.
It certainly made that predicting the rest of year and uncertain exercise, especially now is we look at.
Various states opening up other ones declining open up for doing so slowly. So it's certainly it's a tough year to provide that any guidance at all.
Once we passed the seasonal January February volume softness at most pharma companies experience.
Usually caused by increases in deductibles and out of pocket expenses et cetera, We did see healthy volume increases that we as we entered March you might recall that we gave guidance that we expected volumes to pick up meaningfully in Q2. This year in part as a result of are getting the message out the eye care professionals.
Using the positive data from our most file for Rhopressa and.
And we appear to be building momentum towards the larger quarter uptick as you saw prescription activity for both rhopressa.
We've basically reversed prior trends, where it was flat or declining and also we saw increases in rocket pad.
As far as that net revenue per bottle is concerned we did expect our net revenue per bottle to remain at over $90 on the heels at 2019 experience with the coverage cap exposure.
I remember in full year 2019, net revenue coming in for bottle coming in at $103.
As we are managed care coverage and unit volumes grew to their Q1, there was a larger shift in mix to Medicare part D. Medicaid another government payers than we had anticipated you've seen other companies talk about it increased part D. Theres been a decrease in commercial.
Not the coverage was certainly utilization because the unemployment has been increasing for government assistance programs have been kicking in which obviously for us like Medicaid et cetera are much lower prices and certainly on the commercial side. We did we certainly do see full usage of our co pay cards.
My recall, our discussions last year, we discussed the lag between contracting with health insurance providers and Onboarding of various formulary. These within those programs. We stated that the formulary coverage would would come over time.
And you portion of Medicare part D formulary coverage and pack was implemented effective January one and with that the rebated rebated volumes increased considerably at this point they have contracted lives in the formulary coverage slight percentages are one in the same which for us its excellent news.
As we close the books for the quarter and analyze the payer mix, we saw a demonstrable and greater and expected increase in Medicare part D mix in part from this new underlying formulary coverage that again that started January one upper body lower co pays for patients, which allows for higher prescription volume.
By definition correspondingly higher rebate levels as a result.
With that our net revenue per bottle came in at $88. As you know the government accounts are rebated were steeply in the commercial accounts plus Medicare part D. As a cover trap funding requirement on top of that all that resulting in lower net revenues for bottle relative to what we experience on the commercial side of the business.
Of course glaucoma is a disease of the aging and ultimately seeing volume growth on the Medicare part D side in particularly in particular should bode well for future volumes for reference.
The difference between the $88 net revenues that we experienced in Q1 versus that $90 benchmark that we had out there before amounted to less than half a million dollars and net revenues for Q1.
We have been noticing also and increases in 90 day supply overtime. Those plans along with associated elderly population is appear to be favoring extended supply. It is possible that would occur cobot 19 situation more and more patients are taken advantage of the 90 day mail order plans, where they have it can be.
Any into getting their eyedrops without needing to leave their homes. If this trend continues that may prove beneficial to us. So in the long run recognizing that our ratio bottles to script is currently below that of the broader glaucoma market. Therefore, we may actually see some greater upside there.
Further on coverage, we have very good news effective may Onest, we gained formulary coverage for both Rhopressa and rocket 10, but one of the largest Medicare part D. Players in the nation, we've been working on that for caution to launch of Rhopressa. So it's great to finally get.
At the time of year end 2020 call. This was not expected as our position was there was not that we wouldn't accept rebate offers that were too steep and we instead pursuit of prior authorization strategy and at the end today. If you can imagine that strategy work because we ultimately ended up getting a much better deal.
Then we had expected from Medicare part D covered just now.
Over 90% Rhopressa up from 75% rockets hand is now 55% up from 38%.
Plus there's there's 15% for rocket Tam Theres, an extra 50% of low income subsidy on top of the 55%, bringing rocket pan up to 70% Medicare part D patients with affordable co pays.
Commercial coverage remains very very strong with 90% of coverage for Rhopressa and almost 90% coverage for rocket 10 as well.
In a normal environment. These increases in coverage would obviously carry quite a bit of weight and driving future volumes at still to be the case, although it is difficult to determine the timing and magnitude in this environment, especially as I mentioned earlier at the stage open up.
Dependent of each other's home again, much faster than others are opening up and Tom will talk a little bit more about that when when he talks about the commercial side.
One thing is for sure my mind over the long on while this increase Medicare part D coverage will weigh somewhat on our net revenues per bottle going forward.
The potential volume benefit should be more medical meaningful that clearly is the offset that we're looking for greater volumes.
As part of getting greater coverage.
Changing gears briefly before I turn it over to Tom for further commercial insights I'd like to touch on our other important initiatives.
We continue to expect to commence in the second half of this year the phase Twob trial for our dry eye product candidate that we obtained through our late.
2019 acquisition of a visit correct.
We are currently conducting toxicology work looking at the various concentrations, although it may be hard to predict we are hopeful that with over 30 million dry eye suffers in the United States and as you know only about 2 million of them are treated.
And many states open up.
Later in the year, we could see very very rapid enrollment and its clinical programs once we get it off the ground.
For Japan, we had a virtual meeting with PMDA about a month or so ago. The meeting went very very well and added clarity the recommended phase three approach for the programs, but the good news being.
That is very much in line with what we expected to see.
We are preparing for commencement of phase III trial in to repurpose in Japan in the second half of this year and we also at the same time, we continue to explore partnership opportunities.
Our sustained release retina programs continue and we do expect topline data for our phase II clinical trial for a our 11 O five which is our dexamethasone answered by the end of 2020. In addition to completing our Roman of the first in human clinical study for a our 13th five over three.
Which is our relocate rho kinase inhibitor and that'll be later this year, we are seeing the retina Doc offices are generally staying open in part because the injection regiments, but they had many are patients on is is a requirement and they can't do without those and with that art trials remain on track.
As I pointed out on our last call by the end of 2021, we do expect to have adequate clinical data from our dry eye product and our retina programs to decide how best to proceed with our multiple product candidate with bet chances of that only further clinical but ultimately commercial success for years.
Yup.
We are weighted car Rockland Mercury three data.
From Europe.
We're getting very close to enrolling our last patient the topline data for Mercury three is expected potentially by the end of 2020. So again, we haven't seen a major slowdown as we have are finishing up that program.
We hope to hear the rock Atlanta is approved by the European authorities sometime either later this year in 2020 or early 2021.
We will continue to evaluate the commercial prospects for our glaucoma products in Europe based on the Mercury three data and the commercial opportunity in the region.
Finally on Koby 19, our number one priority remains to health and safety or not only our employees, but our health care professionals are the patients majority of our employees are working from home and we have ample technology to support those efforts safely and securely.
Word is not feasible to have worked on remotely we have implemented flexible schedule sensors instituted personal safety and hygiene regimens in accordance with local regulations. As an example, RF loan plant, which was approved in January for the production of rockets hand for commercial distribution in the US is currently staffed by around.
50 employees added the 80 that normally would be working on the site.
And there were being very productive we've been able to complete our first commercial batch of rocket 10, I. So we're hoping that we'll be able to get Rocco can manufacture and owned facility out in the marketplace here in the us.
Over the next few months in addition to that the team has been preparing for the prior approval supplement rhopressa. So by year end, we hope to get that approved and so we'll be able to manufacture both rhopressa and rockets hand out of that facility and last but not least.
Just recently in fact in last week that team and Ireland actually produce the first batch of our clinical material that will be using in Japan for the phase three trial there.
From an inventory point of view, we have had no supply chain issues to date, we do believe we have over three years or starting material and eight and a pie inventory in over six months to finished goods and production is ongoing and now with our Irish plant.
Coming live we now have three finished product manufacturing sources that we can choose from.
I'd like to do now just turn the call over to Tom to cover his perspectives on our position that glaucoma landscape.
What we're seeing as a result of the current environment from it from that perspective, so Tom.
Well, thank you again.
I'll begin my last earnings call talking about the very positive momentum we are experiencing on the commercial for the good news is if the momentum certainly continued through the majority of the first quarter up until the late March where the impact of covert 19 begin to hit.
In fact in first quarter 2020.
Looking for our franchise were up 92% over the first quarter of 2019 that compares quite favorably to the overall global market, which grew just 3%.
The physician and patient experiences were and actually continue to be quite positive.
We were actively engaged with eye care practitioners to further inform them regarding the positive both great for data that we've discussed with you previously.
Our continued increasing managed care coverage.
Now currently our products and Jerry Falwell Thats, what the prescribers almost all in fact, 98% of our FFO at nine the fell nine and 10 physicians, which as a reminder, the highest frequency prescribers for glaucoma product.
Hi prescribed every product.
Well over 70% of our entire targeted physician uniqures.
Our strategy can use the both phase four data to generate an increase in rhopressa volumes, which clearly having an impact.
And now with later Medicare part D coverage for Rhopressa, and especially rocker Ken.
We anticipate the physician conversations around lower patient co pays and far less need for offer for the for the prior authorizations will certainly be very well received.
Now for today I'd like to focus on through thing our current volume trends results of a recent survey we we conducted.
And our plans for getting out of the good quickly what eye care professionals start to reopen their offices.
Looking at the Acuvue volume trends as I mentioned earlier, our volumes were increasing nicely from the first quarter well begin declining the week of March 27, as result of recorded 19 impact.
Q via data showed a continued decline but at a slower pace until the week of April 24th where we fall our total prescriptions increased 1.6%, while the overall glaucoma market declined 1.1%.
Interestingly, our new prescriptions increased 3.7%, while the overall glaucoma market new prescription declined 2.4%.
Now as you know.
We also focus on sales of performance fees as a more accurate real time gauge or buyer.
While our average weekly sales out in March where nearly 20000 unit.
That frame weekly average.
Was approximately 16800 for the month of April with last week total being 16400.
But for reference and the key current volumes are perspective, our average weekly sales out the pharmacies for the month of April 2020.
[music] exceeded the average weekly sales down for the fourth quarter of 2019.
Well of course, it's impossible to predict future trends based on what we've seen over the past few weeks and just like all of you on the call we'll be watching be buying very very closely.
My second topic, we conducted a survey from March 26 to April 10 involving 225 practitioners around the country. The purpose of the survey with two full.
Understand the physicians reactions to number one the co connecting virus and number two promote trade for data.
On the Richard the Kirkwood.
78% of offices were only thing sick patients at that time.
Two thirds of the offices surveyed had reduced their office there well over half had limited hours and only one in six offices that closed in February.
That excludes the decrease in new prescriptions. The overall market has seen since the end of Mark.
Now the reaction for the most safer data were quite encouraging 70% of healthcare practitioners, we're aware of the most better.
The large majority of doctors close to 80% reported that the drop in Iowa, We reported in the most trial, which was reminder was better than four millimeters of Mercury was consistent with what they were experiencing and their practices with rhopressa.
There were presses the first second or third product added two of prostate gland.
Importantly benefit 95% of eye care practitioners reported that the trial results for both gave them good reason to prescribed.
Rhopressa and rocker.
On my first topic regarding getting back out to the market very busy making plans to quickly we introduced the most phase for the managed care coverage data into the marketplace, what's the eye care practitioners reopened their practices.
In the meantime, our retrofit organizing and conducting virtual office visits with my care practitioners and their staff a.
A member of our reps have received calls from practitioners and getting them to come into their offices.
The clinical data managed care coverage and to provide samples commonly because these offices arent that busy our reference for a great deal of uninterrupted in unhurried time with acquisitions and fat. These visits can go from 20 minutes to an hour, which is obviously a wonderful educational opportunity for our representatives.
Our marketing team have also been quite a few different virtual advisory boards are trained our cable all speakers, who weren't virtual speaker meetings.
Our sales reps will return to feel the food as the state in their respective territory indicates it's safe to do so we'll pay special attention to attend state that generate better than 55% or total glaucoma market prescriptions.
Five of these days are these 10 states, including Florida, Texas, Pennsylvania, Ohio, Georgia, I made statements because the currently planned overstates prior to the end of May.
But we won't stop our efforts there and as soon as possible meeting with the other states allow we'll redeploy across the entire nation just as we were prior to the cobot correct.
Now we believe there is pent up demand out there.
So many patient office business within careful Additionally, because we have such compelling data to communicate we're also evaluating additional ways to increase our shareholders with the physician audience.
So in summary, before I turn the call over to Rich will report early on track to the first quarter, but of course things change with silver 19.
However, we believe with the data that we have for the most phase for trial and the managed care coverage recapturing our momentum will certainly be attainable.
Rich.
Hey, Thanks, Tom as Vince discussed, our combined Rhopressa and Roclatan revenues.
First quarter, 2020 totaled $20.3 million or $88 per bottle normalized gross margins for the quarter ended March 31, 2020 was nearly 95%. However on top of that we took about $1 million of inventory obsolescence reserves.
Also needed to absorb over $3 million and Athlone plants overhead associated with start up commercial production.
Keep in mind at prior to the approval of the ethanol plant Paracatu commercial distribution in the U.S. These expenses would have been charged to pre commercial manufacturing expenses.
Then operating expenses, so essentially it's a geographical change from.
Operating expense and now into cost of sales with the approval of the ethanol plant for the manufacturing Rob.
Our first quarter 2020, GAAP net loss was $49.1 million were one dollar and seven cents per share.
When excluding the $10.5 million of stock based compensation expense. Our total adjusted net loss was $38.6 million already four cents per share.
The first quarter of 2020 adjusted cost of goods sold was $5.6 million and adjusted total operating expenses were $48.2 million.
With adjusted selling general and administrative expenses of $30 million adjusted pre approval commercial manufacturing expenses of $1.8 million and adjusted research and development expenses.
$16.3 million to my earlier point on cost of sales you can see the preapproval commercial manufacturing expenses.
Back did come down meaningfully from the fourth quarter.
To the first quarter of this year.
The first quarter of 2020 or net cash used in operating activities was $41.8 million.
We had nearly $265 million in cash cash equivalents and investments as of March 31 2020.
As outstanding at quarter end totaled 46.5 million.
Additional information regarding our first quarter results prior period comparisons. Please refer to todays earnings release form 10-Q, which we expect to file tomorrow.
Now I'd like to turn the call over to the operator for questions Chris.
Chris we'll take questions.
Yes.
Ladies and gentlemen to ask question. If you would like to ask a question on today's phone line. Please press star one under such tone telephone.
We will draw your question please press the pound Keith.
Please standby will be compiled acumen a roster.
And our first question comes from the line of Annabel, assuming with Stifel. Your line is now.
Hi, guys. Thanks for taking my questions. Thanks.
If you all are well I'm sorry, so ask you about Smith is.
Different dynamics, you're seeing the screen repressing dropped the chance it looks like rockets when still had a nice pick up despite your focus on rhopressa within those data so.
Clearly you must be seeing the most data resonate into court.
That supports Rhopressa are you seeing most data resonate in support of.
Rhopressa or Arsenal.
This is trying to understand it's a well that many are opting.
For Rockland 10, and now with a couple months under your belt any thoughts around what's going right, what's going wrong with that strategy. If there's anything you have to shift.
On a and if there's any switching going on from a press Rockland County.
A lot of loaded question, but.
Yeah, [laughter], hi, Annabel I'm going to have.
Tom that answer the specifics of the question that jazz, but let me just give you that perspective from a timing point of view, which is.
You may remember that in the February meeting or earnings call I did talk about the fact that it was in early January that our Salesforce restrain medical affairs train the speakers et cetera et cetera. So we are static starting to get the message out we did expect that weve to focus.
Going to those prescribers, who it at least then monthly prescriptions and trying to get all that focused on that we would see an inflection point on rhopressa as a result of the additional.
Information that we are providing for most that we wouldn't expect that until Q2, we did see an inflection point a rhopressa pretty early so I gave us good hope that the information that we were providing what's going to be meaningful meaningful and impacting the.
Rhopressa prescriptions longer term. So obviously some of that got the rail, but let me have Tom talk little bit more about what he's seen in the market research that we did.
Yes, thanks for the oil for the questioning about here's what I'd say first off as we all know.
The way to rock repaired is through Rhopressa and really what we've always said is whats practitioners get a some experience with rhopressa to see how it actually works and outperforms that we think that naturally lead them through just a more convenient product using rock repair and once again. It clearly that's what's happened I think what's happened.
Two other things have happened I think one of which is the most data certainly builds a lot of credibility around rhopressa. It add validity to what doctors were seeing in their offices as I said in my prepared remarks and that helps them.
Gain confidence factor Swift Rhopressa, but also with microchip.
The one thing that holds rock return back a little bit still as the coverage is not as good as it is with where practical purpose or frankly had outstanding.
Our coverage with both of our 90% in both commercial and part D. I physicians are sort of burned out from the from the.
Prior authorization standpoint, so for those that don't want to do prior or.
No that do not want to do prior authorizations, we'll stick with four prefer those that don't mind doing some will probably move right over to rocket and that's kind of what we're seeing now and as you know many offices out there prescribed both products to find a way to use both products in their practices.
Okay can be ferenci since a quick follow up.
They did we write enough prior authorizations that you did have a Medicare plan pick you up Terravia 10, correct.
So yes, Ron is largely a rocket both yes, yes, rocktenn also increased the coverage quite a bit because of the prior authorization.
Okay. We expect that momentum can you now for pets given that Medicare is.
Now.
Pretty much majority you know you got majority cover it not covered by Medicare and then you don't have kind of access issues with rocket 10 now.
We have no we don't have nearly there the issues that we've had before we still have some.
Issues with rock with here, it's not as clear sailing is rhopressa is the like since we took the prior authorization strategy with Rhopressa. As result, we not only got Rhopressa approved but we also got Rhopressa approved on firmer at a quarter much better net price for us. So we will hold the line still with locker fan for a little.
Longer because we think prior authorizations again, well well make to managed care added to come our way and give us a reasonable price for our products.
Okay, Alright, great I'll get back in queue. Thanks.
Thank you.
And our next question comes from the London, Ken Cacciatore with Cowen and company. Your line is now.
Hey, guys really good performance during the difficult time, so Mike Congratulations just a follow up on a couple of the up the first questions. You've got thank you just answered it but just wondering if there's any concessions you had the gives to get this additional rockwell 10 coverage and maybe a little bit of thoughts and I know, it's always difficult to predict.
When we might see this move forward a bit I know, where we're getting there in almost all the way there, but just wondering if you have any updated thoughts I knew we were thinking maybe summer or fall to have more comprehensive, but you're moving it forward. So fast wondering if anything else it's close.
And then on rich on the gross margin impact that you described just trying to understand is that onetime in nature or is that should we.
We expect that this is kind of the new.
Gross margin run rate understanding that the expenses came down out of the operating line and to that point on the operating line is this a good run rate that we should be thinking as we go through the balance of the year. Thank you.
Hi, Ken how are Ya.
Good to have you on the call. So we'd expect that that we're going to be pretty cautious about.
Sort of the balance of the 30% or show a Medicare part D that we still need to close off on run rate.
Rapid had you know we're almost there on rhopressa completely so that's pretty well covered but.
We're going to be pretty cautious about giving up on on the lashed out 30% or so because certainly the strategy that we implemented with prior authorizations did help us get a much better price overall so.
We do want to continue that in and again.
Those last ones are hard to predict because it it's really a balancing act between the pressure that the prior authorizations put on the system because remember when those prior authorizations get approved about 40% of him get picked up.
Add because a co pays are reasonable and for that grouping.
The managed care plan is actually paying retail so it does put an awful lot of pressure on them, but it's it's almost impossible to tell when we're going to be able to get those down but again, we're in no hurry, we're happy with the strategy that we've laid out so I mean does turn it over then to add to rich to answer your questions regarding the piano.
Hey, Ken.
Some of your voice so we did take.
$3.5 million of Uh Huh.
Passively charged to cost sales in the first quarter just to give you a reference point.
Last year, we had about $20 million on a full year basis and pre commercial manufacturing expenses.
As we entered 2020 at the end of January the ethanol plant was approved.
To manufacture rock tenn for us consumption.
So in the first quarter, we took about $3 million to $5 million, Okay idle capacity the cost of sales, which otherwise prior to approval would have got operating expense.
With regard to going forward I think it's safe to assume that will have.
$4 million to $5 million per quarter.
Located with Athlone idle capacity flowing to cost of sales.
But on the other side of the Ledger, we'll have a much lighter year as it relates to pre commercial manufacturing expenses.
I had just under 2 million in the first quarter, probably expect maybe another 2 million for each of these subsequent quarters of this year.
So net net it's mostly a geography.
Question.
It's what you would expect where the plant starting up you always have.
Basically underutilized capacity.
As volume pickup.
Got it becomes negligible overtime.
Great. Thanks, so much it does thank you.
Thank you.
And our next question comes from the line of surged blended with Needham and company. Your line is now.
[noise] surge if your phone is on you. Please on unit.
Okay, and then you need to now thanks for taking the questions.
Vince you mentioned there was a significant increase in.
90 days supply prescriptions towards the end the first quarter.
How big was that increase and how much of it impacted has on the first quarter sales and are you seeing the same kind of volume that these 90 day supply.
In the second quarter.
Yeah, So started them ace or if you could hear your voice it I want to have Richie I'd give you all the details, but it did start towards the.
I would just call it the March timeframe, and we started seeing some of the impact of this so we do think assemblies as it is attributed to.
Yeah, the closing down of the states and people not being able to to get out and things like that and so.
And then we do expect that at.
That phenomenon to continue remember.
It is rich I believe said during his prepared remarks.
Our ratio.
Is lower than.
Other got Krakower products because were nowhere in the market in terms of our ratio of 90 day. So hopefully that will just keep moving up but let me just have rich talk to you about the details.
That's right. So if you look at the glaucoma market in the U.S. the ratio of bottles to scripts is roughly 1.5 to 1.53 as I recall.
We've been ranging now yeah recently in the 1.37 to 1.39 range.
Which is pretty meaningful considering about a year ago worried about 1.27.
That continues to pick up.
Did that.
Is associated with the increase in the Medicare part D.
Mix in our book Vince addressed in his prepared remarks.
But historically the med D plans have been more 90 day oriented.
And now that we've got to cope with 19 pandemic to deal with I think more and more patients.
Are going to be opting for the convenience of mail order pharmacy.
So that they could avoid walking into the retail pharmacies.
So I do think we have some runway we'll watch it every every.
So the every week.
But to see numbers in the 1.37 to 1.39 range already.
As is fairly promising and hopefully there's more to come.
Okay and then.
When we hit a couple of months experience with is the new marketing strategy until.
Pretty significant disruption, but can you talk about what's how it changes your stance being efforts and any feedback you got from physicians and reps in terms of.
What's the competitive response was in terms of Theres sampling efforts and counter detailing.
Yeah, I'll have Tom address that.
Sure so.
What would it really did was broken up our sampling to more patients because proficiency got more and more interested in and the product as they looked at the downturn. They look back at the most added I really thought two key parsed Woodward was.
To see.
Very large decrease in millimeters of Mercury viral piece that I mentioned that in my prepared remarks, where they added this to across the granite because that's not the type of drops there used to seeing so they had been very interested in using using it for more and more patients. The second part of course was the responder analysis that show what percentage of.
Patients got down to what levels of myopia was very impressive compared to their or their previous regiment that they were using so with that did it just it just encouraged us to use more and more samples because doctors wanted to give it to more and more patients.
Yes. Good question about what the competitive response was frankly.
Unfortunately step of the virus hit before the competition could actually figure out what we were talking about what we were doing because we certainly cost or by surprise. So before they could record for bucket right. There troops in circle. The wagons, we were out there, making fantastic noise, but then all of a sudden weird to lower the kirker for a little better Gerald.
Until we could get back out there in the field, so well see with their competitor for sponsors now we haven't heard anything from them in any the webinars that they are doing or physicians have told us anything about what they're doing two were to combat our products. So we think we're still got their sales because I don't know how they were going to Franco Nevada withdrawal apartment. So.
Thank you.
Yep.
Thank you.
Our next question comes from London recession.
With Cantor your line is now.
Hi, Thank you thanks for taking my questions here side if you.
First one I had was how should we think about the second quarter sales in Opex. What how are you seeing things shaking out now if you don't want to give numbers, maybe you could speak qualitatively to it and then the second thing here is on payer mix. How do you think about that well rising unemployment impact your sales in second quarter beyond and then how should you know how much.
What's the magnitude there and then just back on this gross margin question should we then consider the second quarter gross margin to be higher or lower than what we're seeing the first quarter or maybe second quarter is not a great quarter to copy to but in general is the gross margin higher or lower than that 70% that we saw this quarter. Thank you.
Hey lease I'm going to just give you a little bit of perspective in terms of sort of the flow of the business and then I'm going to have rich talk specifically about that what you're asking relative to the opex in the payer is specific payer mix and the GM again.
But in terms of what's going on just don't forget what we talked about so we saw the initial impact of the coal 19 on our business starting.
Early March or I'm, sorry, the back end of March we started seeing and you guys saw it from a prescription point of view all of sudden you know things were going really really well, we're feeling pretty good about the the program that a commercial team had put in place and it was growing great with.
Both rhopressa in rocket hand in the marketplace and then obviously things started shutting down and they shut down pretty quickly and so we did see a little bit of an impact on there now that also impacted as you've seen and we report on regular basis, our shipments from wholesale to retail that also is you know the one that we really track.
See how the business is progressing.
And so all we can tell you is that we think that that it appears we perhaps it hit bottom.
As states have opened up and more specifically.
Even if they haven't totally open up you see a lot of state moving forward with elective procedures and a lot of the docs that we talk to.
Oh, that's a bread and butter, it's elective procedures and so they're seeing more and more and as more patients get comfortable going to see the doctors you will see more elective procedures and we think that that's going to bode well for the prescription activity, we certainly saw.
The prescription.
Uptake last last Friday.
We've seen a the at the.
Corresponding uptick in units from wholesale to retail ticking up a we had.
An unusually strong first couple of days or this week, which is great. Because it's the first time, we've seen some of those kind of numbers that kick up and so you'll see that hopefully reflected for the entire week out when we republics the numbers.
But again it the key driver here has been the opening up.
Elective procedures.
And so we think that that's going to dictate.
What these quarters looked like it is hard to call them out because we don't know exactly how big of a deal it's gonna be but Tom gave you. Some information about it really eight states controlled by 55% of our business in that.
Half of those already opening up and so we think that's going to bode well for us and you know maybe it's just a one month impact, but it's too early to tell a let me have rich walk you through the other.
Question Chad.
Yes, so looking at the immediate.
Future the second quarter I do expect operating expenses will be lighter.
We are down to very very little travel if any.
Obviously meeting expenses are close to zero as well so we would expect.
A lighter opex quarter.
Regarding payer mix going into the second quarter I think the trends that we saw in the first quarter will continue.
Moving more toward.
Medicare part D.
Remember as we said earlier effective may one we gained.
Really big chunk of Med D coverage.
How much of that when we get this quarter.
Hard to predict but it will certainly I think give us more of an impact from Medicare part D going into the second quarter.
From a gross margin for second perspective in the second quarter well.
To the extent you have more Medicare part D. Generally your gross margin will go down.
Because it tends to bring your revenue per bottle, though.
Looking at the first quarter moving into the second quarter remember the first quarter did have.
Roughly a 1 million dollar obsolescence reserve for inventory.
Hard to predictable have got again right now we don't see that we look at that at the end of the quarter.
And as I mentioned to one of the earlier questions I would expect.
More than the three and a half million dollars that we took for aethlon idle capacity in the first quarter I expect that to be more in the four or $5 million range.
Okay. Thank you.
Thank you.
Our next question comes from the line of Jason Gerberry with Bank of America. Your line is now open.
Hey, good evening and thanks for taking my question.
I just wanted to confirm so sounds like in the states that are reopening.
I'm not sure if you're seeing this yet or this is just the operating assumption, but it's business as usual once these offices I care professional offices reopened or if theres any type of lag factor at all in terms of these physician so getting caught up and so just curious if you can first for providing perspective on that.
Sure.
On the on information that we got some of it is adding total in some of it is some of the survey data that we've seen them and I think Tom mentioned a little bit.
Just about every doctor out there has.
Made changes to their practices some of them.
Which is interesting.
Split if some of them who had the financial wherewithal decided not to lay anybody off you know their idea was admitted that they were going to be able to opened their doors. They wanted the entire staff sitting there.
And being able to bring patient 10, and and clear their backlog quickly and at the same time see they can make market share gains within the geographies in which they can compete other ones a large percentage the practices that actually late folks also it's going to be a little while before they get those in I could tell you anecdotal.
Dr. Here in a four Myers area near where I live.
He was ready to go day, one and he's he's taken it into high gear right from the very very first day now in the West side of Florida, We haven't had as big of an impact as they did on each side of Florida. So a lot of the patients are moving in there pretty easily.
We do have a experiences in say Sacramento area, where we know one practice that opened up and.
And they just aren't seeing now many patients yet you know the patients are little bit more hesitant you know, obviously, California as more restrictions and then in Florida does and so that I think that's impacting it somewhat.
You know the interesting.
Offset to that is what what.
Tom said, which is in some of these areas the doctors are.
Giving our reps once they get in there a huge amount of time, because they're not as busy as they normally arm. So you know it is.
To our benefit at this point and certainly each of our reps are doing what they can and we're providing all the necessary.
PV so that they can go in there and I'm fully comply with whatever the doctor's offices wanted too.
So it's too early to call it all out but it certainly we're seeing a.
Things open up and when they're opening up for the most part they're moving pretty quickly.
Got it.
This is the follow up thinking about the Mercury three study in 30 outcome as you presumably have some discussions with potential strategic partners. There you just help frame.
How important it is to show superiority to again for in order to.
Captured pricing and ultimately capture value in the market.
So.
We picked up again fourth product in Europe, mainly as a compared are mainly because it's got the highest price for branded products and the combination category.
So if we do a price if we're able to show superiority, we think that we can get a better price and they have so we've got to net positive for us and if we just do Noninferiority then we'll get it roughly the same price. It they have just as a reminder, while we're always.
Open to talk in a partnership.
With partnership opportunities in all of the markets outside the U.S.
We really don't think that that's viable in Europe, we think that a it's more likely if everything goes well that.
We'll probably do that on our own and perhaps in some select markets. We may find local partners.
But we don't see.
Partnering as big of a portion of our thinking as safe as we do in say Japan.
Got it enough and then the Noninferiority scenario I think importantly, as a few years left of exclusivity is that goes off than you and year non inferior reserve. If they do you have reference pricing issues again, the then generic or can you maintain your price point.
Once you've been on the marketing established for a couple years.
Right. So this would be because we're not a processing plant and we don't think that there will be that reference pricing there.
They do have a lot of combination that prospect lantus and timolol. So ours is the only real kinase inhibitor approved over there. So rocket Tanner rock plan that will be the first one a combination of a real kinase inhibitor approved so.
We just don't think that that to a likely scenario.
Got it thank you.
Is there.
Thank you.
And our next question comes in a lot of Aster Rod Mill with Oppenheimer. Your line is now.
Hi, Thank you for taking my questions and congrats on the extended coverage and say consign that add to pile on its just thing you patients and not far from repeats grants that right no.
Remember the prior authorizations, you're not and I'll have yeah.
Tom talked a little bit more about this but the prior authorizations are written for typically one year.
They're not just the one shot deal.
So once you get a prior authorization that's good for awhile and so it does have for a repeat kind of a business.
We haven't been in at long enough to know what once a run out of that one year.
What happens if we haven't had a deal yet, but clearly once we do kind of deal.
Then.
There are eligible for the rebate at that point, So let me have Tom sort of fill in the bikes.
No. This is exactly right number of prior authorization gets us 10 refill so.
And that's by the way it all at retail prices that said there is no rebate there at all that's why it's such an effective strategy. If in fact, you can get.
Physicians to rally around the doing prior authorizations and Fortunately, we've been able to do that and that's why we've got such good coverage, so far but thats. Your question dinners repeat business. It's that initial plus the next plus 10 refill. So it's usually a year period of time.
Understood. Thank you and then.
And thinking kind of about your pipeline.
And he's talked about yes, you know maybe rethinking the pipeline and we Palletizing and.
I'm kind of holding off even if you have data.
The kind of compare several data points before you decide later in that.
And what to pioneer outside just wanted to get an update on on how how you're thinking may have changed over the last over the course of at year end and what they should be expecting from a pipeline at national standpoint going forward.
Sure certainly when we had refresh in rocket Pan.
Through the development process you know the idea was that as soon as we finished the study we went ahead and.
Many times, we actually random unparallel, but.
We went onto the very next study almost immediately and so that's our ammo what at this point and so now we have a number of different programs that are all very very expensive as you go through development as you know the retina programs are far more expensive.
Than anything we could have ever done in glaucoma side and on top of that we have a there's racks.
Which goes into a huge market a unmet need to for dry.
So we do have the opportunity here to.
To make some choices.
All of them work I'd say that every program that we have works you know again, we're just want a line them up take a look at them a it say in the second half of next year and make an assessment as to which ones we want to move forward with.
On our own and perhaps if they again if they all work.
We'll have to consider partnering some of those things off.
We may not be able to get them all done in our own. So again, it's a series of choices will have to make.
But we're trying to do all of that and get all that information.
By the second half of next year.
Hi, just goes in and then now maybe.
So just trying very specific for example, an 11.5 zone program, we do expect to read out at the end of this calendar year right in the second half of the year that usually we would go right into the next set of trials, but we're not going to we're just going to go ahead and get that data. We'll go ahead and prepare as if we're going to move into phase.
Three trials, there and remember for that particular program the majority of that businesses in Europe.
And so we'll do all the work that we need to do to get started in Europe and kind of take a look at a.
Trial designs and all that other kind of stuff that we won't make any final decisions about that until we have all of the other data point or that all the other data from the programs on the table and then we can make choices.
[laughter] and then my last question, maybe taking a step back into more broadly do you think Kevin Madison is something that knowledge is community would be open to considering especially for indications like dry eye in glaucoma.
He has I think with mixed results out in the marketplace. Some of these things are awfully tough to diagnose over the phone or even doing videos or you know certainly there's no some stats being made out there answer and.
Trying to get some of that but.
You saw very very few patients coming through the system because they couldn't get their hands on him. It's awfully hard to do intraocular pressure studies or actually measure intraocular pressure unless you get.
No access to the patients to it.
With dry the signs and symptoms or show variable for each and every patient that.
Again, it's awfully hard to out for you get a new patient that truly diagnose without running a number of different tests and seen in lives. So I think theres going to be staff data there'll be continued stand added I think the telling us how medicine companies that are impacting ophthalmology are doing everything that they possibly can to help the doctors.
We do see some ace disparities in terms of those that are willing to adopt versus not that we.
We think that.
It won't be wholesale moving towards Tele medicine.
In this particular field.
Understood. Thank you very much.
Sam.
Thank you.
And our next question comes from the line of Greg Fraser with Suntrust. Your line is now.
Great. Thank those thanks for taking the questions.
I'm not sure if I missed this but well listen that's the part D and government paid prescriptions in the quarter versus commercial and where do you think that $80 per bottles could go as the part D volumes increase.
So oh, we have not providing don't plan and providing guidance on pricing and things like that until we start change sort of the impact of all these plans that we are they specifically as to plan to one in January they kicked in in January and when it kicked in in May.
And see how they materialize and alike.
And so it's too early to tell what that it's really going to look like as we get some of these plans are very state specific they may be impacting four or five states not all of them. So we have to be careful about calling that out.
But relative to Q1, let me have rich answer your question.
Yes, hi, Greg so historically.
If you looked at the part D component and the Medicaid component.
It was usually.
Rounding to about 50%.
The overall share.
That is now rounding up to nearly 60%. So it's it's been climbing as Ben said tough to predict going forward.
As it relates to our own share.
Picking up a sizeable chunk of coverage for med D. As we discussed effective may one.
That will make it more likely to continue to increase from that point.
Okay. That's helpful. Can you also comment on the geographic regions or states, where the most recent part D. When.
As most relevant.
Yeah, we haven't broken it out that way only because we have to be careful we can't have all too which are the plant is but you know clearly a.
I'll give you at least one example.
The the one that we just activated in may.
One of their largest.
Books of business is down here in Florida.
And so our Florida district manager, who happens to be new yeah. We're on the phone earlier. This week out we're just catching up as a as our state opens up and they are incredibly excited about the prospects because in portions of the state. This is the plan that they need that we needed to get in order to open that up for them for our.
Apps and for the doctors and patients and so it's a huge deal in this particular state, but again, it's a sort of these plans.
I mean, you could almost it to be one of the largest if not the largest Medicare part D plant in the country. So you could almost map out the plus 65 population by state and figure out which states are going to be the most impacted by the plan.
Got it and then my last question is on all now again by now constant plan now that has been approved in yellow label, just curious to hear your view on how that chronicle fit into the glaucoma treatment paradigm and whether you pretty interesting feedback on the implant approach from the field. Thank you.
So delightful is so the good news as they got it approved right. So it's a first implant that we've ever had approved for a indoor camera will use et cetera et cetera.
The downside if this thing which is the which makes it difficult for them and the reason why we really haven't heard anything at all about their plans for this product is because.
There have severe limitations in terms of how it's going to be use you can't do more than one implant period.
So these implants last staff for only a few months.
And so you have to take you know switched the patient off of whatever eyedrops ours, and they're going to go onto this implant and right now the way the labor reach you can't give them the second implant.
So you got to put them back on drops and so I think that's a tough situation to be in and we have not heard anything at all from any of the common guys that I've talked to I'll open it up I'll get Tom a chance to talk little bit too about the saying because he may have heard other things about it but it just doesn't.
Well, they've gone underground with it part of that could be either you know they're pushing up.
On all the stuff with the acquisition by Abbvie bid in the marketplace that label is is really a tough one for them now.
Yeah I think this is right. The label is is really a really holding them back but I can tell you. They pepper doing some our virtual AD boards with physicians and feedback at least comes my way from the physicians are things like your if they get they like the fact that they could move away from Eyedrops course, what they're thinking about as or thinking about.
The patients using 345 eye drops in a day using two or three product or graphic you about once a day eyedrops, that's a fairly but that's a positive signs that things are holding them back.
With including the label or things like this there is nothing that they've ever done before these are not ready to people that are doing this but inject stuff. All the time. These are glaucoma specialist that are used to injecting.
They don't know the buy and Bill model, which is the bottom of the Allergan is using to sell this and so there's a real explanation there and there's a concern about who owns inventory well the doctor owns inventory those sorts of things that they have to work through which we'll certainly take some time or they also note that the into chamber is not so ceiling and what that means as there was a concern about infection.
And they know that.
Admitted that they get it and get an infection thats going to spread through the community like wildfire just hurt them because you don't want to have a patient good infection and perhaps at something very bad habit to their eye with it could have used very safe safe eye drops. So the question is what's the risk reward there.
And then the question is.
No they need to they need to show real World safety and really show the benefit over override drops and with the benefit risk taking into consideration. So there is some infatuation about getting away from eyedrops, but theres also some a lot of caution about hot.
No I really do it didn't really how safe is is to do especially when I'm limited to like with fits of thing.
One implants per patient per life.
So.
Of up here at this point.
Got it thank you.
[laughter].
Thank you and our next question comes from the line of Difei Yang with Mizuho Securities. Your line is now.
Hi, This is Dan Clark on for defense. Thanks for taking my question.
Could you just remind us if commercial co pay cards are those eligible for 90 day scripts and if they're not kind of how net price made that affected by the move to the longer duration scripts in the corner. Thanks.
Sure I wanted to have rich gave you some of the details around the co pay cards in utilization et cetera. Just a reminder, copay cards were only good for commercial side of things.
And over the last several quarters, we have talked about that many of the patients had been leaving.
Some of those copay cards unused or maybe they're not using the last five or $10 or they could use well that's gone I mean, they're using them all right now and I don't blame on the you know, it's a tough environment out there with the unemployment rate et cetera. So.
Yeah, we do see.
Position of the co pay card. So let me have rich up pillar the blacks.
Okay. There thanks, Ben So yep, what Vince said is.
Completely accurate.
Easily into first quarter, you'll see a site slight uptick in the use of the.
The co pay coupon cards as patients work through their deductibles et cetera, with regard to 90 day supply.
It depends on who the payer it. So there are retail pharmacies I'd offer 90 day supply and most of them will accept the co pay coupon card.
The mail order Payors water pharmacies, often will not except the co pay coupon card.
And what they do instead to create a financial incentive to the patient to use mail order is there will often charge.
Two months of copay for three months of supply.
So thats, how the payers address you affordability question as it relates to the out of pocket. So just a different way of lowering the cost of the patient, but it doesn't go through the co pay coupon part vehicle.
That's it for me.
Thank you.
And last question comes from the line of Elliot Wilbur with Raymond James Your line is now.
Thanks, Good evening.
Just a big picture question for Tom and bench.
And just thinking about a concept of virtual detailing before covered 19 I think.
It will be down was probably seven or 8% of all a detailed now it's well over 50% and certainly see a lot of.
Specialty companies and promotion sensitive models actually.
Our next is holding relatively well I'm in the current environment. So certainly seems like at least in the short term virtual detailing has had pretty good job of being able to help company sustain their current prescription base I'm, just wondering how youre thinking about.
That concept going forward, whether or not you think it this could be the beginning of more of a structural change in terms of the classic spec pharma model, which has always been kind of heavy on bodies and heavy on expenses and is this a way either to maybe lighten the expense load in the number of.
Feed on the street in terms of promotion still be able to keep the same rx levels or if not do you think it can basically give you much broader reach and brought in frequency with relatively.
Low low cost just wondering how you sort of think about to.
Concept, a virtual detailing being that much bigger part of the spec pharma model longer term.
Hey, Elliot.
Only half Tom gave you.
His perspectives on it it could easily closer to it and certainly we've been thinking about it's sort of the next steps as.
We opened up state by state, but again, let me just remind you of what we've been doing too that we can just set the stage for what Tom is going to talk about number. One we are we still have 100 sales representatives out there.
We set those up originally around 14000 prescribing eye care professionals, a majority of them are ophthalmologist and in a few thousand of optometrist and so we felt that they they're the ones that represented the bulk of the up.
Prescription writing in glaucoma, there's an awful lot of overlap between the ones we call on it and other therapeutic areas that are relevant because again, a big practice in glaucoma is usually a big practice for cataract and all sorts of other things so.
So it is 100 that we're dealing with and then.
Towards the end of the year beginning of this year, we really decided to focus on.
Within that audience, specifically those doctors that are already had some experience with it rhopressa rocket path and we had about 4000 doctors that we're writing pretty regularly you know that's the bulk of sort of that's the core business for us at this point, but we also had several thousand doctors, who had writing at least monthly and so we decided to decrease.
The size of the territories are for now in terms of their audience. So that they could spend more time moving those monthly writers and the weekly riders and get the weekly writers to increase their prescription activity.
Within the glaucoma category to more either Rhopressa rocktenn and so that was a stage that we sat and we were using the the availability of the most data to execute on that plan and it was working at same time that left an awful lot of doctors that we weren't calling on and so that's a stage I wanted to set so that.
Tom can I give you some his perspectives in terms of additional plans that we have going forward.
Yeah I'll take this from a couple of here first off back to your question about the detailing and what position that'll have in the in our promotional make how about that going forward first it will always have a play.
But the primary first it will be is for doctors that are high prescribers that are in very difficult places to get those are an outreach prices that are probably three hours away from the where the rep has most of our activity. So the reference to drive three hours out three hours back to make a call. There. We can supplement costs. When we don't want to were can't get out there.
With virtual detailing.
But on from a day to day basis, I don't think it's going to have a big placed in ophthalmology, primarily because.
The prescribing audience that as the ophthalmologists are highly personable our positions.
Who like to have day to day contact and liked to have touch which the company.
I can try that I believe the vast majority of ophthalmologists out there believed that they are very important area and they are but they also know that if they want to get a message to dance or me or or Casey orr clinical team, while they need to state of the reference can you tell it could you hear of Tom or groups or somebody give me a call. It we'll call them. The next day they like that.
They don't want to lose that personal goal that personal touch with a company that I think you do through time with virtual detailing when you're dealing more with your frankly for the data and computer than you are with an actual person. So I don't think it'll have.
A significant place going forward I do think though it will have our small price like I talked about about physicians that are difficult to get to what Brad physicians a fair to want a few during oftentimes you know we're supposed to additional doctors. So give me to call. It I'm talking about investor effect that that'll that'll that'll play it.
I do think also that that's probably different if your color figure about primary care physicians that sort of thing where we are representative has a slew of primary care physicians the proper calling of it may not have a personal relationships that you have with ophthalmology.
So that's my first for you earlier.
But the other thing groups talked about is can we were also we're looking for we are looking at different ways, we're increasing the share of voice in this marketplace. We're going through glaucoma market is going through some interesting changes, we know that o'connor's walked away because private hands either main product as losses patent exclusivity. So if you look at their detail they've gone way down.
I'll now again are still maintaining their details for awhile before what theyre fairly old products and of course, the analysis hanging in there as well so we look at it now to say.
Time that if we can get more sure voice in the marketplace. It could help our coffee tremendously. So we're looking your different ways of doing that and we may be putting in a couple different strategies.
Fairly quickly here, it's a tough back to see factor it could work so that would give too, especially the doctors without getting too.
Hi frequency you can increase our frequency there which are data that we have are our most and managed care coverage to see if we can't get some breakthroughs.
Thank you.
Hi, guys does.
This does conclude today's question and answer session I will now, let's turn the call back to Vince Dino Chairman and CEO for further remarks.
Oh, Thank all of you for joining the call I know that in this environment is always kind of tough and you. We wish that we can come to all the meetings that you guys are having so that we can see you as well see investors lives you know it at this point I do want to thank again, all the employees that are the work at area, they're doing a terrific job.
And as you've heard from a call. It's just amazing that working remotely for the most part or.
Or.
Our time in term of the facilities that we have you know all of our clinical trial programs continue to be on track, we made all of our regulatory filings Ah.
Certainly the finance group added New Jersey, a god they did a great job in our quarter end closing and getting S. C documents legal department with all the contracting in the deal making that we're trying to do and as you heard from Tom The commercial team is doing a great job trying to get us ready as states are now opening up and so we can get ourselves back on track.
And so we were pleased with where we are right now.
We are pleased at the states are opening up and that that we can boost this thing forward and we're very excited about the future prospects for our business. So again I want to thank everybody for joining the call and be safe. Thank you.
Ladies and gentlemen. This concludes today's conference call. Thank you for participation you may now disconnect.
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